<PAGE> 1
Securities Act File No. 33-13283
Investment Company Act File No. 811-5105
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
------
Post-Effective Amendment No. 31 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 33
THE PARKSTONE GROUP OF FUNDS
------------------------------
(Exact Name of Registrant as Specified in Charter)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (800) 451-8377
DAVID E. RIGGS, ESQ.
HOWARD & HOWARD ATTORNEYS, P.C.
The Kalamazoo Building, Suite 400
107 West Michigan Avenue
Kalamazoo, Michigan 49007
-------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Immediately, upon effectiveness
It is proposed that this filing will become effective:
/X/ immediately upon filing pursuant to paragraph (b).
/ / on (date) pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1) of Rule 485.
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to rule 24f-2 under the Investment Company
Act of 1940. On August 28, 1996, Registrant filed its Rule 24f-2 Notice with
respect to its fiscal year ended June 30, 1996.
<PAGE> 2
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
INVESTOR A SHARES
THE PARKSTONE GROWTH FUNDS
THE PARKSTONE GROWTH AND INCOME FUNDS
THE PARKSTONE INCOME FUNDS
THE PARKSTONE TAX-FREE INCOME FUNDS
THE PARKSTONE MONEY MARKET FUNDS
FORM N-1A
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM NO. RULE 404(a) CROSS REFERENCE
- ---------------------------------------------------------------------------
<S> <C> <C>
1. Cover Page......................... Cover Page
2. Synopsis........................... Prospectus Summary; Fee Tables
3. Condensed Financial Information.... Financial Highlights; Performance Information
4. General Description of Registrant.. Cover Page; Investment Objectives and Policies;
Investment Restrictions; Risk Factors and
Investment Techniques; General Information -
Organization of the Group
5. Management of the Fund............. Management of the Funds; Fee Tables
5A. Management's Discussion of Fund
Performance........................ Not Applicable
6. Capital Stock and Other Securities. Directed Dividend Option; Dividends and Taxes;
General Information - Organization of the Group;
General Information - Multiple Classes of Shares;
General Information - Miscellaneous
7. Purchase of Securities Being
Offered......................... Management of the Funds - Administrator, Sub-
Administrator and Distributor; Management of
the Funds - Distribution Plan for Investor A
Shares; How to Buy Investor A Shares; Sales
Charges; Reduced Sales Charges; Exchange
Privilege; Parkstone Individual Retirement
Accounts; How Shares are Valued
8. Redemption or Repurchase........... How to Redeem Your Investor A Shares
9. Pending Legal Proceedings.......... Not Applicable
PROSPECTUS - INVESTOR A SHARES
</TABLE>
<PAGE> 3
- --------------------------------------------------------------------------------
THE PARKSTONE
GROUP OF FUNDS
INVESTOR A SHARES
- --------------------------------------------------------------------------------
GROWTH FUNDS
PARKSTONE EQUITY FUND
PARKSTONE SMALL CAPITALIZATION FUND
PARKSTONE LARGE CAPITALIZATION FUND
PARKSTONE INTERNATIONAL DISCOVERY FUND
GROWTH AND INCOME FUNDS
PARKSTONE BALANCED FUND
PARKSTONE HIGH INCOME EQUITY FUND
INCOME FUNDS
PARKSTONE BOND FUND
PARKSTONE LIMITED MATURITY BOND FUND
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
PARKSTONE U.S. GOVERNMENT INCOME FUND
TAX-FREE INCOME FUNDS
PARKSTONE MUNICIPAL BOND FUND
PARKSTONE MICHIGAN MUNICIPAL BOND FUND
MONEY MARKET FUNDS
PARKSTONE PRIME OBLIGATIONS FUND
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND
PARKSTONE TREASURY FUND
PARKSTONE TAX-FREE FUND
Prospectus dated October 8, 1996
[PARKSTONE MUTUAL FUNDS LOGO]
-------------------------
NOT FDIC INSURED
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[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 5
THE PARKSTONE GROUP OF FUNDS
INVESTOR A SHARES PROSPECTUS DATED OCTOBER 8, 1996
<TABLE>
<S> <C>
GROWTH FUNDS For more information call:
Parkstone Equity Fund (800) 451-8377
Parkstone Small Capitalization Fund or write to:
Parkstone Large Capitalization Fund 3435 Stelzer Road
Parkstone International Discovery Fund Columbus, Ohio 43219
GROWTH AND INCOME FUNDS THESE SECURITIES HAVE NOT
Parkstone Balanced Fund BEEN APPROVED OR
Parkstone High Income Equity Fund DISAPPROVED BY THE
SECURITIES AND EXCHANGE
INCOME FUNDS COMMISSION OR ANY STATE
Parkstone Bond Fund SECURITIES COMMISSION NOR
Parkstone Limited Maturity Bond Fund HAS THE COMMISSION OR ANY
Parkstone Intermediate Government Obligations STATE SECURITIES COMMISSION
Fund PASSED UPON THE ACCURACY OR
Parkstone U.S. Government Income Fund ADEQUACY OF THIS
PROSPECTUS. ANY
TAX-FREE INCOME FUNDS REPRESENTATION TO THE
Parkstone Municipal Bond Fund CONTRARY IS A CRIMINAL
Parkstone Michigan Municipal Bond Fund OFFENSE
MONEY MARKET FUNDS
Parkstone Prime Obligations Fund
Parkstone U.S. Government Obligations Fund
Parkstone Treasury Fund
Parkstone Tax-Free Fund
</TABLE>
The Funds listed above are each of the sixteen currently-offered series (the
"Funds") of The Parkstone Group of Funds (the "Group") which offer Investor A
Shares. This Prospectus explains concisely what you should know before investing
in the Investor A Shares of the Funds listed above. Please read it carefully and
keep it for future reference. You can find more detailed information about the
Funds in the October 8, 1996 Statement of Additional Information, as amended
from time to time. For a free copy of the Statement of Additional Information or
other information, contact the Group at the number specified above. The
Statement of Additional Information has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated into this Prospectus by
reference.
THE SHARES OF THE PARKSTONE GROUP OF FUNDS ARE NOT OBLIGATIONS OR DEPOSITS OF
FIRST OF AMERICA INVESTMENT CORPORATION OR ITS PARENT, AND THE INVESTMENTS
DESCRIBED IN THIS PROSPECTUS ARE NOT ENDORSED, INSURED OR GUARANTEED BY FIRST OF
AMERICA INVESTMENT CORPORATION, ITS PARENT OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. INVESTMENTS IN THE PARKSTONE GROUP OF FUNDS
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVOLVED.
PROSPECTUS--Investor A Shares
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
---
Prospectus Roadmap........................................................... 3
Prospectus Summary........................................................... 5
Fee Tables................................................................... 9
Financial Highlights......................................................... 12
Investment Objectives and Policies........................................... 27
Risk Factors and Investment Techniques....................................... 40
Investment Restrictions...................................................... 51
Management of the Funds...................................................... 53
How to Buy Investor A Shares................................................. 58
Sales Charges................................................................ 60
Reduced Sales Charges........................................................ 61
Directed Dividend Option..................................................... 63
Exchange Privilege........................................................... 63
Parkstone Individual Retirement Accounts..................................... 64
How to Redeem Your Investor A Shares......................................... 64
How Shares Are Valued........................................................ 67
Dividends and Taxes.......................................................... 67
Performance Information...................................................... 70
Fundata(R)................................................................... 71
General Information.......................................................... 71
</TABLE>
PROSPECTUS--Investor A Shares 2
<PAGE> 7
PROSPECTUS ROADMAP
For information about the following subjects, consult the pages indicated on the
table below.
<TABLE>
<CAPTION>
INVESTMENT
OBJECTIVES
FINANCIAL AND RISK FACTORS AND
FUND HIGHLIGHTS POLICIES INVESTMENT TECHNIQUES
<S> <C> <C> <C>
Balanced Fund 16 29 31
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Bond Fund 18 32 33
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Equity Fund 12 27 28
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Government Income Fund 21 34 35
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High Income Equity Fund 17 31 32
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International Discovery Fund 15 28 29
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Intermediate Government Obligations Fund 20 34 34
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Large Capitalization Fund 14 27 28
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Limited Maturity Bond Fund 19 32 33
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Michigan Municipal Bond Fund 22 35 37
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Municipal Bond Fund 23 35 37
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Prime Obligations Fund 24 37 39
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Small Capitalization Fund 13 27 28
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Tax-Free Fund 25 37 39
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Treasury Fund 25 37 39
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U.S. Government Obligations Fund 26 37 39
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</TABLE>
The Parkstone Group of Funds (the "Group") is an open-end management investment
company which offers to the public sixteen separate investment portfolios,
fifteen of which are diversified portfolios and one of which is a
non-diversified portfolio, each with different investment objectives. These
Funds enable the Group to meet a wide range of investment needs.
This Prospectus relates only to the Investor A Shares of the following Funds:
Parkstone Equity Fund (the "Equity Fund")
Parkstone Small Capitalization Fund (the "Small Capitalization Fund")
Parkstone Large Capitalization Fund (the "Large Capitalization Fund")
Parkstone International Discovery Fund (the "International Fund")
Parkstone Balanced Fund (the "Balanced Fund")
Parkstone High Income Equity Fund (the "High Income Equity Fund")
Parkstone Bond Fund (the "Bond Fund")
Parkstone Limited Maturity Bond Fund (the "Limited Maturity Bond Fund")
Parkstone Intermediate Government Obligations Fund (the "Intermediate
Government
Obligations Fund")
Parkstone U.S. Government Income Fund (the "Government Income Fund")
Parkstone Municipal Bond Fund (the "Municipal Bond Fund")
Parkstone Michigan Municipal Bond Fund (the "Michigan Bond Fund")
Parkstone Prime Obligations Fund (the "Prime Obligations Fund")
Parkstone U.S. Government Obligations Fund (the "U.S. Government
Obligations Fund")
3 PROSPECTUS--Investor A Shares
<PAGE> 8
Parkstone Treasury Fund (the "Treasury Fund")
Parkstone Tax-Free Fund (the "Tax-Free Fund")
For convenience of reference, the above Funds are sometimes referred to as part
of a general grouping. The Equity Fund, Small Capitalization Fund, Large
Capitalization Fund and International Fund are collectively referred to as the
"Growth Funds." The Balanced Fund and High Income Equity Fund are collectively
referred to as the "Growth and Income Funds." The Bond Fund, Limited Maturity
Bond Fund, Intermediate Government Obligations Fund and Government Income Fund
are collectively referred to as the "Income Funds." The Michigan Bond Fund and
Municipal Bond Fund are collectively referred to as "Tax-Free Income Funds."
Finally, the Prime Obligations Fund, Treasury Fund, Tax-Free Fund and U.S.
Government Obligations Fund are collectively referred to as the "Money Market
Funds."
The Trustees of the Group have divided beneficial ownership of each of the Funds
into an unlimited number of transferable units called shares. Each Fund of the
Group offers multiple classes of shares. This Prospectus describes one class of
shares of each Fund, Investor A Shares. Interested persons who wish to obtain a
copy of the Prospectus of the other classes of shares of the Funds or a copy of
the Group's most recent Annual Report may contact the Group at the telephone
number shown above.
The investment objectives of each of the Funds are described in this Prospectus
and are summarized in the Prospectus Summary. First of America Investment
Corporation, Kalamazoo, Michigan ("First of America" or the "Investment
Adviser"), acts as the investment adviser to each of the Funds of the Group. To
provide investment advisory services for the International Fund and Balanced
Fund for investments in foreign securities, First of America has entered into a
sub-investment advisory agreement with Gulfstream Global Investors, Ltd.,
Dallas, Texas ("Gulfstream" or the "Subadviser").
PROSPECTUS--Investor A Shares 4
<PAGE> 9
PROSPECTUS SUMMARY
Shares Offered
This Prospectus relates to Investor A Shares of the following Funds of the
Group:
GROWTH FUNDS
Equity Fund
Small Capitalization Fund
Large Capitalization Fund
International Fund
GROWTH AND INCOME FUNDS
Balanced Fund
High Income Equity Fund
INCOME FUNDS
Bond Fund
Limited Maturity Bond Fund
Intermediate Government Obligations Fund
Government Income Fund
TAX-FREE INCOME FUNDS
Municipal Bond Fund
Michigan Bond Fund
MONEY MARKET FUNDS
Prime Obligations Fund
U.S. Government Obligations Fund
Treasury Fund
Tax-Free Fund
These Funds represent sixteen separate investment portfolios of The Parkstone
Group of Funds, a Massachusetts business trust which is registered as an
open-end, management investment company.
Purchase and Redemption of Shares
The public offering price of Investor A Shares of each of the Growth Funds and
each of the Growth and Income Funds is equal to the net asset value per share
plus a sales charge equal to 4.50% of the public offering price (4.71% of the
net amount invested). The public offering price of Investor A Shares of each of
the Income Funds and each of the Tax-Free Income Funds is equal to the net asset
value per share plus a sales charge equal to 4.00% of the public offering price
(4.17% of the net amount invested). The public offering price is reduced when
the amount of the transaction at the total public offering price is $50,000 or
more (see "SALES CHARGES"). Under certain circumstances, the sales charge may be
eliminated (see "REDUCED SALES CHARGES--Sales Charge Waivers"). The public
offering price of each Money Market Fund is equal to the net asset value per
share, which the Group will seek to maintain at $1.00.
Shares may be purchased by mail, telephone or wire, through a broker-dealer who
has entered into an agreement with the Group's distributor BISYS Fund Services
Limited Partnership ("BISYS" or the "Distributor"), through the Group's Auto
Invest Plan or through certain Parkstone Individual Retirement Accounts.
Investor A Shares of one Fund of the Group may be exchanged for Investor A
Shares of another Fund of the Group at net asset value without the imposition of
a sales charge, provided certain conditions are met. Shares may be redeemed by
contacting the Transfer Agent or through the Group's Auto Withdrawal Plan. See
"HOW TO BUY INVESTOR A SHARES," "EXCHANGE PRIVILEGE," "HOW TO REDEEM INVESTOR A
SHARES" and "HOW SHARES ARE VALUED."
5 PROSPECTUS--Investor A Shares
<PAGE> 10
Minimum Purchase
There is a $1,000 minimum initial purchase (based upon the public offering
price) per Fund with no minimum subsequent investments. Such minimum initial
investment may be waived for certain purchasers and is reduced to $100 for
investors using the Auto Invest Plan described herein to invest in a Fund,
although such investors are subject to a $50 minimum for each subsequent
investment in such Fund.
Investment Objectives
[CAPTION]
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
Balanced Fund seeks current income, long-term capital growth and
conservation of capital
- ------------------------------------------------------------------------------------
Bond Fund seeks to provide current income and preservation of
capital by investing in a portfolio of high- and
medium-grade fixed-income securities
- ------------------------------------------------------------------------------------
Equity Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks
- ------------------------------------------------------------------------------------
Government Income Fund seeks to provide shareholders with a high level of current
income consistent with prudent investment risk
- ------------------------------------------------------------------------------------
High Income Equity primarily seeks current income by investing in a
Fund diversified portfolio of high quality, dividend-paying
stocks and securities convertible into common stocks; a
secondary objective is growth of capital
- ------------------------------------------------------------------------------------
Intermediate seeks to provide current income with preservation of
Government Obligations capital by investing in a diversified portfolio of U.S.
Fund government securities with remaining maturities of 12
years or less
- ------------------------------------------------------------------------------------
International Fund seeks long-term growth of capital
- ------------------------------------------------------------------------------------
Large Capitalization seeks growth of capital by investing primarily in a
Fund diversified portfolio of common stocks and securities
convertible into common stocks of companies with large
market capitalization
- ------------------------------------------------------------------------------------
Limited Maturity Bond seeks to provide current income and preservation of
Fund capital by investing in a portfolio of high- and
medium-grade fixed-income securities, the remaining
maturities on which will be six years or less
- ------------------------------------------------------------------------------------
Michigan Bond Fund seeks income which is exempt from federal income tax and
Michigan state income and intangibles tax, although such
income may be subject to the federal alternative minimum
tax when received by certain shareholders; also seeks
preservation of capital
- ------------------------------------------------------------------------------------
Municipal Bond Fund seeks to provide current interest income which is exempt
from federal income taxes as well as preservation of
capital
- ------------------------------------------------------------------------------------
Prime Obligations Fund seeks to provide current income, with liquidity and
stability of principal
- ------------------------------------------------------------------------------------
Small Capitalization seeks growth of capital by investing primarily in a
Fund diversified portfolio of common stocks and securities
convertible into common stocks of small- to medium-sized
companies
- ------------------------------------------------------------------------------------
Tax-Free Fund seeks to provide current income free from federal income
taxes, preservation of capital and relative stability of
principal
- ------------------------------------------------------------------------------------
Treasury Fund seeks to provide current income, with liquidity and
stability of principal
- ------------------------------------------------------------------------------------
U.S. Government seeks to provide current income, with liquidity and
Obligation Fund stability of principal
</TABLE>
PROSPECTUS--Investor A Shares 6
<PAGE> 11
Investment Policies
Under normal market conditions, each Fund will invest as described in the
following table:
[CAPTION]
<TABLE>
<CAPTION>
FUND INVESTMENT POLICY
<S> <C>
- --------------------------------------------------------------------------------------
Balanced Fund in any type or class of securities, including all types of
common stocks, fixed-income securities and securities
convertible into common stocks. At least 25% of the value
of the Fund's total assets will be invested in fixed-
income senior securities and up to 15% of the Fund's total
assets may be invested in foreign securities
- --------------------------------------------------------------------------------------
Bond Fund at least 80% of its total assets in bonds, debentures and
certain other debt securities specified herein
- --------------------------------------------------------------------------------------
Equity Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized by
sound management and the ability to finance expected
growth
- --------------------------------------------------------------------------------------
Government Income Fund at least 65% of its total assets in obligations issued or
guaranteed by the U.S. government or its agencies or
instrumentalities; under current market conditions, up to
80% of its total assets in mortgage-related securities,
which are issued or guaranteed by the U.S. government, its
agencies and instrumentalities and by non-governmental
entities, or greater amounts as conditions warrant
- --------------------------------------------------------------------------------------
High Income Equity at least 80% of its total assets in common stocks, and
Fund securities convertible into common stocks, of companies
believed by the investment adviser to be characterized by
sound management, the ability to finance expected growth
and the ability to pay above-average dividends
- --------------------------------------------------------------------------------------
Intermediate at least 80% of its total assets in obligations issued or
Government Obligations guaranteed by the U.S. government or its agencies or
Fund instrumentalities and with remaining maturities of twelve
years or less
- --------------------------------------------------------------------------------------
International Fund at least 65% of its total assets in an internationally
diversified portfolio of equity securities which trade on
markets in countries other than the United States and
which are issued by companies (i) domiciled in countries
other than the United States, or (ii) that derive at least
50% of either their revenues or pre-tax income from
activities outside of the United States, and (iii) which
are ranked as small- or medium-sized companies on the
basis of their capitalization
- --------------------------------------------------------------------------------------
Large Capitalization at least 80% of its total assets in common stocks, and
Fund securities convertible into common stocks, of companies
believed to be characterized by sound management and the
ability to finance expected long-term growth
- --------------------------------------------------------------------------------------
Limited Maturity Bond at least 80% of the value of its total assets in bonds,
Fund debentures and certain other debt securities specified
herein with remaining maturities of six years or less
- --------------------------------------------------------------------------------------
Michigan Bond Fund at least 80% of its total assets in debt securities of all
types; at least 65% of the net assets in municipal
securities issued by or on behalf of the State of
Michigan, its political subdivisions, municipalities and
public authorities
- --------------------------------------------------------------------------------------
Municipal Bond Fund at least 80% of its total assets in tax-exempt obligations
</TABLE>
7 PROSPECTUS--Investor A Shares
<PAGE> 12
[CAPTION]
<TABLE>
<CAPTION>
FUND INVESTMENT POLICY
<S> <C>
- ----------------------------------------------------------------------------------
Prime Obligations Fund in high quality money market instruments and other
comparable investments
- ----------------------------------------------------------------------------------
Small Capitalization at least 80% of its total assets in common stocks, and
Fund securities convertible into common stocks, of companies
believed by the investment adviser to be characterized by
sound management and the ability to finance expected
growth
- ----------------------------------------------------------------------------------
Tax-Free Fund at least 80% of its total assets in municipal obligations
the interest on which is both exempt from federal income
tax and not treated as a preference item for alternative
minimum tax purposes
- ----------------------------------------------------------------------------------
Treasury Fund exclusively in obligations issued or guaranteed by the
U.S. Treasury and in repurchase agreements backed by such
securities
- ----------------------------------------------------------------------------------
U.S. Government at least 65% of its total assets in short-term U.S.
Obligations Fund Treasury bills, notes and other obligations issued by the
U.S. government or its agencies or instrumentalities
</TABLE>
Risk Factors and Special Considerations
An investment in a mutual fund such as any of the Funds involves a certain
amount of risk and may not be suitable for all investors. In addition, some
investment policies of the Funds may entail certain risks. See "RISK FACTORS AND
INVESTMENT TECHNIQUES."
Management of the Funds
First of America serves as investment adviser, and, with respect to the
International Fund and a portion of the Balanced Fund, Gulfstream serves as
sub-adviser. First of America also serves as sub-administrator. BISYS, a
partnership owned by The BISYS Group, Inc., serves as distributor and
administrator. BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Transfer
Agent"), serves as transfer agent, dividend paying agent and fund accountant.
Union Bank of California, N.A. ("Union Bank" or the "Custodian"), formerly known
as The Bank of California, N.A., serves as custodian.
Dividends and Taxes
Dividends from net income are declared and paid monthly, except for the Money
Market Funds which are declared daily and paid monthly. Net realized capital
gains are distributed at least annually. The Directed Dividend Option enables
shareholders to have dividends and capital gains paid by check, or reinvested
automatically without payment of sales charges. See "DIRECTED DIVIDEND OPTION."
Each of the Funds is treated as a separate entity for federal income tax
purposes and intends to qualify as a "regulated investment company."
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made during the year.
PROSPECTUS--Investor A Shares 8
<PAGE> 13
FEE TABLES (INVESTOR A SHARES)
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (as a percentage of the offering price)(1)
<TABLE>
<S> <C>
- --Growth Funds.............................................................. 4.50%
- --Growth and Income Funds................................................... 4.50%
- --Income Funds.............................................................. 4.00%
- --Tax-Free Income Funds..................................................... 4.00%
- --Money Market Funds........................................................ None
Sales Charge on Reinvested Distributions.................................... None
Deferred Sales Charge on Redemptions........................................ None
Redemption Fees(2).......................................................... None
Exchange Fees(3)............................................................ None
<FN>
- ------------
(1) The sales charge may be eliminated under certain circumstances. (See
"REDUCED SALES CHARGES--Sales Charge Waivers.")
(2) Although no such fee currently is in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
subject to a sales charge.
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)*
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES(1) EXPENSES EXPENSES
---------- ------ ------- -------
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund........................................ 1.00% 0.25% 0.29% 1.54%
Small Capitalization Fund.......................... 1.00% 0.25% 0.29% 1.54%
Large Capitalization Fund.......................... 0.80% 0.25% 0.35% 1.40%
International Fund................................. 1.17% 0.25% 0.38% 1.80%
GROWTH AND INCOME FUNDS:
Balanced Fund...................................... 0.75% 0.25% 0.41% 1.41%
High Income Equity Fund............................ 1.00% 0.25% 0.32% 1.57%
INCOME FUNDS:
Bond Fund.......................................... 0.70% 0.25% 0.24% 1.19%
Limited Maturity Bond Fund......................... 0.55% 0.25% 0.29% 1.09%
Intermediate Government Obligations Fund........... 0.70% 0.25% 0.26% 1.21%
Government Income Fund............................. 0.45% 0.25% 0.31% 1.01%
TAX-FREE INCOME FUNDS:
Municipal Bond Fund................................ 0.55% 0.25% 0.25% 1.05%
Michigan Bond Fund................................. 0.55% 0.25% 0.22% 1.02%
MONEY MARKET FUNDS:
Prime Obligations Fund............................. 0.40% 0.10% 0.24% 0.74%
U.S. Government Obligations Fund................... 0.40% 0.10% 0.24% 0.74%
Treasury Fund...................................... 0.40% 0.10% 0.20% 0.70%
Tax-Free Fund...................................... 0.40% 0.10% 0.26% 0.76%
<FN>
- ------------
* after expense reductions
(1) Pursuant to the Investor A Distribution and Shareholder Service Plan, each
Fund is authorized to make payments under such Plan of up to an annual rate of
0.25% of the average daily net asset value of such Fund's Investor A Shares.
However, currently payments of only 0.10% are being charged under such Plan with
respect to the Money Market Funds.
</TABLE>
9 PROSPECTUS--Investor A Shares
<PAGE> 14
Management Fees and Total Expenses as a percentage of average net assets for the
International Fund, absent the voluntary reduction of advisory fees, would have
been 1.25% and 1.88%, respectively. For the Balanced Fund they would have been
1.00% and 1.66%, respectively. Management Fees, Other Expenses and Total
Expenses as a percentage of average net assets for the Bond Fund, absent the
voluntary reduction of administration fees and advisory fees, would have been
0.74%, 0.29% and 1.28%, respectively. For the Limited Maturity Bond Fund, they
would have been 0.74%, 0.34% and 1.33%, respectively. For the Intermediate
Government Obligations Fund, they would have been 0.74%, 0.31% and 1.30%,
respectively. For the Government Income Fund, they would have been 0.74%, 0.36%
and 1.35%, respectively. For the Municipal Bond Fund, they would have been
0.74%, 0.35% and 1.34%, respectively. For the Michigan Bond Fund, they would
have been 0.74%, 0.32% and 1.31%, respectively. 12b-1 Fees, Other Expenses and
Total Expenses as a percentage of average net assets for the Prime Obligations
Fund, absent the voluntary reduction of 12b-1 fees and administration fees,
would have been 0.25%, 0.26% and 0.91%, respectively. For the U.S. Government
Obligations Fund, they would have been 0.25%, 0.26% and 0.91%, respectively. For
the Treasury Fund, they would have been 0.25%, 0.30% and 0.95%, respectively.
For the Tax-Free Fund, they would have been 0.25%, 0.28% and 0.93%,
respectively. The annual percentages of Management Fees and Other Expenses for
the Large Capitalization Fund are based on such fees and expenses incurred since
commencement of operations and expected voluntary reductions. Absent the
expected voluntary reduction of administrative and advisory fees, Management
Fees, Other Expenses and Total Expenses would be 0.80%, 0.97% and 2.62%,
respectively. (See "MANAGEMENT OF THE FUNDS--Investment Adviser and Subadviser"
and "Administrator, Sub-Administrator and Distributor.")
EXPENSE EXAMPLES
You would pay the following expenses rounded to the nearest dollar on a $1,000
investment in Investor A Shares, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------ ------ -------
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund............................................. $ 60 $91 $ 125 $220
Small Capitalization Fund............................... $ 60 $91 $ 125 $220
Large Capitalization Fund*.............................. $ 59 $87 -- --
International Fund...................................... $ 62 $99 $ 138 $247
GROWTH AND INCOME FUNDS:
Balanced Fund........................................... $ 59 $88 $ 119 $206
High Income Equity Fund................................. $ 60 $92 $ 127 $223
INCOME FUNDS:
Bond Fund............................................... $ 52 $76 $ 103 $179
Limited Maturity Bond Fund.............................. $ 51 $73 $ 98 $168
Intermediate Government Obligations Fund................ $ 52 $77 $ 104 $181
Government Income Fund.................................. $ 50 $71 $ 94 $159
TAX-FREE INCOME FUNDS:
Municipal Bond Fund..................................... $ 50 $72 $ 96 $163
Michigan Bond Fund...................................... $ 50 $72 $ 96 $160
MONEY MARKET FUNDS:
Prime Obligations Fund.................................. $ 8 $24 $ 41 $ 92
U.S. Government Obligations Fund........................ $ 8 $24 $ 41 $ 92
Treasury Fund........................................... $ 7 $22 $ 39 $ 87
Tax-Free Fund........................................... $ 8 $24 $ 42 $ 94
<FN>
- ------------
* Because the Large Capitalization Fund has been in operation for less than 10
months, expense example information is provided only for 1-year and 3-year
periods.
</TABLE>
PROSPECTUS--Investor A Shares 10
<PAGE> 15
The information set forth in the foregoing Fee Tables and expense examples
relates only to Investor A Shares of the Funds. Each of the Funds also may offer
other classes of shares. The other classes of shares of the Funds are subject to
the same expenses except that sales charges and Rule 12b-1 fees will differ
between classes.
As a result of the payment of sales charges and 12b-1 fees, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities Dealers, Inc.
(the "NASD"). The NASD has adopted rules effective July 7, 1993, which generally
limit the aggregate sales charges and payments under the Group's Investor A
Distribution and Shareholder Service Plan to a certain percentage of total new
gross share sales, plus interest. The Funds would stop accruing 12b-1 fees if,
to the extent, and for as long as, such limit would otherwise be exceeded.
The purpose of the above tables is to assist a potential purchaser of Investor A
Shares of any Fund in understanding the various costs and expenses that an
investor in a Fund will bear directly or indirectly. Such expenses do not
include any fees charged by First of America or any of its affiliates to its
customer accounts which may invest in Investor A Shares of the Funds. See
"MANAGEMENT OF THE FUNDS," "GENERAL INFORMATION" and "SALES CHARGES" for a more
complete discussion of the shareholder transaction expenses and annual operating
expenses of each of the Funds. The expense information for Investor A Shares
reflects current fees. THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
11 PROSPECTUS--Investor A Shares
<PAGE> 16
FINANCIAL HIGHLIGHTS
The tables on the following pages set forth certain information concerning the
investment results of the Investor A Shares of each of the Funds since its
inception. Further financial information is included in the Statement of
Additional Information and the Group's June 30, 1996 Annual Report to
Shareholders which may be obtained free of charge.
The Financial Highlights for the periods presented below have been derived from
financial statements audited by Coopers & Lybrand L.L.P., independent auditors
for the Group, whose report thereon is incorporated by reference in the
Statement of Additional Information.
On March 31, 1993, the shareholders of all of the then-existing Funds of the
Group approved the reclassification of such Funds' outstanding shares into
Investor A Shares and Institutional Shares. The financial information provided
below and in the Annual Report include periods prior to such reclassification.
EQUITY FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
INVESTOR A SHARES OCT. 31, 1988
------------------------------------- TO
1996 1995 1994 1993(B) 1992 1991 1990 JUNE 30, 1989(A)
---- ---- ---- ------- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $16.56 $14.69 $15.11 $12.80 $11.69 $12.37 $11.48 $10.00
----- ----- ----- ----- ----- ----- ----- ----------
Investment Activities
Net investment income
(loss)............. (0.16) (0.12) (0.10) (0.01) 0.17 0.45 0.30 0.20
Net realized and
unrealized gains
(losses) on
investments........ 4.97 3.46 (0.28) 2.74 1.59 (0.53) 1.86 1.47
----- ----- ----- ----- ----- ----- ----- ----------
Total from Investment
Activities......... 4.81 3.34 (0.38) 2.73 1.76 (0.08) 2.16 1.67
----- ----- ----- ----- ----- ----- ----- ----------
Distributions
Net investment
income............. (0.02) (0.17) (0.45) (0.28) (0.19)
Net realized gains... (0.66) (0.48) (0.04) (0.40) (0.48) (0.15) (0.99)
In excess of net
realized gains..... (0.99)
----- ----- ----- ----- ----- ----- ----- ----------
Total
Distributions...... (0.66) (1.47) (0.04) (0.42) (0.65) (0.60) (1.27) (0.19)
----- ----- ----- ----- ----- ----- ----- ----------
NET ASSET VALUE, END OF
PERIOD................. $20.71 $16.56 $14.69 $15.11 $12.80 $11.69 $12.37 $11.48
----- ----- ----- ----- ----- ----- ----- ----------
----- ----- ----- ----- ----- ----- ----- ----------
Total return (excluding
sales charges)......... 29.57% 24.85% (2.57)% 21.42% 15.18% (0.45)% 19.23% 16.83%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, end of
period (000)....... $66,260 $43,803 $36,108 $26,460 $407,782 $298,655 $247,683 $180,124
Ratio of expenses to
average net
assets............. 1.54% 1.51% 1.38% 1.28% 1.18% 1.10% 1.07% 1.06%(c)
Ratio of net
investment income
(loss) to average
net assets......... (0.94)% (0.87)% (0.75)% (0.12)% 1.24% 3.87% 2.51% 2.80%(c)
Ratio of expenses to
average net
assets*............ 1.54% 1.54% 1.53% 1.35% 1.26% 1.28% 1.29% 1.31%(c)
Ratio of net
investment income
(loss) to average
net assets*........ (0.94)% (0.90)% (0.90)% (0.19)% 1.15% 3.69% 2.29% 2.55%(c)
Portfolio turnover
rate (d)........... 49.27% 46.39% 70.87% 66.48% 93.76% 189.26% 136.95% 87.30%
Average commission
rate paid(g)....... $0.0796
</TABLE>
PROSPECTUS--Investor A Shares 12
<PAGE> 17
SMALL CAPITALIZATION FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------ OCT. 31
INVESTOR A SHARES 1988
-------------------------------------- TO JUNE 30,
1996 1995 1994 1993(b) 1992 1991 1990 1989(a)
-------- ------- ------- ------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $25.88 $19.75 $20.31 $14.64 $13.58 $14.82 $11.59 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Investment Activities
Net investment income
(loss)............. (0.23) (0.18) (0.15) (0.13) (0.08) 0.14 0.04 0.06
Net realized and
unrealized gains
(losses) on
investments........ 12.17 8.46 0.09 6.75 1.89 (1.24) 3.23 1.59
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Activities......... 11.94 8.28 (0.06) 6.62 1.81 (1.10) 3.27 1.65
------ ------ ------ ------ ------ ------ ------ ------
Distributions
Net investment
income............. (0.14) (0.04) (0.06)
Net realized gains... (3.65) (2.15) (0.50) (0.95) (0.75)
------ ------ ------ ------ ------ ------ ------ ------
Total
Distributions...... (3.65) (2.15) (0.50) (0.95) (0.75) (0.14) (0.04) (0.06)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $34.17 $25.88 $19.75 $20.31 $14.64 $13.58 $14.82 $11.59
====== ====== ====== ====== ====== ====== ====== ======
Total Return (excluding
sales charges)......... 49.93% 44.88% (0.55)% 45.77% 12.95% (6.76)% 28.28% 16.60%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, end of
period (000)....... $187,016 $71,984 $42,791 $27,976 $180,079 $107,500 $94,517 $53,917
Ratio of expenses to
average net
assets............. 1.54% 1.55% 1.40% 1.29% 1.19% 1.15% 1.11% 1.29%(c)
Ratio of net
investment income
(loss) to average
net assets......... (1.18)% (1.27)% (1.24)% (1.02)% (0.61)% 1.08% 0.37% 0.80%(c)
Ratio of expenses to
average net
assets*............ 1.54% 1.58% 1.55% 1.36% 1.28% 1.33% 1.33% 1.54%(c)
Ratio of net
investment income
(loss) to
average net
assets*............ (1.18)% (1.30)% (1.39)% (1.09)% (0.70)% 0.90% 0.15% 0.55%(c)
Portfolio turnover
rate (d)........... 67.22% 50.53% 72.64% 71.21% 95.02% 139.66% 83.10% 51.79%
Average commission
rate paid(g)....... $0.0800
</TABLE>
13 PROSPECTUS--Investor A Shares
<PAGE> 18
LARGE CAPITALIZATION FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
INVESTOR A SHARES
-----------------
DEC. 28, 1995
TO
JUNE 30, 1996(a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................................ $10.00
-------
Investment Activities
Net investment income........................................................... 0.03
Net realized and unrealized gains on investments................................ 1.23
-------
Total from Investment Activities................................................ 1.26
-------
Distributions
Net investment income........................................................... (0.03)
In excess of net investment income
-------
Total Distributions............................................................. (0.03)
-------
NET ASSET VALUE, END OF PERIOD...................................................... $11.23
=======
Total Return (excluding sales charges).............................................. 8.99%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)................................................. $1,657
Ratio of expenses to average net assets......................................... 1.40%(c)
Ratio of net investment income to average net assets............................ 0.31%(c)
Ratio of expenses to average net assets*........................................ 2.62%(c)
Ratio of net investment (loss) to average net assets*........................... (0.91)%(c)
Portfolio turnover rate(d)...................................................... 0.86%
Average commission rate paid(g)................................................. $0.0800
</TABLE>
PROSPECTUS--Investor A Shares 14
<PAGE> 19
INTERNATIONAL FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------
INVESTOR A SHARES DEC. 29, 1992
---------------------------- TO
1996 1995(f) 1994 JUNE 30, 1993(a)(b)
---- ------ ---- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $12.23 $13.18 $11.50 $10.00
------ ------ ------ -------
Investment Activities
Net investment income (loss)..................... (0.02) 0.03 (0.02) 0.03
Net realized and unrealized gains (losses) on
investments and foreign currency
transactions................................... 1.81 (0.36) 1.74 1.48
------ ------ ------ -------
Total from Investment Activities................. 1.79 (0.33) 1.72 1.51
------ ------ ------ -------
Distributions
Net investment income............................ (0.02) (0.01)
In excess of net investment income............... (0.01)
Net realized gains............................... (0.62) (0.02)
------ ------ ------ -------
Total Distributions.............................. (0.01) (0.62) (0.04) (0.01)
------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD....................... $14.01 $12.23 $13.18 $11.50
====== ====== ====== =======
Total Return (excluding sales charges)............... 14.65% (2.19)% 14.99% 15.11%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000).................. $39,575 $34,228 $36,297 $8,353
Ratio of expenses to average net assets.......... 1.80% 1.78% 1.63% 1.64%(c)
Ratio of net investment income (loss) to average
net assets..................................... (0.11)% 0.08% (0.29)% 1.02%(c)
Ratio of expenses to average net assets*......... 1.88% 1.91% 1.84% 1.81%(c)
Ratio of net investment income (loss) to average
net assets*.................................... (0.19)% (0.06)% (0.49)% 0.85%(c)
Portfolio turnover rate(d)....................... 54.47% 104.39% 37.23% 12.47%
Average commission rate paid(g).................. $0.0321
</TABLE>
15 PROSPECTUS--Investor A Shares
<PAGE> 20
BALANCED FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
INVESTOR A SHARES JAN. 31, 1992
----------------------------------------- TO
1996 1995(f) 1994 1993(b) JUNE 30, 1992(b)
---- ------ ---- ------ --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $12.19 $10.67 $11.09 $9.68 $10.00
------ ------ ------ ----- ------
Investment Activities
Net investment income...................... 0.32 0.28 0.26 0.28 0.14
Net realized and unrealized gains (losses)
on investments........................... 1.74 1.69 (0.43) 1.42 (0.34)
------ ------ ------ ----- ------
Total from Investment Activities...... 2.06 1.97 (0.17) 1.70 (0.20)
------ ------ ------ ----- ------
Distributions
Net investment income...................... (0.31) (0.29) (0.25) (0.29) (0.12)
Net realized gains......................... (0.57) (0.01)
In excess of net realized gains............ (0.15)
------ ------ ------ ----- ------
Total Distributions................... (0.88) (0.45) (0.25) (0.29) (0.12)
------ ------ ------ ----- ------
NET ASSET VALUE, END OF PERIOD................. $13.37 $12.19 $10.67 $11.09 $9.68
====== ====== ====== ====== ======
Total Return (excluding sales charges)......... 17.51% 18.96% (1.63)% 17.74% (2.06)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)............ $17,097 $12,849 $11,901 $6,115 $38,136
Ratio of expenses to average net assets.... 1.41% 1.47% 1.18% 1.18% 1.19%(c)
Ratio of net investment income to average
net assets............................... 2.37% 2.54% 2.38% 2.66% 3.46%(c)
Ratio of expenses to average net assets*... 1.66% 1.78% 1.63% 1.53% 1.50%(c)
Ratio of net investment income to average
net assets*.............................. 2.12% 2.23% 1.93% 2.31% 3.13%(c)
Portfolio turnover rate(d)................. 437.90% 250.66% 192.39% 177.99% 47.58%
Average commission rate paid(g)............ $0.0848
</TABLE>
PROSPECTUS--Investor A Shares 16
<PAGE> 21
HIGH INCOME EQUITY FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
INVESTOR A SHARES OCT. 31, 1988
------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
---- ---- ---- ------- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF
PERIOD................... $14.49 $13.50 $14.69 $13.14 $12.48 $12.19 $11.35 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Investment Activities
Net investment
income............... 0.30 0.36 0.37 0.45 0.54 0.57 0.56 0.35
Net realized and
unrealized gains
(losses) on
investments.......... 3.27 1.00 (0.56) 1.69 0.99 0.38 1.04 1.32
------ ------ ------ ------ ------ ------ ------ ------
Total from
Investment
Activities...... 3.57 1.36 (0.19) 2.14 1.53 0.95 1.60 1.67
------ ------ ------ ------ ------ ------ ------ ------
Distributions
Net investment
income............... (0.30) (0.36) (0.37) (0.45) (0.54) (0.59) (0.54) (0.32)
In excess of net
investment income.... (0.01)
Net realized gains..... (0.45) (0.24) (0.14) (0.33) (0.07) (0.22)
In excess of net
realized gains....... -- -- (0.39) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total
Distributions... (0.75) (0.37) (1.00) (0.59) (0.87) (0.66) (0.76) (0.32)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $17.31 $14.49 $13.50 $14.69 $13.14 $12.48 $12.19 $11.35
====== ====== ====== ====== ====== ====== ====== ======
Total Return (excluding
sales charges)........... 25.05% 10.32% (1.63)% 16.71% 12.56% 8.22% 14.37% 16.97%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of
period (000)......... $82,396 $71,063 $76,108 $50,000 $270,549 $150,980 $96,344 $66,367
Ratio of expenses to
average net assets... 1.57% 1.54% 1.40% 1.29% 1.19% 1.13% 1.11% 1.16%(c)
Ratio of net investment
income to average
net assets........... 1.86% 2.65% 2.56% 3.24% 4.12% 4.75% 4.69% 4.92%(c)
Ratio of expenses to
average net
assets*.............. 1.57% 1.57% 1.55% 1.36% 1.27% 1.31% 1.33% 1.41%(c)
Ratio of net investment
income to average
net assets*.......... 1.86% 2.61% 2.41% 3.17% 4.03% 4.57% 4.47% 4.67%(c)
Portfolio turnover
rate(d).............. 40.75% 77.70% 69.35% 67.26% 68.42% 115.68% 53.08% 29.55%
Average commission rate
paid(g).............. $0.0800
</TABLE>
17 PROSPECTUS--Investor A Shares
<PAGE> 22
BOND FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------
INVESTOR A SHARES OCT. 31, 1988
------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
---- ---- ---- ------- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............... $9.67 $9.30 $10.54 $10.54 $10.07 $10.00 $10.11 $10.00
----- ----- ----- ------ ------ ------ ------ ------
Investment Activities
Net investment
income.............. 0.57 0.58 0.59 0.71 0.75 0.77 0.78 0.53
Net realized and
unrealized gains
(losses) on
investments......... (0.16) 0.38 (0.72) 0.47 0.56 0.08 (0.11) 0.09
----- ----- ----- ------ ------ ------ ------ ------
Total from Investment
Activities.......... 0.41 0.96 (0.13) 1.18 1.31 0.85 0.67 0.62
----- ----- ----- ------ ------ ------ ------ ------
Distributions
Net investment
income.............. (0.57) (0.58) (0.57) (0.73) (0.76) (0.78) (0.78) (0.51)
In excess of net
investment income... (0.01)
Net realized gains.... (0.45) (0.08)
In excess of net
realized gains...... (0.54)
----- ----- ----- ------ ------ ------ ------ ------
Total Distributions... (0.57) (0.59) (1.11) (1.18) (0.84) (0.78) (0.78) (0.51)
----- ----- ----- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD.................. $9.51 $9.67 $9.30 $10.54 $10.54 $10.07 $10.00 $10.11
===== ===== ===== ====== ====== ====== ====== ======
Total Return (excluding
sales charges).......... 4.27% 10.85% (1.62)% 11.93% 13.47% 8.80% 6.94% 6.42%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of
period (000)........ $20,175 $17,572 $18,391 $18,562 $477,526 $432,225 $316,477 $123,928
Ratio of expenses to
average net
assets.............. 1.19% 1.24% 0.98% 0.89% 0.87% 0.84% 0.81% 0.82%(c)
Ratio of net
investment income
to average net
assets.............. 5.71% 6.32% 5.86% 6.47% 7.19% 7.72% 8.04% 8.06%(c)
Ratio of expenses to
average net
assets*............. 1.28% 1.39% 1.27% 1.07% 1.01% 1.02% 1.02% 1.06%(c)
Ratio of net
investment income
to average net
assets*............. 5.62% 6.17% 5.57% 6.29% 7.05% 7.54% 7.83% 7.82%(c)
Portfolio
Turnover rate(d).... 1189.27% 1010.64% 893.27% 443.98% 289.38% 339.74% 314.71% 121.08%
</TABLE>
PROSPECTUS--Investor A Shares 18
<PAGE> 23
LIMITED MATURITY BOND FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
INVESTOR A SHARES OCT. 31, 1988
------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
------- ------- ------- ------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $9.71 $9.57 $10.18 $10.25 $9.93 $9.88 $10.08 $10.00
----- ----- ----- ------ ------ ----- ----- ------
Investment Activities
Net investment
income ................ 0.62 0.56 0.62 0.65 0.71 0.72 0.83 0.53
Net realized and
unrealized gains
(losses) on
investments............ (0.21) 0.13 (0.58) 0.13 0.35 0.10 (0.15) 0.02
----- ----- ----- ------ ------ ----- ----- ------
Total from
Investment
Activities........ 0.41 0.69 0.04 0.78 1.06 0.82 0.68 0.55
----- ----- ----- ------ ------ ----- ----- ------
Distributions
Net investment income.... (0.62) (0.55) (0.61) (0.69) (0.71) (0.73) (0.83) (0.47)
Net realized gains....... (0.16) (0.03) (0.04) (0.05)
In excess of net realized
gains.................. (0.01) (0.04)
----- ----- ----- ------ ------ ----- ----- ------
Total Return of
Capital................ (0.01)
----- ----- ----- ------ ------ ----- ----- ------
Total
Distributions..... (0.64) (0.55) (0.65) (0.85) (0.74) (0.77) (0.88) (0.47)
----- ----- ----- ------ ------ ----- ----- ------
NET ASSET VALUE, END OF
PERIOD..................... $9.48 $9.71 $9.57 $10.18 $10.25 $9.93 $9.88 $10.08
===== ===== ===== ====== ====== ===== ===== ======
Total Return (excluding sales
charges)................... 4.37% 7.53% 0.32% 7.96% 11.00% 8.66% 7.10% 5.70%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period
(000).................. $14,390 $18,930 $24,907 $18,060 $117,241 $70,870 $43,696 $71,627
Ratio of expenses to
average net assets..... 1.09% 1.05% 0.86% 0.75% 0.83% 0.91% 0.92% 0.88%(c)
Ratio of net investment
income to average net
assets................. 6.09% 5.89% 6.22% 6.41% 7.13% 7.47% 8.01% 8.19%(c)
Ratio of expenses to
average net assets*.... 1.33% 1.36% 1.30% 1.08% 1.05% 1.10% 1.14% 1.12%(c)
Ratio of net investment
income to average net
assets*................ 5.85% 5.58% 5.78% 6.08% 6.91% 7.28% 7.79% 7.95%(c)
Portfolio turnover
rate(d)................ 618.60% 397.97% 353.28% 123.10% 87.75% 161.32% 319.11% 117.37%
</TABLE>
19 PROSPECTUS--Investor A Shares
<PAGE> 24
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------
INVESTOR A SHARES OCT. 31, 1988
------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
---- ---- ---- ------- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............... $9.93 $9.62 $10.53 $10.42 $10.05 $9.91 $10.05 $10.00
----- ----- ----- ------ ------ ------ ----- ------
Investment Activities
Net investment
income.............. 0.60 0.50 0.59 0.68 0.71 0.74 0.79 0.50
Net realized and
unrealized
gains (losses) on
investments......... (0.25) 0.31 (0.66) 0.21 0.46 0.15 (0.11) (0.02)
----- ----- ----- ------ ------ ------ ----- ------
Total from investment
activities.......... 0.35 0.81 (0.07) 0.89 1.17 0.89 0.68 0.48
----- ----- ----- ------ ------ ------ ----- ------
Distributions
Net investment
income.............. (0.58) (0.50) (0.59) (0.73) (0.71) (0.75) (0.79) (0.43)
Net realized gains.... (0.05) (0.09) (0.03)
In excess of net
realized gains...... (0.25)
----- ----- ----- ------ ------ ------ ----- ------
Total Distributions... (0.58) (0.50) (0.84) (0.78) (0.80) (0.75) (0.82) (0.43)
----- ----- ----- ------ ------ ------ ----- ------
NET ASSET VALUE, END OF
PERIOD.................. $9.70 $9.93 $9.62 $10.53 $10.42 $10.05 $9.91 $10.05
===== ===== ===== ====== ====== ====== ===== ======
Total Return (excluding
sales charges).......... 3.69% 8.69% (0.90)% 8.92% 12.03% 9.32% 7.07% 4.92%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of
period (000)........ $22,954 $27,521 $36,106 $37,055 $234,906 $142,864 $100,205 $83,212
Ratio of expenses to
average net
assets.............. 1.21% 1.25% 1.00% 0.90% 0.87% 0.86% 0.85% 0.87%(c)
Ratio of net
investment
income to average
net assets.......... 5.51% 5.22% 5.80% 6.51% 7.07% 7.48% 8.04% 7.79%(c)
Ratio of expenses to
average net
assets*............. 1.30% 1.41% 1.29% 1.08% 1.01% 1.04% 1.06% 1.11%(c)
Ratio of net
investment
income to average
net assets*......... 5.42% 5.07% 5.51% 6.33% 6.93% 7.30% 7.83% 7.55%(c)
Portfolio turnover
rate(d)............. 916.39% 549.93% 546.06% 225.90% 114.76% 164.59% 294.62% 111.96%
</TABLE>
PROSPECTUS--Investor A Shares 20
<PAGE> 25
GOVERNMENT INCOME FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
INVESTOR A SHARES NOV. 12, 1992
------------------------- TO
1996 1995 1994(b) JUNE 30, 1993(a)(b)
---- ---- ------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................... $9.42 $9.41 $10.04 $10.00
----- ----- ----- ------
Investment Activities
Net investment income................................ 0.73 0.75 0.74 0.48
Net realized and unrealized gains (losses) on
investments........................................ (0.17) (0.64) 0.04
----- ----- ----- ------
Total from Investment Activities..................... 0.56 0.75 0.10 0.52
----- ----- ----- ------
Distributions
Net investment income................................ (0.65) (0.66) (0.72) (0.48)
Tax return of capital................................ (0.08) (0.08) (0.01)
----- ----- ----- ------
Total Distributions.................................. (0.73) (0.74) (0.73) (0.48)
----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD........................... $9.25 $9.42 $9.41 $10.04
===== ===== ===== ======
Total Return (excluding sales charges)................... 5.97% 8.46% 0.94% 5.35%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)...................... $52,250 $50,931 $54,027 $32,633
Ratio of expenses to average net assets.............. 1.01% 1.04% 0.82% 0.75%(c)
Ratio of net investment income to average net
assets............................................... 7.70% 8.03% 7.42% 7.41%(c)
Ratio of expenses to average net assets*............. 1.35% 1.44% 1.36% 1.23%(c)
Ratio of net investment income to average net
assets*............................................ 7.36% 7.63% 6.87% 6.93%(c)
Portfolio turnover rate(d)........................... 348.01% 114.71% 102.24% 135.06%
</TABLE>
21 PROSPECTUS--Investor A Shares
<PAGE> 26
MICHIGAN BOND FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
INVESTOR A SHARES JULY 2, 1990
------------------------------------------ TO
1996 1995 1994 1993(b) 1992 JUNE 30, 1991(a)
---- ---- ---- ------- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $10.75 $10.53 $10.97 $10.58 $10.14 $10.00
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income .......... 0.47 0.48 0.47 0.50 0.52 0.55
Net realized and unrealized
gains (losses) on
investments................... 0.04 0.23 (0.36) 0.47 0.44 0.11
------ ------ ------ ------ ------ ------
Total From Investment
Activities.................... 0.51 0.71 0.11 0.97 0.96 0.66
------ ------ ------ ------ ------ ------
Distributions
Net investment income........... (0.47) (0.48) (0.45) (0.54) (0.52) (0.52)
In excess of net investment
income........................ (0.01)
Net realized gains.............. (0.03) (0.01) (0.04)
In excess of net realized
gains......................... (0.09)
------ ------ ------ ------ ------ ------
Total Distributions............. (0.50) (0.49) (0.55) (0.58) (0.52) (0.52)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...... $10.76 $10.75 $10.53 $10.97 $10.58 $10.14
====== ====== ====== ====== ====== ======
Total Return (excluding sales
charges).......................... 4.87% 6.99% 0.92% 9.40% 9.73% 6.77%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period
(000)......................... $36,681 $37,874 $42,204 $32,778 $146,782 $90,182
Ratio of expenses to average
net assets.................... 1.02% 1.00% 0.85% 0.78% 0.84% 0.57%(c)
Ratio of net investment income
to average net assets......... 4.32% 4.57% 4.25% 4.67% 5.15% 5.76%(c)
Ratio of expenses to average
net assets*................... 1.31% 1.32% 1.29% 1.12% 1.05% 1.15%(c)
Ratio of net investment income
to average net assets*........ 4.03% 4.25% 3.81% 4.33% 4.93% 5.18%(c)
Portfolio turnover rate(d)...... 27.66% 26.06% 6.69% 35.81%(d) 19.97% 45.30%
</TABLE>
PROSPECTUS--Investor A Shares 22
<PAGE> 27
MUNICIPAL BOND FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------
INVESTOR A SHARES OCT. 31, 1988
------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
------ ------- ------- ------- -------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.............................. $10.39 $10.29 $10.92 $10.58 $10.20 $10.03 $10.18 $10.00
----- ----- ----- ------ ----- ----- ----- ------
Investment Activities
Net investment income ............ 0.41 0.41 0.40 0.49 0.52 0.55 0.57 0.40
Net realized and unrealized gains
(losses) on investments......... 0.03 0.27 (0.31) 0.48 0.39 0.18 (0.12) (0.14)
----- ----- ----- ------ ----- ----- ----- ------
Total from Investment
Activities...................... 0.44 0.68 0.09 0.97 0.91 0.73 0.45 0.54
----- ----- ----- ------ ----- ----- ----- ------
Distributions
Net investment income............. (0.40) (0.41) (0.39) (0.53 ) (0.52) (0.56) (0.58) (0.36)
Net realized gains................ (0.21) (0.10 ) (0.01) (0.02)
In excess of net realized gains... (0.17) (0.12)
----- ----- ----- ------ ----- ----- ----- ------
Total Distributions............... (0.40) (0.58) (0.72) (0.63 ) (0.53) (0.56) (0.60) (0.36)
----- ----- ----- ------ ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD........ $10.43 $10.39 $10.29 $10.92 $10.58 $10.20 $10.03 $10.18
===== ====== ====== ====== ====== ====== ====== ======
Total Return (excluding sales
charges).......................... 4.29% 7.02% 0.71% 9.46 % 9.11% 7.51% 4.57% 5.52%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)... $7,835 $11,378 $13,123 $9,333 $130,788 $98,186 $100,445 $68,256
Ratio of expenses to average net
assets.......................... 1.05% 1.02% 0.87% 0.76 % 0.81% 0.87% 0.85% 0.85%(c)
Ratio of net investment income
to average net assets........... 3.85% 4.00% 3.72% 4.56 % 5.09% 5.49% 5.78% 6.11%(c)
Ratio of expenses to average
net assets*..................... 1.34% 1.33% 1.32% 1.09 % 1.03% 1.06% 1.06% 1.09%(c)
Ratio of net investment income
to average net assets*.......... 3.56% 3.68% 3.27% 4.23 % 4.88% 5.29% 5.57% 5.87%(c)
Portfolio turnover rate (d)....... 47.46% 35.15% 44.39% 67.26 % 66.31% 76.55% 113.12% 82.22%
</TABLE>
23 PROSPECTUS--Investor A Shares
<PAGE> 28
PRIME OBLIGATIONS FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------
INVESTOR A SHARES AUGUST 24, 1987
-------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 1989 JUNE 30, 1988(a)
--- ---- ---- ------- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD.............. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ------
Investment Activities
Net investment
income.......... 0.050 0.047 0.027 0.028 0.046 0.069 0.080 0.083 0.056
----- ----- ----- ----- ----- ----- ----- ----- ------
Distributions
Net investment
income.......... (0.050) (0.047) (0.027) (0.028) (0.046) (0.069) (0.080) (0.083) (0.056)
----- ----- ----- ----- ----- ----- ----- ----- ------
NET ASSET VALUE, END
OF PERIOD........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return.......... 5.07% 4.81% 2.75% 2.89% 4.75% 7.15% 8.32% 8.58% 5.76%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, end of
period (000).... $147,478 $108,565 $105,611 $129,433 $690,908 $702,340 $547,351 $526,450 $241,545
Ratio of expenses
to average
net assets...... 0.74% 0.75% 0.74% 0.66% 0.64% 0.64% 0.65% 0.62% 0.60%(c)
Ratio of net
investment
income to
average net
assets.......... 4.93% 4.71% 2.71% 2.86% 4.61% 6.86% 8.03% 8.26% 6.48%(c)
Ratio of expenses
to average
net assets*..... 0.91% 0.92% 0.91% 0.71% 0.66% 0.66% 0.67% 0.66% 0.70%(c)
Ratio of net
investment
income to
average net
assets*......... 4.76% 4.54% 2.54% 2.81% 4.59% 6.84% 8.01% 8.22% 6.38%(c)
</TABLE>
PROSPECTUS--Investor A Shares 24
<PAGE> 29
TAX-FREE FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------- JULY 30,
INVESTOR A SHARES 1987 TO
---------------------------------------- JUNE 30,
1996 1995 1994 1993(b) 1992 1991 1990 1989 1988(a)
------- ------- ------- ------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ------
Investment Activities
Net investment
income.............. 0.029 0.029 0.018 0.019 0.033 0.046 0.054 0.055 0.040
----- ----- ----- ----- ----- ----- ----- ----- ------
Distributions
Net investment
income.............. (0.029) (0.029) (0.018) (0.019) (0.033) (0.046) (0.054) (0.055) (0.040)
----- ----- ----- ----- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF
PERIOD.................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return.............. 2.91% 2.90% 1.81% 2.07% 3.34% 4.73% 5.75% 5.62% 4.08%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of
period (000)........ $41,713 $45,102 $48,256 $54,886 $141,913 $139,615 $142,004 $120,031 $107,199
Ratio of expenses to
average net
assets.............. 0.76% 0.74% 0.68% 0.58% 0.59% 0.60% 0.61% 0.63% 0.64%(c)
Ratio of net
investment income
to average
net assets.......... 2.89% 2.88% 1.81% 2.05% 3.29% 4.63% 5.43% 5.46% 4.34%(c)
Ratio of expenses to
average net
assets*............. 0.93% 0.95% 0.93% 0.72% 0.69% 0.70% 0.70% 0.73% 0.75%(c)
Ratio of net
investment income
to average
net assets*......... 2.72% 2.67% 1.56% 1.91% 3.19% 4.53% 5.34% 5.36% 4.23%(c)
</TABLE>
TREASURY FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DEC. 1, 1993
--------------------- TO
1996 1995 JUNE 30, 1994(a)
---- ---- --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD
Investment Activities....................................... $1.000 $1.000 $1.000
------ ------ ----------
Net investment income................................... 0.049 0.047 0.016
------ ------ ----------
Distributions
Net investment income................................... (0.049) (0.047) (0.016)
------ ------ ----------
NET ASSET VALUE, END OF PERIOD.............................. $1.000 $1.000 $1.000
------ ------ ----------
------ ------ ----------
Total Return................................................ 5.04% 4.81% 1.66%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)......................... $158,723 $105,391 $56,535
Ratio of expenses to average net assets................. 0.70% 0.75% 0.64%(c)
Ratio of net investment income to average net
assets................................................ 4.87% 4.82% 2.84%(c)
Ratio of expenses to average net assets*................ 0.95% 1.04% 0.99%(c)
Ratio of net investment income to average net
assets*............................................... 4.62% 4.52% 2.49%(c)
</TABLE>
25 PROSPECTUS--Investor A Shares
<PAGE> 30
U.S. GOVERNMENT OBLIGATIONS FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
INVESTOR A SHARES AUGUST 24, 1987
---------------------------------- TO
1996 1995 1994 1993(B) 1992 1991 1990 1989 JUNE 30, 1988(A)
-------- -------- -------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
Investment Activities
Net investment
income............ 0.049 0.047 0.027 0.028 0.044 0.066 0.078 0.080 0.055
---- ---- ---- ---- ---- ---- ---- ---- --------
Distributions
Net investment
income............ (0.049) (0.047) (0.027) (0.028) (0.044) (0.066) (0.078) (0.080) (0.055)
----- ----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE, END OF
PERIOD................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ----- ---------
Total Return............ 4.99% 4.76% 2.69% 2.84% 4.78% 6.82% 8.10% 8.31% 5.66%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, end of
period (000)...... $186,944 $169,179 $172,482 $208,311 $400,242 $341,903 $248,671 $201,012 $136,823
Ratio of expenses to
average net
assets............ 0.74% 0.77% 0.77% 0.66% 0.64% 0.65% 0.65% 0.63% 0.62%(c)
Ratio of net
investment income
to average net
assets............ 4.88% 4.62% 2.64% 2.79% 4.43% 6.54% 7.79% 8.00% 6.25%(c)
Ratio of expenses to
average net
assets*........... 0.91% 0.94% 0.94% 0.72% 0.66% 0.67% 0.67% 0.68% 0.73%(c)
Ratio of net
investment income
to average net
assets*........... 4.71% 4.45% 2.47% 2.73% 4.41% 6.52% 7.77% 7.95% 6.14%(c)
<FN>
- ------------
NOTES TO FINANCIAL HIGHLIGHTS:
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) On April 1, 1993 the shareholders of the Group exchanged their shares for
either the Group's Investor A Shares or Institutional Shares. For the year
ended June 30, 1993 the Financial Highlights ratios of expenses, ratios of
net investment income, total return and the per share investment activities
and distributions are presented on the basis whereby the Fund's net
investment income, expenses, and distributions for the period July 1, 1992
through March 31, 1993 were allocated to each class of shares based upon the
relative net assets of each class of shares as of April 1, 1993 and the
results combined therewith the results of operations and distributions for
each applicable class for the period April 1, 1993 through June 30, 1993.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(e) Not annualized.
(f) As of January 1, 1995, Gulfstream assumed the role of subadviser with
respect to the International Fund and the portion of the Balanced Fund
invested in foreign securities. Prior to that date, Ivory & Sime
International, Inc. and Ivory & Sime plc served as subadvisers to the
International Fund and the Balanced Fund had no subadviser.
(g) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by
the Fund for which commissions were charged.
</TABLE>
PROSPECTUS--Investor A Shares 26
<PAGE> 31
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The investment objectives of each of the Funds is set forth below under the
headings describing the Funds. The investment objectives of each Fund are
fundamental and may not be changed without a vote of the holders of a majority
of the outstanding shares of that Fund (as defined in the Statement of
Additional Information). The investment policies of a Fund may be changed
without a vote of the holders of a majority of outstanding shares of that Fund
unless the policy is expressly deemed to be a fundamental policy or changeable
only by such majority vote. There can be no assurance that the investment
objective of any Fund will be achieved. Depending upon the performance of a
Fund's investments, the net asset value per share of that Fund may decrease
instead of increase.
During temporary defensive periods as determined by First of America or
Gulfstream, as the case may be, each of the Funds may hold up to 100% of its
total assets in short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that a Fund is so invested, its investment
objective may not be achieved during that time. Uninvested cash reserves will
not earn income.
GROWTH FUNDS
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
The investment objective of the Equity Fund is to seek growth of capital by
investing primarily in a diversified portfolio of common stocks and securities
convertible into common stocks. The investment objective of the Small
Capitalization Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stocks of small- to medium-sized companies. The investment objective of the
Large Capitalization Fund is to seek growth of capital by investing primarily in
a diversified portfolio and common stocks and securities convertible into common
stocks of companies with large market capitalization.
Under normal market conditions, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will invest at least 80% of the value of its
total assets in common stocks and securities convertible into common stocks of
companies believed by First of America to be characterized by sound management
and the ability to finance expected long-term growth. In addition, under normal
market conditions, the Small Capitalization Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks of companies considered by First of America to have a market
capitalization of less than $1 billion and the Large Capitalization Fund will do
the same with companies considered by First of America to have a market
capitalization of greater than $5 billion. Each of the Equity Fund, Small
Capitalization Fund and Large Capitalization Fund may also invest up to 20% of
the value of its total assets in preferred stocks, corporate bonds, notes, units
of real estate investment trusts, warrants, and short-term obligations (with
maturities of 12 months or less) consisting of commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit, repurchase agreements, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and demand and time deposits of
domestic and foreign banks and savings and loan associations. Each of the Equity
Fund, Small Capitalization Fund and Large Capitalization Fund may also hold
securities of other investment companies and depository or custodial receipts
representing beneficial interests in any of the foregoing securities.
Subject to the foregoing policies, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund may also invest up to 25% of its net assets
in foreign securities either directly or through the purchase of American
Depository Receipts ("ADRs") or European Depository Receipts ("EDRs") and may
also invest in securities issued by foreign branches of U.S. banks and foreign
banks, in Canadian commercial paper ("CCP"), and in Europaper (U.S.
dollar-denominated commercial paper and a foreign issuer). For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Foreign Securities."
27 PROSPECTUS--Investor A Shares
<PAGE> 32
The Equity Fund anticipates investing in growth-oriented medium-sized companies.
Medium-sized companies are considered to be those with a market capitalization
between $1 billion and $5 billion. The Large Capitalization Fund anticipates
investing in growth-oriented companies with large market capitalization, defined
as capitalization of over $5 billion. For both the Equity Fund and Large
Capitalization Fund, investments will be in companies that have typically
exhibited consistent, above-average growth in revenues and earnings, strong
management, and sound and improving financial fundamentals. Often, these
companies are market or industry leaders, have excellent products and/or
services, and exhibit the potential for growth. Core holdings of the Equity Fund
and Large Capitalization Fund are in companies that participate in long-term
growth industries, although these will be supplemented by holdings in non-growth
industries that exhibit the desired characteristics.
The Small Capitalization Fund anticipates investing in dynamic small- to
medium-sized companies that exhibit outstanding potential for superior growth.
Small-sized companies are considered to be those with capitalization of less
than $1 billion. The Small Capitalization Fund will limit its investment in
securities of medium-sized companies to not more than 35% of the value of its
total assets. Companies that participate in sectors that are identified as
having long-term growth potential generally make up a substantial portion of
such Fund's holdings. These companies often have established a market niche or
have developed unique products or technologies that are expected to produce
superior growth in revenues and earnings. As smaller capitalization stocks are
quite volatile and subject to wide fluctuations in both the short and medium
term, the Small Capitalization Fund may be fairly characterized more aggressive
than a general equity fund such as the Equity Fund.
Consistent with the foregoing, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will focus its investments in those companies
and types of companies that First of America believes will enable such Fund to
achieve its investment objective.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency
- -Futures Contracts -Government Obligations Transactions
- -Mortgage-Related Securities -Other Mutual Funds -Lending Portfolio
- -Put and Call Options -Repurchase Agreements Securities
- -Reverse Repurchase Agreements -When-Issued and -Portfolio Turnover
and Dollar Roll Agreements Delayed-Delivery -Restricted Securities
Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL FUND
The investment objective of the International Fund is to seek long-term growth
of capital.
Under normal market conditions the International Fund will invest at least 65%
of its total assets in an internationally diversified portfolio of equity
securities which trade on markets in countries other than the United States and
which are issued by companies (i) domiciled in countries other than the United
States, or (ii) that derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States, and (iii) which are small-
or medium-sized companies on the basis of their capitalization.
Equity securities include common and preferred stock, securities (bonds and
preferred stock) convertible into common stock, warrants and securities
representing underlying international securities such as ADRs and EDRs.
For purposes of investment by the International Fund only, companies are deemed
to be small- or medium-sized if, at the time of purchase, they are of a size
which would rank them in the lower half of a major market index in the
applicable country by weighted market capitalization and in the lower half of
all equity securities listed in recognized secondary markets where such markets
exist. In addition, in countries with less well-developed stock markets, where
the range of investment opportunities is more
PROSPECTUS--Investor A Shares 28
<PAGE> 33
restrictive, the equity securities of all listed companies will be eligible for
investment. In major markets, issuers could have capitalizations of up to
approximately $10 billion while in smaller markets issuers would be eligible
with capitalizations as low as approximately $200 million.
The International Fund may invest in securities of issuers in, but not limited
to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Malaysia, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Normally the
International Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries, including the countries listed
above. It is possible, although not currently anticipated, that up to 35% of the
International Fund's assets could be invested in the securities of U.S.
companies. In addition, the International Fund temporarily may invest cash in
short-term debt instruments of U.S. and foreign issuers for cash management
purposes or pending investment.
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THE INTERNATIONAL FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio Securities
- -Other Mutual Funds -Portfolio Turnover -Put and Call Options
- -Repurchase Agreements -Restricted Securities -Reverse Repurchase Agreements and
- -When-Issued and Delayed-Delivery Dollar Roll Agreements
Transactions
</TABLE>
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GROWTH AND INCOME FUNDS
THE BALANCED FUND
The investment objective of the Balanced Fund is to seek current income,
long-term capital growth and conservation of capital.
The Balanced Fund may invest in any type or class of security. Under normal
market conditions the Balanced Fund will invest in common stocks, fixed-income
securities and securities convertible into common stocks (i.e., warrants,
convertible preferred stock, fixed-rate preferred stock, convertible fixed-
income securities, options and rights). At least 25% of the value of the
Balanced Fund's total assets will be invested in fixed-income senior securities.
Up to 15% of the value of the Balanced Fund's total assets may be invested in
foreign securities.
The Balanced Fund's common stocks are held for the purpose of providing dividend
income and long-term growth of capital. The Balanced Fund will invest in the
common and preferred stocks of companies with capitalization of at least $100
million and which are traded either in established over-the-counter markets or
on national exchanges. The Balanced Fund intends to invest primarily in those
companies which are growth-oriented and have exhibited consistent, above-average
growth in revenues and earnings. When choosing such stocks, the potential for
long-term capital appreciation will be the primary basis for selection.
The Balanced Fund's fixed-income securities consist of bonds, debentures, notes,
zero-coupon securities, mortgage-related securities, state, municipal or
industrial revenue bonds, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, certificates of deposit, time
deposits, high quality commercial paper, bankers' acceptances and variable
amount master demand notes. In addition, a portion of the Balanced Fund's assets
may from time to time be invested in first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Some of the securities in which the
Balanced Fund invests may have warrants or options attached. The Balanced Fund
may also invest in repurchase agreements.
The Balanced Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, as well as
"stripped" U.S. Treasury obligations ("Stripped
29 PROSPECTUS--Investor A Shares
<PAGE> 34
Treasury Obligations") such as Treasury receipts issued by the U.S. Treasury
representing either future interest or principal payments, and other obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities. See "RISK FACTORS AND INVESTMENT TECHNIQUES--Government
Obligations" below.
The Balanced Fund also expects to invest in bonds, notes and debentures of a
wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay and in the case of notes
and bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance.
The Balanced Fund will invest only in corporate fixed-income securities which
are rated at the time of purchase within the four highest rating groups assigned
by a nationally-recognized statistical rating organization ("NRSRO") or, if
unrated, which First of America deems present attractive opportunities and are
of comparable quality. For a description of the rating symbols of the NRSROs,
see the Appendix to the Statement of Additional Information. For a discussion of
fixed-income securities rated within the fourth highest rating group assigned by
an NRSRO, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Medium-Grade Securities"
herein.
The Balanced Fund may hold some short-term obligations (with maturities of 12
months or less) consisting of domestic and foreign commercial paper, variable
amount master demand notes, bankers' acceptances, certificates of deposit and
time deposits of domestic and foreign branches of U.S. banks and foreign banks,
and repurchase agreements. The Balanced Fund may also invest in securities of
other investment companies.
The Balanced Fund may also invest in obligations of the Export-Import Bank of
the United States, in U.S. dollar-denominated international bonds for which the
primary trading market is the United States ("Yankee Bonds"), or for which the
primary trading market is abroad ("Eurodollar Bonds"), and in Canadian Bonds and
bonds issued by institutions, such as the World Bank and the European Economic
Community, organized for a specific purpose by two or more sovereign governments
("Supranational Agency Bonds"). The Balanced Fund's investments in foreign
securities may be made either directly or through the purchase of ADRs and the
Balanced Fund may also invest in securities issued by foreign branches of U.S.
banks and foreign banks, in CCP, and in Europaper.
The amount invested in stock, bonds and cash reserves may be varied from time to
time, depending upon First of America's assessment of business, economic and
market conditions, including any potential advantage of price shifts between the
stock market and the bond market. The Balanced Fund reserves the right to hold
short-term securities in whatever proportion deemed desirable for temporary
defensive periods during adverse market conditions as determined by First of
America. However, to the extent that the Balanced Fund is so invested, its
investment objectives may not be achieved during that time.
Like any investment program, the Balanced Fund entails certain risks. As a Fund
investing primarily in common stocks the Balanced Fund is subject to stock
market risk, i.e., the possibility that stock prices in general will decline
over short or even extended periods.
Since the Balanced Fund also invests in bonds, investors in the Balanced Fund
are also exposed to bond market risk, i.e., fluctuations in the market value of
bonds. Bond prices are influenced primarily by changes in interest rate levels.
When interest rates rise, the prices of bonds generally fall; conversely, when
interest rates fall, bond prices generally rise. While bonds normally fluctuate
less in price than stock, there have been extended periods of cyclical increases
in interest rates that have caused significant declines in bond prices.
From time to time, the stock and bond markets may fluctuate independently of one
another. In other words, a decline in the stock market may in certain instances
be offset by a rise in the bond market, or vice versa. As a result the Balanced
Fund, with its balance of common stock and bond investments, is expected to
entail less investment risk (and a potentially smaller investment return) than a
mutual fund investing exclusively in common stocks.
PROSPECTUS--Investor A Shares 30
<PAGE> 35
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THE BALANCED FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio Securities
- -Medium-Grade Securities -Mortgage-Related Securities -Other Mutual Funds
- -Portfolio Turnover -Put and Call Options -Repurchase Agreements
- -Restricted Securities -Reverse Repurchase Agreements and -When-Issued and Delayed-Delivery
Dollar Roll Agreements Transactions
</TABLE>
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THE HIGH INCOME EQUITY FUND
The investment objective of the High Income Equity Fund is to seek current
income by investing in a diversified portfolio of high quality, dividend-paying
common stocks and securities convertible into common stocks. A secondary
investment objective of High Income Equity Fund is growth of capital.
The High Income Equity Fund, under normal market conditions, will invest at
least 80% of the value of its total assets in common stocks and securities
convertible into common stocks of companies believed by First of America to be
characterized by sound management, the ability to finance expected growth and
the ability to pay above-average dividends. The High Income Equity Fund may also
invest up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. The
High Income Equity Fund may also hold securities of other investment companies
and depository or custodial receipts representing beneficial interests in any of
the foregoing securities.
Subject to the foregoing policies, the High Income Equity Fund may also invest
up to 25% of its net assets in foreign securities either directly or through the
purchase of ADRs and may also invest in securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper. For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Foreign Securities" herein.
The High Income Equity Fund anticipates investing in securities that currently
have a high dividend yield, with the anticipation that the dividend will remain
constant or be increased in the future. These securities generally represent the
core holdings of this Fund. However, these holdings are balanced with lower
yielding but higher growth-oriented securities to achieve portfolio balance. All
securities must provide current income. Given its bias towards income, the High
Income Equity Fund may be considered more conservative than growth-oriented
equity funds such as the Group's Equity Fund and Small Capitalization Fund.
Consistent with the foregoing, the High Income Equity Fund will focus its
investments in those companies and types of companies that First of America
believes will enable such Fund to achieve its investment objective.
31 PROSPECTUS--Investor A Shares
<PAGE> 36
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THE HIGH INCOME EQUITY FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio Securities
- -Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
- -Put and Call Options -Repurchase Agreements -Restricted Securities
- -Reverse Repurchase Agreements and -When-Issued and Delayed-Delivery
Dollar Roll Agreements Transactions
</TABLE>
- --------------------------------------------------------------------------------
INCOME FUNDS
THE BOND FUND AND THE LIMITED MATURITY BOND FUND
The investment objective of the Bond Fund is to seek current income as well as
preservation of capital by investing in a portfolio of high- and medium-grade
fixed-income securities. The investment objective of the Limited Maturity Bond
Fund is to seek current income as well as preservation of capital by investing
in a portfolio of high- and medium-grade fixed-income securities with remaining
maturities of six years or less.
Under normal market conditions, the Bond Fund will invest at least 80% of the
value of its total assets in bonds, debentures, notes with remaining maturities
at the time of purchase of one year or more, zero-coupon securities,
mortgage-related securities, state, municipal or industrial revenue bonds,
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, debt securities convertible into, or exchangeable for, common
stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Bond Fund will invest in state and municipal securities
when, in the opinion of First of America, their yields are competitive with
comparable taxable debt obligations. In addition, up to 20% of the value of the
Bond Fund's total assets may be invested in preferred stocks, notes with
remaining maturities at the time of purchase of less than one year, short-term
debt obligations consisting of domestic and foreign commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit and time deposits of domestic and foreign branches of U.S. banks and
foreign banks, repurchase agreements, securities of other investment companies,
and guaranteed investment contracts ("GICs") issued by insurance companies, as
more fully described below. The Bond Fund intends that under normal market
conditions its portfolio will maintain an average weighted maturity of
approximately eight to twelve years. However, the Bond Fund may extend or
shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. Some of
the securities in which the Bond Fund invests may have warrants or options
attached.
Under normal market conditions, the Limited Maturity Bond Fund will invest at
least 80% of the value of its total assets in the following securities which
have remaining maturities of six years or less: bonds, debentures, notes with
remaining maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial revenue
bonds, obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, debt securities convertible into, or exchangeable for,
common stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Limited Maturity Bond Fund will invest in state and
municipal securities when, in the opinion of First of America, their yields are
competitive with comparable taxable debt obligations. In addition, up to 20% of
the value of the Limited Maturity Bond Fund's total assets may be invested in
the debt securities listed above without regard to maturity, as well as
preferred stocks, short-term debt obligations consisting of domestic and foreign
commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, repurchase agreements, securities of
other investment companies and GICs. Under normal market
PROSPECTUS--Investor A Shares 32
<PAGE> 37
conditions, the Limited Maturity Bond Fund expects to maintain a dollar-weighted
average portfolio maturity of its debt securities of three years or less. By
seeking to maintain a dollar-weighted average portfolio maturity of three years
or less, the Limited Maturity Bond Fund attempts to minimize the fluctuation in
its shares' net asset value relative to those funds which invest in longer-term
obligations. Some of the securities in which the Limited Maturity Bond Fund
invests may have warrants or options attached.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Bond Fund or the Limited
Maturity Bond Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The Bond Fund and Limited Maturity Bond Fund each expects to invest in a variety
of U.S. Treasury obligations, differing in their interest rates, maturities, and
times of issuance, as well as Stripped Treasury Obligations, and other
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. See "RISK FACTORS AND INVESTMENT TECHNIQUES--Government
Obligations" below.
The Bond Fund and the Limited Maturity Bond Fund each also expects to invest in
bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures will represent unsecured promises to pay,
in the case of notes and bonds may be secured by mortgages on real property or
security interests in personal property and will in most cases differ in their
interest rates, maturities and times of issuance.
The Bond Fund and the Limited Maturity Bond Fund each will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups assigned by an NRSRO or, if unrated, which First of
America deems present attractive opportunities and are of comparable quality.
For a discussion of debt securities rated within the fourth highest rating
groups assigned by the NRSROs, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Medium-Grade Securities" herein.
The Bond Fund and the Limited Maturity Bond Fund each may also invest in
obligations of the Export-Import Bank of the United States, in Yankee Bonds, in
Eurodollar Bonds, in Canadian Bonds and in Supranational Agency Bonds. Each of
the Bond Fund and Limited Maturity Bond Fund may also invest up to 25% of its
net assets in foreign securities either directly or through the purchase of ADRs
and may also invest in securities issued by foreign branches of U.S. banks and
foreign banks, in CCP, and in Europaper.
An increase in interest rates will generally reduce the value of the investments
in the Bond Fund and the Limited Maturity Bond Fund and a decline in interest
rates will generally increase the value of those investments. Depending upon the
prevailing market conditions, First of America may purchase debt securities at a
discount from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value, the
yield will be lower than the coupon rate. In making investment decisions for the
Bond Fund, First of America will consider many factors other than current yield,
including the preservation of capital, the potential for realizing capital
appreciation, maturity, and yield to maturity. In making investment decisions
for the Limited Maturity Bond Fund, First of America will consider many factors
other than current yield, including the preservation of capital, maturity, and
yield to maturity.
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THE BOND FUND AND THE LIMITED MATURITY BOND FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Guaranteed Investment Contracts
- -Lending Portfolio Securities -Medium-Grade Securities -Mortgage-Related Securities
- -Other Mutual Funds -Portfolio Turnover -Put and Call Options
- -Repurchase Agreements -Restricted Securities -Reverse Repurchase Agreements and
- -When-Issued and Delayed-Delivery Dollar Roll Agreements
Transactions
</TABLE>
- --------------------------------------------------------------------------------
33 PROSPECTUS--Investor A Shares
<PAGE> 38
THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
The investment objective of the Intermediate Government Obligations Fund is to
seek current income with preservation of capital by investing in U.S. government
securities with remaining maturities of twelve years or less.
Under normal market conditions, the Intermediate Government Obligations Fund
will invest at least 80% of its total assets in obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities and with remaining
maturities of twelve years or less, although up to 20% of the value of its total
assets may be invested in debt securities, preferred stocks and other
investments without regard to maturity, except as set forth below. Under normal
market conditions, the Intermediate Government Obligations Fund expects to
maintain a dollar-weighted average portfolio maturity of its debt securities of
three to ten years. By seeking to maintain a dollar-weighted average portfolio
maturity of three to ten years, the Intermediate Government Obligations Fund
attempts to minimize the fluctuation in its shares' net asset value relative to
funds which invest in longer-term obligations.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Intermediate Government
Obligations Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The types of U.S. government obligations invested in by the Intermediate
Government Obligations Fund will include obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Treasury, such as Treasury bills, notes, bonds and certificates of indebtedness,
and government securities, as described below in "RISK FACTORS AND INVESTMENT
TECHNIQUES-- Government Obligations."
The Intermediate Government Obligations Fund may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, as more fully described below under "RISK FACTORS AND
INVESTMENT TECHNIQUES--Government Obligations."
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THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Futures Contracts
- -Government Obligations -Lending Portfolio Securities -Mortgage-Related
- -Municipal Securities -Other Mutual Funds Securities
- -Put and Call Options -Repurchase Agreements -Portfolio Turnover
- -Reverse Repurchase Agreements -When-Issued and -Restricted Securities
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE GOVERNMENT INCOME FUND
The investment objective of the Government Income Fund is to provide
shareholders with a high level of current income consistent with prudent
investment risk.
Under normal market conditions, the Government Income Fund will invest at least
65% of its total assets in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, although up to 35% of the value
of its total assets may be invested in debt securities and preferred stocks of
non-governmental issuers. Consistent with the foregoing, under current market
conditions, the Government Income Fund intends to invest up to 80% of the value
of its total assets in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. The Government Income Fund
also may invest up to 35% of its total assets in mortgage-related securities
issued by non-governmental entities and in other securities described below. For
more information, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Mortgage-Related
Securities," below.
The types of U.S. government obligations, including mortgage-related securities,
invested in by the Government Income Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes and bonds, Stripped Treasury
Obligations and government securities, as described below in "RISK FACTORS AND
INVESTMENT TECHNIQUES--Government Obligations".
PROSPECTUS--Investor A Shares 34
<PAGE> 39
The Government Income Fund may also hold short-term obligations (with maturities
of 12 months or less) consisting of domestic and foreign commercial paper
(including variable amount master demand notes), rated at the time of purchase
within the top two rating groups assigned by an NRSRO or, if unrated, which
First of America deems present attractive opportunities and are of comparable
quality, bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
and reverse repurchase agreements. The Government Income Fund may also invest in
corporate debt securities which are rated at the time of purchase within the top
three rating groups assigned by an NRSRO or, if unrated, which First of America
deems present attractive opportunities and are of comparable quality.
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THE GOVERNMENT INCOME FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Foreign Securities
- -Futures Contracts -Government Obligations -Lending Portfolio
- -Mortgage-Related Securities -Other Mutual Funds Securities
- -Put and Call Options -Repurchase Agreements -Portfolio Turnover
- -Reverse Repurchase Agreements -When-Issued and -Restricted Securities
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
TAX-FREE INCOME FUNDS
THE MUNICIPAL BOND FUND AND THE MICHIGAN BOND FUND
The investment objective of the Municipal Bond Fund is to seek current interest
income which is exempt from federal income taxes and preservation of capital.
The investment objective of the Michigan Bond Fund is to seek income which is
exempt from federal income tax and Michigan state income and intangibles taxes,
although such income may be subject to the federal alternative minimum tax when
received by certain shareholders, and preservation of capital.
Under normal market conditions and as a fundamental policy, at least 80% of the
net assets of the Municipal Bond Fund will be invested in a diversified
portfolio of Municipal Securities, and at least 80% of the net assets of the
Michigan Bond Fund will be invested in a portfolio of Michigan Municipal
Securities.
"Municipal Securities" include obligations consisting of bonds, notes and
commercial paper, issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and other political subdivisions,
agencies, instrumentalities and authorities, the interest on which is both
exempt from federal income taxes and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax. "Michigan
Municipal Securities" include debt obligations, consisting of notes, bonds and
commercial paper, issued by or on behalf of the State of Michigan, its political
subdivisions, municipalities and public authorities, the interest on which is,
in the opinion of bond counsel to the issuer, exempt from federal income tax and
Michigan state income and intangibles taxes (but may be treated as a preference
item for individuals for purposes of the federal alternative minimum tax) and
debt obligations issued by the government of Puerto Rico, the U.S. territories
and possessions of Guam, the U.S. Virgin Islands or such other governmental
entities whose debt obligations, either by law or treaty, generate interest
income which is exempt from federal and Michigan state income and intangibles
taxes. For more information regarding Municipal Securities and Michigan
Municipal Securities, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Municipal
Securities," below.
Under normal market conditions, at least 65% of the net assets of each of the
Municipal Bond Fund and the Michigan Bond Fund will be invested in Municipal
Securities (Michigan Municipal Securities in the case of the Michigan Bond Fund)
consisting of bonds and notes with remaining maturities at the time of purchase
of one year or more. Quality is the primary consideration in selecting Michigan
Municipal Securities for investment by the Michigan Bond Fund.
35 PROSPECTUS--Investor A Shares
<PAGE> 40
The Municipal Bond Fund also intends that under normal market conditions its
portfolio will maintain an average weighted maturity of approximately eight to
ten years and an average weighted rating of AA/Aa. The Michigan Bond Fund
intends that, under normal market conditions, it will be invested in long-term
Michigan Municipal Securities and that the average weighted maturity of such
investments will be 5 to 12 years, although the Michigan Bond Fund may invest in
Michigan Municipal Securities of any maturity and First of America may extend or
shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. In
addition, the average weighted rating of a Tax-Free Income Fund's portfolio may
vary depending upon the availability of suitable Municipal Securities or other
relevant market factors.
The Michigan Bond Fund invests in Michigan Municipal Securities which are rated
at the time of purchase within the four highest rating groups assigned by an
NRSRO or, in the case of notes, tax-exempt commercial paper or variable rate
demand obligations, rated within the two highest rating groups assigned by an
NRSRO. The Michigan Bond Fund may also purchase Michigan Municipal Securities
which are unrated at the time of purchase but are determined to be of comparable
quality by First of America pursuant to guidelines approved by the Group's Board
of Trustees. The applicable Michigan Municipal Securities ratings are described
in the Appendix to the Statement of Additional Information. For a description of
debt securities rated within the fourth highest rating groups assigned by the
NRSROs, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Medium-Grade Securities"
herein.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Tax-Free Income Funds will not treat these
bonds as "Municipal Securities" or "Michigan Municipal Securities" for purposes
of measuring compliance with the 80% tests described above. To the extent the
Tax-Free Income Funds invest in these bonds, individual shareholders, depending
on their own tax status, may be subject to alternative minimum tax on that part
of the Tax-Free Income Funds' distributions derived from these bonds. For
further information relating to the types of municipal securities which will be
included in income subject to alternative minimum tax, see "ADDITIONAL
INFORMATION--Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information.
Investments of the Tax-Free Income Funds may be made in taxable obligations if,
for example, suitable tax-exempt obligations are unavailable or if acquisition
of U.S. government or other taxable securities is deemed appropriate for
temporary defensive purposes as determined by First of America to be warranted
due to market conditions. Such taxable obligations consist of government
securities, certificates of deposit, time deposits and bankers' acceptances of
selected banks, commercial paper meeting the Tax-Free Income Funds' quality
standards for tax-exempt commercial paper (as described above), and such taxable
obligations as may be subject to repurchase agreements. These obligations are
described further in the Statement of Additional Information. Under such
circumstances and during the period of such investment, the affected Tax-Free
Income Fund may not achieve its stated investment objectives.
Although the Municipal Bond Fund may invest more than 25% of its net assets in
(i) Municipal Securities whose issuers are in the same state, (ii) Municipal
Securities the interest on which is paid solely from revenues of similar
projects, and (iii) private activity bonds, it does not presently intend to do
so on a regular basis. To the extent the Municipal Bond Fund's assets are
concentrated in Municipal Securities that are payable from the revenues of
similar projects or are issued by issuers located in the same state, or are
concentrated in private activity bonds, the Municipal Bond Fund will be subject
to the peculiar risks presented by the laws and economic conditions relating to
such states, projects and bonds to a greater extent than it would be if its
assets were not so concentrated.
Because the Michigan Bond Fund invests primarily in securities issued by the
State of Michigan and its political subdivisions, municipalities and public
authorities, the Michigan Bond Fund's performance is closely tied to the general
economic conditions within the State as a whole and to the economic conditions
within particular industries and geographic areas represented or located within
the State. However, the Michigan Bond Fund attempts to diversify, to the extent
First of America deems appropriate, among issuers and geographic areas in the
State of Michigan.
PROSPECTUS--Investor A Shares 36
<PAGE> 41
The Michigan Bond Fund is classified as a "non-diversified" investment company,
which means that the amount of assets of the Michigan Bond Fund that may be
invested in the securities of a single issuer is not limited by the Investment
Company Act of 1940, as amended (the "1940 Act"). Nevertheless, the Michigan
Bond Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which requires the Michigan Bond Fund generally to invest,
with respect to 50% of its total assets, not more than 5% of such assets in the
obligations of a single issuer; as to the remaining 50% of its total assets, the
Michigan Bond Fund is not so restricted. In no event, however, may the Michigan
Bond Fund invest more than 25% of its total assets in the obligations of any one
issuer. Compliance with this requirement is measured at the close of each
quarter of the Michigan Bond Fund's taxable year. Since a relatively high
percentage of the Michigan Bond Fund's assets may be invested in the obligations
of a limited number of issuers, some of which may be within the same economic
sector, the Michigan Bond Fund's portfolio securities may be more susceptible to
any single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
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TAX-FREE INCOME FUNDS
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
-Complex Securities -Foreign Currency Transactions -Futures Contracts (Municipal
-Government Obligations -Lending Portfolio Securities Bond Fund Only)
-Medium-Grade Securities -Mortgage-Related Securities -Municipal Securities
-Other Mutual Funds -Portfolio Turnover -Private Activity Bonds
-Put and Call Options -Repurchase Agreements -Restricted Securities
-Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
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MONEY MARKET FUNDS
THE U.S. GOVERNMENT OBLIGATIONS FUND, THE PRIME OBLIGATIONS FUND, THE TREASURY
FUND AND THE TAX-FREE FUND
The investment objective of each of the U.S. Government Obligations Fund, the
Prime Obligations Fund and the Treasury Fund is to seek current income with
liquidity and stability of principal. The investment objective of the Tax-Free
Fund is to seek as high a level of current interest income free from federal
income taxes as is consistent with the preservation of capital and relative
stability of principal.
Under normal market conditions, the U.S. Government Obligations Fund invests at
least 65% of the value of its total assets in short-term U.S. Treasury bills,
notes, and other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities. The Prime Obligations Fund invests in high-
quality money market instruments, including Municipal Securities and other
instruments deemed to be of comparable high quality as determined by the Board
of Trustees. Under normal market conditions, the Treasury Fund invests
exclusively in obligations issued or guaranteed by the U.S. Treasury, its
agencies or instrumentalities and in repurchase agreements related to such
securities. As a matter of fundamental policy, under normal market conditions,
at least 80% of the Tax-Free Fund's total assets will be invested in Municipal
Securities.
The U.S. Government Obligations Fund may invest up to 35% of the value of its
total assets in high-quality money market instruments, including Municipal
Securities, bankers' acceptances, certificates of deposit, time deposits, and
other instruments deemed to be of comparable high quality as determined by the
Board of Trustees.
The Tax-Free Fund may invest up to 20% of its total assets in obligations the
interest on which is either subject to federal income taxation or treated as a
preference item for purposes of the federal alternative minimum tax ("Taxable
Obligations"). If deemed appropriate for temporary defensive purposes, the Tax-
Free Fund may increase its holdings in Taxable Obligations to over 20% of its
total assets and may also
37 PROSPECTUS--Investor A Shares
<PAGE> 42
hold uninvested cash reserves pending investment. Taxable Obligations may
include obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit and bankers' acceptances of selected banks, and
commercial paper meeting the Tax-Free Fund's quality standards for tax-exempt
commercial paper (as described below). These obligations are described further
in the Statement of Additional Information.
As a money market fund, each Money Market Fund invests exclusively in United
States dollar-denominated instruments which the Trustees of the Group and First
of America determine present minimal credit risks and which at the time of
acquisition are rated by one or more NRSROs in one of the two highest rating
groups for short-term debt obligations or, if unrated, are of comparable
quality. In addition, each of the U.S. Government Obligations Fund, the Prime
Obligations Fund and the Treasury Fund diversifies its investments so that, with
minor exceptions and except for United States government securities, not more
than 5% of its total assets is invested in the securities of any one issuer, not
more than 5% of its total assets is invested in securities of all issuers rated
by an NRSRO at the time of investment in the second highest rating group for
short-term debt obligations or deemed to be of comparable quality to securities
rated in the second highest rating group for short-term debt obligations (either
referred to as "Second Tier Securities") and not more than the greater of 1% of
total assets or $1 million is invested in the Second Tier Securities of one
issuer. All securities or instruments in which a Money Market Fund invests have
remaining maturities of 397 calendar days (thirteen months) or less. The
dollar-weighted average maturity of the obligations in a Money Market Fund will
not exceed 90 days.
The Prime Obligations Fund and, within the limitations described above, the U.S.
Government Obligations Fund may invest in short-term promissory notes issued by
corporations (including variable amount master demand notes) rated at the time
of purchase within the two highest rating groups assigned by an NRSRO or, if not
rated, found by the Group's Board of Trustees to be of comparable quality.
Instruments may be purchased in reliance upon a rating only when the rating
organization is not affiliated with the issuer or guarantor of the instrument.
For a description of the rating groups of the NRSROs, see the Appendix to the
Statement of Additional Information. The Prime Obligations Fund may also invest
in CCP, Europaper, bankers' acceptances, certificates of deposit and time
deposits.
Each of the Money Market Funds may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying security, a dealer in the security, or by another
third party, and may not be transferred separately from the underlying security.
The Money Market Funds use these arrangements to provide liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership, or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable after a payment
default on the underlying security may be treated as a form of credit
enhancement.
Certain of the Money Market Funds' permitted investments may have received
credit enhancement by a guaranty, letter of credit, or insurance. The Money
Market Funds may evaluate the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the entity
providing the credit enhancement, rather than the issuer. The bankruptcy,
receivership, or default of an entity providing credit enhancement may adversely
affect the quality and marketability of the underlying security.
Pursuant to the requirements of Rule 2a-7 adopted under the Investment Company
Act of 1940, each of the Money Market Funds will limit its investment, with
respect to 75% of its assets, in the demand features of a single issuer to 10%
of the Fund's assets. With respect to the remaining 25% of a Money Market Fund's
assets, the Fund may invest in securities subject to demand features from, or
directly issued by, one or more institutions, provided they are rated in the
highest rating category assigned by an NRSRO and are issued by a "non-controlled
person," as defined in the Rule. In addition, a demand feature, other than a
standby commitment, may be acquired by a Money Market Fund only if the demand
feature or its issuer has received a short-term rating from an NRSRO and not
more than 5% of the Fund's
PROSPECTUS--Investor A Shares 38
<PAGE> 43
assets are invested in demand features from a single issuer rated in the second
highest short-term rating category assigned by an NRSRO.
Each of the Money Market Funds intends to follow the operational policies
described above, as well as other non-fundamental policies that will enable the
Fund to comply with the laws and regulations applicable to money market mutual
funds, particularly Rule 2a-7 under the 1940 Act. Each of the Money Market Funds
shall determine the effective maturity of its investments, the applicable credit
rating of securities, and adequate diversification by reference to Rule 2a-7.
Each of the Money Market Funds may change its operational policies to reflect
changes in the laws and regulations applicable to money market mutual funds
without shareholder approval.
The Tax-Free Fund may acquire zero-coupon obligations, which have greater price
volatility than coupon obligations and which will not result in the payment of
interest until maturity. Additionally, the Tax-Free Fund, within the limitations
described above and subject to the quality standards for tax-exempt commercial
paper described below, may invest in commercial paper.
Although the Tax-Free Fund presently does not intend to do so on a regular
basis, it may invest more than 25% of its assets in Municipal Securities which
are related in such a way that an economic, business, or political development
or change affecting one such security would likewise affect the other Municipal
Securities. Examples of such securities are obligations the repayment of which
is dependent upon similar types of projects or projects located in the same
state. Such investments would be made only if deemed necessary or appropriate by
the Investment Adviser. To the extent that the Tax-Free Fund's assets are
concentrated in Municipal Securities that are so related, the Tax-Free Fund will
be subject to the peculiar risks presented by such Municipal Securities, such as
negative developments in a particular industry or state, to a greater extent
than it would be if the Tax-Free Fund's assets were not so concentrated.
Variable amount master demand notes in which the U.S. Government Obligations
Fund and the Prime Obligations Fund may invest are unsecured demand notes that
permit the indebtedness thereunder to vary, and that provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. First of America will consider the
earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand. The period of time remaining until the principal
amount can be recovered under a variable master demand note shall not exceed
seven days.
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MONEY MARKET FUNDS
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
-Complex Securities (except -Foreign Securities -Government Obligations
Treasury Fund) -Guaranteed Investment Contracts -Lending Portfolio Securities
-Municipal Securities (except (Prime Obligations Fund only) -Portfolio Turnover
Treasury Fund) -Private Activity Bonds -Put and Call Options (Tax-Free
-Repurchase Agreements (Tax-Free Fund Only) Fund)
-Reverse Repurchase Agreements -When-Issued and -Restricted Securities (except
and Dollar Roll Agreements Delayed-Delivery Treasury Fund)
Transactions
</TABLE>
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39 PROSPECTUS--Investor A Shares
<PAGE> 44
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in a Fund entails certain risks. The
Funds will not acquire portfolio securities issued by, make savings deposits in,
or enter into repurchase, reverse repurchase or dollar roll agreements with
First of America Bank-Michigan, N.A. ("FOA-Michigan," the parent corporation of
First of America), BISYS, or their affiliates, and will not give preference to
FOA-Michigan's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements, reverse repurchase agreements and
dollar roll agreements.
COMPLEX SECURITIES
Some of the investment techniques utilized by First of America, and in the case
of the International Fund and Balanced Fund, Gulfstream, in the management of
each of the Funds (with the exception of the Treasury Fund) involve complex
securities sometimes referred to as "derivatives." Among such securities are put
and call options, foreign currency transactions and futures contracts, all of
which are described below. The Investment Adviser and Subadviser believe that
such complex securities may, in some circumstances, play a valuable role in
successfully implementing each Fund's investment strategy and achieving its
goals. However, because complex securities and the strategies for which they are
used, are by their nature complicated, they present substantial opportunities
for misunderstanding and misuse. To guard against these risks, the Investment
Adviser and Subadviser will utilize complex securities primarily for hedging,
not speculative, purposes and only after careful review of the unique risk
factors associated with each such security.
FOREIGN SECURITIES
The International Fund invests primarily in the securities of foreign issuers.
The Balanced Fund may invest up to 15% of its total assets in foreign
securities. The Equity Fund, Small Capitalization Fund, Large Capitalization
Fund and High Income Equity Fund may invest in foreign securities as permitted
by their respective investment policies. Each of the Bond Fund and Limited
Maturity Bond Fund may invest up to 25% of its net assets in foreign securities
either directly or through the purchase of ADRs and may also invest in
securities issued by foreign branches of U.S. banks and foreign banks, in CCP,
and in Europaper. The Government Income Fund, the U.S. Government Obligations
Fund, the Prime Obligations Fund and the Tax-Free Fund may invest in foreign
securities by purchasing: Eurodollar certificates of deposit ("ECDs"), which are
U.S. dollar-denominated certificates of deposit issued by offices of foreign and
domestic banks outside the U.S.; Eurodollar time deposits ("ETDs"), which are
U.S. dollar-denominated deposits in a foreign branch of a U.S. or foreign bank;
Canadian time deposits ("CTDs"), which are essentially the same as ETDs, except
that they are issued by Canadian offices of major Canadian banks; Yankee
certificates of deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank but held in
the U.S.; CCP; and Europaper.
Investment in foreign securities is subject to special investment risks that
differ in some respects from those related to investments in securities of U.S.
domestic issuers. Such risks include political, social or economic instability
in the country of the issuer, the difficulty of predicting international trade
patterns, the possibility of the imposition of exchange controls, expropriation,
limits on removal of currency or other assets, nationalization of assets,
foreign withholding and income taxation, and foreign trading practices
(including higher trading commissions, custodial charges and delayed
settlements). Such securities may be subject to greater fluctuations in price
than securities issued by U.S. corporations or issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The markets on which such
securities trade may have less volume and liquidity, and may be more volatile
than securities markets in the U.S. In addition, there may be less publicly
available information about a foreign company than about a U.S.-domiciled
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the United
States. Confiscatory taxation or diplomatic developments could also affect
investment in those countries. In addition, foreign branches of U.S. banks,
foreign banks and foreign issuers may be
PROSPECTUS--Investor A Shares 40
<PAGE> 45
subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and record keeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic issuers.
In many instances, foreign debt securities may provide higher yields than
securities of domestic issuers which have similar maturities and quality. Under
certain market conditions these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Finally, in the event of a default of any such foreign debt obligations, it may
be more difficult for a Fund to obtain or to enforce a judgment against the
issuers of such securities. If a security is denominated in foreign currency,
the value of the security to the Fund will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of any
foreign currency against the U.S. dollar will result in a corresponding change
in the U.S. dollar value of a Fund's securities denominated in that currency.
Such changes will also affect a Fund's income and distributions to shareholders.
In addition, although a Fund will receive income on foreign securities in such
currencies, such Fund will be required to compute and distribute its income in
U.S. dollars. Therefore, if the exchange rate for any such currency declines
materially after such Fund's income has been accrued and translated into U.S.
dollars, the Fund could be required to liquidate portfolio securities to make
required distributions. Similarly, if an exchange rate declines between the time
a Fund incurs expenses in U.S. dollars and the time such expenses are paid, the
amount of such currency required to be converted into U.S. dollars in order to
pay such expenses in U.S. dollars will be greater.
U.S. dollar-denominated ADRs, which are traded in the United States on exchanges
or over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate all of the risk inherent in investing
in the securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, a Fund can avoid currency risks during the
settlement period for either purchases or sales. In general, there is a large,
liquid market in the United States for many ADRs. The information available for
ADRs is subject to the accounting, auditing and financial reporting standards of
the domestic market or exchange on which they are traded, standards which are
more uniform and more exacting than those to which many foreign issuers may be
subject. The International Fund and Balanced Fund may also invest in EDRs, which
are receipts evidencing an arrangement with a European bank similar to that for
ADRs and designed for use in the European securities markets. EDRs are not
necessarily denominated in the currency of the underlying security.
Certain of the ADRs and EDRs, typically those categorized as unsponsored,
require their holders to bear most of the costs of such facilities while issuers
of sponsored facilities normally pay more of the costs. The depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through the voting rights to facility holders with respect to the deposited
securities, whereas the depository of a sponsored facility typically distributes
shareholder communications and passes through the voting rights.
Subject to its applicable investment policies, each of the Growth Funds and
Growth and Income Funds may invest in debt securities denominated in the ECU,
which is a "basket" unit of currency consisting of specified amounts of the
currencies of certain of the twelve member states of the European Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies. Such adjustments may adversely affect holders of
ECU-denominated obligations or the marketability of such securities. European
governments and supranationals, in particular, issue ECU-denominated
obligations.
FOREIGN CURRENCY TRANSACTIONS
Each of the Funds, with the exception of the Money Market Funds and the Tax-Free
Income Funds, may utilize foreign currency transactions in its portfolio. The
value of the assets of a Fund as measured in United States dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and a Fund may incur costs in connection with
conversions between various currencies. A Fund will conduct its foreign currency
exchange transactions either on a
41 PROSPECTUS--Investor A Shares
<PAGE> 46
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through forward contracts to purchase or sell foreign
currencies. A forward foreign currency exchange contract ("forward currency
contracts") involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
forward currency contracts are traded directly between currency traders (usually
large commercial banks) and their customers. The Funds may enter into forward
currency contracts in order to hedge against adverse movements in exchange rates
between currencies.
For example, when a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the United
States dollar cost or proceeds, as the case may be. By entering into a forward
currency contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, such
Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the United States dollar and such foreign currency. Additionally, for example,
when a Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward currency sale contract to
sell an amount of that foreign currency approximating the value of some or all
of that Fund's portfolio securities or other assets denominated in such foreign
currency. Alternatively, when a Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
currency purchase contract to buy that foreign currency for a fixed U.S. dollar
amount; however, this tends to limit potential gains which might result from a
positive change in such currency relationships. A Fund may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.
The forecasting of short-term currency market movement is extremely difficult
and whether such a short-term hedging strategy will be successful is highly
uncertain. It is impossible to forecast with precision the market value of
portfolio securities at the expiration of a forward currency contract.
Accordingly, it may be necessary for a Fund to purchase additional currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency such Fund is obligated
to deliver when a decision is made to sell the security and make delivery of the
foreign currency in settlement of a forward contract. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency such Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward currency contract prices. If the
Fund engages in an offsetting transaction, it may subsequently enter into a new
forward currency contract to sell the foreign currency. Should forward prices
decline during the period between a Fund's entering into a forward currency
contract for the sale of foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, such Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, such Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
The Funds will have to convert their holdings of foreign currencies into United
States dollars from time to time. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies.
The International Fund does not intend to enter into forward currency contracts
if more than 15% of the value of its total assets would be committed to such
contracts on a regular or continuous basis. The International Fund does not
intend to enter into forward currency contracts or to maintain a net exposure in
such contracts where the International Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
PROSPECTUS--Investor A Shares 42
<PAGE> 47
For further information about the characteristics, risks and possible benefits
of options, futures and foreign currency transactions, see "INVESTMENT
OBJECTIVES AND POLICIES--Additional Information on Portfolio Instruments" in the
Statement of Additional Information.
FUTURES CONTRACTS
The Growth Funds, the Growth and Income Funds, the Income Funds and the
Municipal Bond Fund may also enter into contracts for the future delivery of
securities or foreign currencies and futures contracts based on a specific
security, class of securities, foreign currency or an index, purchase or sell
options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
A Fund may engage in such futures contracts in an effort to hedge against market
risks. For example, when interest rates are expected to rise or market values of
portfolio securities are expected to fall, a Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
a Fund, through the purchase of such contracts, can attempt to secure better
rates or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
The acquisition of put and call options on futures contracts will, respectively,
give a Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of a Fund's total assets, and the value of
securities that are the subject of such futures and options (both for receipt
and delivery) may not exceed one-third of the market value of a Fund's total
assets. Futures transactions will be limited to the extent necessary to maintain
each Fund's qualification as a regulated investment company.
Futures transactions involve brokerage costs and require a Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of a Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities or foreign currencies,
limiting the Fund's ability to hedge effectively against interest rate, exchange
rate and/or market risk and giving rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.
GOVERNMENT OBLIGATIONS
The U.S. Government Obligations Fund will invest primarily in obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities.
Subject to the investment parameters described above, each of the remaining
Funds may also invest in such obligations. The Treasury Fund, however, will
invest exclusively in obligations issued or guaranteed by the U.S. Treasury and
in repurchase agreements backed by such securities.
The types of U.S. government obligations in which each of these Funds may invest
include U.S. Treasury notes, bills, bonds, and any other securities directly
issued by the U.S. government for public investment, which differ only in their
interest rates, maturities, and times of issuance. Stripped Treasury Obligations
are also permissible instruments. Stripped securities are issued at a discount
to their "face value" and may exhibit greater price volatility than ordinary
debt securities because of the manner in which their principal and interest are
returned to investors. The Stripped Treasury Obligations in which the Money
Market Funds may invest do not include certificates of accrual on Treasury
securities ("CATS") or Treasury income growth receipts ("TIGRs").
43 PROSPECTUS--Investor A Shares
<PAGE> 48
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association ("GNMA"), are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Federal National Mortgage Association ("FNMA"), are supported by the right of
the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association ("SLMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Funds which may
invest in these government obligations will invest in the obligations of such
agencies or instrumentalities only when First of America believes that the
credit risk with respect thereto is minimal.
GUARANTEED INVESTMENT CONTRACTS
The Bond Fund, the Limited Maturity Bond Fund and the Prime Obligations Fund may
invest in guaranteed investment contracts ("GICs"). When investing in GICs, the
Bond Fund the Limited Maturity Bond Fund and the Prime Obligations Fund make
cash contributions to a deposit fund of an insurance company's general account.
The insurance company then credits guaranteed interest to the deposit fund on a
monthly basis. The GICs provide that this guaranteed interest will not be less
than a certain minimum rate. The insurance company may assess periodic charges
against a GIC for expenses and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. The Bond Fund and the
Limited Maturity Bond Fund may invest in GICs of insurance companies without
regard to the ratings, if any, assigned to such insurance companies' outstanding
debt securities. The Prime Obligations Fund may only invest in GICs that have
received to requisite ratings by one or more NRSROs, see "MONEY MARKET FUNDS" in
this prospectus. Because a Fund may not receive the principal amount of a GIC
from the insurance company on seven days' notice or less, the GIC is considered
an illiquid investment. For each of the Bond Fund and Limited Maturity Bond
Fund, no more than 15% of its total assets will be invested in instruments which
are considered to be illiquid. For the Prime Obligations Fund, no more than 10%
of its total assets may be invested in instruments which are considered to be
illiquid. In determining average portfolio maturity, GICs will be deemed to have
a maturity equal to the period of time remaining until the next readjustment of
the guaranteed interest rate.
MEDIUM-GRADE SECURITIES
Each of the Balanced Fund, Bond Fund, Limited Maturity Bond Fund, Municipal Bond
Fund and Michigan Bond Fund may invest in fixed-income securities rated within
the fourth highest rating group assigned by an NRSRO (i.e., BBB or Baa by S&P
and Moody's, respectively) and comparable unrated securities as determined by
the Investment Adviser. These types of fixed-income securities are considered by
the NRSROs to have some speculative characteristics, and are more vulnerable to
changes in economic conditions, higher interest rates or adverse issuer-specific
developments which are more likely to lead to a weaker capacity to make
principal and interest payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a fixed-income security purchased
by any of the Funds listed above to fall below the fourth highest rating, First
of America will consider such an event in determining whether the Fund should
continue to hold that security. In no event, however, would the Fund be required
to liquidate any such portfolio security where the Fund would suffer a loss on
the sale of such security.
MORTGAGE-RELATED SECURITIES
The Government Income Fund intends to invest up to 80% of the value of its total
assets in mortgage-related securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. However, the Government Income
Fund may invest greater amounts as conditions warrant. Each of the remaining
Funds, except the International Fund, may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Such agencies or instrumentalities
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include GNMA, FNMA and FHLMC. Each of the Balanced Fund, Bond Fund, Limited
Maturity Bond Fund, Intermediate Government Obligations Fund, Government Income
Fund, Prime Obligations Fund and U.S. Government Obligations Fund may also
invest in mortgage-related securities issued by non-governmental entities which
are rated, at the time of purchase, within the three highest bond rating
categories assigned by an NRSRO or, if unrated, which First of America deems
present attractive opportunities and are of comparable quality.
The mortgage-related securities in which the these Funds may invest have
mortgage obligations backing such securities, consisting of conventional
thirty-year fixed-rate mortgage obligations, graduated payment mortgage
obligations, fifteen-year mortgage obligations and adjustable-rate mortgage
obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Because the prepayment
characteristics of the underlying mortgage obligations vary, it is not possible
to predict accurately the realized yield or average life of a particular issue
of pass-through certificates. Prepayment rates are important because of their
effect on the yield and price of the securities. Accelerated prepayments have an
adverse impact on yields for pass-throughs purchased at a premium (i.e., a price
in excess of principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-throughs purchased at a
discount. The Fund may purchase mortgage-related securities at a premium or at a
discount.
If a Fund purchases a mortgage-related security at a premium, that portion may
be lost if there is a decline in the market value of the security, whether
resulting from changes in interest rates or prepayments in the underlying
mortgage collateral. As with other interest-bearing securities, the prices of
such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-related security may decline when interest rates
rise, the converse is not necessarily true, since in periods of declining
interest rates the mortgages underlying the securities are prone to prepayment,
thereby shortening the average life of the security and shortening the period of
time over which income at the higher rate is received. When interest rates are
rising, though, the rate of prepayment tends to decrease, thereby lengthening
the period of time over which income at the lower rate is received. For these
and other reasons, a mortgage-related security's average maturity may be
shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return to the
Fund. In addition, regular payments received with respect to mortgage-related
securities include both interest and principal. No assurance can be given as to
the return a Fund will receive when these amounts are reinvested.
The principal governmental (i.e., backed by the full faith and credit of the
United States government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned United States government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the United States government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of mortgages insured by the Federal Housing Administration
or guaranteed by the Veterans Administration.
Government-related (i.e., not backed by the full faith and credit of the United
States government) guarantors include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States government. FHLMC is a corporate instrumentality of the
United States government whose stock is owned by the twelve Federal Home Loan
Banks. Participation certificates issued by FHLMC are guaranteed
45 PROSPECTUS--Investor A Shares
<PAGE> 50
as to the timely payment of interest and ultimate collection of principal but
are not backed by the full faith and credit of the United States government.
The Government Income Fund also may invest up to 35% of its total assets in
mortgage-related securities issued by non-governmental entities and in other
securities described below. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issues also create pass-through pools of conventional residential
mortgage loans. Such issuers may also be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers will be considered in
determining whether a mortgage-related security meets a Fund's investment
quality standards. There can be no assurance that the private insurers can meet
their obligations under the policies. The Government Income Fund may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the loan experience and practices of the poolers First of America
determines that the securities meet the Government Income Fund's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. The Government Income Fund will not purchase mortgage-related
securities or any other assets which in First of America's opinion are illiquid
if, as a result, more than 15% of the value of the Government Income Fund's
total assets will be illiquid.
Mortgage-related securities in which the above-named Funds may invest may also
include collateralized mortgage obligations ("CMOs"). CMOs are debt obligations
issued generally by finance subsidiaries or trusts that are secured by
mortgage-backed certificates, including, in many cases, certificates issued by
government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations.
The Government Income Fund expects that governmental, government-related or
private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments; that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may differ from customary long-term fixed-rate mortgages. As new types
of mortgage-related securities are developed and offered to investors, First of
America will, consistent with the Government Income Fund's investment objective,
policies and quality standards, consider making investments in such new types of
securities.
MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities (Michigan Municipal
Securities, in the case of the Michigan Bond Fund) which may be held by the Bond
Fund, Limited Maturity Bond Fund, Municipal Bond Fund, Michigan Bond Fund, Prime
Obligations Fund, U.S. Government Obligations Fund and Tax-Free Fund are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by the Municipal Bond and Michigan Bond Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
PROSPECTUS--Investor A Shares 46
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The above-named Funds may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Each of the above-named Funds invests primarily in Municipal Securities which
are rated at the time of purchase within the four highest rating groups assigned
by an NRSRO or in the highest rating group assigned by an NRSRO in the case of
notes, tax-exempt commercial paper or variable rate demand obligations. These
Funds may also purchase Municipal Securities which are unrated at the time of
purchase but determined to be of comparable quality by First of America pursuant
to guidelines approved by the Group's Board of Trustees. The applicable
Municipal Securities ratings are described in the Appendix to the Statement of
Additional Information. For a discussion of debt securities rated within the
fourth highest rating group assigned by an NRSRO, see "RISK FACTORS AND
INVESTMENT TECHNIQUES--Medium-Grade Securities."
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Funds nor First of
America will review the proceedings relating to the issuance of Municipal
Securities or the basis for such opinions.
Municipal Securities and Michigan Municipal Securities purchased by the Tax-Free
Income Funds may include rated and unrated variable and floating rate tax-exempt
notes. A variable rate note is one whose terms provide for the adjustment of its
interest rate on set dates and which, upon such adjustment, can reasonably be
expected to have a market value that approximates its par value. A floating rate
note is one whose terms provide for the adjustment of its interest rate whenever
a specified interest rate changes and which, at any time, can reasonably be
expected to have a market value that approximates its par value. Such notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by the Tax-Free Income Funds will be determined by
First of America, under guidelines established by the Group's Board of Trustees,
to be of comparable quality at the time of purchase to rated instruments
eligible for purchase under the Funds' investment policies. In making such
determinations, First of America will consider the earning power, cash flow and
other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. There may be no active secondary
market with respect to a particular variable or floating rate note.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to the Tax-Free Income Funds will approximate their par value.
The Tax-Free Income Funds will not purchase variable and floating rate notes or
any other securities which in First of America's opinion are illiquid if, as a
result, more than 15% of either Tax-Free Income Fund's total assets will be
illiquid.
OTHER MUTUAL FUNDS
Each of the Funds, except the Money Market Funds, may invest up to 5% of the
value of its total assets in the securities of any one money market mutual fund
(including shares of the Parkstone Money Market Funds, provided that no more
than 10% of a Fund's total assets may be invested in the securities of mutual
funds in the aggregate. In order to avoid the imposition of additional fees as a
result of investments by a Fund in shares of the Money Market Funds of the
Group, the Investment Adviser, Administrator and their affiliates (See
"MANAGEMENT OF THE FUNDS--Investment Adviser and Subadviser" and "Administrator,
Sub-Administrator and Distributor" and "GENERAL INFORMATION-- Transfer Agency
and Fund Accounting Services") will not retain any portion of their usual
asset-based service fees from a Fund that is attributable to investments by the
Fund in shares of those Money Market Funds if the fee is being taken in the
Fund. The Investment Adviser and the Administrator will promptly forward such
fees to the appropriate Fund. Each Fund will incur additional expenses due to
the duplication of expenses as a result of any investment in securities of
unaffiliated mutual funds. Additional restrictions regarding the Funds'
investments in securities of unaffiliated mutual funds and/or the Money Market
Funds of the Group are contained in the Statement of Additional Information.
47 PROSPECTUS--Investor A Shares
<PAGE> 52
PRIVATE ACTIVITY BONDS
The Tax-Free Income Funds and the Tax-Free Fund may invest in private activity
bonds. It should be noted that the Tax Reform Act of 1986 substantially revised
provisions of prior federal law affecting the issuance and use of proceeds of
certain tax-exempt obligations. A new definition of private activity bonds
applies to many types of bonds, including those which were industrial
development bonds under prior law. Any reference herein to private activity
bonds includes industrial development bonds. Interest on private activity bonds
is tax-exempt (and such bonds will be considered Municipal Securities for
purposes of this Prospectus) only if the bonds fall within certain defined
categories of qualified private activity bonds and meet the requirements
specified in those respective categories. If a Fund invests in private activity
bonds which fall outside these categories, shareholders may become subject to
the alternative minimum tax on that part of the Fund's distributions derived
from interest on such bonds. The Tax Reform Act generally does not change the
federal tax treatment of bonds issued to finance government operations. For
further information relating to the types of private activity bonds which will
be included in income subject to the alternative minimum tax, see "ADDITIONAL
INFORMATION--Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information.
PUT AND CALL OPTIONS
Each of the Growth Funds, the Growth and Income Funds, the Income Funds and the
Tax-Free Income Funds may purchase put and call options on securities and on
foreign currencies, subject to its applicable investment policies, for the
purposes of hedging against market risks related to its portfolio securities and
adverse movements in exchange rates between currencies, respectively. Purchasing
options is a specialized investment technique that entails a substantial risk of
a complete loss of the amounts paid as premiums to writers of options. Each Fund
may also engage in writing call options from time to time as First of America or
Gulfstream, as the case may be with respect to the Balanced Fund or
International Fund, deem appropriate. The Funds will write only covered call
options (options on securities or currencies owned by the particular Fund). In
order to close out a call option it has written, the Fund will enter into a
"closing purchase transaction" (the purchase of a call option on the same
security or currency with the same exercise price and expiration date as the
call option which such Fund previously has written). When a portfolio security
or currency subject to a call option is sold, the Fund will effect a closing
purchase transaction to close out any existing call option on that security or
currency. If such Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security or currency until the option
expires or that Fund delivers the underlying security or currency upon exercise.
In addition, upon the exercise of a call option by the option holder, the Fund
will forego the potential benefit represented by market appreciation over the
exercise price. Under normal conditions, it is not expected that the Funds will
cause the underlying value of portfolio securities and currencies subject to
such options to exceed 50% of its net assets, and with respect to each of the
Balanced Fund and International Fund, 20% of its net assets.
Each of the Growth Funds, the Growth and Income Funds and the Government Income
Fund, as part of its options transactions, also may purchase index put and call
options and write index options. As with options on individual securities, a
Fund will write only covered index call options. Through the writing or purchase
of index options a Fund can achieve many of the same objectives as through the
use of options on individual securities. Options on securities indices are
similar to options on a security except that, rather than the right to take or
make delivery of a security at a specified price, an option on a securities
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the securities index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option.
Price movements in securities which a Fund owns or intends to purchase probably
will not correlate perfectly with movements in the level of an index and,
therefore, a Fund bears the risk of a loss on an index option that is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in
PROSPECTUS--Investor A Shares 48
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advance and, unlike call writing on specific securities, cannot provide in
advance for, or cover, its potential settlement obligations by acquiring and
holding the underlying securities. A Fund may be required to segregate assets or
provide an initial margin to cover index options that would require it to pay
cash upon exercise.
In addition, the Tax-Free Fund, the Municipal Bond Fund and the Michigan Bond
Fund may each acquire "puts" with respect to Municipal Securities (or Michigan
Municipal Securities, as the case may be), held in its portfolio. Under a put,
such Fund would have the right to sell a specified Municipal Security (or
Michigan Municipal Security, as the case may be) within a specified period of
time at a specified price. A put would be sold, transferred, or assigned only
with the underlying security. The Municipal Bond Fund, the Michigan Bond Fund
and the Tax-Free Fund will acquire puts solely to facilitate portfolio
liquidity, shorten the maturity of the underlying securities, or permit the
investment of its funds at a more favorable rate of return. Each of the
Municipal Bond Fund, the Michigan Bond Fund and the Tax-Free Fund expects that
it will generally acquire puts only where the puts are available without the
payment of any direct or indirect consideration. However, if necessary or
advisable, such Fund may pay for a put either separately in cash or by paying a
higher price for portfolio securities which are acquired subject to the puts
(thus reducing the yield to maturity otherwise available for the same
securities).
REPURCHASE AGREEMENTS
Securities held by a Fund may be subject to repurchase agreements. Under the
terms of a repurchase agreement, a Fund would acquire securities from financial
institutions such as member banks of the Federal Deposit Insurance Corporation
or registered broker-dealers which First of America or Gulfstream, as the case
may be, deem creditworthy under guidelines approved by the Group's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price would generally equal
the price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. Securities subject to repurchase agreements will be held
in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by that Fund were delayed pending court action. Repurchase
agreements are considered to be loans by an investment company under the 1940
Act. For further information about repurchase agreements, see "INVESTMENT
OBJECTIVES AND POLICIES--Additional Information on Portfolio
Instruments-Repurchase Agreements" in the Statement of Additional Information.
RESTRICTED SECURITIES
Securities in which each of the Funds, with the exception of the Treasury Fund,
may invest include securities issued by corporations without registration under
the Securities Act of 1933, as amended (the "1933 Act"), in reliance on the
exemption from such registration afforded by Section 3(a)(3) thereof, and
securities issued in reliance on the so-called "private placement" exemption
from registration which is afforded by Section 4(2) of the 1933 Act ("Section
4(2) securities"). Section 4(2) securities are restricted as to disposition
under the federal securities laws, and generally are sold to institutional
investors such as the Funds who agree that they are purchasing the securities
for investment and not with a view to public distribution. Any resale must also
generally be made in an exempt transaction. Section 4(2) securities are normally
resold to other institutional investors through or with the assistance of the
issuer or investment dealers who make a market in such Section 4(2) securities,
thus providing liquidity. Pursuant to procedures adopted by the Board of
Trustees of the Group, First of America may determine Section 4(2) securities to
be liquid if such securities are eligible for resale under Rule 144A under the
1933 Act and are readily saleable.
Subject to the limitations described above, the Funds may acquire investments
that are illiquid or of limited liquidity, such as private placements or
investments that are not registered under the 1993 Act. An illiquid investment
is any investment that cannot be disposed of within seven days in the normal
course of
49 PROSPECTUS--Investor A Shares
<PAGE> 54
business at approximately the amount at which it is valued by a Fund. The price
a Fund pays for illiquid securities or receives upon resale may be lower than
the price paid or received for similar securities with a more liquid market.
Accordingly, the valuation of these securities will reflect any limitations on
their liquidity. For each of the Non-Money Market Funds, a Fund may not invest
in additional illiquid securities if, as a result, more than 15% of the market
value of its net assets would be invested in illiquid securities. For each of
the Money Market Funds, a Fund may not invest in additional illiquid securities
if, as a result, more than 10% of the market value of its net assets would be
invested in illiquid securities.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS
Each of the Funds may borrow money by entering into reverse repurchase
agreements and, in the case of the Income Funds and the Tax-Free Income Funds,
dollar roll agreements in accordance with the investment restrictions described
below. Pursuant to reverse repurchase agreements, a Fund would sell certain of
its securities to financial institutions such as banks and broker-dealers, and
agree to repurchase the securities, at a mutually agreed upon date and price.
Dollar roll agreements utilized by the Income Funds and Tax-Free Income Funds
are identical to reverse repurchase agreements except for the fact that
substantially similar securities may be repurchased. At the time a Fund enters
into a reverse repurchase agreement or a dollar roll agreement, it will place in
a segregated custodial account assets such as U.S. government securities or
other liquid high-grade debt securities consistent with its investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently continually monitor the account to ensure that
such equivalent value is maintained at all times. Reverse repurchase agreements
and dollar roll agreements involve the risk that the market value of securities
sold by a Fund may decline below the price at which it is obligated to
repurchase the securities. Reverse repurchase agreements and dollar roll
agreements are considered to be borrowings by an investment company under the
1940 Act and therefore a form of leverage. A Fund may experience a negative
impact on its net asset value if interest rates rise during the term of a
reverse repurchase agreement or dollar roll agreement. A Fund generally will
invest the proceeds of such borrowings only when such borrowings will enhance a
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction. For further information about reverse repurchase
agreements and dollar roll agreements, see "INVESTMENT OBJECTIVES AND
POLICIES--Additional Information on Portfolio Instruments-Reverse Repurchase
Agreements and Dollar Roll Agreements" in the Statement of Additional
Information.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delayed-delivery
basis. Such Funds will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage although such
transactions represent a form of leveraging. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those available in the market when delivery takes
place. A Fund will not pay for such securities or start earning interest on them
until they are received. When a Fund agrees to purchase such securities, its
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a separate account. Securities purchased on a when-issued basis
are recorded as an asset and are subject to changes in the value based upon
changes in the general level of interest rates. In when-issued and
delayed-delivery transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause such Fund to miss a price
or yield considered to be advantageous.
No Fund's commitments to purchase "when-issued" securities will exceed 25% of
the value of its total assets under normal market conditions, and a commitment
by a Fund to purchase "when-issued" securities will not exceed 60 days. In the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
the value of its assets, a Fund's liquidity and the ability of First of America
or Gulfstream, as the case may be, to manage it might be adversely affected. The
Funds intend only to
PROSPECTUS--Investor A Shares 50
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purchase "when-issued" securities for the purpose of acquiring portfolio
securities, not for investment leverage although such transactions represent a
form of leveraging.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, each Fund may, from time to time, lend
its portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral will be valued daily by First of America
or Gulfstream, as the case may be. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to that
Fund. During the time portfolio securities are on loan, the borrower pays that
Fund any dividends or interest received on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, each Fund intends to terminate the loan
and regain the right to vote if that is considered important with respect to the
investment. In the event the borrower defaults in its obligation to a Fund, such
Fund bears the risk of delay in the recovery of its portfolio securities and the
risk of loss of rights in the collateral. The Funds will enter into loan
agreements only with broker-dealers, banks, or other institutions that First of
America or Gulfstream, as the case may be, have determined are creditworthy
under guidelines established by the Group's Board of Trustees.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the lesser
of a Fund's purchases or sales of portfolio securities for the year by the
monthly average value of the portfolio securities. The SEC requires that the
calculation exclude all securities whose remaining maturities at the time of
acquisition are one year or less.
Because the Money Market Funds intend to invest primarily in securities with
maturities of less than one year (although each may invest in securities with
maturities of up to thirteen months) and because the SEC requires such
securities to be excluded from the calculation of portfolio turnover rate, the
portfolio turnover rate with respect to each of the Money Market Funds is
expected to be zero for regulatory purposes. For portfolio turnover rates for
each of the Non-Money Market Funds, see "FINANCIAL HIGHLIGHTS" above.
The portfolio turnover rate for a Fund may vary greatly from year to year, as
well as within a particular year, and may also be affected by cash requirements
for redemptions of Shares. High portfolio turnover rates will generally result
in higher transaction costs, including brokerage commissions, to a Fund and may
result in additional tax consequences to a Fund's shareholders. Portfolio
turnover will not be a limiting factor in making investment decisions.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding Shares of that Fund (as defined
in the Statement of Additional Information).
None of the Funds, with the exception of the Michigan Bond Fund, may:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in such issuer, or the Fund would hold more
than 10% of the outstanding voting securities of the issuer, except that
25% or less of the value of such Fund's total assets may be invested
without regard to such limitations. There is no limit to the percentage of
assets that may be invested in U.S. Treasury bills, notes, or other
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
Irrespective of the investment restriction above, and pursuant to Rule 2a-7
under the 1940 Act, the U.S. Government Obligations Fund, the Prime Obligations
Fund, the Tax-Free Fund and the Treasury Fund each will, with respect to 100% of
its total assets, limit its investment in the securities of any one issuer in
the manner provided by such Rule, which limitations are referred to above under
the caption "INVESTMENT OBJECTIVES AND POLICIES--The Money Market Funds."
51 PROSPECTUS--Investor A Shares
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The Michigan Bond Fund may not:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, (a) more than 5% of the value of the
Fund's total assets (taken at current value) would be invested in such
issuer (except that up to 50% of the value of the Fund's total assets may
be invested without regard to such 5% limitation), and (b) more than 25% of
its total assets (taken at current value) would be invested in the
securities of a single issuer.
For purposes of the investment limitations above, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security and, with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, a security is considered to
be issued by such non-governmental user.
None of the Funds will:
1. Purchase any securities which would cause more than 25% of the value of the
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities of
their parents; and (c) utilities will be divided according to their services.
For example, gas, gas transmission, electric and gas, electric, and telephone
will each be considered a separate industry.
2. (a) Borrow money (not including reverse repurchase agreements or dollar roll
agreements), except that each Fund may borrow from banks for temporary or
emergency purposes and then only in amounts up to 30% (10% in the case of the
Money Market Funds) of its total assets at the time of borrowing (and
provided that such bank borrowings and reverse repurchase agreements and
dollar roll agreements do not exceed in the aggregate one-third of the Fund's
total assets less liabilities other than the obligations represented by the
bank borrowings, reverse repurchase agreements and dollar roll agreements),
or mortgage, pledge or hypothecate any assets except in connection with a
bank borrowing in amounts not to exceed 30% of the Fund's net assets at the
time of borrowing; (b) enter into reverse repurchase agreements, dollar roll
agreements and other permitted borrowings in amounts exceeding in the
aggregate one-third of the Fund's total assets less liabilities other than
the obligations represented by such reverse repurchase and dollar roll
agreements; and (c) issue senior securities except as permitted by the 1940
Act rule, order or interpretation thereunder.
3. Make loans, except that a Fund may purchase or hold debt instruments and lend
portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.
For purposes of investment limitation number 1 above only, such limitation shall
not apply to Municipal Securities or governmental guarantees of Municipal
Securities, and industrial development bonds or private activity bonds that are
backed only by the assets and revenues of a non-governmental user shall not be
deemed to be Municipal Securities.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding Shares of a Fund.
Each Fund may not:
1. Purchase or otherwise acquire any securities, if as a result, more than 15%
(10% in the case of the Money Market Funds) of the Fund's net assets would be
invested in securities that are illiquid.
In addition to the above investment restrictions, the Funds are subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES--Investment Restrictions" in the Statement of Additional Information.
PROSPECTUS--Investor A Shares 52
<PAGE> 57
MANAGEMENT OF THE FUNDS
TRUSTEES
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of all of the Group's Funds. The
Group will be managed by the Trustees in accordance with the laws of the
Commonwealth of Massachusetts governing business trusts. There are currently
four Trustees, three of whom are not "interested persons" of the Group within
the meaning of that term under the 1940 Act. The Trustees, in turn, elect the
officers of the Group to supervise actively its day-to-day operations.
The Trustees of the Group are George R. Landreth* (Chairman), Robert M. Beam,
Lawrence D. Bryan and Adrian Charles Edwards. The addresses, and principal
occupations during the past five years of the Trustees are set forth in the
Statement of Additional Information. The Trustee designated with an asterisk (*)
is considered to be an "interested person" of the Group as defined in the 1940
Act.
The Trustees of the Group receive quarterly fees and fees and expenses for each
meeting of the Board of Trustees attended. However, no officer or employee of
BISYS, The BISYS Group, Inc. or BISYS Ohio receives any compensation from the
Group for acting as a Trustee of the Group. The officers of the Group receive no
compensation directly from the Group for performing the duties of their offices.
BISYS receives fees from the Group for acting as Administrator and may receive
fees from each of the Funds pursuant to the Investor A Distribution and
Shareholder Service Plan described below. BISYS Ohio, an affiliate of BISYS,
receives fees from the Group for acting as Transfer Agent and for providing
certain fund accounting services. Mr. Landreth is an employee of BISYS.
INVESTMENT ADVISER AND SUBADVISER
First of America was established in 1932 and is the investment adviser of the
Group. First of America, a registered investment adviser, is a wholly-owned
subsidiary of FOA-Michigan, which is a wholly-owned subsidiary of First of
America Bank Corporation ("FABC"). FABC currently has over $22 billion in assets
and provides financial services to over 300 communities in Michigan, Indiana,
Illinois and Florida. As of June 30, 1996, First of America managed over $13
billion on behalf of both taxable and tax-exempt clients, including pensions,
endowments, corporations and individual portfolios. First of America acts as
subadviser to the Trust Division of FABC with respect to $5.7 billion in
discretionary assets, providing equity, fixed income, balanced and money
management services.
Subject to such policies as the Group's Board of Trustees may determine, First
of America, either directly or, with respect to the International Fund and the
Balanced Fund, through Gulfstream, furnishes a continuous investment program for
each Fund and makes investment decisions on behalf of each Fund.
First of America utilizes a team approach to the investment management of the
Funds, with up to three professionals working as a team to ensure a disciplined
investment process designed to result in long-term performance consistent with
each Fund's investment objectives. Roger H. Stamper, Managing Director of First
of America, is primarily responsible for the day-to-day management of each of
the Growth Funds (except the International Fund) and the Growth and Income
Funds. Mark R. Kummerer, Managing Director--Fixed Income of First of America, is
primarily responsible for the day-to-day management of the Income Funds.
Christian S. Swantek, Vice President of First of America, is primarily
responsible for the day-to-day management of the Tax-Free Income Funds. Messrs.
Stamper and Kummerer have held their respective positions with First of America
since 1988 and 1986, respectively. Prior to June 1993, Mr. Swantek was a
portfolio manager at PNC Investment Management & Research and its various
investment management affiliates.
For the services provided and expenses assumed pursuant to its Investment
Advisory Agreement with the Group, First of America receives a fee from the
Large Capitalization Fund, computed daily and paid monthly, at the annual rate
of 0.80% of the Fund's average daily net assets. For its services in connection
with each of the Equity Fund, Small Capitalization Fund, High Income Equity Fund
and Balanced Fund, First of America's fee is computed daily and paid monthly at
the annual rate of 1.00% of the applicable
53 PROSPECTUS--Investor A Shares
<PAGE> 58
Fund's average daily net assets. For its services in connection with the
International Fund, First of America's fee is computed daily and paid monthly at
the annual rate of 1.25% of the first $50 million of the International Fund's
average daily net assets, 1.20% of average daily net assets between $50 million
and $100 million, 1.15% of average daily net assets between $100 million and
$400 million and 1.05% of average daily net assets above $400 million. For its
services in connection with each Income Fund and Tax-Free Income Fund, First of
America's fee is computed daily and paid monthly at the annual rate of 0.74% of
each Income Fund's and Tax-Free Income Fund's average daily net assets. For its
services in connection with the Money Market Funds, First of America's fee is
computed daily and paid monthly, at the annual rate of 0.40% of each Money
Market Fund's average daily net assets. First of America may periodically
voluntarily reduce all or a portion of its advisory fee with respect to a Fund
to increase the net income of that Fund available for distribution as dividends.
The voluntary fee reduction will cause the yield of that Fund to be higher than
it would otherwise be in the absence of such a reduction.
Pursuant to the terms of its Investment Advisory Agreement with the Group, First
of America has entered into a Sub-Investment Advisory Agreement with Gulfstream,
100 Crescent Court, Suite 550, Dallas, Texas 75201. Pursuant to the terms of
such Sub-Investment Advisory Agreement, Gulfstream has been retained by First of
America to manage the investment and reinvestment of the assets of the
International Fund and to manage the investment and reinvestment of those assets
of the Balanced Fund which are invested in foreign securities, subject to the
direction and control of the Group's Board of Trustees.
Under this arrangement, Gulfstream is responsible for day-to-day management of
the International Fund's assets and the applicable portion of the Balanced Fund,
reviewing investment performance policies and guidelines and maintaining certain
books and records, and First of America is responsible for selecting and
monitoring the performance of Gulfstream and for reporting the activities of
Gulfstream in managing these Funds to the Group's Board of Trustees. First of
America may also render advice with respect to the International Fund's
investments in the U.S. Gulfstream utilizes a team approach to investment
management to ensure a disciplined investment process designed to result in
long-term performance consistent with a Fund's investment objective. No one
person is responsible for a Fund's management.
For its services provided and expenses assumed pursuant to its Sub-Investment
Advisory Agreement with First of America, Gulfstream receives from First of
America a fee, computed daily and paid monthly, at the annual rate of 0.50% of
the first $50 million of the International Fund's average daily net assets and
the average daily net assets of the Balanced Fund which are invested in foreign
securities, 0.45% of such average daily net assets between $50 million and $100
million, 0.40% of such average daily net assets between $100 million and $400
million and 0.30% of such average daily net assets above $400 million, provided
the minimum annual fee shall be $75,000.
Gulfstream was organized in 1991 as a Texas limited partnership by Tull, Doud,
Marsh & Triltsch, Inc., a Texas corporation ("TDMT"). TDMT is the sole general
partner of Gulfstream. TDMT is owned by C. Thomas Tull, Stephen C. Doud, James
P. Marsh and Reiner M. Triltsch. Messrs. Tull, Doud and Triltsch are the
portfolio managers and Mr. Marsh is responsible for client services with
Gulfstream. First of America is the sole limited partner, and as of August 31,
1996 exercised options to increase its interest in Gulfstream from 49% to 72%.
As of June 30, 1996, Gulfstream has over $596 million in assets of
institutional, investment company, governmental, pension fund and high net worth
individual clients under its investment management. Gulfstream's portfolio
management personnel average 20 years of investment experience and 9 years of
international investment experience.
Under Gulfstream's partnership agreement, First of America possesses veto
authority over the general budgetary affairs of Gulfstream. Because of its
current 72% ownership interest, First of America is deemed to control
Gulfstream for purposes of the 1940 Act.
For further information regarding the relationship between Gulfstream and First
of America, see "MANAGEMENT OF THE GROUP--Investment Adviser" in the Statement
of Additional Information.
PROSPECTUS--Investor A Shares 54
<PAGE> 59
ADMINISTRATOR, SUB-ADMINISTRATOR AND DISTRIBUTOR
BISYS, 3435 Stelzer Road, Columbus, Ohio 43219, is the administrator for each
Fund of the Group, and also acts as the Group's principal underwriter and
distributor. (the "Administrator" or the "Distributor," as the context
indicates). First of America serves as Sub-Administrator for each Fund of the
Group and provides certain services as may be requested by BISYS from time to
time. BISYS and its affiliated companies, including BISYS Ohio are wholly-owned
by The BISYS Group, Inc., a publicly-held company which is a provider of
information processing, loan servicing and 401(k) administration and record
keeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Funds' administration
and operation. For expenses assumed and services provided as administrator
pursuant to its Administration Agreement with the Group, the Administrator
receives a fee from each Fund equal to the lesser of a fee, computed daily and
paid periodically at an annual rate of 0.20% of the Fund's average daily net
assets, or such other fee as may be agreed upon from time to time in writing by
the Group and the Administrator. For its services as Sub-Administrator, First of
America receives, from the Administrator, pursuant to its Sub-Administration
Agreement with BISYS, a fee not to exceed 0.05% of each Fund's average daily net
assets. The Administrator may periodically voluntarily reduce all or a portion
of its administrative fee with respect to a Fund to increase the net income of
that Fund available for distribution as dividends. The voluntary fee reduction
will cause the return of that Fund to be higher than it would otherwise be in
the absence of such reduction.
The Distributor acts as agent for the Funds in the distribution of each of their
Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the cost of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group, but may retain some or all of any sales
charge imposed upon the Investor A Shares and may receive compensation under the
Distribution and Shareholder Service Plan described below.
EXPENSES
First of America, Gulfstream and BISYS each bear all expenses in connection with
the performance of its services as Investment Adviser, Subadviser and
Administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Group. Each Fund will bear the
following expenses relating to its operation: organizational expenses, taxes,
interest, brokerage fees and commissions, fees of the Trustees of the Group, SEC
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
Shareholders, outside auditing and legal expenses, advisory and administration
fees, fees and out-of-pocket expenses of the Custodian, Transfer Agent and Fund
Accountant, certain insurance premiums, costs of maintenance of the Group's
existence, costs of Shareholders' reports and meetings, and any extraordinary
expenses incurred in each Fund's operation. As a general matter, expenses are
allocated to the Investor A Shares and the other Classes of Shares of the Funds
on the basis of the relative net asset value of each class. The various Classes
may bear certain additional retail transfer agency expenses and may also bear
certain additional shareholder service and distribution costs incurred pursuant
to a Distribution and Shareholder Service Plan.
The Trustees reserve the right, subject to the receipt of relevant regulatory
approvals or rulings, if needed, to allocate certain other expenses to the
Shareholders of a particular class, including the Investor A Shares, on a basis
other than relative net asset value, as they deem appropriate ("Class
Expenses"). In such event, Class Expenses would be limited to: transfer agency
fees identified by the Transfer Agent as attributable to a specific class;
printing and postage expenses related to preparing and distributing materials
such as Shareholder reports, prospectuses and proxies to current Shareholders;
Blue Sky registration fees incurred by a class of Shares; SEC registration fees
incurred by a class of Shares; expenses related to administrative personnel and
services as required to support the Shareholders of a specific class; litigation
or other legal expenses relating solely to one class of Shares; and Trustees'
fees incurred as a result of issues relating solely to one class of Shares.
55 PROSPECTUS--Investor A Shares
<PAGE> 60
DISTRIBUTION PLAN FOR INVESTOR A SHARES
Rule 12b-1, adopted by the SEC under the 1940 Act, permits an investment company
to pay directly or indirectly expenses associated with the distribution of its
shares in accordance with a plan adopted by an investment company's trustees and
approved by its shareholders. Pursuant to such Rule, the Group has adopted an
Investor A Distribution and Shareholder Service Plan (the "Investor A Plan")
with respect to the Investor A Shares of each Fund. Pursuant to the Investor A
Plan, each Fund is authorized to pay or reimburse BISYS, as Distributor of the
Investor A Shares, for certain expenses that are incurred in connection with
Shareholder and distribution services. The Plan authorizes any Fund to pay
BISYS, as Distributor of Investor A Shares, a Shareholder and distribution
service fee in an amount not to exceed on an annual basis 0.25% of the average
daily net asset value of Investor A Shares of such Fund. Such amount may be used
by BISYS to pay banks and their affiliates (including FOA-Michigan, and its
affiliates), and other institutions, including broker-dealers ("Participating
Organizations") for administration, distribution, and/or Shareholder service
assistance pursuant to an agreement between BISYS and the Participating
Organization. Under the Investor A Plan, a Participating Organization may
include BISYS, its subsidiaries, and its affiliates.
Fees paid pursuant to the Investor A Plan are accrued daily and paid monthly,
and are charged as expenses of Investor A Shares of a Fund as accrued. Payments
under the Investor A Plan are accrued daily and paid monthly, and are charged as
expenses of Investor A Shares of a Fund as accrued.
Pursuant to the Investor A Plan, the Distributor may enter into agreements with
Participating Organizations for providing Shareholder and distribution services
to their customers who are the record or beneficial owners of Investor A Shares.
Such Participating Organizations will be compensated at the annual rate of up to
0.25% of the average daily net asset value of the Investor A Shares held of
record or beneficially by the Participating Organization's customers. The
Shareholder and distribution services provided by Participating Organizations
may include promoting the purchase of Investor A Shares of a Fund by their
customers; processing purchase, exchange, and redemption requests from customers
and placing orders with the Distributor or the Transfer Agent; processing
dividend and distribution payments from a Fund on behalf of customers; providing
information periodically to customers, including information showing their
positions in Investor A Shares; providing sub-accounting with respect to
Investor A Shares beneficially owned by customers or the information necessary
for sub-accounting; responding to inquiries from customers concerning their
investment in Investor A Shares; arranging for bank wires; and providing other
similar services as may be reasonably requested.
Actual distribution and shareholder service expenses for Investor A Shares at
any given time may exceed the Rule 12b-1 fees collected. These unrecovered
amounts plus interest thereon will be carried forward and paid from future Rule
12b-1 fees collected. If the Investor A Plan were terminated or not continued,
the Group would not be contractually obligated to pay for any expenses not
previously reimbursed by the Group. During the fiscal year ended June 30, 1996,
Rule 12b-1 fees collected were sufficient to cover actual distribution and
shareholder service expenses; that is, there were no unrecovered amounts to be
carried forward.
Conflict of interest restrictions may apply to the receipt by Participating
Organizations of compensation from BISYS in connection with the investment of
fiduciary assets in Investor A Shares. Institutions, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board, or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor, or state
securities commissions, are urged to consult their legal advisers before
investing such assets in Investor A Shares.
As authorized by the Investor A Plan, BISYS has entered into a Participating
Organization Agreement with First of America Securities, Inc. ("FSI"), a
wholly-owned subsidiary of FABC, as a party and on behalf of its affiliate,
First of America Brokerage Services, Inc. ("FOA-Brokerage"), a subsidiary of
FOA-Michigan, pursuant to which FSI and FOA Brokerage have agreed to provide
certain Shareholder and distribution services in connection with Investor A
Shares of the Funds purchased and held by FSI or FOA Brokerage for the accounts
of its customers and Investor A Shares of the Funds purchased and held by
customers of
PROSPECTUS--Investor A Shares 56
<PAGE> 61
FSI or FOA Brokerage directly. These Shareholder and distribution services
include, but are not limited to, printing and distributing prospectuses to
persons other than holders of Investor A Shares of the Funds, printing and
distributing advertising and sales literature in connection with the sale of
Investor A Shares, answering routine customer questions concerning the Funds and
providing such personnel and communication equipment as is necessary and
appropriate to accomplish such matters. In consideration of such services BISYS
has agreed to pay FSI a monthly fee, computed at the annual rate of 0.10% of the
average aggregate net asset value of Investor A Shares of the Money Market Funds
and 0.25% of the average aggregate net asset value of Investor A Shares of the
Non-Money Market Funds held during the period in customer accounts for which FSI
or FOA Brokerage has provided services under this Agreement. FSI is responsible
for payment of any portion of that fee payable to FOA Brokerage under the
Agreement. BISYS will be compensated by the Funds in an amount equal to its
payments to FSI under the Participating Organization Agreement. Such fee may
exceed the actual costs incurred by FSI in providing such services.
Also in accordance with the Investor A Plan, BISYS has entered into a
Participating Organization Agreement with FABC on behalf of its wholly-owned
subsidiary banks (the "Subsidiary Banks"), pursuant to which the Subsidiary
Banks have agreed to provide certain distribution, administrative and
shareholder support service in connection with Investor A Shares purchased
through their accounts. Such services include, but are not limited to,
advertising and marketing the Investor A Shares, printing and distributing
prospectuses to persons other than holders of Investor A Shares, printing and
distributing advertising and sales literature in connection with the sale of
Investor A Shares, answering routine customer questions concerning the Funds and
providing such personnel and communication equipment as is necessary and
appropriate to accomplish such matters. In consideration for such services,
BISYS has agreed to pay FABC a monthly fee, computed at the annual rate of 0.10%
for the Money Market Funds and 0.25% for the Non-Money Market Funds of the
average aggregate net asset value of Investor A Shares held during the period in
customer accounts for which the Subsidiary Banks provided such services under
this Agreement. FABC is responsible for making any applicable payments to each
Subsidiary Bank. BISYS will be compensated by each Fund in an amount equal to
its payments to FABC under the Participating Organization Agreement with respect
to Investor A Shares of that Fund. Such fee may exceed the actual costs incurred
by the Subsidiary Banks in providing the services.
The Group understands that Participating Organizations may charge fees to their
customers who are the owners of Investor A Shares for additional services
provided in connection with their customer accounts. These fees would be in
addition to any amounts which may be received by a Participating Organization
under its Agreement with BISYS. Customers of Participating Organizations should
read this Prospectus in light of the terms governing their account with a
Participating Organization.
The Investor A Plan requires the officers of the Group to provide the Board of
Trustees at least quarterly with a written report of the amounts expended
pursuant to the Plan and the purposes for which such expenditures were made. The
Board reviews these reports in connection with its decisions with respect to the
Plan.
As required by Rule 12b-1, the Investor A Plan was approved by the Trustees of
the Group, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Group and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan ("Independent Trustees"). The Investor A Plan continues in effect as
long as such continuance is specifically approved at least annually by the
Group's Trustees, including a majority of the Independent Trustees.
The Investor A Plan may be terminated by a vote of a majority of the Independent
Trustees, or by a vote of a majority of the holders of the outstanding voting
securities of the Investor A Shares. Any change in the Investor A Plan that
would increase materially the distribution expenses paid by a Fund requires
shareholder approval; otherwise, the Plan may be amended by the Trustees,
including a majority of the Independent Trustees by a vote cast in person at a
meeting called for the purpose of voting upon the amendment. As long as the
Investor A Plan is in effect, the selection or nomination of the Independent
Trustees is committed to the discretion of the Independent Trustees.
57 PROSPECTUS--Investor A Shares
<PAGE> 62
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Ohio, 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Group's
Transfer Agent pursuant to a Transfer Agency Agreement with the Group and
receives a fee for such services. BISYS Ohio also provides certain accounting
services for each of the Funds and receives a fee for such services. See
"MANAGEMENT OF THE GROUP--Custodian, Transfer Agent and Fund Accounting
Services" in the Statement of Additional Information for further information.
While BISYS Ohio is a distinct legal entity from BISYS (the Group's
Administrator and distributor), BISYS Ohio is considered to be an affiliated
person of BISYS under the 1940 Act due to, among other things, the fact that
BISYS Ohio and BISYS are both owned by The BISYS Group, Inc.
BANKING LAWS
First of America believes that it may perform the investment advisory services
for the Group's Funds contemplated by the Investment Advisory Agreement and by
this Prospectus without violating applicable banking laws or regulations. FABC,
FSI, FOA Brokerage and the Subsidiary Banks believe that they may provide the
shareholder and distribution services contemplated by their Participating
Organization Agreements with BISYS and by this Prospectus without violating
applicable banking laws or regulations. Future changes in federal or state
statutes and regulations relating to permissible activities of banks or bank
holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which First of America, FSI,
FOA Brokerage or the Subsidiary Banks could continue to perform such services
for the Group. See the Statement of Additional Information ("MANAGEMENT OF THE
GROUP--Glass-Steagall Act") for further discussion.
HOW TO BUY INVESTOR A SHARES
Investor A Shares of each Fund are continuously offered and may be purchased
directly either by mail, by telephone, or by wire. Investor A Shares may also be
purchased through a broker-dealer who has entered into a dealer agreement with
the Distributor. Except as otherwise discussed below under "Other Information
Regarding Purchases" and "Auto Invest Plan," the minimum initial investment in a
Fund, based upon the public offering price, is $1,000; however, there is no
minimum subsequent purchase. Shareholders will pay the next calculated net asset
value after the receipt by the Distributor of an order to purchase Investor A
Shares, plus any applicable sales charge as described below (see "SALES
CHARGES"). In the case of an order for the purchase of Shares placed through a
broker-dealer, it is the responsibility of the broker-dealer to transmit the
order to the Distributor promptly.
BY MAIL
To purchase Investor A Shares of any of the Funds by mail, complete an Account
Application Form and return it along with a check or money order made payable to
The Parkstone Group of Funds at the following address:
The Parkstone Group of Funds
P.O. Box 50551
Kalamazoo, Michigan 49005-0551
An Account Application Form can be obtained by calling the Group at (800)
451-8377.
BY TELEPHONE OR BY WIRE
To purchase Investor A Shares of any of the Funds by telephone or by wire, your
Account Application Form must have been previously received by the Distributor.
To place an order by telephone or by wire, call the Group's toll-free number
(800) 451-8377. Payment for such Investor A Shares ordered by telephone may be
made by check and must be received by the Group's Custodian within seven
calendar
PROSPECTUS--Investor A Shares 58
<PAGE> 63
days of the telephone order. If payment for such Investor A Shares is not
received within seven days, or if a check timely received does not clear, the
purchase may be canceled and the investor could be liable for any losses or fees
incurred. When purchasing Investor A Shares by wire, contact the Distributor for
wire instructions.
OTHER INFORMATION REGARDING PURCHASES
Investor A Shares may also be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by FABC or one of its
affiliates. Investor A Shares of the Funds sold to FABC or the affiliate acting
in a fiduciary, advisory, custodial, or other similar capacity on behalf of
Customers will normally be held of record by FABC or the affiliate. With respect
to such Investor A Shares so sold, it is the responsibility of the holder of
record to transmit purchase or redemption orders to the Distributor and to
deliver funds for the purchase thereof on a timely basis. Beneficial ownership
of such Investor A Shares of the Funds will be recorded by FABC or one of its
affiliates and reflected in the account statements provided to Customers. FABC
or one of its affiliates may exercise voting authority for those Investor A
Shares for which it has been granted authority by the Customer.
Investor A Shares of the Funds are purchased at the net asset value per share
(see "HOW SHARES ARE VALUED") next determined after receipt by the Distributor
of an order to purchase Shares plus any applicable sales charge as described
below. Purchases of Investor A shares in any of the Funds will be effected only
on a Business Day (as defined in "HOW SHARES ARE VALUED") of the applicable
Fund. An order received after a Valuation Time on any Business Day will be
executed at the net asset value determined as of the next Valuation Time on the
date of receipt. An order received after the last Valuation Time on any Business
Day will be executed at the net asset value determined as of the next Valuation
Time on the next Business Day of that Fund. Investor A Shares of the Funds,
except for the Money Market Funds, are eligible to earn dividends on the first
Business Day after the purchase is executed. Investor A Shares of the Money
Market Funds purchased before 12:00 noon, Eastern Time, begin earning dividends
on the same Business Day. Investor A Shares of the Funds continue to be eligible
to earn dividends through the day before redemption.
An order to purchase Investor A Shares of the Money Market Funds will be deemed
to have been received by the Distributor only when federal funds are available
to the Group's Custodian for investment. Federal funds are monies credited to a
bank's account within a Federal Reserve Bank. Payment for an order to purchase
any of the Money Market Funds which is transmitted by federal funds wire will be
available the same day for investment by the Group's Custodian, if received
prior to the last Valuation Time (see "HOW SHARES ARE VALUED"). Payments
transmitted by other means (such as by check drawn on a member of the Federal
Reserve System) will normally be converted into federal funds within two banking
days after receipt. The Group strongly recommends that investors of substantial
amounts use federal funds to purchase Investor A Shares of the Money Market
Funds.
The minimum initial investment amount of $1,000 referred to above may be waived
if purchases are made in connection with Individual Retirement Accounts (IRAs),
Keoghs or similar plans. For information on IRAs, Keoghs or similar plans,
contact FABC at (800) 544-6155. Due to the relatively high cost of handling
small investments, the Group reserves the right to redeem involuntarily, at net
asset value, the Investor A Shares of any Shareholder if, because of redemptions
of Investor A Shares by or on behalf of the Shareholder (but not as a result of
a decrease in the market price of such Investor A Shares, the deduction of any
sales charge or the establishment of an account with less than $1,000 using the
Auto Invest Plan), the account of such Shareholder in that Fund has a value of
less than $1,000. Accordingly, an investor purchasing Investor A Shares of a
Fund in only the minimum investment amount may be subject to such involuntary
redemption if the investor thereafter redeems any such Investor A Shares. If at
any time a Shareholder's account balance falls below $1,000, upon 30 days'
notice, the Group may exercise its right to redeem such Investor A Shares and to
send the proceeds to the Shareholder.
Depending upon the terms of a particular Customer account, FABC or one of its
affiliates may charge a Customer account fees for services provided in
connection with investment in a Fund. Information
59 PROSPECTUS--Investor A Shares
<PAGE> 64
concerning these services and any charges may be obtained from FABC or the
affiliate. This Prospectus should be read in conjunction with any such
information so received.
The Group reserves the right to reject any order for the purchase of Investor A
Shares in whole or in part.
Every Shareholder will receive a confirmation of each new transaction in the
Shareholder's account which will also show the total number of Investor A Shares
of the respective Fund of the Group owned by the Shareholder. Confirmation of
purchases and redemptions of Investor A Shares of the Funds by FABC or one of
its affiliates on behalf of a Customer may be obtained from FABC or the
affiliate. Shareholders may rely on these statements in lieu of certificates.
Certificates representing Investor A Shares of the Funds will not be issued.
AUTO INVEST PLAN
The Parkstone Group of Funds Auto Invest Plan (the "Auto Invest Plan") enables
Shareholders to make regular monthly or quarterly purchases of Investor A Shares
through automatic deduction from their bank accounts. With Shareholder
authorization, the Group's Transfer Agent will deduct the amount specified
(subject to the applicable minimums) from the Shareholder's bank account which
will automatically be invested in Shares at the public offering price on the
date of such deduction (or the next Business Day thereafter, as defined under
"HOW SHARES ARE VALUED" below). The required minimum initial investment when
opening an account using the Auto Invest Plan is $100; the minimum amount for
subsequent investments in a Fund is $50. To participate in the Auto Invest Plan,
Shareholders should complete the appropriate section of the Account Application
Form or a supplemental Auto Invest Plan application that can be acquired by
calling the Group at (800) 451-8377. For a Shareholder to change the Auto Invest
Plan instructions, the request must be made in writing to the Group's
Distributor, BISYS Fund Services, c/o The Parkstone Group of Funds, 3435 Stelzer
Road, Columbus, Ohio 43219 and may take up to 15 days to implement.
SALES CHARGES
The public offering price of Investor A Shares of the Funds is equal to net
asset value plus the applicable sales charge. BISYS receives this sales charge
as Distributor and may reallow it as dealer discounts and brokerage commissions
as follows:
GROWTH FUNDS
GROWTH AND INCOME FUNDS
<TABLE>
<CAPTION>
SALES DEALER DISCOUNTS
CHARGE SALES AND BROKERAGE
AS % OF CHARGE AS COMMISSIONS AS
AMOUNT OF TRANSACTION AT NET AMOUNT % OF PUBLIC % OF PUBLIC
PUBLIC OFFERING PRICE INVESTED OFFERING PRICE OFFERING PRICE
- -------------------- --------- ----------- -------------
<S> <C> <C> <C>
Less than $50,000.............................................. 4.71% 4.50% 4.00%
$50,000 but less than $100,000................................. 4.17 4.00 3.50
$100,000 but less than $250,000................................ 3.09 3.00 2.50
$250,000 but less than $500,000................................ 2.04 2.00 1.50
$500,000 but less than $1,000,000.............................. 1.01 1.00 1.00
$1,000,000 or more............................................. 0.00 0.00 0.00
</TABLE>
PROSPECTUS--Investor A Shares 60
<PAGE> 65
INCOME FUNDS
TAX-FREE INCOME FUNDS
<TABLE>
<CAPTION>
SALES DEALER DISCOUNTS
CHARGE SALES AND BROKERAGE
AS % OF CHARGE AS COMMISSIONS AS
AMOUNT OF TRANSACTION AT NET AMOUNT % OF PUBLIC % OF PUBLIC
PUBLIC OFFERING PRICE INVESTED OFFERING PRICE OFFERING PRICE
- ----------------------- --------- ----------- -------------
<S> <C> <C> <C>
Less than $50,000.............................................. 4.17% 4.00% 3.75%
$50,000 but less than $100,000................................. 3.63 3.50 3.25
$100,000 but less than $250,000................................ 3.09 3.00 2.50
$250,000 but less than $500,000................................ 2.04 2.00 1.50
$500,000 but less than $1,000,000.............................. 1.01 1.00 1.00
$1,000,000 or more............................................. 0.00 0.00 0.00
</TABLE>
IN GENERAL
From time to time dealers who receive dealer discounts and brokerage commissions
from the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers.
In addition to amounts paid to dealers as a dealer concession out of the sales
charge paid by investors, if any, the Distributor may, from time to time, at its
expense or as an expense for which it may be reimbursed under the Investor A
Plan, pay a bonus or other consideration or incentive to dealers who sell a
minimum dollar amount of shares of a Fund during a specified period of time. Any
such additional consideration or incentive program may be terminated at any time
by the Distributor.
The Dealer Discounts and Brokerage Commissions schedule above applies to all
dealers who have agreements with the Distributor except FSI, to which the
Distributor reallows all of the sales charge on the shares sold by FSI. The
Distributor, at its expense, may also provide additional compensation to dealers
in connection with sales of Shares of any of the Funds of the Group.
Compensation may include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Group, and/or
other dealer-sponsored special events. In some instances, this compensation may
be made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of such shares. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to exotic locations within or outside of the United States for meetings or
seminars of a business nature. The Distributor, at its expense, currently
conducts an annual sales contest for dealers, including FSI, in connection with
their sales of Shares of the Funds. Dealers may not use sales of a Fund's Shares
to qualify for this compensation to the extent such may be prohibited by the
laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc.
REDUCED SALES CHARGES
SALES CHARGE WAIVERS
The Distributor may waive sales charges for the purchase of Investor A Shares of
a Fund by or on behalf of (1) employees and retired employees (including
spouses, children and parents of employees and retired employees) of FABC, BISYS
and any affiliates thereof, (2) Trustees of the Group, (3) directors and retired
directors (including spouses and children of directors and retired directors) of
FABC and any affiliate thereof, (4) employees (and their spouses and children
under the age of 21) of any broker-dealer with which the Distributor enters into
an agreement to sell shares of the Funds, (5) orders placed on behalf of other
investment companies distributed by the Distributor and (6) qualified orders
placed by broker-dealers, investment advisers or financial planners who place
trades for their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; and clients of such
broker-dealers, investment advisers or financial planners who place trades for
their own
61 PROSPECTUS--Investor A Shares
<PAGE> 66
accounts if the accounts are linked to the master account of such broker-dealer,
investment adviser or financial planner on the books and records of the broker
or agent. Investors may be charged a fee if they effect transactions in Investor
A Shares through a broker or agent. In addition, the Distributor may waive sales
charges for the purchase of a Fund's Investor A Shares with the proceeds from
the recent redemption of shares of a non-money market mutual fund (including the
Investor A Shares of the Non-Money Market Funds of the Group, but excluding the
Investor B Shares and Investor C Shares of such Funds). The purchase must be
made within 60 days of the redemption, and the Distributor must be notified in
writing by the investor, or by his financial institution, at the time the
purchase is made. A copy of the investor's account statement showing such
redemption must accompany such notice.
The Distributor may also waive sales charges for the purchase of Investor A
Shares of a Fund by employee benefit plans qualified under Section 401 of the
Internal Revenue Code, including salary reduction plans qualified under Section
401(k) of the Internal Revenue Code, subject to minimum requirements with
respect to number of employees or amount of purchase, which may be established
by the Distributor. Currently, those criteria require that the employer
establishing the plan have 200 or more employees or that the amount invested or
to be invested during the subsequent thirteen-month period in the Funds or the
Investor A Shares of the other Funds of the Group totals at least $1,000,000.00.
Participating Organizations through which employee benefit plans purchase
Investor A Shares may be compensated by the Distributor under the Investor A
Plan.
CONCURRENT PURCHASES
For purposes of qualifying for a lower sales charge, investors have the
privilege of combining "concurrent purchases" of Investor A Shares of one Fund
and of one or more of the other Funds of the Group sold with a sales charge. For
example, if a shareholder concurrently purchases Investor A Shares in one of the
other Funds of the Group sold with a sales charge at the total public offering
price of $25,000 and Investor A Shares in a Fund at the total public offering
price of $25,000, the sales charge would be that applicable to a $50,000
purchase as shown in the appropriate table above. The investor's "concurrent
purchases" described above shall include the combined purchases of the investor,
the investor's spouse and children under the age of 21 and the purchaser's
retirement plan accounts. To receive the applicable public offering price
pursuant to this privilege, Shareholders must, at the time of purchase, give the
Transfer Agent or the Distributor sufficient information to permit confirmation
of qualification. This privilege, however, may be modified or eliminated at any
time or from time to time by the Group without notice.
LETTERS OF INTENT
An investor may obtain a reduced sales charge by means of a written Letter of
Intent which expresses the intention of such investor to purchase Investor A
Shares of a Fund at a designated total public offering price within a designated
13-month period. Each purchase of Investor A Shares under a Letter of Intent
will be made at the net asset value plus the sales charge applicable at the time
of such purchase to a single transaction of the total dollar amount indicated in
the Letter of Intent (the "Applicable Sales Charge"). A Letter of Intent may
include purchases of Investor A Shares made not more than 90 days prior to the
date such investor signs a Letter of Intent; however, the 13-month period during
which the Letter of Intent is in effect will begin on the date of the earliest
purchase to be included. An investor will receive as a credit against his/her
initial purchase(s) of Shares at the end of the 13-month period the difference,
if any, between the sales load paid on previous purchases qualifying under the
Letter of Intent and the Applicable Sales Charge.
A Letter of Intent is not a binding obligation upon the investor to purchase the
full amount indicated. The minimum initial investment under a Letter of Intent
is 5% of such amount. Investor A Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the name of the
investor) to secure payment of the higher sales charge applicable to the
Investor A Shares actually purchased if the full amount indicated is not
purchased, and such escrowed Investor A Shares will be involuntarily redeemed to
pay the additional sales charge, if necessary. Dividends on escrowed Investor A
PROSPECTUS--Investor A Shares 62
<PAGE> 67
Shares, whether paid in cash or reinvested in additional Investor A Shares, are
not subject to escrow. The escrowed Investor A Shares will not be available for
disposal by the investor until all purchases pursuant to the Letter of Intent
have been made or the higher sales charge has been paid. If and when the full
amount indicated has been purchased, the escrow will be released. To the extent
that an investor purchases more than the dollar amount indicated on the Letter
of Intent and qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased, along with any purchases made
during the 90 days prior to the date such investor signs the Letter of Intent,
at the applicable public offering price at the end of the 13-month period. The
difference in sales charge will be used to purchase additional Investor A Shares
of such Fund subject to the rate of sales charge applicable to the actual amount
of the aggregate purchases.
For further information about Letters of Intent, interested investors should
contact the Distributor at (800) 451-8377. This program, however, may be
modified or eliminated at any time or from time to time by the Group without
notice.
RIGHT OF ACCUMULATION
Pursuant to the right of accumulation, investors are permitted to purchase
Investor A Shares of a Fund at the public offering price applicable to the total
of (a) the total public offering price of the Investor A Shares of the Fund then
being purchased plus (b) an amount equal to the then current net asset value of
the "purchaser's combined holdings" of the Investor A Shares of all of the Funds
of the Group sold with a sales charge. The "purchaser's combined holdings"
described in the preceding sentence shall include the combined holdings of the
purchaser, the purchaser's spouse and children under the age of 21 and the
purchaser's retirement plan accounts. To receive the applicable public offering
price pursuant to the right of accumulation, Shareholders must, at the time of
purchase, give the Transfer Agent or the Distributor sufficient information to
permit confirmation of qualification. This right of accumulation, however, may
be modified or eliminated at any time or from time to time by the Group without
notice.
DIRECTED DIVIDEND OPTION
A Shareholder may elect to have all income dividends and capital gains
distributions paid by check, reinvested in the Fund or reinvested in any of the
Group's other Funds, without the payment of a sales charge (provided the other
Fund is maintained at the minimum required balance). If you elect to have
distributions paid by check and the check (1) is returned and marked as
"undeliverable" or (2) remains uncashed for six months, your payment election
will be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks that remain uncashed for six months will be cancelled and
reinvested in the Fund at the per share net asset value determined as of the
date of cancellation.
The Directed Dividend Option may be modified or terminated by the Group at any
time after notice to participating Shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the Shareholder at any time by
writing the Distributor. The Directed Dividend Option is not available to
participants in any of the Parkstone IRAs.
EXCHANGE PRIVILEGE
The exchange privilege enables Shareholders of Investor A Shares to acquire
Investor A Shares that are offered by another Fund of the Group with a different
investment objective. This exchange privilege does not apply to other classes of
Shares of a Fund. For example, holders of a Fund's Investor B Shares may not
exchange their Shares for Investor A Shares, and holders of a Fund's Investor A
Shares may not exchange their Shares for Investor B Shares.
Holders of Investor A Shares of any of the Group's Money Market Funds (including
Investor A Shares acquired through reinvestment of dividends and distributions
on such shares) may exchange those Investor A Shares at net asset value without
any sales charge for Investor A Shares offered by any of the
63 PROSPECTUS--Investor A Shares
<PAGE> 68
Group's other Money Market Funds, provided that the amount to be exchanged meets
the applicable minimum investment requirements and the exchange is made in
states where it is legally authorized. Similarly, holders of Investor A Shares
of any of the Group's other Funds (the "Non-Money Market Funds") may exchange
those Investor A Shares at net asset value without any sales charge for Investor
A Shares offered by any Fund of the Group, including the Money Market Funds.
Holders of Investor A Shares of any of the Group's Money Market Funds may
exchange those Investor A Shares for Investor A Shares offered by the Non-Money
Market Funds of the Group, but a sales load will be charged on the exchange.
An exchange is considered a sale of Shares on which a Shareholder may realize a
capital gain or loss for federal income tax purposes. A Shareholder may not
include any sales charge on Shares of a Fund as a part of the cost of those
Shares for purposes of calculating the gain or loss realized on an exchange of
those Shares within 90 days of their purchase.
A Shareholder wishing to exchange his or her Shares may do so by contacting the
Group at (800) 451-8377 or by providing written instructions to the Transfer
Agent. Any Shareholder who wishes to make an exchange should obtain and review
the current Prospectus of the Fund of the Group in which the Shareholder wishes
to invest before making the exchange. For a discussion of risks associated with
unauthorized telephone exchanges, see "HOW TO REDEEM YOUR INVESTOR A SHARES--By
Telephone" below.
PARKSTONE INDIVIDUAL RETIREMENT ACCOUNTS
Investor A Shares of the Funds are available to Shareholders on a tax-deferred
basis through the following retirement plans:
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A Parkstone IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Parkstone IRA contributions may be tax-deductible and earnings are tax-deferred.
Under the Tax Reform Act of 1986, the tax deductibility of IRA contributions is
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A Parkstone SEP/IRA may be established on a group basis by an employer who
wishes to sponsor a tax-sheltered retirement program by making contributions
into IRAs on behalf of all eligible employees.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR-SEP/IRA")
A Parkstone SAR-SEP/IRA offers employers with 25 or fewer eligible employees the
ability to establish a SEP/IRA that permits salary reduction contributions.
All Parkstone IRA distribution requests must be made in writing to the Transfer
Agent. Any additional deposits to a Parkstone IRA must distinguish the type and
year of the contribution.
For more information on any of the Parkstone IRAs or other retirement plan
options available (401(k) Defined Contribution Plans, 403(b)(7) Defined
Compensation Plans, etc.), call the Group at (800) 451-8377. Shareholders are
advised to consult a tax adviser on Parkstone IRA contribution and withdrawal
requirements and restrictions.
HOW TO REDEEM YOUR INVESTOR A SHARES
Shareholders may redeem their Investor A Shares without charge on any day that
net asset value is calculated (see "HOW SHARES ARE VALUED"). Redemptions will be
effected at the net asset value per
PROSPECTUS--Investor A Shares 64
<PAGE> 69
share next determined after receipt of a redemption request. Redemptions may be
requested by mail or by telephone.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to honor the request. The Transfer Agent's address is: BISYS Fund Services Ohio,
Inc., c/o The Parkstone Group of Funds, Department L-1270, Columbus, Ohio
43260-1270. The Transfer Agent will require a signature guarantee by an eligible
guarantor institution. The signature guarantee requirement will be waived if all
of the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record, and (2) the redemption check is mailed to the
Shareholder(s) at the address of record. The Shareholder may also have the
proceeds mailed to a commercial bank account previously designated on the
Account Application Form. There is no charge for having redemption proceeds
mailed to a designated bank account. To change the address to which a redemption
check is to be mailed, a written request therefor must be received by the
Transfer Agent. In connection with such request, the Transfer Agent will require
a signature guarantee by an eligible guarantor institution.
For purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations, as those terms are
defined in the Securities Exchange Act of 1934. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that neither is a member of a clearing corporation nor maintains net
capital of at least $100,000.
BY TELEPHONE
Investor A Shares may be redeemed by telephone if the Account Application Form
reflects that the Shareholder has that capability. The Shareholder may have the
proceeds mailed to his or her address or mailed or wired to a commercial bank
account previously designated on the Account Application Form. Under most
circumstances, payments will be transmitted on the next Business Day. Wire
redemption requests may be made by the Shareholder by telephone to the Group at
(800) 451-8377. While the Transfer Agent currently does not charge a wire
redemption fee, the Transfer Agent reserves the right to impose such a fee in
the future.
The Group's Account Application Form provides that neither BISYS, the Transfer
Agent, the Group nor any of their affiliates or agents will be liable for any
loss, expense or cost when acting upon any oral, wired or electronically
transmitted instructions or inquiries believed by them to be genuine. While
precautions will be taken, Shareholders bear the risk of any loss as the result
of unauthorized telephone redemptions or exchanges believed by the Transfer
Agent to be genuine. If the telephone feature was not originally selected, the
Shareholder must provide written instructions to the Group to add it. The Group
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine; if these procedures are not followed, the Group may be
liable for any losses due to unauthorized or fraudulent instructions. These
procedures include recording all phone conversations, sending confirmations to
Shareholders within 72 hours of the telephone transaction, verifying the account
name and a shareholder's account number or tax identification number and sending
redemption proceeds only to the address of record or to a previously authorized
bank account. If, due to temporary adverse conditions, investors are unable to
effect telephone transactions, shareholders may mail requests to the Transfer
Agent. In addition, redemptions by telephone will be suspended for a period of
10 days following any change in the Group's telephone number.
CHECK WRITING FEATURE
Shareholders of Investor A Shares of the Money Market Funds may write checks on
accounts for a minimum of $500.00. Once a shareholder has signed and returned a
signature card, he or she will receive a supply of checks. A check may be made
payable to any person, and the shareholder's account will continue to earn
dividends until the check clears. Because of the difficulty of determining in
advance the
65 PROSPECTUS--Investor A Shares
<PAGE> 70
exact value of the Fund account, a shareholder may not use a check to close
his or her account. The shareholder's account will be charged a fee for stopping
payment of a check upon the shareholder's request or if the check cannot be
honored because of insufficient funds or other valid reasons.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of a Fund to make regular monthly
or quarterly redemptions of Investor A Shares. With shareholder authorization,
the Transfer Agent will automatically redeem such Investor A Shares at the net
asset value on the fifteenth day of the month or quarter (or the next Business
Day thereafter) and have the amount specified transferred according to the
written instructions of the Shareholder. Shareholders participating in this plan
must maintain a minimum account balance of $1,000. The required minimum
withdrawal is $100, monthly or quarterly.
The Auto Withdrawal Plan may be modified or terminated without notice. In
addition, the Group may suspend a Shareholder's withdrawal plan without notice
if the account contains insufficient funds to effect a withdrawal or in the
event that the account balance is less than the minimum $1,000 amount.
To participate in the Auto Withdrawal Plan, Shareholders should call (800)
451-8377 for more information. Purchases of additional Investor A Shares
concurrently with withdrawals may be disadvantageous to certain Shareholders
because of tax liabilities and sales charges. For a Shareholder to change the
Auto Withdrawal Plan instructions, the request must be made in writing to the
Distributor and may take up to 15 days to implement.
OTHER INFORMATION REGARDING REDEMPTION OF SHARES
All or part of a Customer's Investor A Shares may be redeemed in accordance with
instructions and limitations pertaining to his or her account at FABC or one of
its affiliates.
All redemption orders are effected at the net asset value per share next
determined after the Investor A Shares are properly tendered for redemption, as
described above. The proceeds paid upon redemption of such Investor A Shares in
the Funds may be more or less than the amount invested. Payment to Shareholders
for such Investor A Shares redeemed will be made within seven days after receipt
by the Transfer Agent of the request for redemption. However, to the greatest
extent possible, requests from Shareholders for next day payments upon
redemption of Investor A Shares will be honored if received by the Transfer
Agent before 4:00 p.m. (Eastern Time) on a Business Day or, if received after
4:00 p.m. (Eastern Time), within two Business Days, unless it would be
disadvantageous to the Group or the Shareholders of a Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner. Also to the greatest extent possible, requests for same day
payments upon redemption of Investor A Shares of the Money Market Funds will
be honored if the request for redemption is received by the Transfer Agent
before 12:00 p.m. noon, (Eastern Time), on a Business Day or, if received after
12:00 p.m. noon, (Eastern Time), on the next Business Day, unless it would be
disadvantageous to the Group or the Shareholders of a Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, the Group may be requested to redeem Investor A Shares for
which it has not yet received good payment. In such circumstances, the
forwarding of proceeds may be delayed until payment has been collected for the
purchase of such Investor A Shares which delay may be for 15 days or more. Such
delay may be avoided if such Investor A Shares are purchased by wire transfer of
federal funds. The Group intends to pay cash for all Investor A Shares redeemed,
but under abnormal conditions which make payment in cash unwise, payment may be
made wholly or partly in portfolio securities at their then market value equal
to the redemption price. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
See the Statement of Additional Information ("ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION") for examples of when the right of redemption may be suspended or
redeem Investor A Shares involuntarily if it appears appropriate to do so in
light of the Group's responsibilities under the 1940 Act.
PROSPECTUS--Investor A Shares 66
<PAGE> 71
HOW SHARES ARE VALUED
The net asset value of each class of the Investor A Shares of the Funds, with
the exception of the Money Market Funds, is determined and priced as of the
close of trading on the New York Stock Exchange ("NYSE") on each Business Day
(generally 4:00 p.m. Eastern Time) (with respect to the Non-Money Market Funds,
the "Valuation Time"). The net asset value of the Investor A Shares of the Money
Market Funds is determined and the Shares are priced as of 12:00 p.m. noon
(Eastern Time) and as of the close of trading on the NYSE on each Business Day
(with respect to the Money Market Funds, the "Valuation Times"). A "Business
Day" is a day on which the NYSE is open for trading and the Federal Reserve
Board of Chicago is open, and any other day (other than a day on which no Shares
are tendered for redemption and no order to purchase any Shares is received)
during which there is sufficient trading in a Fund's portfolio instruments that
its net asset value per share might be materially affected. Currently, the NYSE
or the Federal Reserve Board of Chicago will not open in observance of the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran's Day, Thanksgiving and Christmas.
Net asset value per share for a particular class for purposes of pricing sales
and redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund allocable to such class, less the liabilities charged
to that Fund allocable to such class and any liabilities charged directly to
that class, by the number of outstanding Shares of such class.
The net asset value per share will fluctuate as the value of the investment
portfolio of a Fund changes. However, the assets in each Money Market Fund are
valued based upon the amortized cost method. Pursuant to the rules and
regulations of the SEC regarding the use of the amortized cost method, each
Money Market Fund will maintain a dollar-weighted average portfolio maturity of
90 days or less. Although the Group seeks to maintain each Money Market Fund's
net asset value per share at $1.00, there can be no assurance that net asset
value will not vary.
The securities in each Fund will be valued at market value. If market quotations
are not available, the securities will be valued by a method which the Board of
Trustees believes accurately reflects fair value. Foreign securities are valued
based on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. For further information about valuation of investments, see "NET ASSET
VALUE" in the Statement of Additional Information.
DIVIDENDS AND TAXES
GENERAL
Net income for each Fund is declared monthly as a dividend to Shareholders at
the close of business on the day of declaration and is paid monthly, except for
the Money Market Funds which are declared daily and paid monthly. Distributable
net realized capital gains are distributed at least annually. A Shareholder will
automatically receive all income dividends and capital gains distributions in
additional full and fractional Shares at net asset value as of the date of
declaration, unless the Shareholder elects to receive dividends or distributions
in cash or elects to participate in the Directed Dividend Option. Such election,
or any revocation thereof, must be made in writing to the Transfer Agent at 3435
Stelzer Road, Columbus, Ohio 43219, and will become effective with respect to
dividends and distributions having record dates after its receipt by the
Transfer Agent.
Each Fund's net investment income available for distribution to the holders of
Investor A Shares will be reduced by the amount of Rule 12b-1 fees payable to
Participating Organizations under the Investor A Plan. Each Fund's net
investment income available for distribution to the holders of Investor A Shares
may also be reduced by the amount of retail transfer agency fees payable to the
Transfer Agent applicable to the Investor A Shares.
Each of the Funds of the Group is treated as a separate entity for Federal
income tax purposes. Each Fund intends to qualify as a "regulated investment
company" under the Code for so long as such qualification is
67 PROSPECTUS--Investor A Shares
<PAGE> 72
in the best interest of its shareholders and each intends to distribute all of
its net income and capital gains so that it is not required to pay federal
income taxes on amounts so distributed to shareholders.
To avoid federal income tax, the Code requires each Fund to distribute each
taxable year at least 90% of its investment company taxable income and at least
90% of its exempt-interest income. In addition, to avoid imposition of a
non-deductible 4% excise tax, each Fund is required annually to distribute,
prior to calendar year end, 98% of taxable ordinary income on a calendar year
basis, 98% of capital gain net income realized in the twelve months preceding
October 31, and the balance of undistributed taxable ordinary income and capital
gain net income from the prior calendar year. Finally, in order to permit the
Municipal Bond Fund and the Michigan Bond Fund each to distribute
exempt-interest dividends which Shareholders may exclude from their gross
taxable income for federal income tax purposes, at least 50% of such Fund's
total assets must consist of obligations the interest on which is exempt from
federal income tax as of the close of each fiscal quarter of such Fund.
A Shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term loss would treat it as a receipt of
ordinary income. The dividends-received deduction for corporations will apply to
the aggregate of such ordinary income distributions in the same proportion as
the aggregate dividends from domestic corporations, if any, received by that
Fund bear to its gross income. A Shareholder will not be able to take the
dividends-received deduction unless that Shareholder holds the Shares for at
least 46 days.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to its Shareholders as long-term capital gain
in the year in which it is received, regardless of how long the Shareholder has
held Shares. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to taxation.
Taxes may be imposed on the Funds, particularly the Balanced Fund and
International Fund, by foreign countries with respect to income received on
foreign securities. If more than 50% of the value of a Fund's assets at the
close of its taxable year consists of stocks or securities of foreign
corporations, the Fund may elect to treat any foreign income taxes it paid as
paid by its Shareholders. In this case, Shareholders generally will be required
to include in income their pro rata share of such taxes, but will then be
entitled to claim a credit or deduction for their share of such taxes. However,
a particular Shareholder's ability to utilize such a credit will be subject to
certain limitations imposed by the Code. The Funds will report to their
Shareholders each year the amount, if any, of foreign taxes per share that they
have elected to have treated as paid by their Shareholders.
Shareholders will be advised at least annually as to the Federal income tax
consequences of distributions made during the year.
THE MUNICIPAL BOND FUND, THE MICHIGAN BOND FUND AND THE TAX-FREE FUND (THE
"EXEMPT FUNDS")
Dividends derived from exempt-interest income may be treated by an Exempt Fund's
Shareholders as items of interest excludable from their gross income. However,
such dividends may be taxable to Shareholders of the Municipal Bond Fund and the
Tax-Free Fund under state or local law as ordinary income even though all or a
portion of the amounts may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such taxes. In determining net
exempt-interest income, expenses of the Exempt Fund are allocated to gross
tax-exempt interest income in the proportion that the gross amount of such
interest income bears to the Exempt Fund's total gross income, excluding net
capital gains. (Shareholders are advised to consult a tax adviser with respect
to whether exempt-interest dividends retain the exclusion if such Shareholder
would be treated as a "substantial
PROSPECTUS--Investor A Shares 68
<PAGE> 73
user" or a "related person" to such user under the Code). Interest on
indebtedness incurred or continued by a Shareholder to purchase or carry shares
is not deductible for federal income tax purposes if an Exempt Fund distributes
exempt-interest dividends during the Shareholder's taxable year. It is
anticipated that distributions from the Exempt Funds will not be eligible for
the dividends-received deduction for corporations.
Under the Code, if a Shareholder receives an exempt-interest dividend with
respect to any Share and such Share is held for six months or less, any loss on
the sale or exchange of such Share will be disallowed to the extent of the
amount of such exempt-interest dividend, although the Treasury Department is
authorized to issue regulations reducing the period to not less than 31 days for
regulated investment companies that regularly distribute at least 90% of their
net tax-exempt interest. No such regulations have been issued as of the date of
this Prospectus. In addition, dividends attributable to interest on certain
private activity bonds may have to be included in Shareholders' income for
purposes of calculating alternative minimum tax. See "ADDITIONAL
INFORMATION--Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information for more information regarding the federal alternative minimum tax.
To the extent dividends paid to Shareholders are derived from taxable income
(for example, from interest on certificates of deposit or repurchase agreements)
or from long-term or short-term capital gains, such dividends will be subject to
federal income tax. A Shareholder should consult his or her own tax adviser for
any special advice.
Distributions by the Michigan Bond Fund to holders of Shares who are subject to
the Michigan personal income tax and/or single business tax will not be subject
to the Michigan personal income tax, single business tax or any Michigan city
income tax to the extent that the distributions are attributable to income
received by the Michigan Bond Fund as interest from Michigan Municipal
Securities or to the extent that the distributions are attributable to interest
income and gains from the sale or disposal of United States obligations exempted
from state taxation by the United States Constitution, treaties, and statutes.
However, some or all of the other distributions by the Michigan Bond Fund may be
taxable by the State of Michigan or subject to applicable city income taxes,
even if the distributions are attributable to income of the Michigan Bond Fund
derived from obligations of the United States or its agencies and
instrumentalities. In addition, to the extent that a Shareholder of the Michigan
Bond Fund is obligated to pay state or local taxes outside of Michigan,
dividends earned by an investment in the Michigan Bond Fund may represent
taxable income. Investments held in the Michigan Bond Fund by a Michigan
resident are not subject to the Michigan intangible personal property tax to the
extent that the investments are attributable to bonds or other similar
obligations of the State of Michigan or a political subdivision thereof, or
obligations of the United States.
The Michigan Department of Treasury in a 1986 Revenue Administrative Bulletin
has taken the position that the tax attributes of the securities held by a
mutual fund flow through to the investors. Based on this position, the Michigan
Department of Treasury has stated that mutual fund distributions attributable to
interest from the fund's investment in direct U.S. government securities, as
well as Municipal Securities, will not be subject to the Michigan personal
income tax. The Michigan Department of Treasury also has stated that an owner of
a share of a mutual fund will not be subject to intangible personal property tax
to the extent that the pro rata share of the securities underlying the mutual
fund would be exempt.
For Michigan personal income tax and intangible personal property tax purposes,
taxable distributions from investment income and short-term capital gains, if
any, are taxable as ordinary income, whether received in cash or additional
Shares, and are subject to the Michigan intangible personal property tax and to
applicable Michigan city income taxes. The Michigan single business tax, a
modified value added tax, is computed by applying the tax rate to a tax base
determined by making certain adjustments to federal taxable income. Taxable
distributions from investment income and gains, if any, may be included in
federal taxable income or may comprise one of the adjustments made to the tax
base. Distributions of cash, other property or additional Shares by the Michigan
Bond Fund to a Michigan single business taxpayer attributable to any gain
realized from the sale, exchange or other disposition of Michigan Municipal
Securities are includable in the Michigan single business taxpayer's adjusted
tax base for
69 PROSPECTUS--Investor A Shares
<PAGE> 74
purposes of the Michigan single business tax to the extent included in federal
taxable income. Distributions of cash, other property or additional Shares by
the Michigan Bond Fund to a Michigan single business taxpayer are not subject to
the Michigan single business tax to the extent that the distributions are
attributable to interest income from and any gain realized from the sale,
exchange or other disposition of U.S. securities. Taxable long-term capital
gains distributions are taxable as long-term capital gains for Michigan purposes
irrespective of how long a Shareholder has held the Shares, except that such
distributions reinvested in Shares of the Michigan Bond Fund are exempt from the
Michigan intangible personal property tax.
U.S. GOVERNMENT OBLIGATIONS FUND, PRIME OBLIGATIONS FUND AND TREASURY FUND
Since all of the net investment income of the U.S. Government Obligations Fund,
the Prime Obligations Fund and the Treasury Fund is expected to be derived from
earned interest, it is anticipated that no part of any distribution will be
eligible for the dividends-received deduction for corporations. The U.S.
Government Obligations Fund, the Prime Obligations Fund and the Treasury Fund do
not expect to realize any long-term capital gains and, therefore, do not foresee
paying any "capital gains dividends" as described in the Code.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their Shareholders. Potential
investors are advised to consult their tax advisers concerning state and local
taxes, which may differ from the federal, state and local income taxes described
above.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing their average
annual total return, aggregate total return and/or yield may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return of a class of Shares in a Fund will be
calculated for the period since the establishment of the Funds and will reflect
the imposition of the maximum sales charge, if any. Average annual total return
is measured by comparing the value of an investment in a class of Shares in a
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of annualized.
Yield of a class of Shares will be computed by dividing a class of Shares' net
investment income per share earned during a recent one-month period by that
class of Shares' per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) on the last day of the
period and annualizing the result. Each Fund may also present its average annual
total return, aggregate total return and yield, as the case may be, excluding
the effect of a sales charge, if any.
In addition, from time to time the Funds may present their respective
distribution rates for a class of Shares in Shareholder reports and in
supplemental sales literature which is accompanied or preceded by a prospectus.
Distribution rates will be computed by dividing the distribution per share of a
class made by a Fund over a twelve-month period by the maximum offering price
per share. The calculation of income in the distribution rate includes both
income and capital gains dividends and does not reflect unrealized gains or
losses, although a Fund may also present a distribution rate excluding the
effect of capital gains. The distribution rate differs from the yield, because
it includes capital gains which are often non-recurring in nature, whereas yield
does not include such items. Distribution rates may also be presented excluding
the effect of a sales charge, if any.
Standardized yield and total return quotations will be computed separately for
Investor A Shares and the other classes of the Funds. Because of differences in
the fees and/or expenses borne by different classes of Shares of the Funds, the
net yield and total return on Investor A Shares may be different from that for
another class of the same Fund. For example, net yield and total return on
Investor A Shares is expected,
PROSPECTUS--Investor A Shares 70
<PAGE> 75
at any given time, to be lower than the net yield and total return on
Institutional Shares for the same period.
Investors may also judge the performance of any class of Shares or Fund by
comparing or referencing it to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices such as those prepared by various services and published by such
services or by other services or publications, including, but not limited to,
ratings published by Morningstar, Inc. In addition to performance information,
general information about the Funds that appears in such publications may be
included in advertisements, in sales literature and in reports to shareholders.
For further information regarding such services and publications, see
"ADDITIONAL INFORMATION--Performance Comparisons" in the Statement of Additional
Information.
Total return and yield are functions of the type and quality of instruments held
in the portfolio, levels of operating expenses and changes in market conditions.
Consequently, total return and yield will fluctuate and are not necessarily
representative of future results. Any fees charged by FABC or any of its
affiliates with respect to customer accounts for investing in shares of the
Funds will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted. In addition, if First of
America and BISYS voluntarily reduce all or a part of their respective fees, as
further discussed above, the total return of such Fund will be higher than it
would otherwise be in the absence of such voluntary fee reductions.
FUNDATA(R)
Shareholders of the Group may obtain current price, yield and other performance
information on any of the Group's funds through FUNDATA(R), an Automated Voice
Response System, 24 hours a day by calling (800) 451-8377 from any touch-tone
phone. Shareholders may also speak directly with a Group representative,
employed by BISYS, during regular business hours.
GENERAL INFORMATION
ORGANIZATION OF THE GROUP
The Group was organized as a Massachusetts business trust in 1987 and currently
offers sixteen Funds. The shares of each of the Funds of the Group, other than
its four Money Market Funds and two Tax-Free Income Funds, are offered in four
separate classes: Investor A Shares, Investor B Shares, Investor C Shares and
Institutional Shares. Shares of each of the four Money Market Funds of the Group
are offered in two separate classes: Investor A Shares and Institutional Shares.
Shares of each of the two Tax-Free Income Funds are offered in three separate
classes: Investor A Shares, Investor B Shares and Institutional Shares. Each
Share represents an equal proportionate interest in a Fund with other shares of
the same Fund, and is entitled to such dividends and distributions out of the
income earned on the assets belonging to that Fund as are declared at the
discretion of the Trustees. Shares do not have a par value.
Shareholders are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested.
Shareholders will vote in the aggregate and not by Fund except as otherwise
expressly required by law. For example, Shareholders of the Funds will vote in
the aggregate with other shareholders of the Group with respect to the election
of Trustees and ratification of the selection of independent accountants.
However, Shareholders of a Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of that Fund's
investment advisory agreement. In addition, holders of Investor A Shares of a
Fund will vote as a class and not with holders of another class of that Fund
with respect to the approval of its Investor A Plan.
An annual or special meeting of shareholders to conduct necessary business is
not required by the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to elect Trustees, amend the Declaration of
Trust, approve an investment and sub-investment advisory agreements and to
satisfy certain other requirements. To the extent that such a meeting is not
required, the Group may elect not to have an annual or special meeting.
71 PROSPECTUS--Investor A Shares
<PAGE> 76
The Group has represented to the SEC that the Trustees will call a special
meeting of shareholders for purposes of considering the removal of one or more
Trustees upon written request therefor from shareholders holding not less than
10% of the outstanding votes of the Group. At such a meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Group), by majority vote, has the power to remove one or more
Trustees.
As of June 30, 1996, FABC, through its wholly-owned subsidiaries, possessed on
behalf of its underlying accounts voting or investment power with respect to
more than 25% of the Shares of each of the Funds, and therefore may be presumed
to control each Fund within the meaning of the 1940 Act.
MULTIPLE CLASSES OF SHARES
In addition to Investor A Shares, the Group also offers Investor B Shares,
Investor C Shares and Institutional Shares of the Funds pursuant to a Multiple
Class Plan adopted by the Group's Trustees under Rule 18f-3 of the 1940 Act. A
salesperson or other person entitled to receive compensation for selling or
servicing the Shares may receive different compensation with respect to one
particular class of Shares over another in the same Fund. The amount of
dividends payable with respect to other Classes of Shares will differ from
dividends on Investor A Shares as a result of the Investor A Plan fees
applicable to Investor A Shares and because Investor A Shares may bear different
retail transfer agency expenses. For further details regarding these other
Classes of Shares, call the Group at (800) 451-8377.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
Inquiries regarding the Group may be directed in writing to The Parkstone Group
of Funds at P.O. Box 50551, Kalamazoo, MI 49005-0551, or by calling toll-free
(800) 451-8377.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by their Distributor in any jurisdiction in which such offering may not
lawfully be made.
PROSPECTUS--Investor A Shares 72
<PAGE> 77
THE PARKSTONE GROUP OF FUNDS
INVESTOR A SHARES
INVESTMENT ADVISER (AND SUB-ADMINISTRATOR)
First of America Investment Corporation
Suite 500
303 North Rose Street
Kalamazoo, Michigan 49007
SUBADVISER (INTERNATIONAL FUND AND BALANCED FUND)
Gulfstream Global Investors, Ltd.
Suite 550
100 Crescent Court
Dallas, Texas 75201
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
San Francisco, California 94111
LEGAL COUNSEL
Howard & Howard Attorneys, P.C.
Suite 400
107 West Michigan Avenue
Kalamazoo, Michigan 49007
<PAGE> 78
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
INVESTOR B SHARES
THE PARKSTONE GROWTH FUNDS
THE PARKSTONE GROWTH AND INCOME FUNDS
THE PARKSTONE INCOME FUNDS
THE PARKSTONE TAX-FREE INCOME FUNDS
FORM N-1A
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM NO. RULE 404(a) CROSS REFERENCE
- ---------------------------------------------------------------------------
<S> <C> <C>
1. Cover Page......................... Cover Page
2. Synopsis........................... Prospectus Summary; Fee Tables
3. Condensed Financial Information.... Financial Highlights; Performance Information
4. General Description of Registrant.. Cover Page; Investment Objectives and Policies;
Investment Restrictions; Risk Factors and
Investment Techniques; General Information -
Organization of the Group
5. Management of the Fund............. Management of the Funds; Fee Tables
5A. Management's Discussion of Fund
Performance........................ Not Applicable
6. Capital Stock and Other Securities. Directed Dividend Option; Dividends and Taxes;
General Information - Organization of the Group;
General Information - Multiple Classes of Shares;
General Information - Miscellaneous
7. Purchase of Securities Being
Offered......................... Management of the Funds - Administrator, Sub-
Administrator and Distributor; Management of
the Funds - Distribution Plan for Investor B
Shares; How to Buy Investor B Shares; Sales
Charges; Exchange Privilege; Parkstone Individual
Retirement Accounts; How Shares are Valued
8. Redemption or Repurchase........... Sale Charges; Contingent Deferred Sales Charge;
Exchange Privilege; Conversion Feature; How to
Redeem Your Investor B Shares
9. Pending Legal Proceedings.......... Not Applicable
PROSPECTUS - INVESTOR B SHARES
</TABLE>
<PAGE> 79
- --------------------------------------------------------------------------------
THE PARKSTONE
GROUP OF FUNDS
INVESTOR B SHARES
- --------------------------------------------------------------------------------
GROWTH FUNDS
PARKSTONE EQUITY FUND
PARKSTONE SMALL CAPITALIZATION FUND
PARKSTONE LARGE CAPITALIZATION FUND
PARKSTONE INTERNATIONAL DISCOVERY FUND
GROWTH AND INCOME FUNDS
PARKSTONE BALANCED FUND
PARKSTONE HIGH INCOME EQUITY FUND
INCOME FUNDS
PARKSTONE BOND FUND
PARKSTONE LIMITED MATURITY BOND FUND
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
PARKSTONE U.S. GOVERNMENT INCOME FUND
TAX-FREE INCOME FUNDS
PARKSTONE MUNICIPAL BOND FUND
PARKSTONE MICHIGAN MUNICIPAL BOND FUND
Prospectus dated October 8, 1996
[PARKSTONE MUTUAL FUNDS LOGO]
-------------------------
NOT FDIC INSURED
<PAGE> 80
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 81
THE PARKSTONE GROUP OF FUNDS
INVESTOR B SHARES PROSPECTUS DATED OCTOBER 8, 1996
<TABLE>
<S> <C>
GROWTH FUNDS For more information call:
Parkstone Equity Fund (800) 451-8377
Parkstone Small Capitalization Fund or write to:
Parkstone Large Capitalization Fund 3435 Stelzer Road
Parkstone International Discovery Fund Columbus, Ohio 43219
GROWTH AND INCOME FUNDS
Parkstone Balanced Fund THESE SECURITIES HAVE NOT
Parkstone High Income Equity Fund BEEN APPROVED OR
DISAPPROVED BY THE
INCOME FUNDS SECURITIES AND EXCHANGE
Parkstone Bond Fund COMMISSION OR ANY STATE
Parkstone Limited Maturity Bond Fund SECURITIES COMMISSION NOR
Parkstone Intermediate Government Obligations HAS THE COMMISSION OR ANY
Fund STATE SECURITIES COMMISSION
Parkstone U.S. Government Income Fund PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS
TAX-FREE INCOME FUNDS PROSPECTUS. ANY
Parkstone Municipal Bond Fund REPRESENTATION TO THE
Parkstone Michigan Municipal Bond Fund CONTRARY IS A CRIMINAL
OFFENSE
</TABLE>
The funds listed above are each of the twelve currently-offered series (the
"Funds") of The Parkstone Group of Funds (the "Group") which offer Investor B
Shares. This Prospectus explains concisely what you should know before investing
in the Investor B Shares of the Funds listed above. Please read it carefully and
keep it for future reference. You can find more detailed information about the
Funds in the October 8, 1996 Statement of Additional Information, as amended
from time to time. For a free copy of the Statement of Additional Information or
other information, contact the Group at the number specified above. The
Statement of Additional Information has been filed with the SEC (the "SEC") and
is incorporated into this Prospectus by reference.
THE SHARES OF THE PARKSTONE GROUP OF FUNDS ARE NOT OBLIGATIONS OR DEPOSITS OF
FIRST OF AMERICA INVESTMENT CORPORATION OR ITS PARENT, AND THE INVESTMENTS
DESCRIBED IN THIS PROSPECTUS ARE NOT ENDORSED, INSURED OR GUARANTEED BY FIRST OF
AMERICA INVESTMENT CORPORATION, ITS PARENT OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. INVESTMENTS IN THE PARKSTONE GROUP OF FUNDS
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVOLVED.
PROSPECTUS--Investor B Shares
<PAGE> 82
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Roadmap........................................................... 3
Prospectus Summary........................................................... 4
Fee Tables................................................................... 8
Financial Highlights......................................................... 11
Investment Objectives and Policies........................................... 17
Risk Factors and Investment Techniques....................................... 28
Investment Restrictions...................................................... 39
Management of the Funds...................................................... 40
How to Buy Investor B Shares................................................. 46
Sales Charges................................................................ 48
Contingent Deferred Sales Charge............................................. 48
Directed Dividend Option..................................................... 49
Exchange Privilege........................................................... 50
Factors to Consider When Selecting Investor B Shares......................... 50
Conversion Feature........................................................... 51
Parkstone Individual Retirement Accounts..................................... 51
How to Redeem Your Investor B Shares......................................... 52
How Shares Are Valued........................................................ 54
Dividends and Taxes.......................................................... 54
Performance Information...................................................... 57
Fundata(R)................................................................... 58
General Information.......................................................... 58
</TABLE>
PROSPECTUS--Investor B Shares 2
<PAGE> 83
PROSPECTUS ROADMAP
For information about the following subjects, consult the pages indicated on the
table below.
<TABLE>
<CAPTION>
INVESTMENT
FINANCIAL OBJECTIVES RISK FACTORS AND
FUND HIGHLIGHTS AND POLICIES INVESTMENT TECHNIQUES
<S> <C> <C> <C>
Balanced Fund 13 20 21
Bond Fund 14 22 24
Equity Fund 11 18 19
Government Income Fund 16 25 25
High Income Equity Fund 14 22 22
International Discovery Fund 13 19 20
Intermediate Government Obligations Fund 15 24 25
Large Capitalization Fund 12 18 19
Limited Maturity Bond Fund 15 22 24
Michigan Municipal Bond Fund 16 26 28
Municipal Bond Fund 17 26 28
Small Capitalization Fund 12 18 19
</TABLE>
The Parkstone Group of Funds (the "Group") is an open-end management investment
company which offers to the public sixteen separate investment portfolios,
fifteen of which are diversified portfolios and one of which is a
non-diversified portfolio, each with different investment objectives. These
Funds enable the Group to meet a wide range of investment needs.
This Prospectus relates only to the Investor B Shares of the following Funds:
Parkstone Equity Fund (the "Equity Fund")
Parkstone Small Capitalization Fund (the "Small Capitalization Fund")
Parkstone Large Capitalization Fund (the "Large Capitalization Fund")
Parkstone International Discovery Fund (the "International Fund")
Parkstone Balanced Fund (the "Balanced Fund")
Parkstone High Income Equity Fund (the "High Income Equity Fund")
Parkstone Bond Fund (the "Bond Fund")
Parkstone Limited Maturity Bond Fund (the "Limited Maturity Bond Fund")
Parkstone Intermediate Government Obligations Fund (the "Intermediate
Government Obligations Fund")
Parkstone U.S. Government Income Fund (the "Government Income Fund")
Parkstone Municipal Bond Fund (the "Municipal Bond Fund")
Parkstone Michigan Municipal Bond Fund (the "Michigan Bond Fund")
For convenience of reference, the above Funds are sometimes referred to as part
of a general grouping. The Equity Fund, Small Capitalization Fund, Large
Capitalization Fund and International Fund are collectively referred to as the
"Growth Funds." The Balanced Fund and High Income Equity Fund are collectively
referred to as the "Growth and Income Funds." The Bond Fund, Limited Maturity
Bond Fund, Intermediate Government Obligations Fund and Government Income Fund
are collectively referred to as the "Income Funds." Finally, the Michigan Bond
Fund and Municipal Bond Fund are collectively referred to as "Tax-Free Income
Funds."
3 PROSPECTUS--Investor B Shares
<PAGE> 84
The Trustees of the Group have divided beneficial ownership of each of the Funds
into an unlimited number of transferable units called shares. Each Fund of the
Group offers multiple classes of shares. This Prospectus describes one class of
shares of each Fund, Investor B Shares. Interested persons who wish to obtain a
copy of the Prospectus of the other classes of shares of the Funds or a copy of
the Group's most recent Annual Report may contact the Group at the telephone
number shown above.
The investment objectives of each of the Funds are described in this Prospectus
and are summarized in the Prospectus Summary. First of America Investment
Corporation, Kalamazoo, Michigan ("First of America" or the "Investment
Adviser"), acts as the investment adviser to each of the Funds of the Group. To
provide investment advisory services for the International and Balanced Funds
for investments in foreign securities, First of America has entered into a
sub-investment advisory agreement with Gulfstream Global Investors, Ltd.,
Dallas, Texas ("Gulfstream" or the "Subadviser").
PROSPECTUS SUMMARY
Shares Offered
This Prospectus relates to Investor B Shares of the following Funds of the
Group:
GROWTH FUNDS
Equity Fund
Small Capitalization Fund
Large Capitalization Fund
International Fund
GROWTH AND INCOME FUNDS
Balanced Fund
High Income Equity Fund
INCOME FUNDS
Bond Fund
Limited Maturity Bond Fund
Intermediate Government Obligations Fund
Government Income Fund
TAX-FREE INCOME FUNDS
Municipal Bond Fund
Michigan Bond Fund
These Funds represent twelve separate investment portfolios of The Parkstone
Group of Funds, a Massachusetts business trust which is registered as an
open-end, management investment company.
Purchase and Redemption of Shares
The public offering price of Investor B Shares of each Fund is equal to the net
asset value per share, but investors may be subject to a contingent deferred
sales charge of up to 4.00% when Investor B Shares are redeemed prior to four
years from the date of purchase. Shares may be purchased by mail, telephone or
wire, through a broker-dealer who has entered into an agreement with the Group's
distributor, BISYS Fund Services Limited Partnership ("BISYS" or the
"Distributor"), through the Group's Auto Invest Plan or through certain
Parkstone Individual Retirement Accounts. Investor B Shares of one Fund of the
Group may be exchanged for Investor B Shares of another Fund of the Group at net
asset value without the imposition of a contingent deferred sales charge,
provided certain conditions are met. Shares may be redeemed by contacting the
Transfer Agent or through the Group's Auto Withdrawal Plan. See "HOW TO BUY
INVESTOR B SHARES," "EXCHANGE PRIVILEGE," "HOW TO REDEEM INVESTOR B SHARES" and
"HOW SHARES ARE VALUED."
PROSPECTUS--Investor B Shares 4
<PAGE> 85
Minimum Purchase
There is a $1,000 minimum initial purchase (based upon the public offering
price) per Fund with no minimum subsequent investments. Such minimum initial
investment may be waived for certain purchasers and is reduced to $100 for
investors using the Auto Invest Plan described herein to invest in a Fund,
although such investors are subject to a $50 minimum for each subsequent
investment in such Fund. Investor B Shares must be purchased in amounts less
than $250,000.
Conversion Feature
Investor B Shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A Shares.
Investment Objectives
[CAPTION]
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT OBJECTIVE
<S> <C>
Balanced Fund seeks current income, long-term capital growth and
conservation of capital
Bond Fund seeks to provide current income and preservation of
capital by investing in a portfolio of high- and
medium-grade fixed-income securities
Equity Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks
Government Income Fund seeks to provide shareholders with a high level of
current income consistent with prudent investment risk
High Income Equity Fund primarily seeks current income by investing in a
diversified portfolio of high quality, dividend-paying
stocks and securities convertible into common stocks; a
secondary objective is growth of capital
Intermediate Government seeks to provide current income with preservation of
Obligations Fund capital by investing in a diversified portfolio of U.S.
government securities with remaining maturities of 12
years or less
International Fund seeks long-term growth of capital
Large Capitalization Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks of companies with large
market capitalization
Limited Maturity Bond Fund seeks to provide current income and preservation of
capital by investing in a portfolio of high- and
medium-grade fixed-income securities, the remaining
maturities on which will be six years or less
Michigan Bond Fund seeks income which is exempt from federal income tax
and Michigan state income and intangibles tax, although
such income may be subject to the federal alternative
minimum tax when received by certain shareholders; also
seeks preservation of capital
Municipal Bond Fund seeks to provide current interest income which is
exempt from federal income taxes as well as
preservation of capital
Small Capitalization Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks of small- to
medium-sized companies
</TABLE>
5 PROSPECTUS--Investor B Shares
<PAGE> 86
Investment Policies
Under normal market conditions, each Fund will invest as described in the
following table:
<TABLE>
<CAPTION>
FUND INVESTMENT POLICY
<S> <C>
Balanced Fund in any type or class of securities, including all types
of common stocks, fixed-income securities and
securities convertible into common stocks. At least 25%
of the value of the Fund's total assets will be
invested in fixed-income senior securities and up to
15% of the Fund's total assets may be invested in
foreign securities
Bond Fund at least 80% of its total assets in bonds, debentures
and certain other debt securities specified herein
Equity Fund at least 80% of its total assets in common stocks,
and securities convertible into common stocks, of
companies believed by the investment adviser to be
characterized by sound management and the ability to
finance expected growth
Government Income Fund at least 65% of its total assets in obligations issued
or guaranteed by the U.S. government or its agencies or
instrumentalities; under current market conditions, up
to 80% of its total assets in mortgage-related
securities, which are issued or guaranteed by the U.S.
government, its agencies and instrumentalities and by
non-governmental entities, or greater amounts as
conditions warrant
High Income Equity Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized
by sound management, the ability to finance expected
growth and the ability to pay above-average dividends
Intermediate Government at least 80% of its total assets in obligations issued
Obligations Fund or guaranteed by the U.S. government or its agencies or
instrumentalities and with remaining maturities of
twelve years or less
International Fund at least 65% of its total assets in an internationally
diversified portfolio of equity securities which trade
on markets in countries other than the United States
and which are issued by companies (i) domiciled in
countries other than the United States, or (ii) that
derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States,
and (iii) which are ranked as small- or medium-sized
companies on the basis of their capitalization
Large Capitalization Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed to be characterized by sound management and
the ability to finance expected long-term growth
Limited Maturity Bond Fund at least 80% of the value of its total assets in bonds,
debentures and certain other debt securities specified
herein with remaining maturities of six years or less
Michigan Bond Fund at least 80% of its total assets in debt securities of
all types; at least 65% of the net assets in municipal
securities issued by or on behalf of the State of
Michigan, its political subdivisions, municipalities
and public authorities
</TABLE>
PROSPECTUS--Investor B Shares 6
<PAGE> 87
<TABLE>
<CAPTION>
FUND INVESTMENT POLICY
<S> <C>
Municipal Bond Fund at least 80% of its total assets in tax-exempt
Small Capitalization Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized
by sound management and the ability to finance expected
growth
</TABLE>
Risk Factors and Special Considerations
An investment in a mutual fund such as any of the Funds involves a certain
amount of risk and may not be suitable for all investors. In addition, some
investment policies of the Funds may entail certain risks. See "RISK FACTORS AND
INVESTMENT TECHNIQUES."
Management of the Funds
First of America serves as investment adviser, and, with respect to the
International Fund and a portion of the Balanced Fund, Gulfstream serves as
subadviser. First of America also serves as sub-administrator. BISYS, a
partnership owned by The BISYS Group, Inc., serves as distributor and
administrator. BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Transfer
Agent") serves as transfer agent and fund accountant. Union Bank of California,
N.A., formerly known as The Bank of California, N.A. ("Union Bank" or the
"Custodian"), serves as custodian.
Dividends and Taxes
Dividends from net income are declared and paid monthly. Net realized capital
gains are distributed at least annually. The Directed Dividend Option enables
shareholders to have dividends and capital gains paid by check, or reinvested
automatically without payment of sales charges. See "DIRECTED DIVIDEND OPTION."
Each of the Funds is treated as a separate entity for federal income tax
purposes and intends to qualify as a "regulated investment company."
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made during the year.
7 PROSPECTUS--Investor B Shares
<PAGE> 88
FEE TABLES (INVESTOR B SHARES)
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge (as a percentage of the offering price)................. None
Sales Charge on Reinvested Distributions..................................... None
Maximum Deferred Sales Charge on Redemptions(1).............................. 4.00%
Redemption Fees(2)........................................................... None
Exchange Fees................................................................ None
<FN>
- ------------
(1) A Contingent Deferred Sales Charge is charged only with respect to Investor
B Shares redeemed prior to four years from the date of purchase. (See
"CONTINGENT DEFERRED SALES CHARGE" herein.)
(2) Although no such fee currently is in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)*
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES EXPENSES
---------- ----- ------- -------
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund........................................ 1.00% 1.00% 0.29% 2.29%
Small Capitalization Fund.......................... 1.00% 1.00% 0.29% 2.29%
Large Capitalization Fund.......................... 0.40% 1.00% 0.38% 1.78%
International Fund................................. 1.17% 1.00% 0.38% 2.55%
GROWTH AND INCOME FUNDS:
Balanced Fund...................................... 0.75% 1.00% 0.41% 2.16%
High Income Equity Fund............................ 1.00% 1.00% 0.32% 2.32%
INCOME FUNDS:
Bond Fund.......................................... 0.70% 1.00% 0.24% 1.94%
Limited Maturity Bond Fund......................... 0.55% 1.00% 0.29% 1.84%
Intermediate Government Obligations Fund........... 0.70% 1.00% 0.26% 1.96%
Government Income Fund............................. 0.45% 1.00% 0.31% 1.76%
TAX-FREE INCOME FUNDS:
Municipal Bond Fund................................ 0.55% 1.00% 0.25% 1.80%
Michigan Bond Fund................................. 0.55% 1.00% 0.22% 1.77%
<FN>
- ------------
* after expense reductions
</TABLE>
Management Fees, Other Expenses, and Total Expenses as a percentage of average
net assets for the Balanced Fund, absent the voluntary reduction of advisory
fees and administrative fees, would have been 1.00%, 0.45% and 2.45%,
respectively. For the Bond Fund, they would have been 0.74%, 0.29% and 2.03%,
respectively. For the Limited Maturity Bond Fund they would have been 0.74%,
0.34% and 2.08%, respectively. For the Intermediate Government Obligations Fund
they would have been 0.74%, 0.31% and 2.05%, respectively. For the Government
Income Fund they would have been 0.74%, 0.36% and 2.10%, respectively. For the
Municipal Bond Fund they would have been 0.74%, 0.35% and 2.09%, respectively.
For the Michigan Bond Fund they would have been 0.74%, 0.32% and 2.06%,
respectively. The annual percentages of Management Fees and Other Expenses for
the Large Capitalization Fund are based on such fees and expenses incurred since
commencement of operations and expected voluntary reductions. Absent the
expected voluntary reduction of administrative
PROSPECTUS--Investor B Shares 8
<PAGE> 89
and advisory fees, Management Fees, Other Expenses and Total Expenses would be
0.80%, 3.27% and 4.07%, respectively. (See "MANAGEMENT OF THE FUNDS --
Investment Adviser and Subadviser" and "Administrator, Sub-Administrator and
Distributor.")
EXPENSE EXAMPLES
You would pay the following expenses rounded to the nearest dollar on a $1,000
investment in Investor B Shares, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--- ---- ---- ----
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund.................................................... $ 63 $ 102 $ 123 $ 263
Small Capitalization Fund...................................... $ 63 $ 102 $ 123 $ 263
Large Capitalization Fund*..................................... $ 58 $ 86 -- --
International Fund............................................. $ 66 $ 109 $ 136 $ 289
GROWTH AND INCOME FUNDS:
Balanced Fund.................................................. $ 62 $ 98 $ 116 $ 248
High Income Equity Fund........................................ $ 64 $ 102 $ 124 $ 266
INCOME FUNDS:
Bond Fund...................................................... $ 60 $ 91 $ 105 $ 226
Limited Maturity Bond Fund..................................... $ 59 $ 88 $ 100 $ 216
Intermediate Government Obligations Fund....................... $ 60 $ 92 $ 106 $ 229
Government Income Fund......................................... $ 58 $ 85 $ 95 $ 207
TAX-FREE INCOME FUNDS:
Municipal Bond Fund............................................ $ 58 $ 87 $ 97 $ 212
Michigan Bond Fund............................................. $ 58 $ 86 $ 96 $ 208
<FN>
You would pay the following expenses rounded to the nearest dollar on a $1,000
investment in Investor B Shares, assuming (1) 5% annual return and (2) no
redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--- ---- ---- ----
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund.................................................... $ 23 $ 72 $ 123 $ 263
Small Capitalization Fund...................................... $ 23 $ 72 $ 123 $ 263
Large Capitalization Fund*..................................... $ 18 $ 56 -- --
International Fund............................................. $ 26 $ 79 $ 136 $ 289
GROWTH AND INCOME FUNDS:
Balanced Fund.................................................. $ 22 $ 68 $ 116 $ 248
High Income Equity Fund........................................ $ 24 $ 72 $ 124 $ 266
INCOME FUNDS:
Bond Fund...................................................... $ 20 $ 61 $ 105 $ 226
Limited Maturity Bond Fund..................................... $ 19 $ 58 $ 100 $ 216
Intermediate Government Obligations............................ $ 20 $ 62 $ 106 $ 229
Government Income Fund......................................... $ 18 $ 55 $ 95 $ 207
TAX-FREE INCOME FUNDS:
Municipal Bond Fund............................................ $ 18 $ 57 $ 97 $ 212
Michigan Bond Fund............................................. $ 18 $ 56 $ 96 $ 208
<FN>
* Because the Large Capitalization Fund has been in operation for less than 10
months, expense example information is provided only for 1-year and 3-year
periods.
</TABLE>
The information set forth in the foregoing Fee Tables and expense examples
relates only to Investor B Shares of the Funds. Each of the Funds also may offer
other classes of shares. The other classes of
9 PROSPECTUS--Investor B Shares
<PAGE> 90
Shares of the Funds are subject to the same expenses except that the sales
charges and Rule 12b-1 fees will differ between classes.
As a result of the payment of sales charges and 12b-1 fees, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities Dealers, Inc.
(the "NASD"). The NASD has adopted rules effective July 7, 1993, which generally
limit the aggregate sales charges and payments under the Group's Investor B
Distribution and Shareholder Service Plan to a certain percentage of total new
gross share sales, plus interest. The Funds would stop accruing 12b-1 fees if,
to the extent, and for as long as, such limit would otherwise be exceeded.
The purpose of the above tables is to assist a potential purchaser of Investor B
Shares of any Fund in understanding the various costs and expenses that an
investor in a Fund will bear directly or indirectly. Such expenses do not
include any fees charged by First of America or any of its affiliates to its
customer accounts which may invest in Investor B Shares of the Funds. See
"MANAGEMENT OF THE FUNDS," "GENERAL INFORMATION" and "SALES CHARGES" for a more
complete discussion of the shareholder transaction expenses and annual operating
expenses of each of the Funds. The expense information for Investor B Shares
reflects current fees. THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
PROSPECTUS--Investor B Shares 10
<PAGE> 91
FINANCIAL HIGHLIGHTS
The tables on the following pages set forth certain information concerning the
investment results of the Investor B Shares of each of the Funds since its
inception. Further financial information is included in the Statement of
Additional Information and the Group's June 30, 1996 Annual Report to
Shareholders which may be obtained free of charge.
The Financial Highlights for the periods presented below have been derived from
financial statements audited by Coopers & Lybrand L.L.P., independent
auditors for the Group, whose report thereon is incorporated by reference in
the Statement of Additional Information.
EQUITY FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
------------------ JUNE 30,
1996 1995 1994(E)
------- ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 16.35 $14.63 $16.66
------- ------ ------------
Investment Activities
Net Investment Loss.......................................... (0.23) (0.11) (0.05)
Net Realized and Unrealized Gains (Losses) on Investments.... 4.82 3.30 (1.98)
------- ------ ------------
Total from Investment Activities........................ 4.59 3.19 (2.03)
------- ------ ------------
Distributions
Net Investment Income
Net Realized Gains........................................... (0.66) (0.48)
In Excess of Net Realized Gains.............................. -- (0.99) --
------- ------ ------------
Total Distributions..................................... (0.66) (1.47) --
------- ------ ------------
NET ASSET VALUE, END OF PERIOD................................... $ 20.28 $16.35 $14.63
======== ====== ============
Total Return (excluding sales and redemption charges)............ 28.59% 23.88% (12.18)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000).............................. $15,840 $6,073 $1,616
Ratio of Expenses to Average Net Assets...................... 2.29% 2.29% 2.30%(b)
Ratio of Net Investment Loss to Average Net Assets........... (1.70)% (1.61)% (1.57)%(b)
Ratio of Expenses to Average Net Assets*..................... 2.29% 2.54% 2.56%(b)
Ratio of Net Investment Loss to Average Net Assets*.......... (1.71)% (1.87)% (1.83)%(b)
Portfolio Turnover Rate (c).................................. 49.27% 46.39% 70.87%
Average Commission Rate Paid(g).............................. $0.0796
</TABLE>
11 PROSPECTUS--Investor B Shares
<PAGE> 92
SMALL CAPITALIZATION FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
------------------ JUNE 30,
1996 1995 1994(E)
------- ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 25.79 $19.83 $22.71
------- ------ ------------
Investment Activities
Net Investment Loss.......................................... (0.39) (0.19) (0.09)
Net Realized and Unrealized Gains (Losses) on Investments.... 12.03 8.30 (2.79)
------- ------ ------------
Total from Investment Activities............................. 11.64 8.11 (2.88)
------- ------ ------------
Distributions
Net Investment Income
Net Realized Gains........................................... (3.65) (2.15) --
------- ------ ------------
Total Distributions.......................................... (3.65) (2.15) --
------- ------ ------------
NET ASSET VALUE, END OF PERIOD................................... $ 33.78 $25.79 $19.83
======== ====== ============
Total Return (excluding sales and redemption charges)............ 48.87% 43.78% (12.68)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000).............................. $30,310 $9,990 $2,130
Ratio of Expenses to Average Net Assets...................... 2.29% 2.32% 2.35%(b)
Ratio of Net Investment Loss to Average Net Assets........... (1.93)% (2.03)% (2.19)%(b)
Ratio of Expenses to Average Net Assets*..................... 2.29% 2.55% 2.61%(b)
Ratio of Net Investment Loss to Average Net Assets*.......... (1.93)% (2.26)% (2.45)%(b)
Portfolio Turnover Rate (c).................................. 67.22% 50.53% 72.64%
Average Commission Rate Paid(g).............................. $0.0800
</TABLE>
LARGE CAPITALIZATION FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
DEC.
28,
1995 TO
JUNE
30,
1996(A)
-------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................... $10.00
-------
Investment Activities
Net Investment Income ..................................................... 0.01
Net Realized and Unrealized Gains on Investments........................... 1.23
-------
Total from Investment Activities...................................... 1.24
-------
Distributions
Net Investment Income...................................................... (0.02)
Net Realized Gains......................................................... --
-------
Total Distributions................................................... (0.02)
-------
NET ASSET VALUE, END OF PERIOD................................................. $11.22
========
Total Return (excluding sales and redemption charges).......................... 8.77%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)............................................ $ 832
Ratio of Expenses to Average Net Assets.................................... 1.78%(b)
Ratio of Net Investment Loss to Average Net Assets......................... (0.32)%(b)
Ratio of Expenses to Average Net Assets*................................... 4.07%(b)
Ratio of Net Investment Loss to Average Net Assets*........................ (2.61)%(b)
Portfolio Turnover Rate (c)................................................ 0.86%
Average Commission Rate Paid(g)............................................ $0.0800
</TABLE>
PROSPECTUS--Investor B Shares 12
<PAGE> 93
INTERNATIONAL FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
------------------ JUNE 30,
1996 1995(F) 1994(E)
------- ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 12.15 $13.21 $14.12
------- ------ ------------
Investment Activities
Net Investment Loss......................................... (0.08) (0.04) (0.01)
Net Realized and Unrealized Gains (Losses) on Investments
and Foreign Currency Transactions......................... 1.70 (0.40) (0.90)
------- ------ ------------
Total from Investment Activities....................... 1.62 (0.44) (0.91)
------- ------ ------------
Distributions
Net Investment Income
Net Realized Gains
In Excess of Net Realized Gains............................. -- (0.62) --
------- ------ ------------
Total Distributions.................................... 0.00 (0.62) 0.00
------- ------ ------------
NET ASSET VALUE, END OF PERIOD.................................. $ 13.77 $12.15 $13.21
======== ====== ============
Total Return (excluding sales and redemption charges)........... 13.33% (3.03)% (6.44)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)............................. $ 9,489 $5,469 $2,680
Ratio of Expenses to Average Net............................ 2.55% 2.57% 2.56%(b)
Assets Ratio of Net Investment (Loss) to Average Net Assets. (0.86)% (0.49)% (0.22)%(b)
Ratio of Expenses to Average Net Assets*.................... 2.63% 2.92% 2.61%(b)
Ratio of Net Investment (Loss) to Average Net Assets*....... (0.94)% (0.84)% (0.27)%(b)
Portfolio Turnover Rate (c)................................. 54.47% 104.39% 37.23%
Average Commission Rate Paid(g)............................. $0.0321
</TABLE>
BALANCED FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, FEB. 4, 1994
---------------- TO JUNE 30,
1996 1995(F) 1994(E)
------ ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $12.18 $10.67 $11.71
------ ------ ------------
Investment Activities
Net investment income ........................................ 0.23 0.20 0.10
Net realized and unrealized gain (loss) on investments........ 1.74 1.67 (1.05)
------ ------ ------------
Total from Investment Activities......................... 1.97 1.87 (0.95)
------ ------ ------------
Distributions
Net investment income......................................... (0.22) (0.20) (0.09)
Net realized gains............................................ (0.57) (0.06)
In excess of net realized gains............................... -- (0.10) --
------ ------ ------------
Total Distributions...................................... (0.79) (0.36) (0.09)
------ ------ ------------
NET ASSET VALUE, END OF PERIOD.................................... $13.36 $12.18 $10.67
====== ====== ============
Total Return (excluding sales and redemption charges)............. 16.71% 17.96% (8.16)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............................. $4,278 $1,291 $ 744
Ratio of expenses to average net assets....................... 2.16% 2.25% 2.05%(b)
Ratio of net investment income to average net assets.......... 1.64% 1.74% 1.94%(b)
Ratio of expenses to average net assets*...................... 2.45% 2.77% 2.61%(b)
Ratio of net investment income to average net assets*......... 1.35% 1.22% 1.38%(b)
Portfolio Turnover Rate(c).................................... 437.90% 250.66% 192.39%
$0.0848
</TABLE>
13 PROSPECTUS--Investor B Shares
<PAGE> 94
HIGH INCOME EQUITY FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, FEB. 4, 1994
---------------- TO JUNE 30,
1996 1995 1994(E)
------ ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $14.47 $13.49 $14.92
------ ------ ------------
Investment Activities
Net investment income ....................................... 0.19 0.26 0.13
Net realized and unrealized gains (losses) on investments.... 3.25 0.99 (1.43)
------ ------ ------------
Total from Investment Activities........................ 3.44 1.25 (1.30)
------ ------ ------------
Distributions
Net investment income........................................ (0.19) (0.26) (0.13)
In excess of net investment income........................... (0.01)
Net realized gains........................................... (0.45) -- --
------ ------ ------------
Total Distributions..................................... (0.64) (0.27) (0.13)
------ ------ ------------
NET ASSET VALUE, END OF PERIOD................................... $17.27 $14.47 $13.49
====== ====== ============
Total Return (excluding sales and redemption charges)............ 24.11% 9.41% (8.76)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............................ $12,590 $7,131 $3,836
Ratio of expenses to average net assets...................... 2.32% 2.32% 2.33%(b)
Ratio of net investment income to average net assets......... 1.11% 1.86% 1.87%(b)
Ratio of expenses to average net assets*..................... 2.32% 2.57% 2.59%(b)
Ratio of net investment income to average net assets*........ 1.11% 1.61% 1.61%(b)
Portfolio Turnover Rate(c)................................... 40.75% 77.70% 69.35%
Average commission rate paid(g).............................. $0.080
</TABLE>
BOND FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, FEB. 4, 1994
------------------- TO JUNE 30,
1996 1995 1994(E)
------- ------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 9.68 $ 9.26 $ 9.95
------- ------- ------------
Investment Activities
Net investment income ...................................... 0.50 0.52 0.22
Net realized and unrealized gains (losses) on investments... (0.17) 0.42 (0.70)
------- ------- ------------
Total from Investment Activities....................... 0.33 0.94 (0.48)
------- ------- ------------
Distributions
Net investment income....................................... (0.50) (0.52) (0.21)
In excess of net investment income.......................... -- -- --
------- ------- ------------
Total Distributions.................................... (0.50) (0.52) (0.21)
NET ASSET VALUE, END OF PERIOD.................................. $ 9.51 $ 9.68 $ 9.26
======== ======== ============
Total Return (excluding sales and redemption charges)........... 3.46 10.62 (4.84)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........................... $ 4,426 $ 1,330 $ 485
Ratio of expenses to average net assets..................... 1.94% 2.03% 1.89%(b)
Ratio of net investment income to average net assets........ 4.97% 5.54% 5.34%(b)
Ratio of expenses to average net assets*.................... 2.03% 2.39% 2.29%(b)
Ratio of net investment income to average net assets*....... 4.88% 5.18% 4.94%(b)
Portfolio Turnover Rate(c).................................. 1189.27% 1010.64% 893.27%
</TABLE>
PROSPECTUS--Investor B Shares 14
<PAGE> 95
LIMITED MATURITY BOND FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
----------------- JUNE 30,
1996 1995 1994(E)
------ ------ ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $ 9.70 $ 9.56 $ 9.99
------ ------ -------
Investment Activities
Net Investment Income .................................... 0.55 0.49 0.23
Net Realized and Unrealized Gains (Losses) on
Investments............................................. (0.22) 0.12 (0.44)
------ ------ -------
Total from Investment Activities..................... 0.33 0.61 (0.21)
------ ------ -------
Distributions
Net Investment Income..................................... (0.55) (0.47) (0.22)
Total Return of Capital................................... (0.02) -- --
------ ------ -------
Total Distributions.................................. (0.57) (0.47) (0.22)
------ ------ -------
NET ASSET VALUE, END OF PERIOD................................ $ 9.46 $ 9.70 $ 9.56
====== ====== ===============
Total Return (excluding sales and redemption charges)......... 3.43% 6.68% (2.09)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)........................... $1,547 $ 892 $ 629
Ratio of Expenses to Average Net Assets................... 1.84% 1.85% 1.78%(b)
Ratio of Net Investment Income to Average Net Assets...... 5.35% 5.14% 5.36%(b)
Ratio of Expenses to Average Net Assets*.................. 2.08% 2.36% 2.33%(b)
Ratio of Net Investment Income to Average Net Assets*..... 5.11% 4.62% 4.81%(b)
Portfolio Turnover Rate (c)............................... 618.60% 397.97% 353.28%
</TABLE>
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
----------------- JUNE 30,
1996 1995 1994(E)
------ ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 9.89 $ 9.60 $10.14
------ ------ ------------
Investment Activities
Net Investment Income ....................................... 0.53 0.43 0.21
Net Realized and Unrealized Gains (Losses) on Investments.... (0.24) 0.30 (0.54)
------ ------ ------------
Total from Investment Activities........................ 0.29 0.73 (0.33)
------ ------ ------------
Distributions
Net Investment Income........................................ (0.51) (0.44) (0.21)
------ ------ ------------
Total Distributions..................................... (0.51) (0.44) (0.21)
------ ------ ------------
NET ASSET VALUE, END OF PERIOD................................... $ 9.67 $ 9.89 $ 9.60
====== ====== ============
Total Return (excluding sales and redemption charges)............ 2.93% 7.84% (3.31)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000).............................. $1,843 $ 977 $ 531
Ratio of Expenses to Average Net Assets...................... 1.96% 2.06% 1.92%(b)
Ratio of Net Investment Income to Average Net Assets......... 4.78% 4.41% 4.80%(b)
Ratio of Expenses to Average Net Assets*..................... 2.05% 2.42% 2.32%(b)
Ratio of Net Investment Income to Average Net Assets*........ 4.69% 4.05% 4.41%(b)
Portfolio Turnover Rate (c).................................. 916.39% 549.13% 546.06%
</TABLE>
15 PROSPECTUS--Investor B Shares
<PAGE> 96
GOVERNMENT INCOME FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
------------------ JUNE 30,
1996 1995 1994(E)
------- ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 9.39 $ 9.38 $ 9.88
------- ------ ------------
Investment Activities
Net Investment Income ...................................... 0.66 0.68 0.28
Net Realized and Unrealized Gains (Losses) on Investments... (0.18) 0.01 (0.50)
------- ------ ------------
Total from Investment Activities....................... 0.48 0.69 (0.22)
------- ------ ------------
Distributions
Net Investment Income....................................... (0.59) (0.61) (0.27)
Tax Return of Capital....................................... (0.07) (0.07) (0.01)
------- ------ ------------
Total Distributions.................................... (0.66) (0.68) (0.28)
------- ------ ------------
NET ASSET VALUE, END OF PERIOD.................................. $ 9.21 $ 9.39 $ 9.38
======== ====== ============
Total Return (excluding sales and redemption charges)........... 5.22% 7.71% (2.26)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)............................. $19,556 $8,478 $2,787
Ratio of Expenses to Average Net Assets..................... 1.76% 1.83% 1.77%(b)
Ratio of Net Investment Income to Average Net Assets*....... 6.92% 7.28% 6.72%(b)
Ratio of Expenses to Average Net Assets*.................... 2.10% 2.44% 2.42%(b)
Ratio of Net Investment Income to Average Net Assets*....... 6.58% 6.67% 6.08%(b)
Portfolio Turnover Rate (c)................................. 348.01% 114.71% 102.24%
</TABLE>
MICHIGAN BOND FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED FEB. 4,
JUNE 30, 1994 TO
----------------- JUNE 30,
1996 1995 1994(E)
------ ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $10.75 $10.52 $ 11.09
------ ------ ------------
Investment Activities
Net Investment Income ....................................... 0.40 0.40 0.16
Net Realized and Unrealized Gains (Losses) on Investments.... 0.04 0.24 (0.57)
------ ------ ------------
Total from Investment Activities........................ 0.44 0.64 (0.41)
------ ------ ------------
Distributions
Net Investment Income........................................ (0.40) (0.40) (0.16)
In Excess of Net Investment Income........................... (0.01)
Net Realized Gains........................................... (0.03) -- --
------ ------ ------------
Total Distributions..................................... (0.43) (0.41) (0.16)
------ ------ ------------
NET ASSET VALUE, END OF PERIOD................................... $10.76 $10.75 $ 10.52
====== ====== ============
Total Return (excluding sales and redemption charges)............ 4.13% 6.28% (3.69)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000).............................. $3,565 $2,270 $ 1,302
Ratio of Expenses to Average Net............................. 1.77% 1.78% 1.77%(b)
Assets Ratio of Net Investment Income to Average Net
Assets..................................................... 3.57% 3.80% 3.51%(b)
Ratio of Expenses to Average Net Assets*..................... 2.06% 2.32% 2.32%(b)
Ratio of Net Investment Income to Average Net Assets*........ 3.28% 3.25% 2.97%(b)
Portfolio Turnover Rate (c).................................. 27.66% 26.06% 6.69%
</TABLE>
PROSPECTUS--Investor B Shares 16
<PAGE> 97
MUNICIPAL BOND FUND - INVESTOR B SHARES
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, FEB. 4, 1994
---------------- TO JUNE 30,
1996 1995 1994(e)
------ ------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $10.36 $10.26 $10.76
------ ------ ---------
Investment Activities
Net investment income ........................................ 0.33 0.33 0.13
Net realized and unrealized gains (losses) on investments..... 0.03 0.27 (0.50)
--- ----- --------
Total from Investment Activities......................... 0.36 0.60 (0.37)
--- ----- --------
Distributions
Net investment income......................................... (0.33) (0.33) (0.13)
In excess of net realized income.............................. -- (0.17) --
----- ----- --------
Total Distributions...................................... (0.33) (0.50) (0.13)
----- ----- --------
NET ASSET VALUE, END OF PERIOD.................................... $10.39 $10.36 $10.26
===== ===== ========
Total Return (excluding sales and redemption charges)............. 3.48% 6.17% (3.41)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............................. $ 735 $ 447 $ 359
Ratio of expenses to average net assets....................... 1.80% 1.80% 1.80%(b)
Ratio of net investment income to average net assets.......... 3.11% 3.22% 2.88%(b)
Ratio of expenses to average net assets*...................... 2.09% 2.33% 2.37%(b)
Ratio of net investment income to average net assets*......... 2.82% 2.68% 2.31%(b)
Portfolio turnover rate (c)................................... 47.46% 35.15% 44.39%
<FN>
- ---------------
NOTES TO FINANCIAL HIGHLIGHTS:
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(d) Not annualized.
(e) Period from February 4, 1994 (commencement of offering of Investor B Shares)
to June 30, 1994.
(f) As of January 1, 1995, Gulfstream assumed the role of subadviser with
respect to the International Fund and the portion of the Balanced Fund
invested in foreign securities. Prior to that date, Ivory & Sime
International, Inc. and Ivory & Sime plc served as subadvisers to the
International Fund and the Balanced Fund had no subadviser.
(g) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The investment objectives of each of the Funds is set forth below under the
headings describing the Funds. The investment objective of each Fund is
fundamental and may not be changed without a vote of the holders of a majority
of the outstanding shares of that Fund (as defined in the Statement of
Additional Information). The investment policies of a Fund may be changed
without a vote of the holders of a majority of outstanding shares of that Fund
unless the policy is expressly deemed to be a fundamental policy or changeable
only by such majority vote. There can be no assurance that the investment
objectives of any Fund will be achieved. Depending upon the performance of a
Fund's investments, the net asset value per share of that Fund may decrease
instead of increase.
During temporary defensive periods as determined by First of America or
Gulfstream, as the case may be, each of the Funds may hold up to 100% of its
total assets in short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that a Fund is so invested, its investment
objective may not be achieved during that time. Uninvested cash reserves will
not earn income.
17 PROSPECTUS--Investor B Shares
<PAGE> 98
GROWTH FUNDS
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
The investment objective of the Equity Fund is to seek growth of capital by
investing primarily in a diversified portfolio of common stocks and securities
convertible into common stocks. The investment objective of the Small
Capitalization Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stocks of small- to medium-sized companies. The investment objective of the
Large Capitalization Fund is to seek growth of capital by investing primarily in
a diversified portfolio of common stocks and securities convertible into common
stocks of companies with large market capitalization.
Under normal market conditions, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will invest at least 80% of the value of its
total assets in common stocks and securities convertible into common stocks of
companies believed by First of America to be characterized by sound management
and the ability to finance expected long-term growth. In addition, under normal
market conditions, the Small Capitalization Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks of companies considered by First of America to have a market
capitalization of less than $1 billion and the Large Capitalization Fund will do
the same with companies considered by First of America to have a market
capitalization of greater than $5 billion. Each of the Equity Fund, Small
Capitalization Fund and Large Capitalization Fund may also invest up to 20% of
the value of its total assets in preferred stocks, corporate bonds, notes, units
of real estate investment trusts, warrants, and short-term obligations (with
maturities of 12 months or less) consisting of commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit, repurchase agreements, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and demand and time deposits of
domestic and foreign banks and savings and loan associations. Each of the Equity
Fund, Small Capitalization Fund and Large Capitalization Fund may also hold
securities of other investment companies and depository or custodial receipts
representing beneficial interests in any of the foregoing securities.
Subject to the foregoing policies, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund may also invest up to 25% of its net assets
in foreign securities either directly or through the purchase of American
depository receipts ("ADRs") or European depository receipts ("EDRs") and may
also invest in securities issued by foreign branches of U.S. banks and foreign
banks, in Canadian commercial paper ("CCP"), and in Europaper (U.S.
dollar-denominated commercial paper of a foreign issuer. For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES -- Foreign Securities" herein.
The Equity Fund anticipates investing in growth-oriented, medium-sized large
capitalization companies. Medium-sized companies are considered to be those with
a market capitalization of between $1 billion and $5 billion. The Large
Capitalization Fund anticipates investing in growth-oriented companies with
large market capitalization, or capitalization of over $5 billion. For both the
Equity Fund and Large Capitalization Fund, investments will be in companies that
have typically exhibited consistent, above-average growth in revenues and
earnings, strong management, and sound and improving financial fundamentals.
Often, these companies are market or industry leaders, have excellent products
and/or services, and exhibit the potential for growth. Core holdings of the
Equity Fund and Large Capitalization Fund are in companies that participate in
long-term growth industries, although these will be supplemented by holdings in
non-growth industries that exhibit the desired characteristics.
The Small Capitalization Fund anticipates investing in dynamic small- to
medium-sized companies that exhibit outstanding potential for superior growth.
Small-sized companies are considered to be those with capitalization of less
than $1 billion. The Small Capitalization Fund will limit its investment in
securities of medium-sized companies to not more than 35% of the value of its
total assets. Companies that participate in sectors that are identified as
having long-term growth potential generally make up a substantial portion of
such Fund's holdings. These companies often have established a market niche or
have developed unique products or technologies that are expected to produce
superior growth in revenues and earnings. As smaller capitalization stocks are
quite volatile and subject to wide fluctuations in both the short and
PROSPECTUS--Investor B Shares 18
<PAGE> 99
medium term, the Small Capitalization Fund may be fairly characterized more
aggressive than a general equity fund such as the Equity Fund.
Consistent with the foregoing, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will focus its investments in those companies
and types of companies that First of America believes will enable such Fund to
achieve its investment objective.
<TABLE>
- --------------------------------------------------------------------------------
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Securities -Foreign Currency Transactions
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
-Put and Call Options -Repurchase Agreements -Restricted Securities
-Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL FUND
The investment objective of the International Fund is to seek long-term growth
of capital.
Under normal market conditions the International Fund will invest at least 65%
of its total assets in an internationally diversified portfolio of equity
securities which trade on markets in countries other than the United States and
which are issued by companies (i) domiciled in countries other than the United
States, or (ii) that derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States, and (iii) which are small-
or medium-sized companies on the basis of their capitalization.
Equity securities include common and preferred stock, securities (bonds and
preferred stock) convertible into common stock, warrants and securities
representing underlying international securities such as ADRs and EDRs.
For purposes of investment by the International Fund only, companies are deemed
to be small- or medium-sized if at the time of purchase, they are of a size
which would rank them in the lower half of a major market index in the
applicable country by weighted market capitalization and in the lower half of
all equity securities listed in recognized secondary markets where such markets
exist. In addition, in countries with less well-developed stock markets, where
the range of investment opportunities is more restrictive, the equity securities
of all listed companies will be eligible for investment. In major markets,
issuers could have capitalizations of up to approximately $10 billion while in
smaller markets issuers would be eligible with capitalizations as low as
approximately $200 million.
The International Fund may invest in securities of issuers in, but not limited
to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Malaysia, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Normally the
International Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries, including the countries listed
above. It is possible, although not currently anticipated, that up to 35% of the
International Fund's assets could be invested in the securities of U.S.
companies. In addition, the International Fund temporarily may invest cash in
short-term debt instruments of U.S. and foreign issuers for cash management
purposes or pending investment.
19 PROSPECTUS--Investor B Shares
<PAGE> 100
<TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Securities -Foreign Currency Transactions
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Other Mutual Funds -Portfolio Turnover -Put and Call Options
-Repurchase Agreements -Restricted Securities -Reverse Repurchase Agreements
-When-Issued and and Dollar Roll Agreements
Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
THE BALANCED FUND
The investment objective of the Balanced Fund is to seek current income,
long-term capital growth and conservation of capital.
The Balanced Fund may invest in any type or class of security. Under normal
market conditions the Balanced Fund will invest in common stocks, fixed-income
securities and securities convertible into common stocks (i.e., warrants,
convertible preferred stock, fixed-rate preferred stock, convertible fixed-
income securities, options and rights). At least 25% of the value of the
Balanced Fund's total assets will be invested in fixed-income senior securities.
Up to 15% of the value of the Balanced Fund's total assets may be invested in
foreign securities.
The Balanced Fund's common stocks are held for the purpose of providing dividend
income and long-term growth of capital. The Balanced Fund will invest in the
common and preferred stocks of companies with capitalization of at least $100
million and which are traded either in established over-the-counter markets or
on national exchanges. The Balanced Fund intends to invest primarily in those
companies which are growth-oriented and have exhibited consistent, above-average
growth in revenues and earnings. When choosing such stocks, the potential for
long-term capital appreciation will be the primary basis for selection.
The Balanced Fund's fixed-income securities consist of bonds, debentures, notes,
zero-coupon securities, mortgage-related securities, state, municipal or
industrial revenue bonds, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, certificates of deposit, time
deposits, high quality commercial paper, bankers' acceptances and variable
amount master demand notes. In addition, a portion of the Balanced Fund's assets
may from time to time be invested in first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Some of the securities in which the
Balanced Fund invests may have warrants or options attached. The Balanced Fund
may also invest in repurchase agreements.
The Balanced Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, as well as
"stripped" U.S. Treasury obligations ("Stripped Treasury Obligations"), such as
Treasury receipts issued by the U.S. Treasury representing either future
interest or principal payments and other obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities. See "RISK FACTORS AND
INVESTMENT TECHNIQUES -- Government Obligations" below.
The Balanced Fund also expects to invest in bonds, notes and debentures of a
wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, and in the case of notes
and bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance.
The Balanced Fund will invest only in corporate fixed-income securities which
are rated at the time of purchase within the four highest rating groups assigned
by a nationally-recognized statistical rating organization ("NRSRO") or, if
unrated, which First of America deems present attractive opportunities and
PROSPECTUS--Investor B Shares 20
<PAGE> 101
are of comparable quality. For a description of the rating symbols of the
NRSROs, see the Appendix to the Statement of Additional Information. For a
discussion of fixed-income securities rated within the fourth highest rating
group assigned by an NRSRO, see "RISK FACTORS AND INVESTMENT TECHNIQUES --
Medium-Grade Securities" herein.
The Balanced Fund may hold some short-term obligations (with maturities of 12
months or less) consisting of domestic and foreign commercial paper, variable
amount master demand notes, bankers' acceptances, certificates of deposit and
time deposits of domestic and foreign branches of U.S. banks and foreign banks,
and repurchase agreements. The Balanced Fund may also invest in securities of
other investment companies.
The Balanced Fund may also invest in obligations of the Export-Import Bank of
the United States, in U.S. dollar-denominated international bonds for which the
primary trading market is in the United States ("Yankee Bonds"), or for which
the primary trading market is abroad ("Eurodollar Bonds"), and in Canadian bonds
and bonds issued by institutions, such as the World Bank and the European
Economic Community, organized for a specific purpose by two or more sovereign
governments ("Supranational Agency Bonds"). The Balanced Fund's investments in
foreign securities may be made either directly or through the purchase of ADRs
and the Balanced Fund may also invest in securities issued by foreign branches
of U.S. banks and foreign banks, in CCP, and in Europaper.
The amount invested in stock, bonds and cash reserves may be varied from time to
time, depending upon First of America's assessment of business, economic and
market conditions, including any potential advantage of price shifts between the
stock market and the bond market. The Balanced Fund reserves the right to hold
short-term securities in whatever proportion deemed desirable for temporary
defensive periods during adverse market conditions as determined by First of
America. However, to the extent that the Balanced Fund is so invested, its
investment objectives may not be achieved during that time.
Like any investment program, the Balanced Fund entails certain risks. As a Fund
investing primarily in common stocks the Balanced Fund is subject to stock
market risk, i.e., the possibility that stock prices in general will decline
over short or even extended periods.
Since the Balanced Fund also invests in bonds, investors in the Balanced Fund
are also exposed to bond market risk, i.e., fluctuations in the market value of
bonds. Bond prices are influenced primarily by changes in interest rate levels.
When interest rates rise, the prices of bonds generally fall; conversely, when
interest rates fall, bond prices generally rise. While bonds normally fluctuate
less in price than stock, there have been extended periods of cyclical increases
in interest rates that have caused significant declines in bond prices.
From time to time, the stock and bond markets may fluctuate independently of one
another. In other words, a decline in the stock market may in certain instances
be offset by a rise in the bond market, or vice versa. As a result the Balanced
Fund, with its balance of common stock and bond investments, is expected to
entail less investment risk (and a potentially smaller investment return) than a
mutual fund investing exclusively in common stocks.
<TABLE>
- --------------------------------------------------------------------------------
THE BALANCED FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Securities -Foreign Currency Transactions
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Medium-Grade Securities -Mortgage-Related Securities -Other Mutual Funds
-Portfolio Turnover -Put and Call Options -Repurchase Agreements
-Restricted Securities -Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
21 PROSPECTUS--Investor B Shares
<PAGE> 102
THE HIGH INCOME EQUITY FUND
The investment objective of the High Income Equity Fund is to seek current
income by investing in a diversified portfolio of high quality, dividend-paying
common stocks and securities convertible into common stocks. A secondary
investment objective of High Income Equity Fund is growth of capital.
The High Income Equity Fund, under normal market conditions, will invest at
least 80% of the value of its total assets in common stocks and securities
convertible into common stocks of companies believed by First of America to be
characterized by sound management, the ability to finance expected growth and
the ability to pay above-average dividends. The High Income Equity Fund may also
invest up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. The
High Income Equity Fund may also hold securities of other investment companies
and depository or custodial receipts representing beneficial interests in any of
the foregoing securities.
Subject to the foregoing policies, the High Income Equity Fund may also invest
up to 25% of its net assets in foreign securities either directly or through the
purchase of ADRs and may also invest in securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper. For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES -- Foreign Securities" herein.
The High Income Equity Fund anticipates investing in securities that currently
have a high dividend yield, with the anticipation that the dividend will remain
constant or be increased in the future. These securities generally represent the
core holdings of this Fund. However, these holdings are balanced with lower
yielding but higher growth-oriented securities to achieve portfolio balance. All
securities must provide current income. Given its bias towards income, the High
Income Equity Fund may be considered more conservative than growth-oriented
equity funds such as the Group's Equity Fund and Small Capitalization Fund.
Consistent with the foregoing, the High Income Equity Fund will focus its
investments in those companies and types of companies that First of America
believes will enable such Fund to achieve its investment objective.
<TABLE>
- --------------------------------------------------------------------------------
THE HIGH INCOME EQUITY FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Securities -Foreign Currency Transactions
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
-Put and Call Options -Repurchase Agreements -Restricted Securities
-Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
INCOME FUNDS
THE BOND FUND AND THE LIMITED MATURITY BOND FUND
The investment objective of the Bond Fund is to seek current income as well as
preservation of capital by investing in a portfolio of high- and medium-grade
fixed-income securities. The investment objective of the Limited Maturity Bond
Fund is to seek current income as well as preservation of capital by investing
in a portfolio of high and medium grade fixed-income securities with remaining
maturities of six years or less.
PROSPECTUS--Investor B Shares 22
<PAGE> 103
Under normal market conditions, the Bond Fund will invest at least 80% of the
value of its total assets in bonds, debentures, notes with remaining maturities
at the time of purchase of one year or more, zero-coupon securities,
mortgage-related securities, state, municipal or industrial revenue bonds,
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, debt securities convertible into, or exchangeable for, common
stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Bond Fund will invest in state and municipal securities
when, in the opinion of First of America, their yields are competitive with
comparable taxable debt obligations. In addition, up to 20% of the value of the
Bond Fund's total assets may be invested in preferred stocks, notes with
remaining maturities at the time of purchase of less than one year, short-term
debt obligations consisting of domestic and foreign commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit and time deposits of domestic and foreign branches of U.S. banks and
foreign banks, repurchase agreements, securities of other investment companies,
and guaranteed investment contracts ("GICs") issued by insurance companies, as
more fully described below. The Bond Fund intends that under normal market
conditions its portfolio will maintain an average weighted maturity of
approximately eight to twelve years. However, the Bond Fund may extend or
shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. Some of
the securities in which the Bond Fund invests may have warrants or options
attached.
Under normal market conditions, the Limited Maturity Bond Fund will invest at
least 80% of the value of its total assets in the following securities which
have remaining maturities of six years or less: bonds, debentures, notes with
remaining maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial revenue
bonds, obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, debt securities convertible into, or exchangeable for,
common stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Limited Maturity Bond Fund will invest in state and
municipal securities when, in the opinion of First of America, their yields are
competitive with comparable taxable debt obligations. In addition, up to 20% of
the value of the Limited Maturity Bond Fund's total assets may be invested in
the debt securities listed above without regard to maturity, as well as
preferred stocks, short-term debt obligations consisting of domestic and foreign
commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, repurchase agreements, securities of
other investment companies and GICs. Under normal market conditions, the Limited
Maturity Bond Fund expects to maintain a dollar-weighted average portfolio
maturity of its debt securities of three years or less. By seeking to maintain a
dollar-weighted average portfolio maturity of three years or less, the Limited
Maturity Bond Fund attempts to minimize the fluctuation in its shares' net asset
value relative to those funds which invest in longer term obligations. Some of
the securities in which the Limited Maturity Bond Fund invests may have warrants
or options attached.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Bond Fund or the Limited
Maturity Bond Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The Bond Fund and Limited Maturity Bond Fund each expects to invest in a variety
of U.S. Treasury obligations, differing in their interest rates, maturities, and
times of issuance, as well as Stripped Treasury Obligations, and other
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. See "RISK FACTORS AND INVESTMENT TECHNIQUES -- Government
Obligations" below.
The Bond Fund and the Limited Maturity Bond Fund each also expects to invest in
bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures will represent unsecured promises to pay,
and in the case of notes and bonds, may be secured by mortgages on real property
or security interests in personal property and will in most cases differ in
their interest rates, maturities and times of issuance.
The Bond Fund and the Limited Maturity Bond Fund each will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups assigned by an NRSRO or, if unrated, which First of
America deems present attractive opportunities and are of comparable quality.
For
23 PROSPECTUS--Investor B Shares
<PAGE> 104
a discussion of debt securities rated within the fourth highest rating groups
assigned by the NRSROs, see "RISK FACTORS AND INVESTMENT
TECHNIQUES -- Medium-Grade Securities" herein.
The Bond Fund and the Limited Maturity Bond Fund each may also invest in
obligations of the Export-Import Bank of the United States, in Yankee Bonds, in
Eurodollar Bonds, in Canadian Bonds and in Supranational Agency Bonds. Each of
the Bond Fund and Limited Maturity Bond Fund may also invest up to 25% of its
net assets in foreign securities either directly or through the purchase of ADRs
and may also invest in securities issued by foreign branches of U.S. banks and
foreign banks, in CCP, and in Europaper.
An increase in interest rates will generally reduce the value of the investments
in the Bond Fund and the Limited Maturity Bond Fund and a decline in interest
rates will generally increase the value of those investments. Depending upon the
prevailing market conditions, First of America may purchase debt securities at a
discount from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value, the
yield will be lower than the coupon rate. In making investment decisions for the
Bond Fund, First of America will consider many factors other than current yield,
including the preservation of capital, the potential for realizing capital
appreciation, maturity, and yield to maturity. In making investment decisions
for the Limited Maturity Bond Fund, First of America will consider many factors
other than current yield, including the preservation of capital, maturity, and
yield to maturity.
<TABLE>
- --------------------------------------------------------------------------------
THE BOND FUND AND THE LIMITED MATURITY BOND FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Securities -Foreign Currency Transactions
-Futures Contracts -Government Obligations -Guaranteed Investment Contracts
-Lending Portfolio Securities -Medium-Grade Securities -Portfolio Turnover
-Mortgage-Related Securities -Other Mutual Funds -Restricted Securities
-Put and Call Options -Repurchase Agreements
-Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
The investment objective of the Intermediate Government Obligations Fund is to
seek current income with preservation of capital by investing in U.S. government
securities with remaining maturities of twelve years or less.
Under normal market conditions, the Intermediate Government Obligations Fund
will invest at least 80% of its total assets in obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities and with remaining
maturities of twelve years or less, although up to 20% of the value of its total
assets may be invested in debt securities, preferred stocks and other
investments without regard to maturity, except as set forth below. Under normal
market conditions, the Intermediate Government Obligations Fund expects to
maintain a dollar-weighted average portfolio maturity of its debt securities of
three to ten years. By seeking to maintain a dollar-weighted average portfolio
maturity of three to ten years, the Intermediate Government Obligations Fund
attempts to minimize the fluctuation in its shares' net asset value relative to
those funds which invest in longer-term obligations.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Intermediate Government
Obligations Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The types of U.S. government obligations invested in by the Intermediate
Government Obligations Fund will include obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Treasury, such as Treasury bills, notes, bonds and certificates of indebtedness,
and government securities, as described below in "RISK FACTORS AND INVESTMENT
TECHNIQUES -- Government Obligations."
The Intermediate Government Obligations Fund may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, as more fully described below under "RISK FACTORS AND
INVESTMENT TECHNIQUES -- Government Obligations."
PROSPECTUS--Investor B Shares 24
<PAGE> 105
<TABLE>
- --------------------------------------------------------------------------------
THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Currency Transactions -Futures Contracts
-Government Obligations -Lending Portfolio Securities -Mortgage Related Securities
-Municipal Securities -Other Mutual Funds -Portfolio Turnover
-Put and Call Options -Repurchase Agreements -Restricted Securities
-Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE GOVERNMENT INCOME FUND
The investment objective of the Government Income Fund is to provide
shareholders with a high level of current income consistent with prudent
investment risk.
Under normal market conditions, the Government Income Fund will invest at least
65% of its total assets in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, although up to 35% of the value
of its total assets may be invested in debt securities and preferred stocks of
non-governmental issuers. Consistent with the foregoing, under current market
conditions, the Government Income Fund intends to invest up to 80% of the value
of its total assets in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. The Government Income Fund
also may invest up to 35% of its total assets in mortgage-related securities
issued by non-governmental entities and in other securities described below. For
more information, see "RISK FACTORS AND INVESTMENT TECHNIQUES -Mortgage-Related
Securities," below.
The types of U.S. government obligations, including mortgage-related securities,
invested in by the Government Income Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes and bonds, Stripped Treasury
Obligations and government securities, as described below in "RISK FACTORS AND
INVESTMENT TECHNIQUES -- Government Obligations."
The Government Income Fund may also hold short-term obligations (with maturities
of 12 months or less) consisting of domestic and foreign commercial paper
(including variable amount master demand notes) rated at the time of purchase
within the top two rating groups assigned by an NRSRO or, if unrated, which
First of America deems present attractive opportunities and are of comparable
quality, bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
and reverse repurchase agreements. The Government Income Fund may also invest in
corporate debt securities which are rated at the time of purchase within the top
three rating groups assigned by an NRSRO or, if unrated, which First of America
deems present attractive opportunities and are of comparable quality.
<TABLE>
- --------------------------------------------------------------------------------
THE GOVERNMENT INCOME FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Currency Transactions -Foreign Securities
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
-Put and Call Options -Repurchase Agreements -Restricted Securities
-Reverse Repurchase Agreements -*When-Issued and
and Dollar Roll Delivery Delayed-Delivery
Transactions Agreements Transactions
</TABLE>
- --------------------------------------------------------------------------------
25 PROSPECTUS--Investor B Shares
<PAGE> 106
TAX-FREE INCOME FUNDS
THE MUNICIPAL BOND FUND AND THE MICHIGAN BOND FUND
The investment objective of the Municipal Bond Fund is to seek current interest
income which is exempt from federal income taxes and preservation of capital.
The investment objective of the Michigan Bond Fund is to seek income which is
exempt from federal income tax and Michigan state income and intangibles taxes,
although such income may be subject to the federal alternative minimum tax when
received by certain shareholders, and preservation of capital.
Under normal market conditions, at least 80% of the net assets of the Municipal
Bond Fund will be invested in a diversified portfolio of Municipal Securities,
and at least 80% of the net assets of the Michigan Bond Fund will be invested in
a portfolio of Michigan Municipal Securities.
"Municipal Securities" include obligations consisting of bonds, notes and
commercial paper, issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and other political subdivisions,
agencies, instrumentalities and authorities, the interest on which is both
exempt from federal income taxes and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax. "Michigan
Municipal Securities" include debt obligations, consisting of notes, bonds and
commercial paper, issued by or on behalf of the State of Michigan, its political
subdivisions, municipalities and public authorities, the interest on which is,
in the opinion of bond counsel to the issuer, exempt from federal income tax and
Michigan state income and intangibles taxes (but may be treated as a preference
item for individuals for purposes of the federal alternative minimum tax) and
debt obligations issued by the government of Puerto Rico, the U.S. territories
and possessions of Guam, the U.S. Virgin Islands or such other governmental
entities whose debt obligations, either by law or treaty, generate interest
income which is exempt from federal and Michigan state income and intangibles
taxes. For more information regarding Municipal Securities and Michigan
Municipal Securities, see "RISK FACTORS AND INVESTMENT TECHNIQUES -- Municipal
Securities," below.
Under normal market conditions, at least 65% of the net assets of each of the
Municipal Bond Fund and the Michigan Bond Fund will be invested in Municipal
Securities (Michigan Municipal Securities in the case of the Michigan Bond Fund)
consisting of bonds and notes with remaining maturities at the time of purchase
of one year or more. Quality is the primary consideration in selecting Michigan
Municipal Securities for investment by the Michigan Bond Fund.
The Municipal Bond Fund also intends that under normal market conditions its
portfolio will maintain an average weighted maturity of approximately eight to
ten years and an average weighted rating of AA/Aa. The Michigan Bond Fund
intends that, under normal market conditions, it will be invested in long-term
Michigan Municipal Securities and that the average weighted maturity of such
investments will be 5 to 12 years, although the Michigan Bond Fund may invest in
Michigan Municipal Securities of any maturity and First of America may extend or
shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. In
addition, the average weighted rating of a Tax-Free Income Fund's portfolio may
vary depending upon the availability of suitable Municipal Securities or other
relevant market factors.
The Michigan Bond Fund invests in Michigan Municipal Securities which are rated
at the time of purchase within the four highest rating groups assigned by an
NRSRO or, in the case of notes, tax-exempt commercial paper or variable rate
demand obligations, rated within the two highest rating groups assigned by an
NRSRO. The Michigan Bond Fund may also purchase Michigan Municipal Securities
which are unrated at the time of purchase but are determined to be of comparable
quality by First of America pursuant to guidelines approved by the Group's Board
of Trustees. The applicable Michigan Municipal Securities ratings are described
in the Appendix to the Statement of Additional Information. For a description of
debt securities rated within the fourth highest rating groups assigned by the
NRSROs, see "RISK FACTORS AND INVESTMENT TECHNIQUES -- Medium-Grade Securities"
herein.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Tax-Free Income Funds will not treat these
bonds as "Municipal Securities" or "Michigan Municipal Securities" for purposes
of measuring compliance with the 80% tests described above. To the
PROSPECTUS--Investor B Shares 26
<PAGE> 107
extent the Tax-Free Income Funds invest in these bonds, individual shareholders,
depending on their own tax status, may be subject to alternative minimum tax on
that part of the Tax-Free Income Funds' distributions derived from these bonds.
For further information relating to the types of municipal securities which will
be included in income subject to alternative minimum tax, see "ADDITIONAL
INFORMATION -- Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information.
Investments of the Tax-Free Income Funds may be made in taxable obligations if,
for example, suitable tax-exempt obligations are unavailable or if acquisition
of U.S. government or other taxable securities is deemed appropriate for
temporary defensive purposes as determined by First of America to be warranted
due to market conditions. Such taxable obligations consist of government
securities, certificates of deposit, time deposits and bankers' acceptances of
selected banks, commercial paper meeting the Tax-Free Income Funds' quality
standards for tax-exempt commercial paper (as described above), and such taxable
obligations as may be subject to repurchase agreements. These obligations are
described further in the Statement of Additional Information. Under such
circumstances and during the period of such investment, the affected Tax-Free
Income Fund may not achieve its stated investment objectives.
Although the Municipal Bond Fund may invest more than 25% of its net assets in
(i) Municipal Securities whose issuers are in the same state, (ii) Municipal
Securities the interest on which is paid solely from revenues of similar
projects, and (iii) private activity bonds, it does not presently intend to do
so on a regular basis. To the extent the Municipal Bond Fund's assets are
concentrated in Municipal Securities that are payable from the revenues of
similar projects or are issued by issuers located in the same state, or are
concentrated in private activity bonds, the Municipal Bond Fund will be subject
to the peculiar risks presented by the laws and economic conditions relating to
such states, projects and bonds to a greater extent than it would be if its
assets were not so concentrated.
Because the Michigan Bond Fund invests primarily in securities issued by the
State of Michigan and its political subdivisions, municipalities and public
authorities, the Michigan Bond Fund's performance is closely tied to the general
economic conditions within the State as a whole and to the economic conditions
within particular industries and geographic areas represented or located within
the State. However, the Michigan Bond Fund attempts to diversify, to the extent
First of America deems appropriate, among issuers and geographic areas in the
State of Michigan.
The Michigan Bond Fund is classified as a "non-diversified" investment company,
which means that the amount of assets of the Michigan Bond Fund that may be
invested in the securities of a single issuer is not limited by Investment
Company Act of 1940, as amended ("the 1940 Act"). Nevertheless, the Michigan
Bond Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which requires the Michigan Bond Fund generally to invest,
with respect to 50% of its total assets, not more than 5% of such assets in the
obligations of a single issuer; as to the remaining 50% of its total assets, the
Michigan Bond Fund is not so restricted. In no event, however, may the Michigan
Bond Fund invest more than 25% of its total assets in the obligations of any one
issuer. Compliance with this requirement is measured at the close of each
quarter of the Michigan Bond Fund's taxable year. Since a relatively high
percentage of the Michigan Bond Fund's assets may be invested in the obligations
of a limited number of issuers, some of which may be within the same economic
sector, the Michigan Bond Fund's portfolio securities may be more susceptible to
any single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
27 PROSPECTUS--Investor B Shares
<PAGE> 108
<TABLE>
- --------------------------------------------------------------------------------
TAX-FREE INCOME FUNDS
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
<S> <C> <C>
-Complex Securities -Foreign Currency Transactions -Futures Contracts
-Government Obligations -Lending Portfolio Securities (Municipal Bond Fund Only)
-Medium-Grade Securities -Mortgage-Related Securities -Municipal Securities
-Other Mutual Funds -Portfolio Turnover -Private Activity Bonds
-Put and Call Options -Repurchase Agreements -Restricted Securities
-Reverse Repurchase Agreements -When-Issued and Delayed
and Dollar Roll Agreements Delivery Transactions
</TABLE>
- --------------------------------------------------------------------------------
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in a Fund entails certain risks. The
Funds will not acquire portfolio securities issued by, make savings deposits in,
or enter into repurchase, reverse repurchase or dollar roll agreements with
First of America Bank-Michigan, N.A. ("FOA-Michigan," the parent corporation of
First of America), BISYS, or their affiliates, and will not give preference to
FOA-Michigan's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements, reverse repurchase agreements and
dollar roll agreements.
COMPLEX SECURITIES
Some of the investment techniques utilized by First of America, and in the case
of the International Fund and Balanced Fund, Gulfstream in the management of
each of the Funds (with the exception of the Treasury Fund) involve complex
securities sometimes referred to as "derivatives." Among such securities are put
and call options, foreign currency transactions and futures contracts, all of
which are described below. The Investment Adviser and Subadviser believe that
such complex securities may, in some circumstances, play a valuable role in
successfully implementing each Fund's investment strategy and achieving its
goals. However, because complex securities and the strategies for which they are
used, are by their nature complicated, they present substantial opportunities
for misunderstanding and misuse. To guard against these risks, the Investment
Adviser and Subadviser will utilize complex securities primarily for hedging,
not speculative, purposes and only after careful review of the unique risk
factors associated with each such security.
FOREIGN SECURITIES
The International Fund invests primarily in the securities of foreign issuers.
The Balanced Fund may invest up to 15% of its total assets in foreign
securities. The Equity Fund, Small Capitalization Fund, Large Capitalization
Fund and High Income Equity Fund may invest in foreign securities as permitted
by their respective investment policies. Each of the Bond Fund and Limited
Maturity Bond Fund may also invest up to 25% of its net assets in foreign
securities either directly or through the purchase of ADRs and may also invest
in securities issued by foreign branches of U.S. banks and foreign banks, in
CCP, and in Europaper. The Government Income Fund may invest in foreign
securities by purchasing: Eurodollar certificates of deposit ("ECDs"), which are
U.S. dollar-denominated certificates of deposit issued by offices of foreign and
domestic banks outside the U.S.; Eurodollar time deposits ("ETDs"), which are
U.S. dollar-denominated deposits in a foreign branch of a U.S. or foreign bank;
Canadian time deposits ("CTDs"), which are essentially the same as ETDs, except
that they are issued by Canadian offices of major Canadian banks; Yankee
certificates of deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank but held in
the U.S.; CCP; and Europaper.
Investment in foreign securities is subject to special investment risks that
differ in some respects from those related to investments in securities of U.S.
domestic issuers. Such risks include political, social or economic instability
in the country of the issuer, the difficulty of predicting international trade
patterns, the
PROSPECTUS--Investor B Shares 28
<PAGE> 109
possibility of the imposition of exchange controls, expropriation, limits on
removal of currency or other assets, nationalization of assets, foreign
withholding and income taxation, and foreign trading practices (including higher
trading commissions, custodial charges and delayed settlements). Such securities
may be subject to greater fluctuations in price than securities issued by U.S.
corporations or issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The markets on which such securities trade may have less
volume and liquidity, and may be more volatile than securities markets in the
U.S. In addition, there may be less publicly available information about a
foreign company than about a U.S.-domiciled company. Foreign companies generally
are not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to U.S. domestic companies. There is
generally less government regulation of securities exchanges, brokers and listed
companies abroad than in the United States. Confiscatory taxation or diplomatic
developments could also affect investment in those countries. In addition,
foreign branches of U.S. banks, foreign banks and foreign issuers may be subject
to less stringent reserve requirements and to different accounting, auditing,
reporting, and record keeping standards than those applicable to domestic
branches of U.S. banks and U.S. domestic issuers.
In many instances, foreign debt securities may provide higher yields than
securities of domestic issuers which have similar maturities and quality. Under
certain market conditions these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Finally, in the event of a default of any such foreign debt obligations, it may
be more difficult for a Fund to obtain or to enforce a judgment against the
issuers of such securities. If a security is denominated in foreign currency,
the value of the security to the Fund will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of any
foreign currency against the U.S. dollar will result in a corresponding change
in the U.S. dollar value of a Fund's securities denominated in that currency.
Such changes will also affect a Fund's income and distributions to shareholders.
In addition, although a Fund will receive income on foreign securities in such
currencies, such Fund will be required to compute and distribute its income in
U.S. dollars. Therefore, if the exchange rate for any such currency declines
materially after such Fund's income has been accrued and translated into U.S.
dollars, the Fund could be required to liquidate portfolio securities to make
required distributions. Similarly, if an exchange rate declines between the time
a Fund incurs expenses in U.S. dollars and the time such expenses are paid, the
amount of such currency required to be converted into U.S. dollars in order to
pay such expenses in U.S. dollars will be greater.
U.S. dollar-denominated ADRs, which are traded in the United States on exchanges
or over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate all of the risk inherent in investing
in the securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, a Fund can avoid currency risks during the
settlement period for either purchases or sales. In general, there is a large,
liquid market in the United States for many ADRs. The information available for
ADRs is subject to the accounting, auditing and financial reporting standards of
the domestic market or exchange on which they are traded, standards which are
more uniform and more exacting than those to which many foreign issuers may be
subject. The International Fund and Balanced Fund may also invest in EDRs which
are receipts evidencing an arrangement with a European bank similar to that for
ADRs and designed for use in the European securities markets. EDRs are not
necessarily denominated in the currency of the underlying security.
Certain of the ADRs and EDRs, typically those categorized as unsponsored,
require their holders to bear most of the costs of such facilities while issuers
of sponsored facilities normally pay more of the costs. The depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through the voting rights to facility holders with respect to the deposited
securities, whereas the depository of a sponsored facility typically distributes
shareholder communications and passes through the voting rights.
Subject to its applicable investment policies, each of the Growth Funds and
Growth and Income Funds may invest in debt securities denominated in the ECU,
which is a "basket" unit of currency consisting of specified amounts of the
currencies of certain of the twelve member states of the European Community.
29 PROSPECTUS--Investor B Shares
<PAGE> 110
The specific amounts of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community to reflect changes in relative
values of the underlying currencies. Such adjustments may adversely affect
holders of ECU-denominated obligations or the marketability of such securities.
European governments and supranationals, in particular, issue ECU-denominated
obligations.
FOREIGN CURRENCY TRANSACTIONS
Each of the Funds, with the exception of the Tax-Free Income Funds, may utilize
foreign currency transactions in its portfolio. The value of the assets of a
Fund as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and a Fund may incur costs in connection with conversions between
various currencies. A Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
("forward currency contracts") involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These forward currency contracts are traded directly between
currency traders (usually large commercial banks) and their customers. The Funds
may enter into forward currency contracts in order to hedge against adverse
movements in exchange rates between currencies.
For example, when a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the United
States dollar cost or proceeds, as the case may be. By entering into a forward
currency contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, such
Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the United States dollar and such foreign currency. Additionally, for example,
when a Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward currency sale contract to
sell an amount of that foreign currency approximating the value of some or all
of that Fund's portfolio securities or other assets denominated in such foreign
currency. Alternatively, when a Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
currency purchase contract to buy that foreign currency for a fixed U.S. dollar
amount; however, this tends to limit potential gains which might result from a
positive change in such currency relationships. A Fund may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.
The forecasting of short-term currency market movement is extremely difficult
and whether such a short-term hedging strategy will be successful is highly
uncertain. It is impossible to forecast with precision the market value of
portfolio securities at the expiration of a forward currency contract.
Accordingly, it may be necessary for a Fund to purchase additional currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency such Fund is obligated
to deliver when a decision is made to sell the security and make delivery of the
foreign currency in settlement of a forward contract. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency such Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward currency contract prices. If the
Fund engages in an offsetting transaction, it may subsequently enter into a new
forward currency contract to sell the foreign currency. Should forward prices
decline during the period between a Fund's entering into a forward currency
contract for the sale of foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, such Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, such Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also
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tend to limit any potential gain which might result should the value of such
currency increase. The Funds will have to convert their holdings of foreign
currencies into United States dollars from time to time. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies.
The International Fund does not intend to enter into forward currency contracts
if more than 15% of the value of its total assets would be committed to such
contracts on a regular or continuous basis. The International Fund does not
intend to enter into forward currency contracts or to maintain a net exposure in
such contracts where the International Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
For further information about the characteristics, risks and possible benefits
of options, futures and foreign currency transactions, see "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio Instruments" in
the Statement of Additional Information.
FUTURES CONTRACTS
The Growth Funds, the Growth and Income Funds, the Income Funds and the
Municipal Bond Fund may enter into contracts for the future delivery of
securities or foreign currencies and futures contracts based on a specific
security, class of securities, foreign currency or an index, purchase or sell
options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
A Fund may engage in such futures contracts in an effort to hedge against market
risks. For example, when interest rates are expected to rise or market values of
portfolio securities are expected to fall, a Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
a Fund, through the purchase of such contracts, can attempt to secure better
rates or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
The acquisition of put and call options on futures contracts will, respectively,
give a Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of a Fund's total assets, and the value of
securities that are the subject of such futures and options (both for receipt
and delivery) may not exceed one-third of the market value of a Fund's total
assets. Futures transactions will be limited to the extent necessary to maintain
each Fund's qualification as a regulated investment company.
Futures transactions involve brokerage costs and require a Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of a Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities or foreign currencies,
limiting the Fund's ability to hedge effectively against interest rate, exchange
rate and/or market risk and giving rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.
GOVERNMENT OBLIGATIONS
Subject to the investment parameters described above, each of the Funds may
invest in obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities. The types of U.S. government obligations in which
each of these Funds may invest include U.S. Treasury notes, bills, bonds, and
any
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other securities directly issued by the U.S. government for public investment,
which differ only in their interest rates, maturities, and times of issuance.
Stripped Treasury Obligations are also permissible investments. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association ("GNMA"), are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Federal National Mortgage Association ("FNMA"), are supported by the right of
the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association ("SLMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. government would provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Funds which may invest in these government
obligations will invest in the obligations of such agencies or instrumentalities
only when First of America believes that the credit risk with respect thereto is
minimal.
GUARANTEED INVESTMENT CONTRACTS
The Bond Fund and the Limited Maturity Bond Fund may invest in guaranteed
investment contracts ("GICs"). When investing in GICs, the Bond Fund and the
Limited Maturity Bond Fund make cash contributions to a deposit fund of an
insurance company's general account. The insurance company then credits
guaranteed interest to the deposit fund on a monthly basis . The GICs provide
that this guaranteed interest will not be less than a certain minimum rate. The
insurance company may assess periodic charges against a GIC for expenses and
service costs allocable to it, and the charges will be deducted from the value
of the deposit fund. The Bond Fund and the Limited Maturity Bond Fund may invest
in GICs of insurance companies without regard to the ratings, if any, assigned
to such insurance companies' outstanding debt securities. Because a Fund may not
receive the principal amount of a GIC from the insurance company on seven days'
notice or less, the GIC is considered an illiquid investment. For each of the
Bond Fund and Limited Maturity Bond Fund, no more than 15% of its total assets
will be invested in instruments which are considered to be illiquid. In
determining average portfolio maturity, GICs will be deemed to have a maturity
equal to the period of time remaining until the next readjustment of the
guaranteed interest rate.
MEDIUM-GRADE SECURITIES
Each of the Balanced Fund, Bond Fund, Limited Maturity Bond Fund, Municipal Bond
Fund and Michigan Bond Fund may invest in fixed-income securities rated within
the fourth highest rating group assigned by an NRSRO (i.e., BBB or Baa by S&P
and Moody's, respectively) and comparable unrated securities as determined by
the Investment Adviser. These types of fixed-income securities are considered by
the NRSROs to have some speculative characteristics, and are more vulnerable to
changes in economic conditions, higher interest rates or adverse issuer-specific
developments which are more likely to lead to a weaker capacity to make
principal and interest payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a fixed-income security purchased
by any of the Funds listed above to fall below the fourth highest rating, First
of America will consider such an event in determining whether the Fund should
continue to hold that security. In no event, however, would the Fund be required
to liquidate any such portfolio security where the Fund would suffer a loss on
the sale of such security.
MORTGAGE-RELATED SECURITIES
The Government Income Fund intends to invest up to 80% of the value of its total
assets in mortgage-related securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. However, the Government Income
Fund may invest greater amounts as conditions warrant. Each of the
PROSPECTUS--Investor B Shares 32
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remaining Funds, except the International Fund, may also invest in
mortgage-related securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. Such agencies or instrumentalities include GNMA,
FNMA and FHLMC. Each of the Balanced Fund, Bond Fund, Limited Maturity Bond
Fund, Intermediate Government Obligations Fund and Government Income Fund may
also invest in mortgage-related securities issued by non-governmental entities
which are rated, at the time of purchase, within the three highest bond rating
categories assigned by an NRSRO or, if unrated, which First of America deems
present attractive opportunities and are of comparable quality.
The mortgage-related securities in which the these Funds may invest have
mortgage obligations backing such securities, consisting of conventional
thirty-year fixed-rate mortgage obligations, graduated payment mortgage
obligations, fifteen-year mortgage obligations and adjustable rate mortgage
obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Because the prepayment
characteristics of the underlying mortgage obligations vary, it is not possible
to predict accurately the realized yield or average life of a particular issue
of pass-through certificates. Prepayment rates are important because of their
effect on the yield and price of the securities. Accelerated prepayments have an
adverse impact on yields for pass-throughs purchased at a premium (i.e., a price
in excess of principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-throughs purchased at a
discount. The Fund may purchase mortgage-related securities at a premium or at a
discount.
If a Fund purchases a mortgage-related security at a premium, that portion may
be lost if there is a decline in the market value of the security, whether
resulting from changes in interest rates or prepayments in the underlying
mortgage collateral. As with other interest-bearing securities, the prices of
such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-related security may decline when interest rates
rise, the converse is not necessarily true, since in periods of declining
interest rates the mortgages underlying the securities are prone to prepayment,
thereby shortening the average life of the security and shortening the period of
time over which income at the higher rate is received. When interest rates are
rising, though, the rate of prepayment tends to decrease, thereby lengthening
the period of time over which income at the lower rate is received. For these
and other reasons, a mortgage-related security's average maturity may be
shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return to the
Fund. In addition, regular payments received with respect to mortgage-related
securities include both interest and principal. No assurance can be given as to
the return a Fund will receive when these amounts are reinvested.
The principal governmental (i.e., backed by the full faith and credit of the
United States government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned United States government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the United States government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of mortgages insured by the Federal Housing Administration
or guaranteed by the Veterans Administration.
Government-related (i.e., not backed by the full faith and credit of the United
States government) guarantors include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States government. FHLMC is a corporate instrumentality of the
United States government whose stock is owned by the twelve Federal Home Loan
Banks. Participation certificates issued by FHLMC are guaranteed
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as to the timely payment of interest and ultimate collection of principal but
are not backed by the full faith and credit of the United States government.
The Government Income Fund also may invest up to 35% of its total assets in
mortgage-related securities issued by non-governmental entities and in other
securities described below. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issues also create pass-through pools of conventional residential
mortgage loans. Such issuers may also be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers will be considered in
determining whether a mortgage-related security meets a Fund's investment
quality standards. There can be no assurance that the private insurers can meet
their obligations under the policies. The Government Income Fund may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the loan experience and practices of the poolers, First of
America determines that the securities meet the Government Income Fund's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. The Government Income Fund will not purchase mortgage-related
securities or any other assets which in First of America's opinion are illiquid
if, as a result, more than 15% of the value of the Government Income Fund's
total assets will be illiquid.
Mortgage-related securities in which the above-named Funds may invest may also
include collateralized mortgage obligations ("CMOs"). CMOs are debt obligations
issued generally by finance subsidiaries or trusts that are secured by
mortgage-backed certificates, including, in many cases, certificates issued by
government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations.
The Government Income Fund expects that governmental, government-related or
private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments; that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may differ from customary long-term fixed-rate mortgages. As new types
of mortgage-related securities are developed and offered to investors, First of
America will, consistent with the Government Income Fund's investment objective,
policies and quality standards, consider making investments in such new types of
securities.
MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities (Michigan Municipal
Securities, in the case of the Michigan Bond Fund) which may be held by the Bond
Fund, Limited Maturity Bond Fund, Municipal Bond Fund and Michigan Bond Fund are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by the Municipal Bond Fund and Michigan Bond Fund are in
most cases revenue securities and are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
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The above-named Funds may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Each of the above-named Funds invests primarily in Municipal Securities which
are rated at the time of purchase within the four highest rating groups assigned
by an NRSRO or in the highest rating group assigned by an NRSRO in the case of
notes, tax-exempt commercial paper or variable rate demand obligations. These
Funds may also purchase Municipal Securities which are unrated at the time of
purchase but determined to be of comparable quality by First of America pursuant
to guidelines approved by the Group's Board of Trustees. The applicable
Municipal Securities ratings are described in the Appendix to the Statement of
Additional Information. For a discussion of debt securities rated within the
fourth highest rating group assigned by an NRSRO, see "RISK FACTORS AND
INVESTMENT TECHNIQUES -- Medium Grade Securities" herein.
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Funds nor First of
America will review the proceedings relating to the issuance of Municipal
Securities or the basis for such opinions.
Municipal Securities and Michigan Municipal Securities purchased by the Tax-Free
Income Funds may include rated and unrated variable and floating rate tax-exempt
notes. A variable rate note is one whose terms provide for the adjustment of its
interest rate on set dates and which, upon such adjustment, can reasonably be
expected to have a market value that approximates its par value. A floating rate
note is one whose terms provide for the adjustment of its interest rate whenever
a specified interest rate changes and which, at any time, can reasonably be
expected to have a market value that approximates its par value. Such notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by the Tax-Free Income Funds will be determined by
First of America, under guidelines established by the Group's Board of Trustees,
to be of comparable quality at the time of purchase to rated instruments
eligible for purchase under the Funds' investment policies. In making such
determinations, First of America will consider the earning power, cash flow and
other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. There may be no active secondary
market with respect to a particular variable or floating rate note.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to the Tax-Free Income Fund will approximate their par value.
The Tax-Free Income Funds will not purchase variable and floating rate notes or
any other securities which in First of America's opinion are illiquid if, as a
result, more than 15% of either Tax-Free Income Fund's total assets will be
illiquid.
OTHER MUTUAL FUNDS
Each of the Funds may invest up to 5% of the value of its total assets in the
securities of any one money market mutual fund (including shares of the
Parkstone Money Market Funds: the Prime Obligations Fund, the Parkstone
Municipal Investor Fund, and the Parkstone Treasury Fund), provided that no more
than 10% of a Fund's total assets may be invested in the securities of mutual
funds in the aggregate. In order to avoid the imposition of additional fees as a
result of investments by a Fund in shares of the Money Market Funds of the
Group, the Investment Adviser, Administrator and their affiliates (See
"MANAGEMENT OF THE FUNDS -- Investment Adviser and Subadviser" and
"Administrator, Sub-Administrator and Distributor" and "GENERAL
INFORMATION -- Transfer Agency and Fund Accounting Services") will not retain
any portion of their usual asset-based service fees from a Fund that is
attributable to investments by the Fund in shares of those Money Market Funds if
the fee is being taken in the Fund. The Investment Adviser and the Administrator
will promptly forward such fees to the appropriate Fund. Each Fund will incur
additional expenses due to the duplication of expenses as a result of any
investment in securities of unaffiliated mutual funds. Additional restrictions
regarding the Funds'
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investments in securities of unaffiliated mutual funds and/or the Money Market
Funds of the Group are contained in the Statement of Additional Information.
PRIVATE ACTIVITY BONDS
The Tax-Free Income Funds may invest in private activity bonds. It should be
noted that the Tax Reform Act of 1986 substantially revised provisions of prior
federal law affecting the issuance and use of proceeds of certain tax-exempt
obligations. A new definition of private activity bonds applies to many types of
bonds, including those which were industrial development bonds under prior law.
Any reference herein to private activity bonds includes industrial development
bonds. Interest on private activity bonds is tax-exempt (and such bonds will be
considered Municipal Securities for purposes of this Prospectus) only if the
bonds fall within certain defined categories of qualified private activity bonds
and meet the requirements specified in those respective categories. If a Fund
invests in private activity bonds which fall outside these categories,
shareholders may become subject to the alternative minimum tax on that part of
the Tax-Free Income Fund's distributions derived from interest on such bonds.
The Tax Reform Act generally does not change the federal tax treatment of bonds
issued to finance government operations. For further information relating to the
types of private activity bonds which will be included in income subject to the
alternative minimum tax, see "ADDITIONAL INFORMATION -- Additional Tax
Information Concerning the Tax-Free Fund, the Municipal Bond Fund and the
Michigan Bond Fund" in the Statement of Additional Information.
PUT AND CALL OPTIONS
Each of the Growth Funds, the Growth and Income Funds, the Income Funds and the
Tax-Free Income Funds may purchase put and call options on securities and on
foreign currencies, subject to its applicable investment policies, for the
purposes of hedging against market risks related to its portfolio securities and
adverse movements in exchange rates between currencies, respectively. Purchasing
options is a specialized investment technique that entails a substantial risk of
a complete loss of the amounts paid as premiums to writers of options. Each Fund
may also engage in writing call options from time to time as First of America or
Gulfstream, as the case may be with respect to the Balanced Fund or
International Fund, deem appropriate. The Funds will write only covered call
options (options on securities or currencies owned by the particular Fund). In
order to close out a call option it has written, the Fund will enter into a
"closing purchase transaction" (the purchase of a call option on the same
security or currency with the same exercise price and expiration date as the
call option which such Fund previously has written). When a portfolio security
or currency subject to a call option is sold, the Fund will effect a closing
purchase transaction to close out any existing call option on that security or
currency. If such Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security or currency until the option
expires or that Fund delivers the underlying security or currency upon exercise.
In addition, upon the exercise of a call option by the option holder, the Fund
will forego the potential benefit represented by market appreciation over the
exercise price. Under normal conditions, it is not expected that the Funds will
cause the underlying value of portfolio securities and currencies subject to
such options to exceed 50% of its net assets, and with respect to each of the
Balanced Fund and International Fund, 20% of its net assets.
Each of the Growth Funds, the Growth and Income Funds and the Government Income
Fund, as part of its options transactions, also may purchase index put and call
options and write index options. As with options on individual securities, a
Fund will write only covered index call options. Through the writing or purchase
of index options a Fund can achieve many of the same objectives as through the
use of options on individual securities. Options on securities indices are
similar to options on a security except that, rather than the right to take or
make delivery of a security at a specified price, an option on a securities
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the securities index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option.
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Price movements in securities which a Fund owns or intends to purchase probably
will not correlate perfectly with movements in the level of an index and,
therefore, a Fund bears the risk of a loss on an index option that is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities. A Fund may be
required to segregate assets or provide an initial margin to cover index options
that would require it to pay cash upon exercise.
In addition, the Tax-Free Income Funds may each acquire "puts" with respect to
Municipal Securities (or Michigan Municipal Securities, as the case may be),
held in its portfolio. Under a put, such Fund would have the right to sell a
specified Municipal Security (or Michigan Municipal Security, as the case may
be) within a specified period of time at a specified price. A put would be sold,
transferred, or assigned only with the underlying security. The Tax-Free Income
Funds will acquire puts solely to either facilitate portfolio liquidity, shorten
the maturity of the underlying securities, or permit the investment of its funds
at a more favorable rate of return. Each of the Tax-Free Income Funds expects
that it will generally acquire puts only where the puts are available without
the payment of any direct or indirect consideration. However, if necessary or
advisable, such Fund may pay for a put either separately in cash or by paying a
higher price for portfolio securities which are acquired subject to the puts
(thus reducing the yield to maturity otherwise available for the same
securities).
REPURCHASE AGREEMENTS
Securities held by a Fund may be subject to repurchase agreements. Under the
terms of a repurchase agreement, a Fund would acquire securities from financial
institutions such as member banks of the Federal Deposit Insurance Corporation
or registered broker-dealers which First of America or Gulfstream, as the case
may be, deem creditworthy under guidelines approved by the Group's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price would generally equal
the price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. Securities subject to repurchase agreements will be held
in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by that Fund were delayed pending court action. Repurchase
agreements are considered to be loans by an investment company under the 1940
Act. For further information about repurchase agreements, see "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments-Repurchase Agreements" in the Statement of Additional Information.
RESTRICTED SECURITIES
Securities in which each of the Funds may invest include securities issued by
corporations without registration under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof, and securities issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2) securities are
restricted as to disposition under the federal securities laws, and generally
are sold to institutional investors such as the Funds who agree that they are
purchasing the securities for investment and not with a view to public
distribution. Any resale must also generally be made in an exempt transaction.
Section 4(2) securities are normally resold to other institutional investors
through or with the assistance of the issuer or investment dealers who make a
market in such Section 4(2) securities, thus providing liquidity. Pursuant to
procedures adopted by the Board of Trustees of the Group, First of America may
determine Section 4(2) securities to be liquid if such securities are eligible
for resale under Rule 144A under the 1933 Act and are readily saleable.
37 PROSPECTUS--Investor B Shares
<PAGE> 118
Subject to the limitations described above, the Funds may acquire investments
that are illiquid or of limited liquidity, such as private placements or
investments that are not registered under the 1993 Act. An illiquid investment
is any investment that cannot be disposed of within seven days in the normal
course of business at approximately the amount at which it is valued by a Fund.
The price a Fund pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly, the valuation of these securities will reflect any
limitations on their liquidity. A Fund may not invest in additional illiquid
securities if, as a result, more than 15% of the market value of its net assets
would be invested in illiquid securities.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS
Each of the Funds may borrow money by entering into reverse repurchase
agreements and, in the case of the Income Funds and the Tax-Free Income Funds,
dollar roll agreements in accordance with the investment restrictions described
below. Pursuant to reverse repurchase agreements, a Fund would sell certain of
its securities to financial institutions such as banks and broker-dealers, and
agree to repurchase the securities at a mutually agreed upon date and price.
Dollar roll agreements utilized by the Income Funds and Tax-Free Income Funds
are identical to reverse repurchase agreements except for the fact that
substantially similar securities may be repurchased. At the time a Fund enters
into a reverse repurchase agreement or a dollar roll agreement, it will place in
a segregated custodial account assets such as U.S. government securities or
other liquid high-grade debt securities consistent with its investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently continually monitor the account to ensure that
such equivalent value is maintained at all times. Reverse repurchase agreements
and dollar roll agreements involve the risk that the market value of securities
sold by a Fund may decline below the price at which it is obligated to
repurchase the securities. Reverse repurchase agreements and dollar roll
agreements are considered to be borrowings by an investment company under the
1940 Act and therefore a form of leverage. A Fund may experience a negative
impact on its net asset value if interest rates rise during the term of a
reverse repurchase agreement or dollar roll agreement. A Fund generally will
invest the proceeds of such borrowings only when such borrowings will enhance a
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction. For further information about reverse repurchase
agreements and dollar roll agreements, see "INVESTMENT OBJECTIVES AND
POLICIES -- Additional Information on Portfolio Instruments-Reverse Repurchase
Agreements and Dollar Roll Agreements" in the Statement of Additional
Information.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delayed-delivery
basis. Such Funds will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage although such
transactions represent a form of leveraging. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those available in the market when delivery takes
place. A Fund will not pay for such securities or start earning interest on them
until they are received. When a Fund agrees to purchase such securities, its
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a separate account. Securities purchased on a when-issued basis
are recorded as an asset and are subject to changes in the value based upon
changes in the general level of interest rates. In when-issued and
delayed-delivery transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause such Fund to miss a price
or yield considered to be advantageous.
No Fund's commitments to purchase "when-issued" securities will exceed 25% of
the value of its total assets under normal market conditions, and a commitment
by a Fund to purchase "when-issued" securities will not exceed 60 days. In the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
the value of its assets, a Fund's liquidity and the ability of First of America
or Gulfstream, as the case may be, to manage it might be adversely affected. The
Funds intend only to
PROSPECTUS--Investor B Shares 38
<PAGE> 119
purchase "when-issued" securities for the purpose of acquiring portfolio
securities, not for investment leverage.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, each Fund may, from time to time, lend
its portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral will be valued daily by First of America
or by Gulfstream, as the case may be. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to that
Fund. During the time portfolio securities are on loan, the borrower pays that
Fund any dividends or interest received on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, each Fund intends to terminate the loan
and regain the right to vote if that is considered important with respect to the
investment. In the event the borrower defaults in its obligation to a Fund, such
Fund bears the risk of delay in the recovery of its portfolio securities and the
risk of loss of rights in the collateral. The Funds will enter into loan
agreements only with broker-dealers, banks, or other institutions that First of
America or Gulfstream, as the case may be, have determined are creditworthy
under guidelines established by the Group's Board of Trustees.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the lesser
of a Fund's purchases or sales of portfolio securities for the year by the
monthly average value of the portfolio securities. The SEC requires that the
calculation exclude all securities whose remaining maturities at the time of
acquisition are one year or less. The portfolio turnover rate for a Fund may
vary greatly from year to year, as well as within a particular year, and may
also be affected by cash requirements for redemptions of shares. High portfolio
turnover rates will generally result in higher transaction costs, including
brokerage commissions, to a Fund and may result in additional tax consequences
to a Fund's shareholders. Portfolio turnover will not be a limiting factor in
making investment decisions.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding shares of that Fund (as defined
in the Statement of Additional Information).
None of the Funds, with the exception of the Michigan Bond Fund, may:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
if, immediately after such purchase, more than 5% of the value of the
Fund's total assets would be invested in such issuer, or the Fund would
hold more than 10% of the outstanding voting securities of the issuer,
except that 25% or less of the value of such Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes,
or other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
The Michigan Bond Fund may not:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
if, immediately after such purchase, (a) more than 5% of the value of the
Fund's total assets (taken at current value) would be invested in such
issuer (except that up to 50% of the value of the Fund's total assets may
be invested without regard to such 5% limitation), and (b) more than 25%
of its total assets (taken at current value) would be invested in the
securities of a single issuer.
For purposes of the investment limitations above, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security and, with respect to a
39 PROSPECTUS--Investor B Shares
<PAGE> 120
private activity bond that is backed only by the assets and revenues of a
non-governmental user, a security is considered to be issued by such
non-governmental user.
NONE OF THE FUNDS WILL:
1. Purchase any securities which would cause more than 25% of the value of the
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities of
their parents; and (c) utilities will be divided according to their services.
For example, gas, gas transmission, electric and gas, electric, and telephone
will each be considered a separate industry.
2. (a) Borrow money (not including reverse repurchase agreements or dollar roll
agreements), except that each Fund may borrow from banks for temporary or
emergency purposes and then only in amounts up to 30% of its total assets at
the time of borrowing (and provided that such bank borrowings and reverse
repurchase agreements and dollar roll agreements do not exceed in the
aggregate one-third of the Fund's total assets less liabilities other than
the obligations represented by the bank borrowings, reverse repurchase
agreements and dollar roll agreements), or mortgage, pledge or hypothecate
any assets except in connection with a bank borrowing in amounts not to
exceed 30% of the Fund's net assets at the time of borrowing; (b) enter into
reverse repurchase agreements, dollar roll agreements and other permitted
borrowings in amounts exceeding in the aggregate one-third of the Fund's
total assets less liabilities other than the obligations represented by such
reverse repurchase and dollar roll agreements; and (c) issue senior
securities except as permitted by the 1940 Act rule, order or interpretation
thereunder.
3. Make loans, except that a Fund may purchase or hold debt instruments and lend
portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.
For purposes of investment limitation number 1 above only, such limitation shall
not apply to Municipal Securities or governmental guarantees of Municipal
Securities, and industrial development bonds or private activity bonds that are
backed only by the assets and revenues of a non-governmental user shall not be
deemed to be Municipal Securities.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding shares of a Fund.
EACH FUND MAY NOT:
1. Purchase or otherwise acquire any securities, if as a result, more than 15%
of the Fund's net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, the Funds are subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
TRUSTEES
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of all of the Group's Funds. The
Group will be managed by the Trustees in accordance with the laws of the
Commonwealth of Massachusetts governing business trusts. There are currently
four Trustees, three of whom are not "interested persons" of the Group within
the meaning of that term under
PROSPECTUS--Investor B Shares 40
<PAGE> 121
the 1940 Act. The Trustees, in turn, elect the officers of the Group to
supervise actively its day-to-day operations.
The Trustees of the Group are George R. Landreth* (Chairman), Robert M. Beam,
Lawrence D. Bryan and Adrian Charles Edwards. The addresses, and principal
occupations during the past five years of the Trustees are set forth in the
Statement of Additional Information. The Trustee designated with an asterisk (*)
is considered to be an "interested person" of the Group as defined in the 1940
Act.
The Trustees of the Group receive quarterly fees and fees and expenses for each
meeting of the Board of Trustees attended. However, no officer or employee of
BISYS, The BISYS Group, Inc. or BISYS Fund Ohio receives any compensation from
the Group for acting as a Trustee of the Group. The officers of the Group
receive no compensation directly from the Group for performing the duties of
their offices. BISYS receives fees from the Group for acting as Administrator
and may receive fees from each of the Funds pursuant to the Investor B
Distribution and Shareholder Service Plan described below. BISYS Ohio, an
affiliate of BISYS, receives fees from the Group for acting as Transfer Agent
and for providing certain fund accounting services. Mr. Landreth is an employee
of BISYS.
INVESTMENT ADVISER AND SUBADVISER
First of America was established in 1932 and is the investment adviser of the
Group. First of America, a registered investment adviser, is a wholly-owned
subsidiary of FOA-Michigan, which is a wholly-owned subsidiary of First of
America Bank Corporation ("FABC"). FABC currently has over $22 billion in assets
and provides financial services to over 300 communities in Michigan, Indiana,
Illinois and Florida. As of June 30, 1996, First of America managed over $13
billion on behalf of both taxable and tax-exempt clients, including pensions,
endowments, corporations and individual portfolios. First of America acts as
subadviser to the Trust Division of FABC with respect to $5.7 billion in
discretionary assets, providing equity, fixed income, balanced and money
management services.
Subject to such policies as the Group's Board of Trustees may determine, First
of America, either directly or, with respect to the International Fund and the
Balanced Fund, through Gulfstream, furnishes a continuous investment program for
each Fund and makes investment decisions on behalf of each Fund.
First of America utilizes a team approach to the investment management of the
Funds, with up to three professionals working as a team to ensure a disciplined
investment process designed to result in long-term performance consistent with
each Fund's investment objectives. Roger H. Stamper, Managing Director of First
of America, is primarily responsible for the day-to-day management of each of
the Growth Funds (except the International Fund) and the Growth and Income
Funds. Mark R. Kummerer, Managing Director -- Fixed Income of First of America,
is primarily responsible for the day-to-day management of the Income Funds.
Christian S. Swantek, Vice President of First of America, is primarily
responsible for the day-to-day management of the Tax-Free Income Funds. Messrs.
Stamper and Kummerer have held their respective positions with First of America
since 1988 and 1986, respectively. Prior to June 1993, Mr. Swantek was a
portfolio manager at PNC Investment Management & Research and its various
investment management affiliates.
For the services provided and expenses assumed pursuant to its Investment
Advisory Agreement with the Group, First of America receives a fee from the
Large Capitalization Fund, computed daily and paid monthly, at an annual rate of
0.80% of the Fund's average daily net assets. For its services in connection
with each of the Equity Fund, Small Capitalization Fund, High Income Equity Fund
and Balanced Fund, First of America's Fee is computed daily and paid monthly at
the annual rate of 1.00% of the applicable Fund's average daily net assets. For
its services in connection with the International Fund, First of America's fee
is computed daily and paid monthly at the annual rate of 1.25% of the first $50
million of the International Fund's average daily net assets, 1.20% of average
daily net assets between $50 million and $100 million, 1.15% of average daily
net assets between $100 million and $400 million and 1.05% of average daily net
assets above $400 million. For its services in connection with each Income Fund
and Tax-Free Income Fund, First of America's fee is computed daily and paid
monthly at the annual rate of 0.74% of each Income Fund's and Tax-Free Income
Fund's average daily net assets. First of America may
41 PROSPECTUS--Investor B Shares
<PAGE> 122
periodically voluntarily reduce all or a portion of its advisory fee with
respect to a Fund to increase the net income of that Fund available for
distribution as dividends. The voluntary fee reduction will cause the yield of
that Fund to be higher than it would otherwise be in the absence of such a
reduction.
Pursuant to the terms of its Investment Advisory Agreement with the Group, First
of America has entered into a Sub-Investment Advisory Agreement with Gulfstream,
100 Crescent Court, Suite 550, Dallas, Texas 75201. Pursuant to the terms of
such Sub-Investment Advisory Agreement, Gulfstream has been retained by First of
America to manage the investment and reinvestment of the assets of the
International Fund and to manage the investment and reinvestment of those assets
of the Balanced Fund which are invested in foreign securities, subject to the
direction and control of the Group's Board of Trustees.
Under this arrangement, Gulfstream is responsible for day-to-day management of
the International Fund's assets and the applicable portion of the Balanced Fund,
reviewing investment performance policies and guidelines and maintaining certain
books and records, and First of America is responsible for selecting and
monitoring the performance of Gulfstream and for reporting the activities of
Gulfstream in managing these Funds to the Group's Board of Trustees. First of
America may also render advice with respect to the International Fund's
investments in the U.S. Gulfstream utilizes a team approach to investment
management to ensure a disciplined investment process designed to result in
long-term performance consistent with a Fund's investment objective. No one
person is responsible for the Fund's management.
For its services provided and expenses assumed pursuant to its Sub-Investment
Advisory Agreement with First of America, Gulfstream receives from First of
America a fee, computed daily and paid monthly, at the annual rate of 0.50% of
the first $50 million of the International Fund's average daily net assets and
the average daily net assets of the Balanced Fund which are invested in foreign
securities, 0.45% of such average daily net assets between $50 million and $100
million, 0.40% of such average daily net assets between $100 million and $400
million and 0.30% of such average daily net assets above $400 million, provided
the minimum annual fee shall be $75,000.
Gulfstream was organized in 1991 as a Texas limited partnership by Tull, Doud,
Marsh & Triltsch, Inc., a Texas corporation ("TDMT"). TDMT is the sole general
partner of Gulfstream. TDMT is owned by C. Thomas Tull, Stephen C. Doud, James
P. Marsh and Reiner M. Triltsch. Messrs. Tull, Doud and Triltsch are the
portfolio managers and Mr. Marsh is responsible for client services with
Gulfstream. First of America is the sole limited partner, and as of August 31,
1996, exercised options to increase its interest in Gulfstream from 49% to 72%.
As of June 30, 1996, Gulfstream had over $596 million in international assets of
institutional, investment company, governmental, pension fund and high net worth
individual clients under its investment management. Gulfstream's portfolio
management personnel average 20 years of investment experience and 9 years of
international investment experience.
Under Gulfstream's partnership agreement, First of America possesses veto
authority over the general budgetary affairs of Gulfstream. Because of its
current 72% ownership interest, First of America is deemed to control
Gulfstream for purposes of the 1940 Act.
For further information regarding the relationship between Gulfstream and First
of America, see "MANAGEMENT OF THE GROUP -- Investment Adviser" in the Statement
of Additional Information.
ADMINISTRATOR, SUB-ADMINISTRATOR AND DISTRIBUTOR
BISYS, 3435 Stelzer Road, Columbus, Ohio 43219, is the administrator for each
Fund of the Group, and also acts as the Group's principal underwriter and
distributor (the "Administrator" or the "Distributor," as the context
indicates). First of America serves as Sub-Administrator for each Fund of the
Group and provides certain services as may be requested by BISYS from time to
time. BISYS and its affiliated companies, including BISYS Ohio are wholly-owned
by The BISYS Group, Inc., a publicly-held company which is a provider of
information processing, loan servicing and 401(k) administration and record
keeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Funds' administration
and operation. For expenses assumed and services provided as administrator
pursuant to its Administration Agreement with the Group, the Administrator
receives a fee from each Fund equal to the lesser of a fee, computed daily
PROSPECTUS--Investor B Shares 42
<PAGE> 123
and paid periodically at an annual rate of 0.20% of the Fund's average daily net
assets, or such other fee as may be agreed upon from time to time in writing by
the Group and the Administrator. For its services as Sub-Administrator, First of
America receives from the Administrator, pursuant to its Sub-Administration
Agreement with BISYS, a fee not to exceed 0.05% of each Fund's average daily net
assets. The Administrator may periodically voluntarily reduce all or a portion
of its administrative fee with respect to a Fund to increase the net income of
that Fund available for distribution as dividends. The voluntary fee reduction
will cause the return of that Fund to be higher than it would otherwise be in
the absence of such reduction.
The Distributor acts as agent for the Funds in the distribution of each of their
shares and, in such capacity, solicits orders for the sale of shares,
advertises, and pays the cost of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group, but may retain some or all of any sales
charge imposed upon the Investor B Shares and may receive compensation under the
Distribution and Shareholder Service Plan described below.
EXPENSES
First of America, Gulfstream and BISYS each bear all expenses in connection with
the performance of its services as Investment Adviser, Subadviser and
Administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Group. Each Fund will bear the
following expenses relating to its operation: organizational expenses, taxes,
interest, brokerage fees and commissions, fees of the Trustees of the Group, SEC
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
shareholders, outside auditing and legal expenses, advisory and administration
fees, fees and out-of-pocket expenses of the Custodian, Transfer Agent and Fund
Accountant, certain insurance premiums, costs of maintenance of the Group's
existence, costs of shareholders' reports and meetings, and any extraordinary
expenses incurred in each Fund's operation. As a general matter, expenses are
allocated to the Investor B Shares and the other classes of shares of the Funds
on the basis of the relative net asset value of each class. The various classes
may bear certain additional retail transfer agency expenses and may also bear
certain additional shareholder service and distribution costs incurred pursuant
to a Distribution and Shareholder Service Plan.
The Trustees reserve the right, subject to the receipt of relevant regulatory
approvals or rulings, if needed, to allocate certain other expenses to the
shareholders of a particular class, including the Investor B Shares class, on a
basis other than relative net asset value, as they deem appropriate ("Class
Expenses"). In such event, Class Expenses would be limited to: transfer agency
fees identified by the Transfer Agent as attributable to a specific class;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
Blue Sky registration fees incurred by a class of shares; SEC registration fees
incurred by a class of shares; expenses related to administrative personnel and
services as required to support the shareholders of a specific class; litigation
or other legal expenses relating solely to one class of shares; and Trustees'
fees incurred as a result of issues relating solely to one class of shares.
DISTRIBUTION PLAN FOR INVESTOR B SHARES
Rule 12b-1, adopted by the SEC under the 1940 Act, permits an investment company
to pay directly or indirectly expenses associated with the distribution of its
shares in accordance with a plan adopted by an investment company's trustees and
approved by its shareholders. Pursuant to such Rule, the Group has adopted an
Investor B Distribution and Shareholder Service Plan (the "Investor B Plan")
with respect to the Investor B Shares of each Fund. Pursuant to the Investor B
Plan, each Fund is authorized to pay or reimburse BISYS, as Distributor of the
Investor B Shares, for certain expenses that are incurred in connection with
shareholder and distribution services. The Plan authorizes any Fund to pay
BISYS, as Distributor of Investor B Shares, a distribution fee in an amount not
to exceed on an annual basis 0.75% of the average daily net asset value of
Investor B Shares of such Fund (the "Distribution Fee"). Such
43 PROSPECTUS--Investor B Shares
<PAGE> 124
amount may be used by BISYS to pay banks and their affiliates (including
FOA-Michigan and its affiliates), and other institutions, including
broker-dealers ("Participating Organizations") for administration, distribution,
and/or shareholder service assistance pursuant to an agreement between BISYS and
the Participating Organization. Under the Investor B Plan, a Participating
Organization may include BISYS, its subsidiaries and its affiliates.
Also pursuant to the Investor B Plan, a Fund is authorized to pay a service fee
in an amount not to exceed on an annual basis 0.25% of the average daily net
asset value of the Investor B Shares of such Fund (the "Service Fee"). Such
amount may be used to pay Participating Organizations for shareholder services
provided or expenses incurred in providing such services.
Fees paid pursuant to the Investor B Plan are accrued daily and paid monthly,
and are charged as expenses of Investor B Shares of a Fund as accrued. Payments
under the Investor B Plan will be calculated daily and paid monthly at a rate
not to exceed the limits described above, which rates are set from time to time
by the Board of Trustees.
Pursuant to the Investor B Plan, the Distributor may enter into agreements with
Participating Organizations for providing distribution assistance and
shareholder services with respect to the Investor B Shares. Such Participating
Organizations will be compensated at the annual rate of up to 1.00% (up to 0.75%
Distribution Fee plus up to 0.25% Service Fee) of the average daily net asset
value of the Investor B Shares held of record or beneficially by the
Participating Organization's customers. The distribution services provided by
Participating Organizations for which the Distribution Fee may be paid may
include promoting the purchase of Investor B Shares of a Fund by their
customers; processing purchase, exchange, and redemption requests from customers
and placing orders with the Distributor or the Transfer Agent; processing
dividend and distribution payments from a Fund on behalf of customers; providing
information periodically to customers, including information showing their
positions in Investor B Shares; responding to inquiries from customers
concerning their investment in Investor B Shares; and providing other similar
services as may be reasonably requested. The shareholder services provided by
Participating Organizations for which the Service Fee may be paid may include
providing sub-accounting with respect to Investor B Shares beneficially owned by
customers or the information necessary for sub-accounting; arranging for bank
wires; and other continuing personal services to holders of Investor B Shares.
Actual distribution and shareholder service expenses for Investor B Shares at
any given time may exceed the Rule 12b-1 fees and contingent deferred sales
charges collected. These unrecovered amounts plus interest thereon will be
carried forward and paid from future Rule 12b-1 fees and contingent deferred
sales charges collected. If the Investor B Plan were terminated or not
continued, the Group would not be contractually obligated to pay for any
expenses not previously reimbursed by the Group or recovered through contingent
deferred sales charges. During the fiscal year ended June 30, 1996, Rule 12b-1
fees and contingent deferred sales charges collected were sufficient to cover
actual distribution and shareholder service expenses; that is, there were no
unrecovered amounts to be carried forward.
Conflict of interest restrictions may apply to the receipt by Participating
Organizations of compensation from BISYS in connection with the investment of
fiduciary assets in Investor B Shares. Institutions, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board, or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor, or state
securities commissions, are urged to consult their legal advisers before
investing such assets in Investor B Shares.
As authorized by the Investor B Plan, BISYS has entered into a Service and
Commission Agreement with Security Distributors, Inc. ("SDI"), Security Benefit
Group, Inc. ("SBG") and First of America Brokerage Service, Inc.
("FOA-Brokerage") which relates to purchases of Investor B Shares made prior to
January 1, 1995. Pursuant to the Service and Commission Agreement, FOA-Brokerage
performs certain brokerage and related services in connection with the purchase
of Investor B Shares by its customers and maintains shareholder accounts for
such customers. Also pursuant to the Service and Commission Agreement, SBG
provides financing assistance, consistent with the Investor B Plan, in
connection with the services performed by FOA-Brokerage. Services provided by
FOA-Brokerage include placing orders to
PROSPECTUS--Investor B Shares 44
<PAGE> 125
purchase Investor B Shares, as agent for its customers, pursuant to the terms of
its Dealer Agreement; providing shareholder liaison services; responding to
inquiries; providing such information as FOA-Brokerage and SDI mutually
determine to be appropriate in order to properly maintain shareholder accounts;
and providing at its own expense such office space, equipment, facilities and
personnel as may be reasonably necessary or beneficial in order to provide such
services to customers. In consideration for such services, FOA-Brokerage
receives from SBG a commission rate of 4.00% of the net asset value of Investor
B Shares purchased by FOA-Brokerage as agent for its customers. SDI, either
directly or through an affiliate, receives amounts specified in the Shareholder
Services and Financing Agreement dated February 1, 1994 between BISYS and SDI.
Under that Agreement, SDI receives compensation for financing assistance at the
annual rate of up to 0.75% of the average daily net assets of Investor B Shares
of each Fund and compensation for shareholder support services at an annual rate
of up to 0.25% of the average daily net assets of the Investor B Shares of each
Fund.
The Group understands that Participating Organizations may charge fees to their
customers who are owners of Investor B Shares for additional services provided
in connection with their customer accounts. These fees would be in addition to
any amounts which may be received by a Participating Organization under its
Agreement with BISYS.
The Investor B Plan requires the officers of the Group to provide the Board of
Trustees at least quarterly with a written report of the amounts expended
pursuant to the Plan and the purposes for which such expenditures were made. The
Board reviews these reports in connection with its decisions with respect to the
Plan.
As required by Rule 12b-1, the Investor B Plan was approved by the Trustees of
the Group, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Group and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan ("Independent Trustees"). The Investor B Plan continues in effect as
long as such continuance is specifically approved at least annually by the
Group's Trustees, including a majority of the Independent Trustees.
The Investor B Plan may be terminated by a vote of a majority of the Independent
Trustees, or by a vote of a majority of the holders of the outstanding voting
securities of the Investor B Shares. Any change in the Investor B Plan that
would increase materially the distribution expenses paid by a Fund requires
shareholder approval; otherwise, the Plan may be amended by the Trustees,
including a majority of the Independent Trustees by a vote cast in person at a
meeting called for the purpose of voting upon the amendment. As long as the
Investor B Plan is in effect, the selection or nomination of the Independent
Trustees is committed to the discretion of the Independent Trustees.
45 PROSPECTUS--Investor B Shares
<PAGE> 126
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Ohio, 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Group's
Transfer Agent pursuant to a Transfer Agency Agreement with the Group and
receives a fee for such services. BISYS Ohio also provides certain accounting
services for each of the Funds and receives a fee for such services. See
"MANAGEMENT OF THE GROUP -- Custodian, Transfer Agent and Fund Accounting
Services" in the Statement of Additional Information for further information.
While BISYS Ohio is a distinct legal entity from BISYS (the Group's
Administrator and Distributor), BISYS Ohio is considered to be an affiliated
person of BISYS under the 1940 Act due to, among other things, the fact that
BISYS Ohio and BISYS are both owned by The BISYS Group, Inc.
BANKING LAWS
First of America believes that it may perform the investment advisory services
for the Group's Funds contemplated by the Investment Advisory Agreement and by
this Prospectus without violating applicable banking laws or regulations. Future
changes in federal or state statutes and regulations relating to permissible
activities of banks or bank holding companies and their subsidiaries and
affiliates as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations could change the
manner in which First of America could continue to perform such services
for the Group. See the Statement of Additional Information ("MANAGEMENT OF THE
GROUP -- Glass-Steagall Act") for further discussion.
HOW TO BUY INVESTOR B SHARES
Investor B Shares of each Fund are continuously offered and may be purchased
directly either by mail, by telephone, or by wire. Investor B Shares may also be
purchased through a broker-dealer who has entered into a dealer agreement with
the Distributor. Except as otherwise discussed below under "Other Information
Regarding Purchases" and "Auto Invest Plan," the minimum initial investment in a
Fund, based upon the public offering price, is $1,000; however, there is no
minimum subsequent purchase. Shareholders will pay the next calculated net asset
value after the receipt by the Distributor of an order to purchase Investor B
Shares, plus any applicable sales charge as described below (see "SALES
CHARGES"). In the case of an order for the purchase of shares placed through a
broker-dealer, it is the responsibility of the broker-dealer to transmit the
order to the Distributor promptly.
BY MAIL
To purchase Investor B Shares of any of the Funds by mail, complete an Account
Application Form and return it along with a check or money order made payable to
The Parkstone Group of Funds at the following address:
The Parkstone Group of Funds
P.O. Box 50551
Kalamazoo, MI 49005-0551
An Account Application Form can be obtained by calling the Group at (800)
451-8377.
BY TELEPHONE OR BY WIRE
To purchase Investor B Shares of any of the Funds by telephone or by wire, your
Account Application Form must have been previously received by the Distributor.
To place an order by telephone or by wire, call the Group's toll-free number
(800) 451-8377. Payment for such Investor B Shares ordered by telephone may be
made by check and must be received by the Group's Custodian within seven
calendar days of the telephone order. If payment for such Investor B Shares is
not received within seven days, or if a check timely received does not clear,
the purchase may be canceled and the investor could be liable for
PROSPECTUS--Investor B Shares 46
<PAGE> 127
any losses or fees incurred. When purchasing Investor B Shares by wire, contact
the Distributor for wire instructions.
OTHER INFORMATION REGARDING PURCHASES
Investor B Shares may also be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by FABC or one of its
affiliates. Investor B Shares of the Funds sold to FABC or the affiliate acting
in a fiduciary, advisory, custodial, or other similar capacity on behalf of
Customers will normally be held of record by FABC or the affiliate. With respect
to such Investor B Shares so sold, it is the responsibility of the holder of
record to transmit purchase or redemption orders to the Distributor and to
deliver funds for the purchase thereof on a timely basis. Beneficial ownership
of such Investor B Shares of the Funds will be recorded by FABC or one of its
affiliates and reflected in the account statements provided to Customers. FABC
or one of its affiliates may exercise voting authority for those Investor B
Shares for which it has been granted authority by the Customer.
Investor B Shares of the Funds are purchased at the net asset value per share
(see "HOW SHARES ARE VALUED") next determined after receipt by the Distributor
of an order to purchase shares plus any applicable sales charge as described
below. Purchases of Investor B Shares in any of the Funds will be effected only
on a Business Day (as defined in "HOW SHARES ARE VALUED") of the applicable
Fund. An order received prior to the Valuation Time on any Business Day will be
executed at the net asset value determined as of the Valuation Time on the date
of receipt. An order received after the Valuation Time on any Business Day will
be executed at the net asset value determined as of the next Valuation Time on
the Business Day of that Fund. Investor B Shares of the Funds are eligible to
earn dividends on the first Business Day after the purchase is executed.
Investor B Shares continue to be eligible to earn dividends through the day
before redemption.
The minimum initial investment amount referred to above may be waived if
purchases are made in connection with Individual Retirement Accounts (IRAs),
Keoghs or similar plans. For information on IRAs, Keoghs or similar plans,
contact FABC at (800) 544-6155. Due to the relatively high cost of handling
small investments, the Group reserves the right to redeem involuntarily, at net
asset value, the Investor B Shares of any shareholder if, because of redemptions
of Investor B Shares by or on behalf of the shareholder (but not as a result of
a decrease in the market price of such Investor B Shares, the deduction of any
sales charge or the establishment of an account with less than $1,000 using the
Auto Invest Plan), the account of such shareholder in that Fund has a value of
less than $1,000. Accordingly, an investor purchasing Investor B Shares of a
Fund in only the minimum investment amount may be subject to such involuntary
redemption if the investor thereafter redeems any such Investor B Shares. If at
any time a shareholder's account balance falls below $1,000, upon 30 days'
notice, the Group may exercise its right to redeem such Investor B Shares and to
send the proceeds to the shareholder.
Depending upon the terms of a particular Customer account, FABC or one of its
affiliates may charge a Customer account fees for services provided in
connection with investment in a Fund. Information concerning these services and
any charges may be obtained from FABC or the affiliate. This Prospectus should
be read in conjunction with any such information so received.
The Group reserves the right to reject any order for the purchase of Investor B
Shares in whole or in part.
Every shareholder will receive a confirmation of each new transaction in the
shareholder's account which will also show the total number of Investor B Shares
of the respective Fund of the Group owned by the shareholder. Confirmation of
purchases and redemptions of Investor B Shares of the Funds by FABC or one of
its affiliates on behalf of a Customer may be obtained from FABC or the
affiliate. Shareholders may rely on these statements in lieu of certificates.
Certificates representing Investor B Shares of the Funds will not be issued.
47 PROSPECTUS--Investor B Shares
<PAGE> 128
AUTO INVEST PLAN
The Parkstone Group of Funds Auto Invest Plan (the "Auto Invest Plan") enables
shareholders to make regular monthly or quarterly purchases of Investor B Shares
through automatic deduction from their bank accounts. With shareholder
authorization, the Group's Transfer Agent will deduct the amount specified
(subject to the applicable minimums) from the shareholder's bank account which
will automatically be invested in shares at the public offering price on the
date of such deduction (or the next Business Day thereafter, as defined under
"HOW SHARES ARE VALUED" below). The required minimum initial investment when
opening an account using the Auto Invest Plan is $100; the minimum amount for
subsequent investments in a Fund is $50. To participate in the Auto Invest Plan,
shareholders should complete the appropriate section of the Account Application
Form or a supplemental Auto Invest Plan application that can be acquired by
calling the Group at (800) 451-8377. For a shareholder to change the Auto Invest
Plan instructions, the request must be made in writing to the Group's
Distributor, BISYS Fund Services, c/o The Parkstone Group of Funds, 3435 Stelzer
Road, Columbus, Ohio 43219 and may take up to 15 days to implement.
SALES CHARGES
Investor B Shares may be purchased only in amounts of less than $250,000. There
is no sales charge imposed upon purchases of Investor B Shares, but investors
may be subject to a contingent deferred sales charge of up to 4.00% when
Investor B Shares are redeemed prior to four years from the date of purchase.
See "CONTINGENT DEFERRED SALES CHARGE" below.
From time to time dealers who receive dealer discounts and brokerage commissions
from the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers.
In addition to amounts paid to dealers as a dealer concession out of the sales
charge paid by investors, if any, the Distributor may, from time to time, at its
expense or as an expense for which it may be reimbursed under the Investor B
Plan, pay a bonus or other consideration or incentive to dealers who sell a
minimum dollar amount of shares of a Fund during a specified period of time. The
Distributor also may, from time to time, arrange for the payment of additional
consideration to dealers not to exceed 6.25% of the offering price per share on
all sales of Investor B Shares as an expense of the Distributor or for which the
Distributor may be reimbursed under the Investor B Plan or upon receipt of a
contingent deferred sales charge. Any such additional consideration or incentive
program may be terminated at any time by the Distributor.
The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of any of the Funds of the Group.
Compensation may include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Group, and/or
other dealer-sponsored special events. In some instances, this compensation may
be made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of such shares. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to exotic locations within or outside of the United States for meetings or
seminars of a business nature. The Distributor, at its expense, currently
conducts an annual sales contest for dealers in connection with their sales of
shares of the Funds. Dealers may not use sales of a Fund's shares to qualify for
this compensation to the extent such may be prohibited by the laws of any state
or any self-regulatory agency, such as the National Association of Securities
Dealers, Inc.
CONTINGENT DEFERRED SALES CHARGE
Investor B Shares which are redeemed prior to four years from the date of
purchase will be subject to a contingent deferred sales charge equal to a
percentage of the lesser of net asset value at the time of
PROSPECTUS--Investor B Shares 48
<PAGE> 129
purchase of the Investor B Shares being redeemed or net asset value of such
shares at the time of redemption, as set forth in the chart below:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT DEFERRED
REDEMPTION SALES CHARGE
<S> <C>
--------- ----------------
First 4.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
</TABLE>
Accordingly, a contingent deferred sales charge will not be imposed on amounts
representing increases in net asset value above the net asset value at the time
of purchase. In addition, a charge will not be assessed on Investor B Shares
purchased through reinvestment of dividends or capital gains distributions.
Solely for purposes of determining the number of years which have elapsed from
the time of purchase of any Investor B Shares, all purchases during a month will
be aggregated and deemed to have been made on the last day of the month. In
determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for more than four years or shares
acquired pursuant to reinvestment of dividends or distributions.
For example, assume an investor purchased 100 Investor B Shares with a net asset
value of $10 per share (i.e., at an aggregate net asset value of $1,000) and in
the eleventh month after purchase, the net asset value per share is $12 and,
during such time, the investor has acquired five additional Investor B Shares
through dividend reinvestment. If at such time the investor makes his first
redemption of 50 Investor B Shares (producing proceeds of $600), five of such
shares will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 45 Investor B Shares being redeemed, the charge will be
applied only to the original cost of $10 per share and not to the increase in
net asset value of $2 per share. Therefore, only $450 of the $600 redemption
proceeds will be subject to the charge of 4.00%, totalling $18.00.
The contingent deferred sales charge is waived on redemptions of Investor B
Shares (i) following the death or disability (as defined in the Code ) of a
shareholder (or both shareholders in the case of joint accounts), (ii) to the
extent that the redemption represents a minimum required distribution from an
IRA or a Custodial Account under Code Section 403(b)(7) to a shareholder who has
reached age 70 1/2, and (iii) to the extent the redemption represents the
minimum distribution from retirement plans under Code Section 401(a) where such
redemptions are necessary to make distributions to plan participants.
DIRECTED DIVIDEND OPTION
A shareholder may elect to have all income dividends and capital gains
distributions paid by check, reinvested in the Fund or reinvested in any of the
Group's other Funds, without the payment of a sales charge (provided the other
Fund is maintained at the minimum required balance). If you elect to receive
distributions paid by check and the check (1) is returned and marked as
"undeliverable" or (2) remains uncashed for six months, your payment election
will be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks that remain uncashed for six months will be cancelled and
reinvested in the Fund at the per share net asset value determined as of the
date of cancellation.
The Directed Dividend Option may be modified or terminated by the Group at any
time after notice to participating shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the shareholder at any time by
writing the Distributor. The Directed Dividend Option is not available to
participants in any of the Parkstone IRAs.
49 PROSPECTUS--Investor B Shares
<PAGE> 130
EXCHANGE PRIVILEGE
The exchange privilege enables shareholders of Investor B Shares to acquire
Investor B Shares that are offered by another Fund of the Group with a different
investment objective. This exchange privilege does not apply to other classes of
shares of a Fund. For example, holders of a Fund's Investor B Shares may not
exchange their shares for Investor A Shares, and holders of a Fund's Investor A
Shares may not exchange their shares for Investor B Shares.
Holders of Investor B Shares of any of the Group's Funds (including Investor B
Shares acquired through reinvestment of dividends and distributions on such
shares) may exchange those Investor B Shares without the imposition of a
contingent deferred sales charge for Investor B Shares offered by any of the
Group's other Funds, provided that the amount to be exchanged meets the
applicable minimum investment requirements and the exchange is made in states
where it is legally authorized.
An exchange is considered a sale of shares on which a shareholder may realize a
capital gain or loss for federal income tax purposes. A shareholder may not
include any sales charge on shares of a Fund as a part of the cost of those
shares for purposes of calculating the gain or loss realized on an exchange of
those shares within 90 days of their purchase. An exchange of will not be
considered a redemption on which a contingent deferred sales charge will be
applicable. Redemptions of Investor B Shares which have been exchanged will be
subject to contingent deferred sales charges based upon the date of the purchase
of the original Investor B Shares.
A shareholder wishing to exchange his or her shares may do so by contacting the
Group at (800) 451-8377 or by providing written instructions to the Transfer
Agent. Any shareholder who wishes to make an exchange should obtain and review
the current Prospectus of the Fund of the Group in which the shareholder wishes
to invest before making the exchange. For a discussion of risks associated with
unauthorized telephone exchanges, see "HOW TO REDEEM YOUR INVESTOR B
SHARES -- By Telephone" below.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR B SHARES
Before purchasing Investor B Shares of a Fund, investors should consider
whether, during the anticipated life of their investment in the Fund, the
accumulated Rule 12b-1 fees and potential contingent deferred sales charges on
Investor B Shares prior to conversion (as described below) would be less than
the initial sales charge and accumulated Rule 12b-1 fees on shares of a
traditionally-priced fund (the Group's Investor A Shares are an example of such
a fund) purchased at the same time, and to what extent such differential would
be offset by the higher yield of a traditionally-priced fund. To the extent that
the sales charge for Investor B Shares is waived or reduced by one of the
methods described above, investments in Investor A Shares become more desirable.
The Group will refuse all purchase orders for Investor A Shares of over
$250,000.
Although Investor A Shares are subject to Rule 12b-1 fees, they are not subject
to the higher Rule 12b-1 fees applicable to Investor B Shares. For this reason,
Investor A Shares can be expected to pay correspondingly higher dividends per
share. However, because initial sales charges are deducted at the time of
purchase, purchasers of Investor A Shares that do not qualify for waivers of or
reductions in the initial sales charge would have less of their purchase price
initially invested in a Fund than purchasers of Investor B Shares.
As described above, purchasers of Investor B Shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B Shares. Because the Group's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor B Shares would, however, own shares that are subject to
higher annual expenses and, for a four-year period, such shares would be subject
to a contingent deferred sales charge of up to 4.00% upon redemption, depending
upon the year of redemption. Investors expecting to redeem during this four-year
period should compare the cost of the contingent deferred sales charge plus the
aggregate annual Investor B Shares' Rule 12b-1 fees to the cost of the initial
sales charge and Rule 12b-1 fees on the Investor A Shares. Over
PROSPECTUS--Investor B Shares 50
<PAGE> 131
time, the expenses of the annual Rule 12b-1 fees on the Investor B Shares may
equal or exceed the initial sales charge and annual Rule 12b-1 fees applicable
to Investor A Shares. For example, if net asset value remains constant, the
aggregate Rule 12b-1 fees with respect to Investor B Shares on the Funds would
equal or exceed the initial sales charge and aggregate Rule 12b-1 fees of
Investor A Shares approximately seven years after the purchase. In order to
reduce such fees for investors that hold Investor B Shares for more than eight
years, Investor B Shares will be automatically converted to Investor A Shares,
as described below, at the end of such eight-year period. This example assumes
that the initial purchase of Investor A Shares would be subject to the maximum
initial sales charge of 4.50%. This example does not take into account the time
value of money which reduces the impact of the Investor B Shares' administrative
and Rule 12b-1 fees on the investment, the benefit of having the additional
initial purchase price invested during the period before it is effectively paid
out as administrative and Rule 12b-1 fees, fluctuations in net asset value or
the effect of different performance assumptions.
CONVERSION FEATURE
Investor B Shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A Shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fees of the Investor B Plan. Such conversion will be on the
basis of the relative net asset values of the two classes, without the
imposition of any sales charge or other charge except that the Rule 12b-1 fees
applicable to Investor A Shares shall thereafter be applied to such converted
shares. Such investors will then benefit from the lower Rule 12b-1 fees of
Investor A Shares. Because the per share net asset value of the Investor A
Shares may be higher than that of the Investor B Shares at the time of
conversion, a shareholder may receive fewer Investor A Shares than the number of
Investor B Shares converted, although the dollar value will be the same.
Reinvestments of dividends and distributions in Investor B Shares will not be
considered new purchases for purposes of the conversion feature.
The Investor A Shares into which the Investor B Shares will convert will differ
only in the amount of the Rule 12b-1 fees assessed to the shareholder. The Rule
12b-1 fees which may be assessed to holders of Investor A Shares is equal to
0.25% of the average daily net assets of the Investor A Shares owned, rather
than 1.00% of the average daily net assets assessed to holders of Investor B
Shares.
If a shareholder effects one or more exchanges among Investor B Shares of the
Funds during the eight-year period, the holding period for shares so exchanged
will be counted toward such period.
PARKSTONE INDIVIDUAL RETIREMENT ACCOUNTS
Investor B Shares of the Fund are available to shareholders on a tax-deferred
basis through the following retirement plans:
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A Parkstone IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Parkstone IRA contributions may be tax-deductible and earnings are tax-deferred.
Under the Tax Reform Act of 1986, the tax deductibility of IRA contributions is
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")
A Parkstone SEP/IRA may be established on a group basis by an employer who
wishes to sponsor a tax-sheltered retirement program by making contributions
into IRAs on behalf of all eligible employees.
51 PROSPECTUS--Investor B Shares
<PAGE> 132
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR-SEP/IRA")
A Parkstone SAR-SEP/IRA offers employers with 25 or fewer eligible employees the
ability to establish a SEP/IRA that permits salary reduction contributions.
All Parkstone IRA distribution requests must be made in writing to the Transfer
Agent. Any additional deposits to a Parkstone IRA must distinguish the type and
year of the contribution.
For more information on any of the Parkstone IRAs or other retirement plan
options available (401(k) Defined Contribution Plans, 403(b)(7) Defined
Compensation Plans, etc.), call the Group at (800) 451-8377. Shareholders are
advised to consult a tax adviser on Parkstone IRA contribution and withdrawal
requirements and restrictions.
HOW TO REDEEM YOUR INVESTOR B SHARES
Shareholders may redeem their Investor B Shares, subject to the contingent
deferred sales charge described above, on any day that net asset value is
calculated (see "HOW SHARES ARE VALUED"). Redemptions will be effected at the
net asset value per share next determined after receipt of a redemption request.
Redemptions may be requested by mail or by telephone.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to honor the request. The Transfer Agent's address is: BISYS Fund Services Ohio,
Inc., c/o The Parkstone Group of Funds, Department L-1270, Columbus, Ohio
43260-1270. The Transfer Agent will require a signature guarantee by an eligible
guarantor institution. The signature guarantee requirement will be waived if all
of the following conditions apply: (1) the redemption check is payable to the
shareholder(s) of record, and (2) the redemption check is mailed to the
shareholder(s) at the address of record. The shareholder may also have the
proceeds mailed to a commercial bank account previously designated on the
Account Application Form. There is no charge for having redemption proceeds
mailed to a designated bank account. To change the address to which a redemption
check is to be mailed, a written request therefor must be received by the
Transfer Agent. In connection with such request, the Transfer Agent will require
a signature guarantee by an eligible guarantor institution.
For purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations as those terms are
defined in the Securities Exchange Act of 1934. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that neither is a member of a clearing corporation nor maintains net
capital of at least $100,000.
BY TELEPHONE
Investor B Shares may be redeemed by telephone if the Account Application Form
reflects that the shareholder has that capability. The shareholder may have the
proceeds mailed to his or her address or mailed or wired to a commercial bank
account previously designated on the Account Application Form. Under most
circumstances, payments will be transmitted on the next Business Day. Wire
redemption requests may be made by the shareholder by telephone to the Group at
(800) 451-8377. While the Transfer Agent currently does not charge a wire
redemption fee, the Transfer Agent reserves the right to impose such a fee in
the future.
The Group's Account Application Form provides that neither BISYS, BISYS Ohio,
the Group nor any of their affiliates or agents will be liable for any loss,
expense or cost when acting upon any oral, wired or electronically transmitted
instructions or inquiries believed by them to be genuine. While precautions will
be taken, shareholders bear the risk of any loss as the result of unauthorized
telephone redemptions or exchanges believed by the Transfer Agent to be genuine.
If the telephone feature was not originally selected, the shareholder must
provide written instructions to the Group to add it. The Group will employ
PROSPECTUS--Investor B Shares 52
<PAGE> 133
reasonable procedures to confirm that instructions communicated by telephone are
genuine; if these procedures are not followed, the Group may be liable for any
losses due to unauthorized or fraudulent instructions. These procedures include
recording all phone conversations, sending confirmations to shareholders within
72 hours of the telephone transaction, verifying the account name and a
shareholder's account number or tax identification number and sending redemption
proceeds only to the address of record or to a previously authorized bank
account. If, due to temporary adverse conditions, investors are unable to effect
telephone transactions, shareholders may mail the request to the Transfer Agent.
In addition, redemptions by telephone will be suspended for a period of 10 days
following any charge in the applicable telephone number.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables shareholders of a Fund to make regular monthly
or quarterly redemptions of Investor B Shares, subject to applicable contingent
deferred sales charges. With shareholder authorization, the Transfer Agent will
automatically redeem such Investor B Shares at the net asset value on the
fifteenth day of the month or quarter (or the next Business Day thereafter) and
have the amount specified transferred according to the written instructions of
the shareholder. Shareholders participating in this plan must maintain a minimum
account balance of $1,000. The required minimum withdrawal is $100, monthly or
quarterly.
The Auto Withdrawal Plan may be modified or terminated without notice. In
addition, the Group may suspend a shareholder's withdrawal plan without notice
if the account contains insufficient funds to effect a withdrawal or in the
event that the account balance is less than the minimum $1,000 amount.
To participate in the Auto Withdrawal Plan, shareholders should call (800)
451-8377 for more information. Purchases of additional Investor B Shares
concurrently with withdrawals may be disadvantageous to certain shareholders
because of tax liabilities and sales charges. For a Shareholder to change the
Auto Withdrawal Plan instructions, the request must be made in writing to the
Distributor and may take up to 15 days to implement.
OTHER INFORMATION REGARDING REDEMPTION OF SHARES
All or part of a Customer's Investor B Shares may be redeemed in accordance with
instructions and limitations pertaining to his or her account at FABC or one of
its affiliates.
All redemption orders are effected at the net asset value per share next
determined after the Investor B Shares are properly tendered for redemption, as
described above. The proceeds paid upon redemption of such Investor B Shares in
the Funds, less any applicable contingent deferred sales charge, may be more or
less than the amount invested. Payment to shareholders for such Investor B
Shares redeemed will be made within seven days after receipt by the Transfer
Agent of the request for redemption. However, to the greatest extent possible,
requests from shareholders for next day payments upon redemption of Investor B
Shares will be honored if received by the Transfer Agent before 4:00 p.m.
(Eastern Time) on a Business Day or, if received after 4:00 p.m. (Eastern Time),
within two Business Days, unless it would be disadvantageous to the Group or the
shareholders of a Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner.
At various times, the Group may be requested to redeem Investor B Shares for
which it has not yet received good payment. In such circumstances, the
forwarding of proceeds may be delayed until payment has been collected for the
purchase of such Investor B Shares which delay may be for 15 days or more. Such
delay may be avoided if such Investor B Shares are purchased by wire transfer of
federal funds. The Group intends to pay cash for all Investor B Shares redeemed,
but under abnormal conditions which make payment in cash unwise, payment may be
made wholly or partly in portfolio securities at their then market value equal
to the redemption price. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
See the Statement of Additional Information ("ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION") for examples of when the right of redemption may be suspended.
53 PROSPECTUS--Investor B Shares
<PAGE> 134
HOW SHARES ARE VALUED
The net asset value of the Investor B Shares of the Funds is determined and the
shares are priced as of the close of trading on the New York Stock Exchange (the
"NYSE") on each Business Day (generally 4:00 p.m. Eastern Time) (the "Valuation
Time"). A "Business Day" is a day on which the NYSE is open for trading and the
Federal Reserve Board of Chicago is open, and any other day (other than a day on
which no shares are tendered for redemption and no order to purchase any shares
is received) during which there is sufficient trading in a Fund's portfolio
instruments that its net asset value per share might be materially affected.
Currently, the New York Stock Exchange or the Federal Reserve Board of Chicago
will not open in observance of the following holidays: New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving and
Christmas.
Net asset value per share for a particular class for purposes of pricing sales
and redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund allocable to such class, less the liabilities charged
to that Fund allocable to such class and any liabilities charged directly to
that class, by the number of outstanding shares of such class. The net asset
value per share will fluctuate as the value of the investment portfolio of a
Fund changes.
The securities in each Fund will be valued at market value. If market quotations
are not available, the securities will be valued by a method which the Board of
Trustees believes accurately reflects fair value. Foreign securities are valued
based on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. For further information about valuation of investments, see "NET ASSET
VALUE" in the Statement of Additional Information.
DIVIDENDS AND TAXES
GENERAL
Net income for each Fund is declared monthly as a dividend to shareholders at
the close of business on the day of declaration and is paid monthly.
Distributable net realized capital gains are distributed at least annually. A
shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional shares at net asset value as of
the date of declaration, unless the shareholder elects to receive dividends or
distributions in cash or elects to participate in the Directed Dividend Option.
Such election, or any revocation thereof, must be made in writing to the
Transfer Agent at 3435 Stelzer Road, Columbus, Ohio 43219, and will become
effective with respect to dividends and distributions having record dates after
its receipt by the Transfer Agent.
Each Fund's net investment income available for distribution to the holders of
Investor B Shares will be reduced by the amount of Rule 12b-1 fees payable to
Participating Organizations under the Investor B Plan. Each Fund's net
investment income available for distribution to the holders of Investor B Shares
may also be reduced by the amount of retail transfer agency fees payable to the
Transfer Agent applicable to the Investor B Shares.
Each of the Funds of the Group is treated as a separate entity for federal
income tax purposes. Each Fund intends to qualify as a "regulated investment
company" under the Code, for so long as such qualification is in the best
interest of its shareholders and each intends to distribute all of its net
income and capital gains so that it is not required to pay federal income taxes
on amounts so distributed to shareholders.
To avoid federal income tax, the Code requires each Fund to distribute each
taxable year at least 90% of its investment company taxable income and at least
90% of its exempt interest income. In addition, to avoid imposition of a
non-deductible 4% excise tax, each Fund is required annually to distribute,
prior to calendar year end, 98% of taxable ordinary income on a calendar year
basis, 98% of capital gain net income realized in the twelve months preceding
October 31, and the balance of undistributed taxable ordinary income and capital
gain net income from the prior calendar year. Finally, in order to permit the
Municipal Bond Fund and the Michigan Bond Fund each to distribute
exempt-interest dividends which shareholders may exclude from their gross
taxable income for federal income tax purposes, at least 50%
PROSPECTUS--Investor B Shares 54
<PAGE> 135
of such Fund's total assets must consist of obligations the interest on which is
exempt from federal income tax as of the close of each fiscal quarter of such
Fund.
A shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term loss would treat it as a receipt of
ordinary income. The dividends-received deduction for corporations will apply to
the aggregate of such ordinary income distributions in the same proportion as
the aggregate dividends from domestic corporations, if any, received by that
Fund bear to its gross income. A shareholder will not be able to take the
dividends-received deduction unless that shareholder holds the shares for at
least 46 days.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to its shareholders as long-term capital gain
in the year in which it is received, regardless of how long the shareholder has
held shares. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares prior to the record
date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to taxation.
Taxes may be imposed on the Funds, particularly the Balanced Fund and
International Fund, by foreign countries with respect to income received on
foreign securities. If more than 50% of the value of a Fund's assets at the
close of its taxable year consists of stocks or securities of foreign
corporations, the Fund may elect to treat any foreign income taxes it paid as
paid by its shareholders. In this case, shareholders generally will be required
to include in income their pro rata share of such taxes, but will then be
entitled to claim a credit or deduction for their share of such taxes. However,
a particular shareholder's ability to utilize such a credit will be subject to
certain limitations imposed by the Code. The Funds will report to their
shareholders each year the amount, if any, of foreign taxes per share that they
have elected to have treated as paid by their Shareholders.
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made during the year.
THE MUNICIPAL BOND FUND AND THE MICHIGAN BOND FUND (THE "EXEMPT FUNDS")
Dividends derived from exempt interest income may be treated by an Exempt Fund's
shareholders as items of interest excludable from their gross income. However,
such dividends may be taxable to shareholders of the Municipal Bond Fund under
state or local law as ordinary income even though all or a portion of the
amounts may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such taxes. In determining net exempt
interest income, expenses of the Exempt Fund are allocated to gross tax-exempt
interest income in the proportion that the gross amount of such interest income
bears to the Exempt Fund's total gross income, excluding net capital gains.
(Shareholders are advised to consult a tax adviser with respect to whether
exempt interest dividends retain the exclusion if such shareholder would be
treated as a "substantial user" or a "related person" to such user under the
Code). Interest on indebtedness incurred or continued by a Shareholder to
purchase or carry Shares is not deductible for federal income tax purposes if an
Exempt Fund distributes exempt interest dividends during the shareholder's
taxable year. It is anticipated that distributions from the Exempt Funds will
not be eligible for the dividends-received deduction for corporations.
Under the Code, if a shareholder receives an exempt interest dividend with
respect to any share and such share is held for six months or less, any loss on
the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt interest dividend, although the Treasury Department is
authorized to issue regulations reducing the period to not less than 31 days for
regulated investment companies that regularly distribute at least 90% of their
net tax-exempt interest. No such regulations have been issued as of the date of
this Prospectus. In addition, dividends attributable to interest on certain
55 PROSPECTUS--Investor B Shares
<PAGE> 136
private activity bonds may have to be included in shareholders' income for
purposes of calculating alternative minimum tax. See "ADDITIONAL
INFORMATION -- Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information for more information regarding the federal alternative minimum tax.
To the extent dividends paid to shareholders are derived from taxable income
(for example, from interest on certificates of deposit or repurchase agreements)
or from long-term or short-term capital gains, such dividends will be subject to
federal income tax. A shareholder should consult his or her own tax adviser for
any special advice.
Distributions by the Michigan Bond Fund to holders of shares who are subject to
the Michigan personal income tax and/or single business tax will not be subject
to the Michigan personal income tax, single business tax or any Michigan city
income tax to the extent that the distributions are attributable to income
received by the Michigan Bond Fund as interest from Michigan Municipal
Securities or to the extent that the distributions are attributable to interest
income and gains from the sale or disposal of United States obligations exempted
from state taxation by the United States Constitution, treaties, and statutes.
However, some or all of the other distributions by the Michigan Bond Fund may be
taxable by the State of Michigan or subject to applicable city income taxes,
even if the distributions are attributable to income of the Michigan Bond Fund
derived from obligations of the United States or its agencies and
instrumentalities. In addition, to the extent that a shareholder of the Michigan
Bond Fund is obligated to pay state or local taxes outside of Michigan,
dividends earned by an investment in the Michigan Bond Fund may represent
taxable income. Investments held in the Michigan Bond Fund by a Michigan
resident are not subject to the Michigan intangible personal property tax to the
extent that the investments are attributable to bonds or other similar
obligations of the State of Michigan or a political subdivision thereof, or
obligations of the United States.
The Michigan Department of Treasury in a 1986 Revenue Administrative Bulletin
has taken the position that the tax attributes of the securities held by a
mutual fund flow through to the investors. Based on this position, the Michigan
Department of Treasury has stated that mutual fund distributions attributable to
interest from the fund's investment in direct U.S. government securities, as
well as Municipal Securities, will not be subject to the Michigan personal
income tax. The Michigan Department of Treasury also has stated that an owner of
a share of a mutual fund will not be subject to intangible personal property tax
to the extent that the pro rata share of the securities underlying the mutual
fund would be exempt.
For Michigan personal income tax and intangible personal property tax purposes,
taxable distributions from investment income and short-term capital gains, if
any, are taxable as ordinary income, whether received in cash or additional
shares, and are subject to the Michigan intangible personal property tax and to
applicable Michigan city income taxes. The Michigan single business tax, a
modified value added tax, is computed by applying the tax rate to a tax base
determined by making certain adjustments to federal taxable income. Taxable
distributions from investment income and gains, if any, may be included in
federal taxable income or may comprise one of the adjustments made to the tax
base. Distributions of cash, other property or additional shares by the Michigan
Bond Fund to a Michigan single business taxpayer attributable to any gain
realized from the sale, exchange or other disposition of Michigan Municipal
Securities are includable in the Michigan single business taxpayer's adjusted
tax base for purposes of the Michigan single business tax to the extent included
in federal taxable income. Distributions of cash, other property or additional
shares by the Michigan Bond Fund to a Michigan single business taxpayer are not
subject to the Michigan single business tax to the extent that the distributions
are attributable to interest income from and any gain realized from the sale,
exchange or other disposition of U.S. Securities. Taxable long-term capital
gains distributions are taxable as long-term capital gains for Michigan purposes
irrespective of how long a shareholder has held the shares, except that such
distributions reinvested in shares of the Michigan Bond Fund are exempt from the
Michigan intangible personal property tax.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors are advised to consult their tax advisers
PROSPECTUS--Investor B Shares 56
<PAGE> 137
concerning state and local taxes, which may differ from the federal, state and
local income taxes described above.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing their average
annual total return, aggregate total return and/or yield may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return of a class of shares in a Fund will be
calculated for the period since the establishment of the Funds and will reflect
the imposition of the maximum sales charge, if any. Average annual total return
is measured by comparing the value of an investment in a class of shares in a
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of annualized.
Yield of a class of shares will be computed by dividing a class of shares' net
investment income per share earned during a recent one-month period by that
class of shares' per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) on the last day of the
period and annualizing the result. Each Fund may also present its average annual
total return, aggregate total return and yield, as the case may be, excluding
the effect of a sales charge, if any.
In addition, from time to time the Funds may present their respective
distribution rates for a class of shares in shareholder reports and in
supplemental sales literature which is accompanied or preceded by a prospectus.
Distribution rates will be computed by dividing the distribution per share of a
class made by a Fund over a twelve-month period by the maximum offering price
per share. The calculation of income in the distribution rate includes both
income and capital gains dividends and does not reflect unrealized gains or
losses, although a Fund may also present a distribution rate excluding the
effect of capital gains. The distribution rate differs from the yield, because
it includes capital gains which are often non-recurring in nature, whereas yield
does not include such items. Distribution rates may also be presented excluding
the effect of a sales charge, if any.
Standardized yield and total return quotations will be computed separately for
Investor B Shares and the other classes of the Funds. Because of differences in
the fees and/or expenses borne by different classes of shares of the Funds, the
net yield and total return on Investor B Shares may be different from that for
another class of the same Fund. For example, net yield and total return on
Investor B Shares is expected, at any given time, to be lower than the net yield
and total return on Institutional Shares for the same period.
Investors may also judge the performance of any class of shares or Fund by
comparing or referencing it to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices such as those prepared by various services and published by such
services or by other services or publications, including, but not limited to,
ratings published by Morningstar, Inc. In addition to performance information,
general information about the Funds that appears in such publications may be
included in advertisements, in sales literature and in reports to shareholders.
For further information regarding such services and publications, see
"ADDITIONAL INFORMATION -- Performance Comparisons" in the Statement of
Additional Information.
Total return and yield are functions of the type and quality of instruments held
in the portfolio, levels of operating expenses and changes in market conditions.
Consequently, total return and yield will fluctuate and are not necessarily
representative of future results. Any fees charged by FABC or any of its
affiliates with respect to customer accounts for investing in shares of the
Funds will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted. In addition, if First of
America and BISYS voluntarily reduce all or a part of their respective fees, as
further discussed above, the total return of such Fund will be higher than it
would otherwise be in the absence of such voluntary fee reductions.
57 PROSPECTUS--Investor B Shares
<PAGE> 138
FUNDATA(R)
Shareholders of the Group may obtain current price, yield and other performance
information on any of the Group's Funds through FUNDATA(R), an Automated Voice
Response System, 24 hours a day by calling (800) 451-8377 from any touch-tone
phone. Shareholders may also speak directly with a Group representative,
employed by BISYS, during regular business hours.
GENERAL INFORMATION
ORGANIZATION OF THE GROUP
The Group was organized as a Massachusetts business trust in 1987 and currently
offers sixteen Funds. The shares of each of the Funds of the Group, other than
its four Money Market Funds and two Tax-Free Income Funds, are offered in four
separate classes: Investor A Shares, Investor B Shares, Investor C Shares and
Institutional Shares. Shares of each of the two Tax-Free Income Funds are
offered in three separate classes: Investor A Shares, Investor B Shares and
Institutional Shares. Shares of each of the four Money Market Funds of the Group
are offered in two separate classes: Investor A Shares and Institutional Shares.
Each share represents an equal proportionate interest in a Fund with other
shares of the same Fund, and is entitled to such dividends and distributions out
of the income earned on the assets belonging to that Fund as are declared at the
discretion of the Trustees. Shares do not have par value.
Shareholders are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested.
Shareholders will vote in the aggregate and not by Fund except as otherwise
expressly required by law. For example, shareholders of the Funds will vote in
the aggregate with other shareholders of the Group with respect to the election
of Trustees and ratification of the selection of independent accountants.
However, shareholders of a Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of that Fund's
investment advisory agreement. In addition, holders of Investor B Shares of a
Fund will vote as a class and not with holders of another class of that Fund
with respect to the approval of its Investor B Plan.
An annual or special meeting of shareholders to conduct necessary business is
not required by the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to elect Trustees, amend the Declaration of
Trust, approve an investment and sub-investment advisory agreements and to
satisfy certain other requirements. To the extent that such a meeting is not
required, the Group may elect not to have an annual or special meeting.
The Group has represented to the SEC that the Trustees will call a special
meeting of shareholders for purposes of considering the removal of one or more
Trustees upon written request therefor from shareholders holding not less than
10% of the outstanding votes of the Group. At such a meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Group), by majority vote, has the power to remove one or more
Trustees.
As of June 30, 1996, FABC, through its wholly-owned subsidiaries, possessed on
behalf of its underlying accounts voting or investment power with respect to
more than 25% of the shares of each of the Funds, and therefore may be presumed
to control each Fund within the meaning of the 1940 Act.
MULTIPLE CLASSES OF SHARES
In addition to Investor B Shares, the Group also offers Investor A Shares,
Investor C Shares and Institutional Shares of the Funds pursuant to a Multiple
Class Plan adopted by the Group's Trustees under Rule 18f-3 of the 1940 Act. A
salesperson or other person entitled to receive compensation for selling or
servicing the shares may receive different compensation with respect to one
particular class of shares over another in the same Fund. The amount of
dividends payable with respect to other classes of shares will differ from
dividends on Investor B Shares as a result of the different Investor B Plan fees
applicable to Investor B Shares and because Investor B Shares may bear different
retail transfer agency expenses. For further details regarding these other
classes of shares, call the Group at (800) 451-8377.
PROSPECTUS--Investor B Shares 58
<PAGE> 139
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
Inquiries regarding the Group may be directed in writing to The Parkstone Group
of Funds at P.O. Box 50551, Kalamazoo, MI 49005-0551, or by calling toll-free
(800) 451-8377.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by their Distributor in any jurisdiction in which such offering may not
lawfully be made.
59 PROSPECTUS--Investor B Shares
<PAGE> 140
THE PARKSTONE GROUP OF FUNDS
Investor B Shares
INVESTMENT ADVISER (AND SUB-ADMINISTRATOR)
First of America Investment Corporation
Suite 500
303 North Rose Street
Kalamazoo, Michigan 49007
SUBADVISER (INTERNATIONAL FUND AND BALANCED FUND)
Gulfstream Global Investors, Ltd.
Suite 550
100 Crescent Court
Dallas, Texas 75201
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
San Francisco, California 94111
LEGAL COUNSEL
Howard & Howard Attorneys, P.C.
Suite 400
107 West Michigan Avenue
Kalamazoo, Michigan 49007
<PAGE> 141
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
INVESTOR C SHARES
THE PARKSTONE GROWTH FUNDS
THE PARKSTONE GROWTH AND INCOME FUNDS
THE PARKSTONE INCOME FUNDS
FORM N-1A
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM NO. RULE 404(a) CROSS REFERENCE
- ---------------------------------------------------------------------------
<S> <C> <C>
1. Cover Page......................... Cover Page
2. Synopsis........................... Prospectus Summary; Fee Tables
3. Condensed Financial Information.... Financial Highlights; Performance Information
4. General Description of Registrant.. Cover Page; Investment Objectives and Policies;
Investment Restrictions; Risk Factors and
Investment Techniques; General Information -
Organization of the Group
5. Management of the Fund............. Management of the Funds; Fee Tables
5A. Management's Discussion of Fund
Performance........................ Not Applicable
6. Capital Stock and Other Securities. Directed Dividend Option; Dividends and Taxes;
General Information - Organization of the Group;
General Information - Multiple Classes of Shares;
General Information - Miscellaneous
7. Purchase of Securities Being
Offered......................... Management of the Funds - Administrator, Sub-
Administrator and Distributor; Management of
the Funds - Distribution Plan for Investor C
Shares; How to Buy Investor C Shares; Sales
Charges; Exchange Privilege; How Shares are Valued
8. Redemption or Repurchase........... Sale Charges; Contingent Deferred Sales Charge;
Exchange Privilege; Conversion Feature; How to
Redeem Your Investor C Shares
9. Pending Legal Proceedings.......... Not Applicable
PROSPECTUS - INVESTOR C SHARES
</TABLE>
<PAGE> 142
- --------------------------------------------------------------------------------
THE PARKSTONE
GROUP OF FUNDS
INVESTOR C SHARES
- --------------------------------------------------------------------------------
GROWTH FUNDS
PARKSTONE EQUITY FUND
PARKSTONE SMALL CAPITALIZATION FUND
PARKSTONE LARGE CAPITALIZATION FUND
PARKSTONE INTERNATIONAL DISCOVERY FUND
GROWTH AND INCOME FUNDS
PARKSTONE BALANCED FUND
PARKSTONE HIGH INCOME EQUITY FUND
INCOME FUNDS
PARKSTONE BOND FUND
PARKSTONE LIMITED MATURITY BOND FUND
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
PARKSTONE U.S. GOVERNMENT INCOME FUND
Prospectus dated October 8, 1996
[PARKSTONE MUTUAL FUNDS LOGO]
-------------------------
NOT FDIC INSURED
<PAGE> 143
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 144
THE PARKSTONE GROUP OF FUNDS
INVESTOR C SHARES PROSPECTUS DATED OCTOBER 8, 1996
<TABLE>
<S> <C>
GROWTH FUNDS For more information call:
Parkstone Equity Fund (800) 451-8377
Parkstone Small Capitalization Fund or write to:
Parkstone Large Capitalization Fund 3435 Stelzer Road
Parkstone International Discovery Fund Columbus, Ohio 43219
GROWTH AND INCOME FUNDS
Parkstone Balanced Fund THESE SECURITIES HAVE NOT
Parkstone High Income Equity Fund BEEN APPROVED OR
DISAPPROVED BY THE
INCOME FUNDS SECURITIES AND EXCHANGE
Parkstone Bond Fund COMMISSION OR ANY STATE
Parkstone Limited Maturity Bond Fund SECURITIES COMMISSION NOR
Parkstone Intermediate Government Obligations HAS THE COMMISSION OR ANY
Fund STATE SECURITIES COMMISSION
Parkstone U.S. Government Income Fund PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE
</TABLE>
The funds listed above are each of the ten currently-offered series (the
"Funds") of The Parkstone Group of Funds (the "Group") which offer Investor C
Shares. This Prospectus explains concisely what you should know before investing
in the Investor C Shares of the Funds listed above. Please read it carefully and
keep it for future reference. Investor C Shares are currently offered only to
(i) employee benefit plans qualified under Section 401 of the Internal Revenue
Code of 1986, as amended (the "Code"), subject to requirements established by
the Group's distributor, BISYS Fund Services Limited Partnership ("BISYS" or the
"Distributor"), and (ii) retail investors that purchase Investor C Shares
through a broker or dealer that has entered into a sales agreement with the
Distributor. You can find more detailed information about the Funds in the
October 8, 1996 Statement of Additional Information, as amended from time to
time. For a free copy of the Statement of Additional Information or other
information, contact the Group at the number specified above. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated into this Prospectus by reference.
THE SHARES OF THE PARKSTONE GROUP OF FUNDS ARE NOT OBLIGATIONS OR DEPOSITS OF
FIRST OF AMERICA INVESTMENT CORPORATION OR ITS PARENT, AND THE INVESTMENTS
DESCRIBED IN THIS PROSPECTUS ARE NOT ENDORSED, INSURED OR GUARANTEED BY FIRST OF
AMERICA INVESTMENT CORPORATION, ITS PARENT OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. INVESTMENTS IN THE PARKSTONE GROUP OF FUNDS
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVOLVED.
PROSPECTUS--Investor C Shares
<PAGE> 145
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
---
Prospectus Summary........................................................... 4
Fee Tables................................................................... 8
Financial Highlights......................................................... 10
Investment Objectives and Policies........................................... 15
Risk Factors and Investment Techniques....................................... 24
Investment Restrictions...................................................... 34
Management of the Funds...................................................... 36
How to Buy Investor C Shares................................................. 41
Sales Charges................................................................ 42
Contingent Deferred Sales Charge............................................. 43
Directed Dividend Option..................................................... 44
Exchange Privilege........................................................... 44
Factors to Consider When Selecting Investor C Shares......................... 45
Conversion Feature........................................................... 45
How to Redeem Your Investor C Shares......................................... 46
How Shares Are Valued........................................................ 47
Dividends and Taxes.......................................................... 48
Performance Information...................................................... 49
Fundata(R)................................................................... 50
General Information.......................................................... 50
</TABLE>
PROSPECTUS--Investor C Shares 2
<PAGE> 146
PROSPECTUS ROADMAP
For information about the following subjects, consult the pages indicated on the
table below.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT
FINANCIAL OBJECTIVES RISK FACTORS AND
FUND HIGHLIGHTS AND POLICIES INVESTMENT TECHNIQUES
<CAPTION>
<S> <C> <C> <C>
Balanced Fund 12 18 20
Bond Fund 13 21 22
Equity Fund 10 16 17
Government Income Fund 15 23 24
High Income Equity Fund 13 20 21
International Discovery Fund 12 17 18
Intermediate Government Obligations Fund 14 23 23
Large Capitalization Fund 11 16 17
Limited Maturity Bond Fund 14 21 22
Small Capitalization Fund 11 16 17
</TABLE>
The Parkstone Group of Funds (the "Group") is an open-end management investment
company which offers to the public sixteen separate investment portfolios,
fifteen of which are diversified portfolios and one of which is a
non-diversified portfolio, each with different investment objectives. These
Funds enable the Group to meet a wide range of investment needs.
This Prospectus relates only to the Investor C Shares of the following Funds:
Parkstone Equity Fund (the "Equity Fund")
Parkstone Small Capitalization Fund (the "Small Capitalization Fund")
Parkstone Large Capitalization Fund (the "Large Capitalization Fund")
Parkstone International Discovery Fund (the "International Fund")
Parkstone Balanced Fund (the "Balanced Fund")
Parkstone High Income Equity Fund (the "High Income Equity Fund")
Parkstone Bond Fund (the "Bond Fund")
Parkstone Limited Maturity Bond Fund (the "Limited Maturity Bond Fund")
Parkstone Intermediate Government Obligations Fund (the "Intermediate
Government Obligations Fund")
Parkstone U.S. Government Income Fund (the "Government Income Fund")
For convenience of reference, the above Funds are sometimes referred to as part
of a general grouping. The Equity Fund, Small Capitalization Fund, Large
Capitalization Fund and International Fund are collectively referred to as the
"Growth Funds." The Balanced Fund and High Income Equity Fund are collectively
referred to as the "Growth and Income Funds." The Bond Fund, Limited Maturity
Bond Fund, Intermediate Government Obligations Fund and Government Income Fund
are collectively referred to as the "Income Funds."
Effective October 11, 1995, the Group no longer offers Investor C Shares of the
Parkstone Municipal Bond Fund (the "Municipal Bond Fund") and the Parkstone
Michigan Municipal Bond Fund (the "Michigan Bond Fund"). Neither Fund had any
investors during the period in which they were offered to the public.
3 PROSPECTUS--Investor C Shares
<PAGE> 147
The Trustees of the Group have divided beneficial ownership of each of the Funds
into an unlimited number of transferable units called shares. Each Fund of the
Group offers multiple classes of shares. This Prospectus describes one class of
shares of each Fund, Investor C Shares. Interested persons who wish to obtain a
copy of the Prospectus of the other classes of shares of the Funds or a copy of
the Group's most recent Annual Report may contact the Group at the telephone
number shown above.
The investment objectives of each of the Funds are described in this Prospectus
and are summarized in the Prospectus Summary. First of America Investment
Corporation, Kalamazoo, Michigan ("First of America" or the "Investment
Adviser"), acts as the investment adviser to each of the Funds of the Group. To
provide investment advisory services for the International Fund and Balanced
Fund for investments in foreign securities, First of America has entered into a
sub-investment advisory agreement with Gulfstream Global Investors, Ltd.,
Dallas, Texas ("Gulfstream" or the "Subadviser").
PROSPECTUS SUMMARY
Shares Offered
This Prospectus relates to Investor C Shares of the following Funds of the
Group:
GROWTH FUNDS
Equity Fund
Small Capitalization Fund
Large Capitalization Fund
International Fund
GROWTH AND INCOME FUNDS
Balanced Fund
High Income Equity Fund
INCOME FUNDS
Bond Fund
Limited Maturity Bond Fund
Intermediate Government Obligations Fund
Government Income Fund
These Funds represent ten separate investment portfolios of The Parkstone Group
of Funds, a Massachusetts business trust which is registered as an open-end,
management investment company.
Purchase and Redemption of Shares
The public offering price of Investor C Shares of each Fund is equal to the net
asset value per share, but investors may be subject to a contingent deferred
sales charge of up to 1.00% when Investor C Shares are redeemed prior to one
year from the date of purchase. Shares may be purchased by mail, telephone or
wire, through a broker-dealer who has entered into an agreement with BISYS,
through the Group's Auto Invest Plan or through certain Parkstone Individual
Retirement Accounts. Investor C Shares of one Fund of the Group may be exchanged
for Investor C Shares of another Fund of the Group at net asset value without
the imposition of a contingent deferred sales charge, provided certain
conditions are met. Shares may be redeemed by contacting the Transfer Agent or
through the Group's Auto Withdrawal Plan. See "HOW TO BUY INVESTOR C SHARES,"
"EXCHANGE PRIVILEGE," "HOW TO REDEEM INVESTOR C SHARES" and "HOW SHARES ARE
VALUED."
Minimum Purchase
There is a $1,000 minimum initial purchase (based upon the public offering
price) per Fund with no minimum subsequent investments. Such minimum initial
investment may be waived for certain purchasers and is reduced to $100 for
investors using the Auto Invest Plan described herein to invest in a
PROSPECTUS--Investor C Shares 4
<PAGE> 148
Fund, although such investors are subject to a $50 minimum for each subsequent
investment in such Fund.
Conversion Feature
Investor C Shares which have been outstanding for nine years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A Shares.
Investment Objectives
[CAPTION]
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT OBJECTIVE
<S> <C>
Balanced Fund seeks current income, long-term capital growth and
conservation of capital
Bond Fund seeks to provide current income and preservation of
capital by investing in a portfolio of high- and
medium-grade fixed-income securities
Equity Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks
Government Income Fund seeks to provide shareholders with a high level of
current income consistent with prudent investment risk
High Income Equity Fund primarily seeks current income by investing in a
diversified portfolio of high quality, dividend-paying
stocks and securities convertible into common stocks; a
secondary objective is growth of capital
Intermediate Government seeks to provide current income with preservation of
Obligations Fund capital by investing in a diversified portfolio of U.S.
government securities with remaining maturities of 12
years or less
International Fund seeks long-term growth of capital
Large Capitalization seeks growth of capital by investing primarily in a
Fund diversified portfolio of common stocks and securities
convertible into common stocks of companies with large
market capitalization.
Limited Maturity Bond seeks to provide current income and preservation of
Fund capital by investing in a portfolio of high- and
medium-grade fixed-income securities, the remaining
maturities on which will be six years or less
Small Capitalization seeks growth of capital by investing primarily in a
Fund diversified portfolio of common stocks and securities
convertible into common stocks of small- to
medium-sized companies
</TABLE>
5 PROSPECTUS--Investor C Shares
<PAGE> 149
Investment Policies
Under normal market conditions, each Fund will invest as described in the
following table:
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT POLICY
<S> <C>
Balanced Fund in any type or class of securities, including all types
of common stocks, fixed-income securities and
securities convertible into common stocks. At least 25%
of the value of the Fund's total assets will be
invested in fixed-income senior securities and up to
15% of the Fund's total assets may be invested in
foreign securities
Bond Fund at least 80% of its total assets in bonds, debentures
and certain other debt securities specified herein
Equity Fund at least 80% of its total assets in common stocks,
and securities convertible into common stocks, of
companies believed by the investment adviser to be
characterized by sound management and the ability to
finance expected growth
Government Income Fund at least 65% of its total assets in obligations issued
or guaranteed by the U.S. government or its agencies or
instrumentalities; under current market conditions, up
to 80% of its total assets in mortgage-related
securities, which are issued or guaranteed by the U.S.
government, its agencies and instrumentalities and by
non-governmental entities, or greater amounts as
conditions warrant
High Income Equity Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized
by sound management, the ability to finance expected
growth and the ability to pay above-average dividends
Intermediate Government at least 80% of its total assets in obligations issued
Obligations Fund or guaranteed by the U.S. government or its agencies or
instrumentalities and with remaining maturities of
twelve years or less
International Fund at least 65% of its total assets in an internationally
diversified portfolio of equity securities which trade
on markets in countries other than the United States
and which are issued by companies (i) domiciled in
countries other than the United States, or (ii) that
derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States,
and (iii) which are ranked as small- or medium-sized
companies on the basis of their capitalization
Large Capitalization Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed to be characterized by sound management and
the ability to finance expected long-term growth
Limited Maturity Bond Fund at least 80% of the value of its total assets in bonds,
debentures and certain other debt securities specified
herein with remaining maturities of six years or less
Small Capitalization Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized
by sound management and the ability to finance expected
growth
</TABLE>
PROSPECTUS--Investor C Shares 6
<PAGE> 150
Risk Factors and Special Considerations
An investment in a mutual fund such as any of the Funds involves a certain
amount of risk and may not be suitable for all investors. In addition, some
investment policies of the Funds may entail certain risks. See "RISK FACTORS AND
INVESTMENT TECHNIQUES."
Management of the Funds
First of America serves as investment adviser, and, with respect to the
International Fund and a portion of the Balanced Fund, Gulfstream serves as
subadviser. First of America also serves as sub-administrator. BISYS, a
partnership owned by The BISYS Group, Inc., serves as distributor and
administrator. BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Transfer
Agent") serves as transfer agent and fund accountant. Union Bank of California,
N.A. ("Union Bank" or the "Custodian"), formerly known as The Bank of
California, N.A., serves as custodian.
Dividends and Taxes
Dividends from net income are declared and paid monthly. Net realized capital
gains are distributed at least annually. The Directed Dividend Option enables
shareholders to have dividends and capital gains paid by check, or reinvested
automatically without payment of sales charges. See "DIRECTED DIVIDEND OPTION."
Each of the Funds is treated as a separate entity for federal income tax
purposes and intends to qualify as a "regulated investment company."
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made during the year.
7 PROSPECTUS--Investor C Shares
<PAGE> 151
FEE TABLES (INVESTOR C SHARES)
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge (as a percentage of the offering price)................ None
Sales Charge on Reinvested Distributions.................................... None
Maximum Deferred Sales Charge on Redemptions(1)............................. 1.00%
Redemption Fees(2).......................................................... None
Exchange Fees............................................................... None
</TABLE>
- ------------
(1) A Contingent Deferred Sales Load is charged only with respect to Investor C
Shares redeemed prior to one year from the date of purchase. (See "CONTINGENT
DEFERRED SALES CHARGE" herein.)
(2) Although no such fee currently is in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)*
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES EXPENSES
---------- ----- ------- -------
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund........................................ 1.00% 1.00% 0.29% 2.29%
Small Capitalization Fund.......................... 1.00% 1.00% 0.29% 2.29%
Large Capitalization Fund.......................... 0.40% 1.00% 0.84% 2.24%
International Fund................................. 1.17% 1.00% 0.33% 2.50%
GROWTH AND INCOME FUNDS:
Balanced Fund...................................... 1.00% 1.00% 0.16% 2.16%
High Income Equity Fund............................ 1.00% 1.00% 0.32% 2.32%
INCOME FUNDS:
Bond Fund.......................................... 0.70% 1.00% 0.21% 1.91%
Limited Maturity Bond Fund......................... 0.55% 1.00% 0.27% 1.82%
Intermediate Government Obligations Fund 0.70% 1.00% 0.26% 1.96%
Government Income Fund............................. 0.45% 1.00% 0.31% 1.76%
</TABLE>
- ------------
* after expense reductions
Management Fees and Total Expenses as a percentage of average net assets for the
International Fund, absent the voluntary reduction of advisory fees, would have
been 1.25% and 2.62%, respectively. Management Fees, Other Expenses and Total
Expenses as a percentage of average net assets for the Bond Fund, absent the
voluntary reduction of administration fees and advisory fees, would have been
0.74%, 0.29% and 2.03%, respectively. For the Limited Maturity Bond Fund, they
would have been 0.74%, 0.28% and 2.02%, respectively. For the Intermediate
Government Obligations Fund, they would have been 0.74%, 0.31% and 2.05%,
respectively. For the Government Income Fund, they would have been 0.74%, 0.36%
and 2.10%, respectively. The annual percentages of Management Fees and Other
Expenses for the Large Capitalization Fund are based on such fees and expenses
incurred since commencement of operations and expected voluntary reductions.
Absent the expected voluntary reduction of administrative and advisory fees,
Management Fees, Other Expenses and Total Expenses would be 0.80%, 2.45% and
4.25%, respectively. (See "MANAGEMENT OF THE FUNDS--Investment Adviser and
Subadviser" and "Administrator, Sub-Administrator and Distributor").
PROSPECTUS--Investor C Shares 8
<PAGE> 152
EXPENSE EXAMPLES
You would pay the following expenses rounded to the nearest dollar on a $1,000
investment in Investor C Shares, assuming (1) 5% annual return; (2) redemption
at the end of Year 1 or no redemption; and (3) payment of the maximum sales
charge:
<TABLE>
<CAPTION>
1 YEAR 1 YEAR
(REDEEMED) (NOT REDEEMED) 3 YEARS 5 YEARS 10 YEARS
---------- ------------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund.............................. $ 33 $ 23 $72 $ 123 $263
Small Capitalization Fund................ $ 33 $ 23 $72 $ 123 $263
Large Capitalization Fund*............... $ 33 $ 23 $70 -- --
International Fund....................... $ 35 $ 25 $78 $ 133 $284
GROWTH AND INCOME FUNDS:
Balanced Fund............................ $ 32 $ 22 $68 $ 116 $249
High Income Equity Fund.................. $ 34 $ 24 $72 $ 124 $266
INCOME FUNDS:
Bond Fund................................ $ 29 $ 19 $60 $ 103 $223
Limited Maturity Bond Fund............... $ 28 $ 18 $57 $ 99 $214
Intermediate Government Obligations
Fund................................... $ 30 $ 20 $62 $ 106 $229
Government Income Fund................... $ 28 $ 18 $55 $ 95 $207
</TABLE>
* Because the Large Capitalization Fund has been in operation for less than 10
months, expense example information is provided only for 1-year and 3-year
periods.
The information set forth in the foregoing Fee Tables and expense examples
relates only to Investor C Shares of the Funds. Each of the Funds also may offer
other classes of shares. The other classes of shares of the Funds are subject to
the same expenses except that the sales charges and Rule 12b-1 fees will differ
between classes.
As a result of the payment of sales charges and 12b-1 fees, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities Dealers, Inc.
(the "NASD"). The NASD has adopted rules effective July 7, 1993, which generally
limit the aggregate sales charges and payments under the Group's Investor C
Distribution and Shareholder Service Plan to a certain percentage of total new
gross share sales, plus interest. The Funds would stop accruing 12b-1 fees if,
to the extent, and for as long as, such limit would otherwise be exceeded.
The purpose of the above tables is to assist a potential purchaser of Investor C
Shares of any Fund in understanding the various costs and expenses that an
investor in a Fund will bear directly or indirectly. Such expenses do not
include any fees charged by First of America or any of its affiliates to its
customer accounts which may invest in Investor C Shares of the Funds. See
"MANAGEMENT OF THE FUNDS," "GENERAL INFORMATION" and "SALES CHARGES" for a more
complete discussion of the shareholder transaction expenses and annual operating
expenses of each of the Funds. The expense information for Investor C Shares
reflects current fees. THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
9 PROSPECTUS--Investor C Shares
<PAGE> 153
FINANCIAL HIGHLIGHTS
The tables on the following pages set forth certain information concerning the
investment results of the Investor C Shares of each of the Funds since its
inception. Further financial information is included in the Statement of
Additional Information and the Group's June 30, 1996 Annual Report to
Shareholders which may be obtained free of charge.
The Financial Highlights for the periods presented below have been derived from
financial statements audited by Coopers & Lybrand L.L.P., independent auditors
for the Group, whose report thereon is incorporated by reference in the
Statement of Additional Information.
EQUITY FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)
------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $16.40 $16.29
--------- -----------
Investment Activities
Net investment loss................................................. (0.17) (0.02)
Net realized and unrealized gains (losses) on investments........... 4.79 1.60
------ --------
Total from Investment Activities............................... 4.62 1.58
------ --------
Distributions
Net investment income...............................................
Net realized gains.................................................. (0.66)
In excess of net realized gains..................................... (1.47)
-------- ----------
Total Distributions............................................ (0.66) (1.47)
-------- ----------
NET ASSET VALUE, END OF PERIOD.......................................... $20.36 $16.40
--------- -----------
--------- -----------
Total Return (excluding sales and redemption charges)................... 28.69% 23.56%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)..................................... $1,088 $153
Ratio of expenses to average net assets............................. 2.29% 2.27%(b)
Ratio of net investment loss to average net assets.................. (1.73)% (1.43)%(b)
Ratio of expenses to average net assets*............................ 2.29% 2.53%(b)
Ratio of net investment loss to average net assets*................. (1.74)% (1.70)%(b)
Portfolio turnover rate (c)......................................... 49.27% 46.39%
Average Commission Rate Paid(h)..................................... $0.0796
</TABLE>
PROSPECTUS--Investor C Shares 10
<PAGE> 154
SMALL CAPITALIZATION FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)
------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $25.91 $24.17
--------- -----------
Investment Activities
Net investment loss................................................. (0.20) (0.05)
Net realized and unrealized gains (losses) on investments........... 11.77 3.94
-------- --------
Total from Investment Activities............................... 11.57 3.89
-------- --------
Distributions
Net investment income
Net realized gains.................................................. (3.65) (2.15)
-------- ----------
Total Distributions............................................ (3.65) (2.15)
-------- ----------
NET ASSET VALUE, END OF PERIOD.......................................... $33.83 $25.91
--------- -----------
--------- -----------
Total Return (excluding sales and redemption charges)................... 48.32% 44.37%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)..................................... $5,751 $224
Ratio of expenses to average net assets............................. 2.29% 3.53%(b)
Ratio of net investment loss to average net assets.................. (1.94)% (3.06)%(b)
Ratio of expenses to average net assets*............................ 2.29% 3.53%(b)
Ratio of net investment loss to average net assets*................. (1.94)% (3.06)%(b)
Portfolio turnover rate (c)......................................... 67.22% 50.53%
Average Commission Rate Paid(h)..................................... $0.0800
</TABLE>
LARGE CAPITALIZATION FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
DECEMBER 28, 1995
TO
JUNE 30, 1996(A)
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................................ $10.00
-----------
Investment Activities
Net realized and unrealized gain (loss) on investments.......................... 1.17
--------
Total from Investment Activities........................................... 1.17
--------
Distributions
Net realized gains.............................................................. (0.01)
----------
Total Distributions........................................................ (0.01)
----------
NET ASSET VALUE, END OF PERIOD...................................................... $11.16
-----------
-----------
Total Return (excluding sales and redemption charges)............................... 8.14%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)................................................. 2
Ratio of expenses to average net assets......................................... 2.24%(b)
Ratio of net investment loss to average net assets.............................. (0.45)%(b)
Ratio of expenses to average net assets*........................................ 4.25%(b)
Ratio of net investment loss to average net assets*............................. (2.46)%(b)
Portfolio turnover rate (c)..................................................... 0.86
Average commission rate paid(h)................................................. $0.0800
</TABLE>
11 PROSPECTUS--Investor C Shares
<PAGE> 155
INTERNATIONAL FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)(G)
------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................ $12.42 $12.97
--------- ------------
Investment Activities
Net investment income (loss).................................... (0.10) 0.03
Net realized and unrealized gains (losses) on investments and
foreign currency transactions................................. 1.79 0.04
------ ---------
Total from Investment Activities........................... 1.69 0.07
------ ---------
Distributions
Net investment income net realized gains........................
In excess of net realized gains................................. (0.03) (0.62)
-------- -----------
Total Distributions........................................ (0.03) (0.62)
-------- -----------
NET ASSET VALUE, END OF PERIOD...................................... $14.08 $12.42
--------- ------------
--------- ------------
Total Return (excluding sales and redemption charges)............... 13.62% (1.15)%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)................................. $474 $82
Ratio of expenses to average net assets......................... 2.50% 2.32%(b)
Ratio of net investment income (loss) to average net assets..... (0.84)% 1.74%(b)
Ratio of expenses to average net assets*........................ 2.62% 3.27%(b)
Ratio of net investment income (loss) to average net assets*.... (0.97)% 0.79%(b)
Portfolio turnover rate (c)..................................... 54.47% 104.39%
Average commission rate paid(h)................................. $0.0321
</TABLE>
BALANCED FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)(G)
------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................ $12.12 $11.13
--------- ------------
Investment Activities
Net investment income (loss).................................... 0.24 0.09
Net realized and unrealized gains (losses) on investments....... 1.71 1.16
------ ---------
Total from Investment Activities........................... 1.95 1.25
------ ---------
Distributions
Net investment income........................................... (0.22) (0.10)
Net realized gains.............................................. (0.57)
In excess of net realized gains................................. (0.16)
-------- -----------
Total Distributions........................................ (0.79) (0.26)
-------- -----------
NET ASSET VALUE, END OF PERIOD...................................... $13.28 $12.12
--------- ------------
--------- ------------
Total Return (excluding sales and redemption charges)............... 16.61% 17.53%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)................................. $362 $114
Ratio of expenses to average net assets......................... 2.16% 2.16%(b)
Ratio of net investment income (loss) to average net assets..... 1.65% 1.65%(b)
Ratio of expenses to average net assets*........................ 2.41% 2.68%(b)
Ratio of net investment income (loss) to average net assets*.... 1.40% 1.13%(b)
Portfolio turnover rate (c)..................................... 437.90% 250.66%
Average commission rate paid(h)................................. $0.0848
</TABLE>
PROSPECTUS--Investor C Shares 12
<PAGE> 156
HIGH INCOME EQUITY FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)
------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................. $14.54 $13.38
--------- ------------
Investment Activities
Net investment income (loss)..................................... 0.19 0.11
Net realized and unrealized gains (losses) on investments........ 3.27 1.17
------ ---------
Total from Investment Activities............................ 3.46 1.28
------ ---------
Distributions
Net investment income............................................ (0.19) (0.11)
In excess of net investment income............................... (0.01)
Net realized gains............................................... (0.45)
In excess of net realized gains..................................
-------- -----------
Total Distributions......................................... (0.64) (0.12)
-------- -----------
NET ASSET VALUE, END OF PERIOD....................................... $17.36 $14.54
--------- ------------
--------- ------------
Total Return (excluding sales and redemption charges)................ 24.17% 9.71%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000).................................. $164 $25
Ratio of expenses to average net assets.......................... 2.32% 2.30%(b)
Ratio of net investment income (loss) to average net assets...... 1.11% 1.88%(b)
Ratio of expenses to average net assets*......................... 2.32% 2.55%(b)
Ratio of net investment income (loss) to average net assets*..... 1.11% 1.62%(b)
Portfolio turnover rate (c)...................................... 40.75% 77.70%
Average commission rate paid(h).................................. $0.0800
</TABLE>
BOND FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)
------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................. $9.64 $9.02
------- ----------
Investment Activities
Net investment income (loss)..................................... 0.50 0.22
Net realized and unrealized gains (losses) on investments........ (0.17) 0.62
------- --------
Total from Investment Activities............................ 0.33 0.84
----- --------
Distributions
Net investment income............................................ (0.50) (0.22)
In excess of net investment income...............................
Net realized gains...............................................
In excess of net realized gains..................................
------- ----------
Total Distributions......................................... (0.50) (0.22)
NET ASSET VALUE, END OF PERIOD....................................... $9.47 $9.64
------- ----------
------- ----------
Total Return (excluding sales and redemption charges)................ 3.50% 8.41%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000).................................. $210 $28
Ratio of expenses to average net assets.......................... 1.91% 1.99%(b)
Ratio of net investment income (loss) to average net assets...... 5.00% 5.62%(b)
Ratio of expenses to average net assets*......................... 2.03% 2.26%(b)
Ratio of net investment income (loss) to average net assets*..... 4.88% 5.36%(b)
Portfolio turnover rate(c)....................................... 1189.27% 1010.64%
</TABLE>
13 PROSPECTUS--Investor C Shares
<PAGE> 157
LIMITED MATURITY BOND FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)
----------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................... $9.53 $9.35
-------- ----------
Investment Activities
Net investment income (loss)....................................... 0.58 0.20
Net realized and unrealized gains (losses) on investments.......... (0.23) 0.17
-------- --------
Total from Investment Activities.............................. 0.35 0.37
------ --------
Distributions
Net investment income.............................................. (0.58) (0.19)
Net realized gains.................................................
In excess of net realized gains.................................... (0.01)
-------- --------
Total Distributions........................................... (0.59) (0.19)
NET ASSET VALUE, END OF PERIOD......................................... $9.29 $9.53
-------- ----------
-------- ----------
Total Return (excluding sales and redemption charges).................. 3.71% 3.58%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000).................................... $11 --
Ratio of expenses to average net assets............................ 1.82% 1.18%(b)
Ratio of net investment income (loss) to average net assets........ 5.34% 5.61%(b)
Ratio of expenses to average net assets*........................... 2.02% 1.18%(b)
Ratio of net investment income (loss) to average net assets*....... 5.14% 5.61%(b)
Portfolio turnover rate(c)......................................... 618.60% 397.97%
</TABLE>
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30,1996 JUNE 30, 1995(E)
----------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................................... $9.76 $9.42
-------- ----------
Investment Activities
Net investment income (loss)......................................... 0.53 0.18
Net realized and unrealized gains (losses) on investments............ (0.25) 0.33
-------- ----------
Total from Investment Activities................................ 0.28 0.51
------ --------
Distributions
Net investment income................................................ (0.52) (0.17)
Net realized gains...................................................
In excess of net realized gains......................................
-------- ----------
Total Distributions............................................. (0.52) (0.17)
-------- ----------
NET ASSET VALUE, END OF PERIOD........................................... $9.52 $9.76
-------- ----------
-------- ----------
Total Return (excluding sales and redemption charges).................... 2.86% 5.21%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)...................................... $80 $9
Ratio of expenses to average net assets.............................. 1.96% 2.09%(b)
Ratio of net investment income (loss) to average net assets.......... 4.83% 4.24%(b)
Ratio of expenses to average net assets*............................. 2.05% 2.36%(b)
Ratio of net investment income (loss) to average net assets*......... 4.74% 3.98%(b)
Portfolio turnover rate (c).......................................... 916.39% 549.13%
</TABLE>
PROSPECTUS--Investor C Shares 14
<PAGE> 158
GOVERNMENT INCOME FUND - INVESTOR C SHARES
<TABLE>
<CAPTION>
NOVEMBER 16, 1994
YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995(E)
----------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................................... $9.36 $9.12
-------- ----------
Investment Activities
Net investment income (loss)......................................... 0.66 0.28
Net realized and unrealized gains (losses) on investments............ (0.17) 0.24
-------- --------
Total from investment activities................................ 0.49 0.52
------ --------
Distributions
Net investment income................................................ (0.66) (0.25)
Tax return of capital................................................ (0.03)
-------- ----------
Total Distributions............................................. (0.66) (0.28)
-------- ----------
NET ASSET VALUE, END OF PERIOD........................................... $9.19 $9.36
-------- ----------
-------- ----------
Total Return (excluding sales and redemption charges).................... 5.25% 5.26%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, end of period (000)...................................... $70 $29
Ratio of expenses to average net assets.............................. 1.76% 2.88%(b)
Ratio of net investment income (loss) to average net assets.......... 6.92% 11.54%(b)
Ratio of expenses to average net assets*............................. 2.10% 2.88%(b)
Ratio of net investment income (loss) to average net assets*......... 6.58% 11.54%(b)
Portfolio turnover rate (c).......................................... 348.01% 114.71%
</TABLE>
- ------------
NOTES TO FINANCIAL HIGHLIGHTS:
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(d) Not annualized.
(e) Period from November 16, 1994 (commencement of offering of Investor C
Shares) to June 30, 1995.
(f) Represents total return for the Institutional Shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
Shares for the period from November 16, 1994 to June 30, 1995.
(g) As of January 1, 1995, Gulfstream assumed the role of subadviser with
respect to the International Fund and the portion of the Balanced Fund
invested in foreign securities. Prior to that date, Ivory & Sime
International, Inc. and Ivory & Sime plc served as subadvisers to the
International Fund and the Balanced Fund had no subadviser.
(h) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
Financial Highlights for Investor C Shares of the Municipal Bond Fund and the
Michigan Bond Fund are not included in this Prospectus since Investor C Shares
of such Funds are no longer offered to the public and there have never been
investors of Investor C Shares of such Funds.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The investment objective of each of the Funds is set forth below under the
headings describing the Funds. The investment objective of each Fund is
fundamental and may not be changed without a vote of the holders of a majority
of the outstanding shares of that Fund (as defined in the Statement of
Additional Information). The investment policies of a Fund may be changed
without a vote of the holders of a majority of outstanding shares of that Fund
unless the policy is expressly deemed to be a fundamental policy or changeable
only by such majority vote. There can be no assurance that the investment
15 PROSPECTUS--Investor C Shares
<PAGE> 159
objectives of any Fund will be achieved. Depending upon the performance of a
Fund's investments, the net asset value per share of that Fund may decrease
instead of increase.
During temporary defensive periods as determined by First of America or
Gulfstream, as the case may be, each of the Funds may hold up to 100% of its
total assets in short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that a Fund is so invested, its investment
objective may not be achieved during that time. Uninvested cash reserves will
not earn income.
GROWTH FUNDS
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
The investment objective of the Equity Fund is to seek growth of capital by
investing primarily in a diversified portfolio of common stocks and securities
convertible into common stocks. The investment objective of the Small
Capitalization Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stocks of small-to medium-sized companies. The investment objective of the Large
Capitalization Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stocks of companies with large market capitalization.
Under normal market conditions, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will invest at least 80% of the value of its
total assets in common stocks and securities convertible into common stocks of
companies believed by First of America to be characterized by sound management
and the ability to finance expected long-term growth. In addition, under normal
market conditions, the Small Capitalization Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks of companies considered by First of America to have a market
capitalization of less than $1 billion and the Large Capitalization Fund will do
the same with companies considered by First of America to have a market
capitalization of greater than $5 billion. Each of the Equity Fund, Small
Capitalization Fund and Large Capitalization Fund may also invest up to 20% of
the value of its total assets in preferred stocks, corporate bonds, notes, units
of real estate investment trusts, warrants, and short-term obligations (with
maturities of 12 months or less) consisting of commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit, repurchase agreements, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and demand and time deposits of
domestic and foreign banks and savings and loan associations. Each of the Equity
Fund, Small Capitalization Fund and Large Capitalization Fund may also hold
securities of other investment companies and depository or custodial receipts
representing beneficial interests in any of the foregoing securities.
Subject to the foregoing policies, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund may also invest up to 25% of its net assets
in foreign securities either directly or through the purchase of American
depository receipts ("ADRs") or European depository receipts ("EDRs") and may
also invest in securities issued by foreign branches of U.S. banks and foreign
banks, in Canadian commercial paper ("CCP"), and in Europaper (U.S.
dollar-denominated commercial paper of a foreign issuer). For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Foreign Securities" herein.
The Equity Fund anticipates investing in growth-oriented, medium-sized
capitalization companies. Medium-sized companies are considered to be those with
a market capitalization of between $1 billion and $5 billion. The Large
Capitalization Fund anticipates investing in growth-oriented companies with
large market capitalization, defined as capitalization of over $5 billion. For
both the Equity Fund and the Large Capitalization Fund, investments will be in
companies that have typically exhibited consistent, above-average growth in
revenues and earnings, strong management, and sound and improving financial
fundamentals. Often, these companies are market or industry leaders, have
excellent products and/or services, and exhibit the potential for growth. Core
holdings of the Equity Fund and Large Capitalization Fund are in companies that
participate in long-term growth industries, although these will be supplemented
by holdings in non-growth industries that exhibit the desired characteristics.
PROSPECTUS--Investor C Shares 16
<PAGE> 160
The Small Capitalization Fund anticipates investing in dynamic small- to
medium-sized companies that exhibit outstanding potential for superior growth.
Small-sized companies are considered to be those with market capitalization of
less than $1 billion. The Small Capitalization Fund will limit its investment in
securities of medium-sized companies to not more than 35% of the value of its
total assets. Companies that participate in sectors that are identified as
having long-term growth potential generally make up a substantial portion of
such Fund's holdings. These companies often have established a market niche or
have developed unique products or technologies that are expected to produce
superior growth in revenues and earnings. As smaller capitalization stocks are
quite volatile and subject to wide fluctuations in both the short and medium
term, the Small Capitalization Fund may be fairly characterized more aggressive
than a general equity fund such as the Equity Fund.
Consistent with the foregoing, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will focus its investments in those companies
and types of companies that First of America believes will enable such Fund to
achieve its investment objective.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
-Complex Securities -Foreign Securities -Foreign Currency Transactions
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Mortgage-Related Securities -Portfolio Turnover -Put and Call Options
-Other Mutual Funds -Restricted Securities -Reverse Repurchase Agreements
-Repurchase Agreements and
-When-Issued and Dollar Roll Agreements
Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE INTERNATIONAL FUND
The investment objective of the International Fund is to seek long-term growth
of capital.
Under normal market conditions the International Fund will invest at least 65%
of its total assets in an internationally diversified portfolio of equity
securities which trade on markets in countries other than the United States and
which are issued by companies (i) domiciled in countries other than the United
States, or (ii) that derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States, and (iii) which are small-
or medium-sized companies on the basis of their capitalization.
Equity securities include common and preferred stock, securities (bonds and
preferred stock) convertible into common stock, warrants and securities
representing underlying international securities such as ADRs and EDRs.
For purposes of investment by the International Fund only, companies are deemed
to be small- or medium-sized if, at the time of purchase, they are of a size
which would rank them in the lower half of a major market index in the
applicable country by weighted market capitalization and in the lower half of
all equity securities listed in recognized secondary markets where such markets
exist. In addition, in countries with less well-developed stock markets, where
the range of investment opportunities is more restrictive, the equity securities
of all listed companies will be eligible for investment. In major markets
issuers could have capitalizations of up to approximately $10 billion while in
smaller markets issuers would be eligible with capitalizations as low as
approximately $200 million.
The International Fund may invest in securities of issuers in, but not limited
to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Malaysia, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Normally the
International Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries, including the countries listed
above. It is possible, although not currently anticipated, that up to 35% of the
International Fund's assets could be invested in the securities of U.S.
companies. In addition,
17 PROSPECTUS--Investor C Shares
<PAGE> 161
the International Fund temporarily may invest cash in short-term debt
instruments of U.S. and foreign issuers for cash management purposes or pending
investment.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE INTERNATIONAL FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency -Foreign Securities
- -Futures Contracts Transactions -Lending Portfolio Securities
- -Other Mutual Funds -Government Obligations -Put and Call Options
- -Repurchase Agreements -Portfolio Turnover -Reverse Repurchase Agreements
- -When-Issued and -Restricted Securities and Dollar Roll Agreements
Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
THE BALANCED FUND
The investment objective of the Balanced Fund is to seek current income,
long-term capital growth and conservation of capital.
The Balanced Fund may invest in any type or class of security. Under normal
market conditions the Balanced Fund will invest in common stocks, fixed-income
securities and securities convertible into common stocks (i.e., warrants,
convertible preferred stock, fixed-rate preferred stock, convertible fixed-
income securities, options and rights). At least 25% of the value of the
Balanced Fund's total assets will be invested in fixed-income senior securities.
Up to 15% of the value of the Balanced Fund's total assets may be invested in
foreign securities.
The Balanced Fund's common stocks are held for the purpose of providing dividend
income and long-term growth of capital. The Balanced Fund will invest in the
common and preferred stocks of companies with capitalization of at least $100
million and which are traded either in established over-the-counter markets or
on national exchanges. The Balanced Fund intends to invest primarily in those
companies which are growth-oriented and have exhibited consistent, above-average
growth in revenues and earnings. When choosing such stocks, the potential for
long-term capital appreciation will be the primary basis for selection.
The Balanced Fund's fixed-income securities consist of bonds, debentures, notes,
zero-coupon securities, mortgage-related securities, state, municipal or
industrial revenue bonds, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, certificates of deposit, time
deposits, high quality commercial paper, bankers' acceptances and variable
amount master demand notes. In addition, a portion of the Balanced Fund's assets
may from time to time be invested in first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Some of the securities in which the
Balanced Fund invests may have warrants or options attached. The Balanced Fund
may also invest in repurchase agreements.
The Balanced Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, as well as
"stripped" U.S. Treasury obligations ("Stripped Treasury Obligations"), such as
Treasury receipts issued by the U.S. Treasury representing either future
interest or principal payments and other obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities. See "RISK FACTORS AND
INVESTMENT TECHNIQUES--Government Obligations" below.
The Balanced Fund also expects to invest in bonds, notes and debentures of a
wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, and in the case of notes
and bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance.
PROSPECTUS--Investor C Shares 18
<PAGE> 162
The Balanced Fund will invest only in corporate fixed-income securities which
are rated at the time of purchase within the four highest rating groups assigned
by a nationally-recognized statistical rating organization ("NRSRO") or, if
unrated, which First of America deems present attractive opportunities and are
of comparable quality. For a description of the rating symbols of the NRSROs,
see the Appendix to the Statement of Additional Information. For a discussion of
fixed-income securities rated within the fourth highest rating group assigned by
an NRSRO, see "RISK FACTORS AND INVESTMENT TECHNIQUES-- Medium-Grade Securities"
herein.
The Balanced Fund may hold some short-term obligations (with maturities of 12
months or less) consisting of domestic and foreign commercial paper, variable
amount master demand notes, bankers' acceptances, certificates of deposit and
time deposits of domestic and foreign branches of U.S. banks and foreign banks,
and repurchase agreements. The Balanced Fund may also invest in securities of
other investment companies.
The Balanced Fund may also invest in obligations of the Export-Import Bank of
the United States, in U.S. dollar-denominated international bonds for which the
primary trading market is in the United States ("Yankee Bonds"), or for which
the primary trading market is abroad ("Eurodollar Bonds"), and in Canadian bonds
and bonds issued by institutions, such as the World Bank and the European
Economic Community, organized for a specific purpose by two or more sovereign
governments ("Supranational Agency Bonds"). The Balanced Fund's investments in
foreign securities may be made either directly or through the purchase of ADRs
and the Balanced Fund may also invest in securities issued by foreign branches
of U.S. banks and foreign banks, in CCP, and in Europaper.
The amount invested in stock, bonds and cash reserves may be varied from time to
time, depending upon First of America's assessment of business, economic and
market conditions, including any potential advantage of price shifts between the
stock market and the bond market. The Balanced Fund reserves the right to hold
short-term securities in whatever proportion deemed desirable for temporary
defensive periods during adverse market conditions as determined by First of
America. However, to the extent that the Balanced Fund is so invested, its
investment objectives may not be achieved during that time.
Like any investment program, the Balanced Fund entails certain risks. As a Fund
investing primarily in common stocks the Balanced Fund is subject to stock
market risk, i.e., the possibility that stock prices in general will decline
over short or even extended periods.
Since the Balanced Fund also invests in bonds, investors in the Balanced Fund
are also exposed to bond market risk, i.e., fluctuations in the market value of
bonds. Bond prices are influenced primarily by changes in interest rate levels.
When interest rates rise, the prices of bonds generally fall; conversely, when
interest rates fall, bond prices generally rise. While bonds normally fluctuate
less in price than stock, there have been extended periods of cyclical increases
in interest rates that have caused significant declines in bond prices.
From time to time, the stock and bond markets may fluctuate independently of one
another. In other words, a decline in the stock market may in certain instances
be offset by a rise in the bond market, or vice versa. As a result the Balanced
Fund, with its balance of common stock and bond investments, is expected to
entail less investment risk (and a potentially smaller investment return) than a
mutual fund investing exclusively in common stocks.
19 PROSPECTUS--Investor C Shares
<PAGE> 163
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE BALANCED FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio Securities
- -Medium-Grade Securities -Mortgage-Related Securities -Other Mutual Funds
- -Portfolio Turnover -Put and Call Options -Repurchase Agreements
- -Restricted Securities -Reverse Repurchase Agreements and -When-Issued and Delayed-Delivery
Dollar Roll Agreements Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE HIGH INCOME EQUITY FUND
The investment objective of the High Income Equity Fund is to seek current
income by investing in a diversified portfolio of high quality, dividend-paying
common stocks and securities convertible into common stocks. A secondary
investment objective of High Income Equity Fund is growth of capital.
The High Income Equity Fund, under normal market conditions, will invest at
least 80% of the value of its total assets in common stocks and securities
convertible into common stocks of companies believed by First of America to be
characterized by sound management, the ability to finance expected growth and
the ability to pay above-average dividends. The High Income Equity Fund may also
invest up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. The
High Income Equity Fund may also hold securities of other investment companies
and depository or custodial receipts representing beneficial interests in any of
the foregoing securities.
Subject to the foregoing policies, the High Income Equity Fund may also invest
up to 25% of its net assets in foreign securities either directly or through the
purchase of ADRs and may also invest in securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper. For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Foreign Securities" herein.
The High Income Equity Fund anticipates investing in securities that currently
have a high dividend yield, with the anticipation that the dividend will remain
constant or be increased in the future. These securities generally represent the
core holdings of this Fund. However, these holdings are balanced with lower
yielding but higher growth-oriented securities to achieve portfolio balance. All
securities must provide current income. Given its bias towards income, the High
Income Equity Fund may be considered more conservative than growth-oriented
equity funds such as the Group's Equity Fund and Small Capitalization Fund.
Consistent with the foregoing, the High Income Equity Fund will focus its
investments in those companies and types of companies that First of America
believes will enable such Fund to achieve its investment objective.
PROSPECTUS--Investor C Shares 20
<PAGE> 164
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE HIGH INCOME EQUITY FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio Securities
- -Mortgage-Related Securities -Portfolio Turnover -Put and Call Options
- -Other Mutual Funds -Restricted Securities -Reverse Repurchase Agreements and
- -Repurchase Agreements Dollar Roll Agreements
- -When-Issued and Delayed-Delivery
Transactions
</TABLE>
- --------------------------------------------------------------------------------
INCOME FUNDS
THE BOND FUND AND THE LIMITED MATURITY BOND FUND
The investment objective of the Bond Fund is to seek current income as well as
preservation of capital by investing in a portfolio of high and medium grade
fixed-income securities. The investment objective of the Limited Maturity Bond
Fund is to seek current income as well as preservation of capital by investing
in a portfolio of high- and medium-grade fixed-income securities with remaining
maturities of six years or less.
Under normal market conditions, the Bond Fund will invest at least 80% of the
value of its total assets in bonds, debentures, notes with remaining maturities
at the time of purchase of one year or more, zero-coupon securities,
mortgage-related securities, state, municipal or industrial revenue bonds,
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, debt securities convertible into, or exchangeable for, common
stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Bond Fund will invest in state and municipal securities
when, in the opinion of First of America, their yields are competitive with
comparable taxable debt obligations. In addition, up to 20% of the value of the
Bond Fund's total assets may be invested in preferred stocks, notes with
remaining maturities at the time of purchase of less than one year, short-term
debt obligations consisting of domestic and foreign commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit and time deposits of domestic and foreign branches of U.S. banks and
foreign banks, repurchase agreements, securities of other investment companies,
and guaranteed investment contracts ("GICs") issued by insurance companies, as
more fully described below. The Bond Fund intends that under normal market
conditions its portfolio will maintain an average weighted maturity of
approximately eight to twelve years. However, the Bond Fund may extend or
shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. Some of
the securities in which the Bond Fund invests may have warrants or options
attached.
Under normal market conditions, the Limited Maturity Bond Fund will invest at
least 80% of the value of its total assets in the following securities which
have remaining maturities of six years or less: bonds, debentures, notes with
remaining maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial revenue
bonds, obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, debt securities convertible into, or exchangeable for,
common stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Limited Maturity Bond Fund will invest in state and
municipal securities when, in the opinion of First of America, their yields are
competitive with comparable taxable debt obligations. In addition, up to 20% of
the value of the Limited Maturity Bond Fund's total assets may be invested in
the debt securities listed above without regard to maturity, as well as
preferred stocks, short-term debt obligations consisting of domestic and foreign
commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, repurchase agreements, securities of
other investment companies and GICs. Under normal market conditions, the Limited
Maturity Bond Fund expects to maintain a dollar-weighted average portfolio
21 PROSPECTUS--Investor C Shares
<PAGE> 165
maturity of its debt securities of three years or less. By seeking to maintain a
dollar-weighted average portfolio maturity of three years or less, the Limited
Maturity Bond Fund attempts to minimize the fluctuation in its shares' net asset
value relative to those funds which invest in longer term obligations. Some of
the securities in which the Limited Maturity Bond Fund invests may have warrants
or options attached.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Bond Fund or the Limited
Maturity Bond Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The Bond Fund and Limited Maturity Bond Fund each expects to invest in a variety
of U.S. Treasury obligations, differing in their interest rates, maturities, and
times of issuance, as well as Stripped Treasury Obligations, and other
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. See "RISK FACTORS AND INVESTMENT TECHNIQUES--Government
Obligations" below.
The Bond Fund and the Limited Maturity Bond Fund each also expects to invest in
bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures will represent unsecured promises to pay,
and in the case of notes and bonds, may be secured by mortgages on real property
or security interests in personal property and will in most cases differ in
their interest rates, maturities and times of issuance.
The Bond Fund and the Limited Maturity Bond Fund each will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups assigned by an NRSRO or, if unrated, which First of
America deems present attractive opportunities and are of comparable quality.
For a discussion of debt securities rated within the fourth highest rating
groups assigned by the NRSROS, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Medium-Grade Securities" herein.
The Bond Fund and the Limited Maturity Bond Fund each may also invest in
obligations of the Export-Import Bank of the United States, in Yankee Bonds, in
Eurodollar Bonds, in Canadian Bonds and in Supranational Agency Bonds. Each of
the Bond Fund and Limited Maturity Bond Fund may also invest up to 25% of its
net assets in foreign securities either directly or through the purchase of ADRs
and may also invest in securities issued by foreign branches of U.S. banks and
foreign banks, in CCP, and in Europaper.
An increase in interest rates will generally reduce the value of the investments
in the Bond Fund and the Limited Maturity Bond Fund and a decline in interest
rates will generally increase the value of those investments. Depending upon the
prevailing market conditions, First of America may purchase debt securities at a
discount from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value, the
yield will be lower than the coupon rate. In making investment decisions for the
Bond Fund, First of America will consider many factors other than current yield,
including the preservation of capital, the potential for realizing capital
appreciation, maturity, and yield to maturity. In making investment decisions
for the Limited Maturity Bond Fund, First of America will consider many factors
other than current yield, including the preservation of capital, maturity, and
yield to maturity.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE BOND FUND AND THE LIMITED MATURITY BOND FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Foreign Securities
- -Futures Contracts -Government Obligations -Guaranteed Investment Contracts
- -Lending Portfolio Securities -Medium-Grade Securities -Mortgage-Related Securities
- -Other Mutual Funds -Portfolio Turnover -Put and Call Options
- -Repurchase Agreements -Restricted Securities -Reverse Repurchase Agreements and
- -When-Issued and Delayed-Delivery Dollar Roll Agreements
Transactions
</TABLE>
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PROSPECTUS--Investor C Shares 22
<PAGE> 166
THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
The investment objective of the Intermediate Government Obligations Fund is to
seek current income with preservation of capital by investing in U.S. government
securities with remaining maturities of twelve years or less.
Under normal market conditions, the Intermediate Government Obligations Fund
will invest at least 80% of its total assets in obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities and with remaining
maturities of twelve years or less, although up to 20% of the value of its total
assets may be invested in debt securities, preferred stocks and other
investments without regard to maturity, except as set forth below. Under normal
market conditions, the Intermediate Government Obligations Fund expects to
maintain a dollar-weighted average portfolio maturity of its debt securities of
three to ten years. By seeking to maintain a dollar-weighted average portfolio
maturity of three to ten years, the Intermediate Government Obligations Fund
attempts to minimize the fluctuation in its shares' net asset value relative to
those funds which invest in longer-term obligations.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Intermediate Government
Obligations Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The types of U.S. government obligations invested in by the Intermediate
Government Obligations Fund will include obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Treasury, such as Treasury bills, notes, bonds and certificates of indebtedness,
and government securities, as described below in "RISK FACTORS AND INVESTMENT
TECHNIQUES-- Government Obligations."
The Intermediate Government Obligations Fund may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, as more fully described below under "RISK FACTORS AND
INVESTMENT TECHNIQUES--Government Obligations."
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Futures Contracts
- -Government Obligations -Lending Portfolio Securities -Mortgage-Related Securities
- -Municipal Securities -Other Mutual Funds -Portfolio Turnover
- -Put and Call Options -Repurchase Agreements -Restricted Securities
- -Reverse Repurchase Agreements and -When-Issued and Delayed-Delivery
Dollar Roll Agreements Transactions
</TABLE>
- --------------------------------------------------------------------------------
THE GOVERNMENT INCOME FUND
The investment objective of the Government Income Fund is to provide
shareholders with a high level of current income consistent with prudent
investment risk.
Under normal market conditions, the Government Income Fund will invest at least
65% of its total assets in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, although up to 35% of the value
of its total assets may be invested in debt securities and preferred stocks of
non-governmental issuers. Consistent with the foregoing, under current market
conditions, the Government Income Fund intends to invest up to 80% of the value
of its total assets in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. The Government Income Fund
also may invest up to 35% of its total assets in mortgage-related securities
issued by non-governmental entities and in other securities described below. For
more information, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Mortgage-Related
Securities," below.
The types of U.S. government obligations, including mortgage-related securities,
invested in by the Government Income Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes and bonds, Stripped Treasury
Obligations and government securities, as described below in "RISK FACTORS AND
INVESTMENT TECHNIQUES--Government Obligations".
23 PROSPECTUS--Investor C Shares
<PAGE> 167
The Government Income Fund may also hold short-term obligations (with maturities
of 12 months or less) consisting of domestic and foreign commercial paper
(including variable amount master demand notes), rated at the time of purchase
within the top two rating groups assigned by an NRSRO or, if unrated, which
First of America deems present attractive opportunities and are of comparable
quality bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
and reverse repurchase agreements. The Government Income Fund may also invest in
corporate debt securities which are rated at the time of purchase within the top
three rating groups assigned by an NRSRO or, if unrated, which First of America
deems present attractive opportunities and are of comparable quality.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE GOVERNMENT INCOME FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Futures Contracts
- -Government Obligations -Lending Portfolio Securities -Mortgage-Related Securities
- -Other Mutual Funds -Portfolio Turnover -Put and Call Options
- -Repurchase Agreements -Restricted Securities -Reverse Repurchase Agreements and
- -When-Issued and Delayed-Delivery Dollar Roll Agreements
Transactions
</TABLE>
- --------------------------------------------------------------------------------
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in a Fund entails certain risks. The
Funds will not acquire portfolio securities issued by, make savings deposits in,
or enter into repurchase, reverse repurchase or dollar roll agreements with
First of America Bank-Michigan, N.A. ("FOA-Michigan," the parent corporation of
First of America), BISYS, or their affiliates, and will not give preference to
FOA-Michigan's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements, reverse repurchase agreements and
dollar roll agreements.
COMPLEX SECURITIES
Some of the investment techniques utilized by First of America, and in the case
of the International Fund and Balanced Fund, Gulfstream in the management of
each of the Funds (with the exception of the Treasury Fund) involve complex
securities sometimes referred to as "derivatives." Among such securities are put
and call options, foreign currency transactions and futures contracts, all of
which are described below. The Investment Adviser and Subadviser believe that
such complex securities may, in some circumstances, play a valuable role in
successfully implementing each Fund's investment strategy and achieving its
goals. However, because complex securities and the strategies for which they are
used, are by their nature complicated, they present substantial opportunities
for misunderstanding and misuse. To guard against these risks, the Investment
Adviser and Subadviser will utilize complex securities primarily for hedging,
not speculative, purposes and only after careful review of the unique risk
factors associated with each such security.
FOREIGN SECURITIES
The International Fund invests primarily in the securities of foreign issuers.
The Balanced Fund may invest up to 15% of its total assets in foreign
securities. The Equity Fund, Small Capitalization Fund, Large Capitalization
Fund and High Income Equity Fund may invest in foreign securities as permitted
by their respective investment policies. Each of the Bond Fund and Limited
Maturity Bond Fund may also invest up to 25% of its net assets in foreign
securities either directly or through the purchase of ADRs and may also invest
in securities issued by foreign branches of U.S. banks and foreign banks, in
CCP, and in Europaper. The Government Income Fund may invest in foreign
securities by purchasing: Eurodollar certificates of deposit ("ECDs"), which are
U.S. dollar-denominated certificates of deposit issued by offices of foreign
PROSPECTUS--Investor C Shares 24
<PAGE> 168
and domestic banks outside the U.S.; Eurodollar time deposits ("ETDs"), which
are U.S. dollar-denominated deposits in a foreign branch of a U.S. or foreign
bank; Canadian time deposits ("CTDs"), which are essentially the same as ETDs,
except that they are issued by Canadian offices of major Canadian banks; Yankee
certificates of deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank but held in
the U.S.; CCP; and Europaper.
Investment in foreign securities is subject to special investment risks that
differ in some respects from those related to investments in securities of U.S.
domestic issuers. Such risks include political, social or economic instability
in the country of the issuer, the difficulty of predicting international trade
patterns, the possibility of the imposition of exchange controls, expropriation,
limits on removal of currency or other assets, nationalization of assets,
foreign withholding and income taxation, and foreign trading practices
(including higher trading commissions, custodial charges and delayed
settlements). Such securities may be subject to greater fluctuations in price
than securities issued by U.S. corporations or issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The markets on which such
securities trade may have less volume and liquidity, and may be more volatile
than securities markets in the U.S. In addition, there may be less publicly
available information about a foreign company than about a U.S.-domiciled
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the United
States. Confiscatory taxation or diplomatic developments could also affect
investment in those countries. In addition, foreign branches of U.S. banks,
foreign banks and foreign issuers may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and record
keeping standards than those applicable to domestic branches of U.S. banks and
U.S. domestic issuers.
In many instances, foreign debt securities may provide higher yields than
securities of domestic issuers which have similar maturities and quality. Under
certain market conditions these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Finally, in the event of a default of any such foreign debt obligations, it may
be more difficult for a Fund to obtain or to enforce a judgment against the
issuers of such securities. If a security is denominated in foreign currency,
the value of the security to the Fund will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of any
foreign currency against the U.S. dollar will result in a corresponding change
in the U.S. dollar value of a Fund's securities denominated in that currency.
Such changes will also affect a Fund's income and distributions to shareholders.
In addition, although a Fund will receive income on foreign securities in such
currencies, such Fund will be required to compute and distribute its income in
U.S. dollars. Therefore, if the exchange rate for any such currency declines
materially after such Fund's income has been accrued and translated into U.S.
dollars, the Fund could be required to liquidate portfolio securities to make
required distributions. Similarly, if an exchange rate declines between the time
a Fund incurs expenses in U.S. dollars and the time such expenses are paid, the
amount of such currency required to be converted into U.S. dollars in order to
pay such expenses in U.S. dollars will be greater.
U.S. dollar-denominated ADRs, which are traded in the United States on exchanges
or over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, a Fund can avoid currency risks during the
settlement period for either purchases or sales. In general, there is a large,
liquid market in the United States for many ADRs. The information available for
ADRs is subject to the accounting, auditing and financial reporting standards of
the domestic market or exchange on which they are traded, standards which are
more uniform and more exacting than those to which many foreign issuers may be
subject. The International Fund and Balanced Fund may also invest in EDRs which
are receipts evidencing an arrangement with a European bank similar to that for
ADRs and designed for use in the European securities markets. EDRs are not
necessarily denominated in the currency of the underlying security.
25 PROSPECTUS--Investor C Shares
<PAGE> 169
Certain of the ADRs and EDRs, typically those categorized as unsponsored,
require their holders to bear most of the costs of such facilities while issuers
of sponsored facilities normally pay more of the costs. The depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through the voting rights to facility holders with respect to the deposited
securities, whereas the depository of a sponsored facility typically distributes
shareholder communications and passes through the voting rights.
Subject to its applicable investment policies, each of the Growth Funds and
Growth and Income Funds may invest in debt securities denominated in the ECU,
which is a "basket" unit of currency consisting of specified amounts of the
currencies of certain of the twelve member states of the European Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies. Such adjustments may adversely affect holders of
ECU-denominated obligations or the marketability of such securities. European
governments and supranationals, in particular, issue ECU-denominated
obligations.
FOREIGN CURRENCY TRANSACTIONS
Each of the Funds may utilize foreign currency transactions in its portfolio.
The value of the assets of a Fund as measured in United States dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and a Fund may incur costs in connection with
conversions between various currencies. A Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through forward contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract ("forward currency contracts") involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These forward currency contracts are traded directly
between currency traders (usually large commercial banks) and their customers.
The Funds may enter into forward currency contracts in order to hedge against
adverse movements in exchange rates between currencies.
For example, when a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the United
States dollar cost or proceeds, as the case may be. By entering into a forward
currency contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, such
Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the United States dollar and such foreign currency. Additionally, for example,
when a Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward currency sale contract to
sell an amount of that foreign currency approximating the value of some or all
of that Fund's portfolio securities or other assets denominated in such foreign
currency. Alternatively, or when a Fund believes that the U.S. dollar may suffer
a substantial decline against a foreign currency, it may enter into a forward
currency purchase contract to buy that foreign currency for a fixed U.S. dollar
amount; however, this tends to limit potential gains which might result from a
positive change in such currency relationships. A Fund may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.
The forecasting of short-term currency market movement is extremely difficult
and whether such a short-term hedging strategy will be successful is highly
uncertain. It is impossible to forecast with precision the market value of
portfolio securities at the expiration of a forward currency contract.
Accordingly, it may be necessary for a Fund to purchase additional currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency such Fund is obligated
to deliver when a decision is made to sell the security and make delivery of the
foreign currency in settlement of a forward contract. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency such Fund is obligated to deliver.
PROSPECTUS--Investor C Shares 26
<PAGE> 170
If the Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward currency contract prices. If the
Fund engages in an offsetting transaction, it may subsequently enter into a new
forward currency contract to sell the foreign currency. Should forward prices
decline during the period between a Fund's entering into a forward currency
contract for the sale of foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, such Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, such Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
The Funds will have to convert their holdings of foreign currencies into United
States dollars from time to time. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies.
The International Fund does not intend to enter into forward currency contracts
if more than 15% of the value of its total assets would be committed to such
contracts on a regular or continuous basis. The International Fund does not
intend to enter into forward currency contracts or to maintain a net exposure in
such contracts where the International Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
For further information about the characteristics, risks and possible benefits
of options, futures and foreign currency transactions, see "INVESTMENT
OBJECTIVES AND POLICIES--Additional Information on Portfolio Instruments" in the
Statement of Additional Information.
FUTURES CONTRACTS
The Growth Funds, the Growth and Income Funds and the Income Funds may also
enter into contracts for the future delivery of securities or foreign currencies
and futures contracts based on a specific security, class of securities, foreign
currency or an index, purchase or sell options on any such futures contracts and
engage in related closing transactions. A futures contract on a securities index
is an agreement obligating either party to pay, and entitling the other party to
receive, while the contract is outstanding, cash payments based on the level of
a specified securities index.
A Fund may engage in such futures contracts in an effort to hedge against market
risks. For example, when interest rates are expected to rise or market values of
portfolio securities are expected to fall, a Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
a Fund, through the purchase of such contracts, can attempt to secure better
rates or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
The acquisition of put and call options on futures contracts will, respectively,
give a Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of a Fund's total assets, and the value of
securities that are the subject of such futures and options (both for receipt
and delivery) may not exceed one-third of the market value of a Fund's total
assets. Futures transactions will be limited to the extent necessary to maintain
each Fund's qualification as a regulated investment company.
Futures transactions involve brokerage costs and require a Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of a Fund's futures positions may not prove to be perfectly
27 PROSPECTUS--Investor C Shares
<PAGE> 171
or even highly correlated with the value of its portfolio securities or foreign
currencies, limiting the Fund's ability to hedge effectively against interest
rate, exchange rate and/or market risk and giving rise to additional risks.
There is no assurance of liquidity in the secondary market for purposes of
closing out futures positions.
GOVERNMENT OBLIGATIONS
Subject to the investment parameters described above, each of the Funds may
invest in obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities. The types of U.S. government obligations in which
each of these Funds may invest include U.S. Treasury notes, bills, bonds, and
any other securities directly issued by the U.S. government that are available
for public investment, which differ only in their interest rates, maturities,
and times of issuance. Stripped Treasury Obligations are also permissible
investments. Stripped securities are issued at a discount to their "face value"
and may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are returned to investors.
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association ("GNMA"), are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Federal National Mortgage Association ("FNMA"), are supported by the right of
the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association ("SLMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Funds which may
invest in these government obligations will invest in the obligations of such
agencies or instrumentalities only when First of America believes that the
credit risk with respect thereto is minimal.
GUARANTEED INVESTMENT CONTRACTS
The Bond Fund and the Limited Maturity Bond Fund may invest in guaranteed
investment contracts ("GICs"). When investing in GICs, the Bond Fund and the
Limited Maturity Bond Fund make cash contributions to a deposit fund of an
insurance company's general account. The insurance company then credits
guaranteed interest to the deposit fund on a monthly basis. The GICs provide
that this guaranteed interest will not be less than a certain minimum rate. The
insurance company may assess periodic charges against a GIC for expenses and
service costs allocable to it, and the charges will be deducted from the value
of the deposit fund. The Bond Fund and the Limited Maturity Bond Fund may invest
in GICs of insurance companies without regard to the ratings, if any, assigned
to such insurance companies' outstanding debt securities. Because a Fund may not
receive the principal amount of a GIC from the insurance company on seven days'
notice or less, the GIC is considered an illiquid investment. For each of the
Bond Fund and Limited Maturity Bond Fund, no more than 15% of its total assets
will be invested in instruments which are considered to be illiquid. In
determining average portfolio maturity, GICs will be deemed to have a maturity
equal to the period of time remaining until the next readjustment of the
guaranteed interest rate.
MEDIUM-GRADE SECURITIES
Each of the Balanced Fund, Bond Fund, and the Limited Maturity Bond, may invest
in fixed-income securities rated within the fourth highest rating group assigned
by an NRSRO (i.e., BBB or Baa by S&P and Moody's, respectively) and comparable
unrated securities as determined by the Investment Adviser. These types of
fixed-income securities are considered by the NRSROs to have some speculative
characteristics, and are more vulnerable to changes in economic conditions,
higher interest rates or adverse issuer-specific developments which are more
likely to lead to a weaker capacity to make principal and interest payments than
comparable higher rated debt securities.
PROSPECTUS--Investor C Shares 28
<PAGE> 172
Should subsequent events cause the rating of a fixed-income security purchased
by any of the Funds listed above to fall below the fourth highest rating, First
of America will consider such an event in determining whether the Fund should
continue to hold that security. In no event, however, would the Fund be required
to liquidate any such portfolio security where the Fund would suffer a loss on
the sale of such security.
MORTGAGE-RELATED SECURITIES
The Government Income Fund intends to invest up to 80% of the value of its total
assets in mortgage-related securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. However, the Government Income
Fund may invest greater amounts as conditions warrant. Each of the remaining
Funds, except the International Fund, may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Such agencies or instrumentalities include GNMA, FNMA and
FHLMC. Each of the Balanced Fund, Bond Fund, Limited Maturity Bond Fund,
Intermediate Government Obligations Fund and Government Income Fund may also
invest in mortgage-related securities issued by non-governmental entities which
are rated, at the time of purchase, within the three highest bond rating
categories assigned by an NRSRO or, if unrated, which First of America deems
present attractive opportunities and are of comparable quality.
The mortgage-related securities in which the these Funds may invest have
mortgage obligations backing such securities, consisting of conventional
thirty-year fixed-rate mortgage obligations, graduated payment mortgage
obligations, fifteen-year mortgage obligations and adjustable-rate mortgage
obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Because the prepayment
characteristics of the underlying mortgage obligations vary, it is not possible
to predict accurately the realized yield or average life of a particular issue
of pass-through certificates. Prepayment rates are important because of their
effect on the yield and price of the securities. Accelerated prepayments have an
adverse impact on yields for pass-throughs purchased at a premium (i.e., a price
in excess of principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-throughs purchased at a
discount. The Fund may purchase mortgage-related securities at a premium or at a
discount.
If a Fund purchases a mortgage-related security at a premium, that portion may
be lost if there is a decline in the market value of the security, whether
resulting from changes in interest rates or prepayments in the underlying
mortgage collateral. As with other interest-bearing securities, the prices of
such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-related security may decline when interest rates
rise, the converse is not necessarily true, since in periods of declining
interest rates the mortgages underlying the securities are prone to prepayment,
thereby shortening the average life of the security and shortening the period of
time over which income at the higher rate is received. When interest rates are
rising, though, the rate of prepayment tends to decrease, thereby lengthening
the period of time over which income at the lower rate is received. For these
and other reasons, a mortgage-related security's average maturity may be
shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return to the
Fund. In addition, regular payments received with respect to mortgage-related
securities include both interest and principal. No assurance can be given as to
the return a Fund will receive when these amounts are reinvested.
The principal governmental (i.e., backed by the full faith and credit of the
United States government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned United States government
29 PROSPECTUS--Investor C Shares
<PAGE> 173
corporation within the Department of Housing and Urban Development. GNMA is
authorized to guarantee, with the full faith and credit of the United States
government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks and mortgage bankers) and backed by pools of mortgages insured by the
Federal Housing Administration or guaranteed by the Veterans Administration.
Government-related (i.e., not backed by the full faith and credit of the United
States government) guarantors include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States government. FHLMC is a corporate instrumentality of the
United States government whose stock is owned by the twelve Federal Home Loan
Banks. Participation certificates issued by FHLMC are guaranteed as to the
timely payment of interest and ultimate collection of principal but are not
backed by the full faith and credit of the United States government.
The Government Income Fund also may invest up to 35% of its total assets in
mortgage-related securities issued by non-governmental entities and in other
securities described below. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issues also create pass-through pools of conventional residential
mortgage loans. Such issuers may also be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets a Fund's investment
quality standards. There can be no assurance that the private insurers can meet
their obligations under the policies. The Government Income Fund may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the loan experience and practices of the poolers, First of
America determines that the securities meet the Government Income Fund's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. The Government Income Fund will not purchase mortgage-related
securities or any other assets which in First of America's opinion are illiquid
if, as a result, more than 15% of the value of the Government Income Fund's
total assets will be illiquid.
Mortgage-related securities in which the above-named Funds may invest may also
include collateralized mortgage obligations ("CMOs"). CMOs are debt obligations
issued generally by finance subsidiaries or trusts that are secured by
mortgage-backed certificates, including, in many cases, certificates issued by
government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations.
The Government Income Fund expects that governmental, government-related or
private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments; that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may differ from customary long-term fixed-rate mortgages. As new types
of mortgage-related securities are developed and offered to investors, First of
America will, consistent with the Government Income Fund's investment objective,
policies and quality standards, consider making investments in such new types of
securities.
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MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities which may be held by
the Bond Fund and Limited Maturity Bond Fund are "general obligation" securities
and "revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue securities are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from proceeds of a special excise tax or other specific revenue source such as
the user of the facility being financed.
The above-named Funds may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Each of the above-named Funds invests primarily in Municipal Securities which
are rated at the time of purchase within the four highest rating groups assigned
by an NRSRO or in the highest rating group assigned by an NRSRO in the case of
notes, tax-exempt commercial paper or variable rate demand obligations. These
Funds may also purchase Municipal Securities which are unrated at the time of
purchase but are determined to be of comparable quality by First of America
pursuant to guidelines approved by the Group's Board of Trustees. The applicable
Municipal Securities ratings are described in the Appendix to the Statement of
Additional Information. For a discussion of debt securities rated within the
fourth highest rating group assigned by an NRSRO, see "RISK FACTORS AND
INVESTMENT TECHNIQUES--Medium Grade Securities" herein.
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Funds nor First of
America will review the proceedings relating to the issuance of Municipal
Securities or the basis for such opinions.
OTHER MUTUAL FUNDS
Each of the Funds may invest up to 5% of the value of its total assets in the
securities of any one money market mutual fund (including shares of the
Parkstone Money Market Funds: the Parkstone Prime Obligations Fund, the
Parkstone U.S. Government Obligations Fund, the Parkstone Tax-Free Fund, the
Parkstone Municipal Investor Fund, and the Parkstone Treasury Fund), provided
that no more than 10% of a Fund's total assets may be invested in the securities
of mutual funds in the aggregate. In order to avoid the imposition of additional
fees as a result of investments by a Fund in shares of the Money Market Funds of
the Group, the Investment Adviser, Administrator and their affiliates (See
"MANAGEMENT OF THE FUNDS--Investment Adviser and Subadviser" and "Administrator,
Sub-Administrator and Distributor" and "GENERAL INFORMATION--Transfer Agency and
Fund Accounting Services") will not retain any portion of their usual
asset-based service fees from a Fund that are attributable to investments by
such Fund in shares of those Money Market Mutual Funds if the fee is being taken
in the Non-Money Market Fund. The Investment Adviser and the Administrator will
promptly forward such fees to the appropriate Fund. Each Fund will incur
additional expenses due to the duplication of expenses as a result of any
investment in securities of unaffiliated mutual funds. Additional restrictions
regarding the Funds' investments in securities of unaffiliated mutual funds
and/or Money Market Funds of the Group are contained in the Statement of
Additional Information.
PUT AND CALL OPTIONS
Each of the Growth Funds, the Growth and Income Funds and the Income Funds may
purchase put and call options on securities and on foreign currencies, subject
to its applicable investment policies, for the purposes of hedging against
market risks related to its portfolio securities and adverse movements in
exchange rates between currencies, respectively. Purchasing options is a
specialized investment technique that entails a substantial risk of a complete
loss of the amounts paid as premiums to writers of options. Each Fund may also
engage in writing call options from time to time as First of America or
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Gulfstream, as the case may be with respect to the Balanced Fund or
International Fund, deem appropriate. The Funds will write only covered call
options (options on securities or currencies owned by the particular Fund). In
order to close out a call option it has written, the Fund will enter into a
"closing purchase transaction" (the purchase of a call option on the same
security or currency with the same exercise price and expiration date as the
call option which such Fund previously has written). When a portfolio security
or currency subject to a call option is sold, the Fund will effect a closing
purchase transaction to close out any existing call option on that security or
currency. If such Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security or currency until the option
expires or that Fund delivers the underlying security or currency upon exercise.
In addition, upon the exercise of a call option by the option holder, the Fund
will forego the potential benefit represented by market appreciation over the
exercise price. Under normal conditions, it is not expected that the Funds will
cause the underlying value of portfolio securities and currencies subject to
such options to exceed 50% of its net assets, and with respect to each of the
Balanced Fund and International Fund, 20% of its net assets.
Each of the Growth Funds, the Growth and Income Funds and the Government Income
Fund, as part of its options transactions, also may purchase index put and call
options and write index options. As with options on individual securities, a
Fund will write only covered index call options. Through the writing or purchase
of index options a Fund can achieve many of the same objectives as through the
use of options on individual securities. Options on securities indices are
similar to options on a security except that, rather than the right to take or
make delivery of a security at a specified price, an option on a securities
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the securities index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option.
Price movements in securities which a Fund owns or intends to purchase probably
will not correlate perfectly with movements in the level of an index and,
therefore, a Fund bears the risk of a loss on an index option that is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities. A Fund may be
required to segregate assets or provide an initial margin to cover index options
that would require it to pay cash upon exercise.
REPURCHASE AGREEMENTS
Securities held by a Fund may be subject to repurchase agreements. Under the
terms of a repurchase agreement, a Fund would acquire securities from financial
institutions such as member banks of the Federal Deposit Insurance Corporation
or registered broker-dealers which First of America or Gulfstream, as the case
may be, deem creditworthy under guidelines approved by the Group's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price would generally equal
the price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. Securities subject to repurchase agreements will be held
in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by that Fund were delayed pending court action. Repurchase
agreements are considered to be loans by an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). For further
information about repurchase agreements, see "INVESTMENT OBJECTIVES AND
POLICIES--Additional Information on Portfolio Instruments-Repurchase Agreements"
in the Statement of Additional Information.
PROSPECTUS--Investor C Shares 32
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RESTRICTED SECURITIES
Securities in which each of the Funds may invest include securities issued by
corporations without registration under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof, and securities issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2) securities are
restricted as to disposition under the federal securities laws, and generally
are sold to institutional investors such as the Funds who agree that they are
purchasing the securities for investment and not with a view to public
distribution. Any resale must also generally be made in an exempt transaction.
Section 4(2) securities are normally resold to other institutional investors
through or with the assistance of the issuer or investment dealers who make a
market in such Section 4(2) securities, thus providing liquidity. Pursuant to
procedures adopted by the Board of Trustees of the Group, First of America may
determine Section 4(2) securities to be liquid if such securities are eligible
for resale under Rule 144A under the 1933 Act and are readily saleable.
Subject to the limitations described above, the Funds may acquire investments
that are illiquid or of limited liquidity, such as private placements or
investments that are not registered under the 1993 Act. An illiquid investment
is any investment that cannot be disposed of within seven days in the normal
course of business at approximately the amount at which it is valued by a Fund.
The price a Fund pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly, the valuation of these securities will reflect any
limitations on their liquidity. A Fund may not invest in additional illiquid
securities if, as a result, more than 15% of the market value of its net assets
would be invested in illiquid securities.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS
Each of the Funds may borrow money by entering into reverse repurchase
agreements and, in the case of the Income Funds, dollar roll agreements in
accordance with the investment restrictions described below. Pursuant to reverse
repurchase agreements, a Fund would sell certain of its securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed upon date and price. Dollar roll agreements
utilized by the Income Funds are identical to reverse repurchase agreements
except for the fact that substantially similar securities may be repurchased. At
the time a Fund enters into a reverse repurchase agreement or a dollar roll
agreement, it will place in a segregated custodial account assets such as U.S.
government securities or other liquid-high grade debt securities consistent with
its investment restrictions having a value equal to the repurchase price
(including accrued interest), and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements and dollar roll agreements involve the risk that the
market value of securities sold by a Fund may decline below the price at which
it is obligated to repurchase the securities. Reverse repurchase agreements and
dollar roll agreements are considered to be borrowings by an investment company
under the 1940 Act and therefore a form of leverage. A Fund may experience a
negative impact on its net asset value if interest rates rise during the term of
a reverse repurchase agreement or dollar roll agreement. A Fund generally will
invest the proceeds of such borrowings only when such borrowings will enhance a
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction. For further information about reverse repurchase
agreements and dollar roll agreements, see "INVESTMENT OBJECTIVES AND
POLICIES--Additional Information on Portfolio Instruments-Reverse Repurchase
Agreements and Dollar Roll Agreements" in the Statement of Additional
Information.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delayed-delivery
basis. Such Funds will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage although such
transactions represent a form of leveraging. When-issued securities are
securities purchased for
33 PROSPECTUS--Investor C Shares
<PAGE> 177
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. A Fund will not
pay for such securities or start earning interest on them until they are
received. When a Fund agrees to purchase such securities, its Custodian will set
aside cash or liquid securities equal to the amount of the commitment in a
separate account. Securities purchased on a when-issued basis are recorded as an
asset and are subject to changes in the value based upon changes in the general
level of interest rates. In when-issued and delayed-delivery transactions, a
Fund relies on the seller to complete the transaction; the seller's failure to
do so may cause such Fund to miss a price or yield considered to be
advantageous.
No Fund's commitments to purchase "when-issued" securities will exceed 25% of
the value of its total assets under normal market conditions, and a commitment
by a Fund to purchase "when-issued" securities will not exceed 60 days. In the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
the value of its assets, a Fund's liquidity and the ability of First of America
or Gulfstream, as the case may be, to manage it might be adversely affected. The
Funds intend only to purchase "when-issued" securities for the purpose of
acquiring portfolio securities, not for investment leverage.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, each Fund may, from time to time, lend
its portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral will be valued daily by First of America
or by Gulfstream, as the case may be. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to that
Fund. During the time portfolio securities are on loan, the borrower pays that
Fund any dividends or interest received on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, each Fund intends to terminate the loan
and regain the right to vote if that is considered important with respect to the
investment. In the event the borrower defaults in its obligation to a Fund, such
Fund bears the risk of delay in the recovery of its portfolio securities and the
risk of loss of rights in the collateral. The Funds will enter into loan
agreements only with broker-dealers, banks, or other institutions that First of
America or Gulfstream, as the case may be, have determined are creditworthy
under guidelines established by the Group's Board of Trustees.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the lesser
of a Fund's purchases or sales of portfolio securities for the year by the
monthly average value of the portfolio securities. The SEC requires that the
calculation exclude all securities whose remaining maturities at the time of
acquisition are one year or less. The portfolio turnover rate for a Fund may
vary greatly from year to year, as well as within a particular year, and may
also be affected by cash requirements for redemptions of shares. High portfolio
turnover rates will generally result in higher transaction costs, including
brokerage commissions, to a Fund and may result in additional tax consequences
to a Fund's shareholders. Portfolio turnover will not be a limiting factor in
making investment decisions.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding shares of that Fund (as defined
in the Statement of Additional Information).
None of the Funds may:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in such issuer, or the Fund would hold more
than 10% of the outstanding voting securities of the issuer, except that
25% or less of the
PROSPECTUS--Investor C Shares 34
<PAGE> 178
value of such Fund's total assets may be invested without regard to such
limitations. There is no limit to the percentage of assets that may be
invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
For purposes of the investment limitation above, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security and, with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, a security is considered to
be issued by such non-governmental user.
None of the Funds will:
1. Purchase any securities which would cause more than 25% of the value of the
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities of
their parents; and (c) utilities will be divided according to their services.
For example, gas, gas transmission, electric and gas, electric, and telephone
will each be considered a separate industry.
2. (a) Borrow money (not including reverse repurchase agreements or dollar roll
agreements), except that each Fund may borrow from banks for temporary or
emergency purposes and then only in amounts up to 30% of its total assets at
the time of borrowing (and provided that such bank borrowings and reverse
repurchase agreements and dollar roll agreements do not exceed in the
aggregate one-third of the Fund's total assets less liabilities other than
the obligations represented by the bank borrowings, reverse repurchase
agreements and dollar roll agreements), or mortgage, pledge or hypothecate
any assets except in connection with a bank borrowing in amounts not to
exceed 30% of the Fund's net assets at the time of borrowing; (b) enter into
reverse repurchase agreements, dollar roll agreements and other permitted
borrowings in amounts exceeding in the aggregate one-third of the Fund's
total assets less liabilities other than the obligations represented by such
reverse repurchase and dollar roll agreements; and (c) issue senior
securities except as permitted by the 1940 Act rule, order or interpretation
thereunder.
3. Make loans, except that a Fund may purchase or hold debt instruments and lend
portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.
For purposes of investment limitation number 1 above only, such limitation shall
not apply to Municipal Securities or governmental guarantees of Municipal
Securities, and industrial development bonds or private activity bonds that are
backed only by the assets and revenues of a non-governmental user shall not be
deemed to be Municipal Securities.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding shares of a Fund.
Each Fund may not:
1. Purchase or otherwise acquire any securities, if as a result, more than 15%
of the Fund's net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, the Funds are subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES--Investment Restrictions" in the Statement of Additional Information.
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<PAGE> 179
MANAGEMENT OF THE FUNDS
TRUSTEES
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of all of the Group's Funds. The
Group will be managed by the Trustees in accordance with the laws of the
Commonwealth of Massachusetts governing business trusts. There are currently
four Trustees, three of whom are not "interested persons" of the Group within
the meaning of that term under the 1940 Act. The Trustees, in turn, elect the
officers of the Group to supervise actively its day-to-day operations.
The Trustees of the Group are George R. Landreth* (Chairman), Robert M. Beam,
Lawrence D. Bryan and Adrian Charles Edwards. The addresses, and principal
occupations during the past five years of the Trustees are set forth in the
Statement of Additional Information. The Trustee designated with an asterisk (*)
is considered to be an "interested person" of the Group as defined in the 1940
Act.
The Trustees of the Group receive quarterly fees and fees and expenses for each
meeting of the Board of Trustees attended. However, no officer or employee of
BISYS, The BISYS Group, Inc. or BISYS Ohio receives any compensation from the
Group for acting as a Trustee of the Group. The officers of the Group receive no
compensation directly from the Group for performing the duties of their offices.
BISYS receives fees from the Group for acting as Administrator and may receive
fees from each of the Funds pursuant to the Investor C Distribution and
Shareholder Service Plan described below. BISYS Ohio, an affiliate of BISYS,
receives fees from the Group for acting as Transfer Agent and for providing
certain fund accounting services. Mr. Landreth is an employee of BISYS.
INVESTMENT ADVISER AND SUBADVISER
First of America was established in 1932 and is the investment adviser of the
Group. First of America, a registered investment adviser, is a wholly-owned
subsidiary of FOA-Michigan, which is a wholly-owned subsidiary of First of
America Bank Corporation ("FABC"). FABC currently has over $22 billion in assets
and provides financial services to over 300 communities in Michigan, Indiana,
Illinois and Florida. As of June 30, 1996, First of America managed over $13
billion on behalf of both taxable and tax-exempt clients, including pensions,
endowments, corporations and individual portfolios. First of America acts as
subadviser to the Trust Division of FABC with respect to $5.7 billion in
discretionary assets, providing equity, fixed income, balanced and money
management services.
Subject to such policies as the Group's Board of Trustees may determine, First
of America, either directly or, with respect to the International Fund and the
Balanced Fund, through Gulfstream, furnishes a continuous investment program for
each Fund and makes investment decisions on behalf of each Fund.
First of America utilizes a team approach to the investment management of the
Funds, with up to three professionals working as a team to ensure a disciplined
investment process designed to result in long-term performance consistent with
each Fund's investment objectives. Roger H. Stamper, Managing Director of First
of America, is primarily responsible for the day-to-day management of each of
the Growth Funds (except the International Fund) and the Growth and Income
Funds. Mark R. Kummerer, Managing Director--Fixed Income of First of America, is
primarily responsible for the day-to-day management of the Income Funds. Messrs.
Stamper and Kummerer have held their respective positions with First of America
since 1988 and 1986, respectively.
For the services provided and expenses assumed pursuant to its Investment
Advisory Agreement with the Group, First of America receives a fee from the
Large Capitalization Fund, computed daily and paid monthly, at an annual rate of
0.80% of the Fund's average daily net assets. For its services in connection
with each of the Equity Fund, Small Capitalization Fund, High Income Equity Fund
and Balanced Fund, First of America's fee is computed daily and paid monthly at
the annual rate of 1.00% of the applicable Fund's average daily net assets. For
its services in connection with the International Fund, First of America's fee
is computed daily and paid monthly at the annual rate of 1.25% of the first $50
million of the International Fund's average daily net assets, 1.20% of average
daily net assets between $50 million
PROSPECTUS--Investor C Shares 36
<PAGE> 180
and $100 million, 1.15% of average daily net assets between $100 million and
$400 million and 1.05% of average daily net assets above $400 million. For its
services in connection with each Income Fund, First of America's fee is computed
daily and paid monthly at the annual rate of 0.74% of each Income Fund's average
daily net assets. First of America may periodically voluntarily reduce all or a
portion of its advisory fee with respect to a Fund to increase the net income of
that Fund available for distribution as dividends. The voluntary fee reduction
will cause the yield of that Fund to be higher than it would otherwise be in the
absence of such a reduction.
Pursuant to the terms of its Investment Advisory Agreement with the Group, First
of America has entered into a Sub-Investment Advisory Agreement with Gulfstream
100 Crescent Court, Suite 550, Dallas, Texas 75201. Pursuant to the terms of
such Sub-Investment Advisory Agreement, Gulfstream has been retained by First of
America to manage the investment and reinvestment of the assets of the
International Fund and to manage the investment and reinvestment of those assets
of the Balanced Fund which are invested in foreign securities, subject to the
direction and control of the Group's Board of Trustees.
Under this arrangement, Gulfstream is responsible for day-to-day management of
the International Fund's assets and the applicable portion of the Balanced Fund,
reviewing investment performance policies and guidelines and maintaining certain
books and records. First of America is responsible for selecting and monitoring
the performance of Gulfstream and for reporting the activities of Gulfstream in
managing these Funds to the Group's Board of Trustees. First of America may also
render advice with respect to the International Fund's investments in the U.S.
Gulfstream utilizes a team approach to investment management to ensure a
disciplined investment process designed to result in long-term performance
consistent with a Fund's investment objective. No one person is responsible for
a Fund's management.
For its services provided and expenses assumed pursuant to its Sub-Investment
Advisory Agreement with First of America, Gulfstream receives from First of
America a fee, computed daily and paid monthly, at the 0.50% of the first $50
million of the International Fund's average daily net assets and the average
daily net assets of the Balanced Fund which are invested in foreign securities,
0.45% of such average daily net assets between $50 million and $100 million,
0.40% of such average daily net assets between $100 million and $400 million and
0.30% of such average daily net assets above $400 million, provided the minimum
annual fee shall be $75,000.
Gulfstream was organized in 1991 as a Texas limited partnership by Tull, Doud,
Marsh & Triltsch, Inc., a Texas corporation ("TDMT"). TDMT is the sole general
partner of Gulfstream. TDMT is owned by C. Thomas Tull, Stephen C. Doud, James
P. Marsh and Reiner M. Triltsch. Messrs. Tull, Doud and Triltsch are the
portfolio managers and Mr. Marsh is responsible for client services with
Gulfstream. First of America is the sole limited partner, and as of August 31,
1996, exercised options to increase its interest in Gulfstream from 49% to 72%.
As of June 30, 1996, Gulfstream had over $596 million in assets of
institutional, investment company, governmental, pension fund and high net worth
individual clients under its investment management. Gulfstream's portfolio
management personnel average 20 years of investment experience and 9 years of
international investment experience.
Under Gulfstream's partnership agreement, First of America possesses veto
authority over the general budgetary affairs of Gulfstream. Because of its
current 72% ownership interest, First of America is deemed to control Gulfstream
for purposes of the 1940 Act.
For further information regarding the relationship between Gulfstream and First
of America, see "MANAGEMENT OF THE GROUP--Investment Adviser" in the Statement
of Additional Information.
ADMINISTRATOR, SUB-ADMINISTRATOR AND DISTRIBUTOR
BISYS, 3435 Stelzer Road, Columbus, Ohio 43219, is the administrator for each
Fund of the Group, and also acts as the Group's principal underwriter and
distributor (the "Administrator" or the "Distributor," as the context
indicates). First of America serves as Sub-Administrator for each Fund of the
Group and provides certain services as may be requested by BISYS from time to
time. BISYS and its affiliated companies, including BISYS Fund Services Ohio,
Inc. are wholly-owned by The BISYS Group, Inc., a
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<PAGE> 181
publicly-held company which is a provider of information processing, loan
servicing and 401(k) administration and record keeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of the Funds' administration
and operation. For expenses assumed and services provided as administrator
pursuant to its Administration Agreement with the Group, the Administrator
receives a fee from each Fund equal to the lesser of a fee, computed daily and
paid periodically at an annual rate of 0.20% of the Fund's average daily net
assets, or such other fee as may be agreed upon from time to time in writing by
the Group and the Administrator. For its services as Sub-Administrator, First of
America receives, from the Administrator, pursuant to its Sub-Administration
Agreement with BISYS, a fee not to exceed 0.05% of each Fund's average daily net
assets. The Administrator may periodically voluntarily reduce all or a portion
of its administrative fee with respect to a Fund to increase the net income of
that Fund available for distribution as dividends. The voluntary fee reduction
will cause the return of that Fund to be higher than it would otherwise be in
the absence of such reduction.
The Distributor acts as agent for the Funds in the distribution of each of their
shares and, in such capacity, solicits orders for the sale of shares,
advertises, and pays the cost of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group, but may retain some or all of any sales
charge imposed upon the Investor C Shares and may receive compensation under the
Distribution and Shareholder Service Plan described below.
EXPENSES
First of America, Gulfstream and BISYS each bear all expenses in connection with
the performance of its services as Investment Adviser, Subadviser and
Administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Group. Each Fund will bear the
following expenses relating to its operation: organizational expenses, taxes,
interest, brokerage fees and commissions, fees of the Trustees of the Group, SEC
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
shareholders, outside auditing and legal expenses, advisory and administration
fees, fees and out-of-pocket expenses of the Custodian, Transfer Agent and Fund
Accountant, certain insurance premiums, costs of maintenance of the Group's
existence, costs of shareholders' reports and meetings, and any extraordinary
expenses incurred in each Fund's operation. As a general matter, expenses are
allocated to the Investor C Shares and the other classes of shares of the Funds
on the basis of the relative net asset value of each class. The various classes
may bear certain additional retail transfer agency expenses and may also bear
certain additional shareholder service and distribution costs incurred pursuant
to a Distribution and Shareholder Service Plan.
The Trustees reserve the right, subject to the receipt of relevant regulatory
approvals or rulings, if needed, to allocate certain other expenses to the
shareholders of a particular class, including the Investor C Shares, on a basis
other than relative net asset value, as they deem appropriate ("Class
Expenses"). In such event, Class Expenses would be limited to: transfer agency
fees identified by the Transfer Agent as attributable to a specific class;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
Blue Sky registration fees incurred by a class of shares; SEC registration fees
incurred by a class of shares; expenses related to administrative personnel and
services as required to support the shareholders of a specific class; litigation
or other legal expenses relating solely to one class of shares; and Trustees'
fees incurred as a result of issues relating solely to one class of shares.
DISTRIBUTION PLAN FOR INVESTOR C SHARES
Rule 12b-1, adopted by the SEC under the 1940 Act, permits an investment company
to pay directly or indirectly expenses associated with the distribution of its
shares in accordance with a plan adopted by an investment company's trustees and
approved by its shareholders. Pursuant to such Rule, the Group has adopted an
Investor C Distribution and Shareholder Service Plan (the "Investor C Plan")
with respect to
PROSPECTUS--Investor C Shares 38
<PAGE> 182
the Investor C Shares of each Fund. Pursuant to the Investor C Plan, each Fund
is authorized to pay or reimburse BISYS, as Distributor of the Investor C
Shares, for certain expenses that are incurred in connection with shareholder
and distribution services. The Plan authorizes any Fund to pay BISYS, as
Distributor of Investor C Shares, a distribution fee in an amount not to exceed
on an annual basis 0.75% of the average daily net asset value of Investor C
Shares of such Fund (the "Distribution Fee"). Such amount may be used by BISYS
to pay banks and their affiliates (including FOA-Michigan and its affiliates),
and other institutions, including broker-dealers (collectively, "Participating
Organizations") for distribution assistance or to reimburse them for expenses
incurred in providing distribution assistance pursuant to an agreement between
BISYS and the Participating Organization. Under the Investor C Plan, BISYS, its
subsidiaries and its affiliates may be Participating Organizations.
Also pursuant to the Investor C Plan, a Fund is authorized to pay a service fee
in an amount not to exceed on an annual basis 0.25% of the average daily net
asset value of the Investor C Shares of such Fund (the "Service Fee"). Such
amount may be used to pay Participating Organizations for shareholder services
provided or expenses incurred in providing such services.
Fees paid pursuant to the Investor C Plan are accrued daily and paid monthly,
and are charged as expenses of Investor C Shares of a Fund as accrued. Payments
under the Investor C Plan will be calculated daily and paid monthly at a rate
not to exceed the limits described above, which rates are set from time to time
by the Board of Trustees.
Pursuant to the Investor C Plan, the Distributor may enter into agreements with
Participating Organizations for providing distribution assistance and
shareholder services with respect to the Investor C Shares. Such Participating
Organizations will be compensated at the annual rate of up to 1.00% (up to 0.75%
Distribution Fee plus up to 0.25% Service Fee) of the average daily net asset
value of the Investor C Shares held of record or beneficially by the
Participating Organization's customers. The distribution services provided by
Participating Organizations for which the Distribution Fee may be paid may
include promoting the purchase of Investor C Shares of a Fund by their
customers; processing purchase, exchange, and redemption requests from customers
and placing orders with the Distributor or the Transfer Agent; processing
dividend and distribution payments from a Fund on behalf of customers; providing
information periodically to customers, including information showing their
positions in Investor C Shares; responding to inquiries from customers
concerning their investment in Investor C Shares; and providing other similar
services as may be reasonably requested. The shareholder services provided by
Participating Organizations for which the Service Fee may be paid may include
providing sub-accounting with respect to Investor C Shares beneficially owned by
customers or the information necessary for sub-accounting; arranging for bank
wires; and other continuing personal services to holders of Investor C Shares.
Actual distribution and shareholder service expenses for Investor C Shares at
any given time may exceed the Rule 12b-1 fees and contingent deferred sales
charges collected. These unrecovered amounts plus interest thereon will be
carried forward and paid from future Rule 12b-1 fees and contingent deferred
sales charges collected. If the Investor C Plan were terminated or not
continued, the Group would not be contractually obligated to pay for any
expenses not previously reimbursed by the Group or recovered through contingent
deferred sales charges.
Conflict of interest restrictions may apply to the receipt by Participating
Organizations of compensation from BISYS in connection with the investment of
fiduciary assets in Investor C Shares. Institutions, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board, or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor, or state
securities commissions, are urged to consult their legal advisers before
investing such assets in Investor C Shares.
As authorized by the Investor C Plan, BISYS has entered into a Participating
Organization Agreement with First of America Securities, Inc. ("FSI"), a
wholly-owned subsidiary of FABC, pursuant to which FSI has agreed to provide
certain shareholder and distribution services in connection with Investor C
Shares of the Funds purchased through accounts of FSI. Such services include,
but are not limited to, printing and distributing prospectuses to persons other
than holders of Investor C Shares of the Funds and printing
39 PROSPECTUS--Investor C Shares
<PAGE> 183
and distributing advertising and sales literature in connection with the sale of
Investor C Shares; answering routine customer questions concerning the Funds and
providing such personnel and equipment as is necessary and appropriate to
accomplish such matters. In consideration for such services, BISYS has agreed to
pay FSI a monthly fee, computed at an annual rate of 1.00% of the average
aggregate net asset value of Investor C Shares held during the period for which
FSI has provided services under the Agreement. BISYS will be compensated by the
Funds in an amount equal to the payments to FSI under the Participating
Organization Agreement. Such fee may exceed the actual costs incurred by FSI in
providing the services.
The Group understands that Participating Organizations may charge fees to their
customers who are owners of Investor C Shares for additional services provided
in connection with their customer accounts. These fees would be in addition to
any amounts which may be received by a Participating Organization under its
Agreement with BISYS. Customers of Participating Organizations should read this
Prospectus in light of the terms governing their account with a Participating
Organization.
The Investor C Plan requires the officers of the Group to provide the Board of
Trustees at least quarterly with a written report of the amounts expended
pursuant to the Plan and the purposes for which such expenditures were made. The
Board reviews these reports in connection with its decisions with respect to the
Plan.
As required by Rule 12b-1, the Investor C Plan was approved by the Trustees of
the Group, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Group and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan ("Independent Trustees"). The Investor C Plan continues in effect as
long as such continuance is specifically approved at least annually by the
Group's Trustees, including a majority of the Independent Trustees.
The Investor C Plan may be terminated by a vote of a majority of the Independent
Trustees, or by a vote of a majority of the holders of the outstanding voting
securities of the Investor C Shares. Any change in the Investor C Plan that
would increase materially the distribution expenses paid by a Fund requires
shareholder approval; otherwise, the Plan may be amended by the Trustees,
including a majority of the Independent Trustees by a vote cast in person at a
meeting called for the purpose of voting upon the amendment. As long as the
Investor C Plan is in effect, the selection or nomination of the Independent
Trustees is committed to the discretion of the Independent Trustees.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Ohio, 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Group's
Transfer Agent pursuant to a Transfer Agency Agreement with the Group and
receives a fee for such services. BISYS Ohio also provides certain accounting
services for each of the Funds and receives a fee for such services. See
"MANAGEMENT OF THE GROUP--Custodian, Transfer Agent and Fund Accounting
Services" in the Statement of Additional Information for further information.
While BISYS Ohio is a distinct legal entity from BISYS (the Group's
Administrator and Distributor), BISYS Ohio is considered to be an affiliated
person of BISYS under the 1940 Act due to, among other things, the fact that
BISYS Ohio and BISYS are both owned by The BISYS Group, Inc.
BANKING LAWS
First of America believes that it may perform the investment advisory services
for the Group's Funds contemplated by the Investment Advisory Agreement and by
this Prospectus without violating applicable banking laws or regulations. FSI
believes that it may provide the shareholder and distributor services
contemplated by its Participating Organization Agreement with BISYS and by this
Prospectus without violating applicable banking laws or regulations. Future
changes in federal or state statutes and regulations relating to permissible
activities of banks or bank holding companies and their subsidiaries and
affiliates as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations could change the
manner in which First of America or FSI could continue to
PROSPECTUS--Investor C Shares 40
<PAGE> 184
perform such services for the Group. See the Statement of Additional Information
("MANAGEMENT OF THE GROUP--Glass-Steagall Act") for further discussion.
HOW TO BUY INVESTOR C SHARES
Investor C Shares of each Fund are continuously offered and may be purchased
directly either by mail, by telephone, or by wire. Investor C Shares may also be
purchased through a broker-dealer who has entered into a dealer agreement with
the Distributor. Except as otherwise discussed below under "Other Information
Regarding Purchases" and "Auto Invest Plan," the minimum initial investment in a
Fund, based upon the public offering price, is $1,000; however, there is no
minimum subsequent purchase. Shareholders will pay the next calculated net asset
value after the receipt by the Distributor of an order to purchase Investor C
Shares. In the case of an order for the purchase of shares placed through a
broker-dealer, it is the responsibility of the broker-dealer to transmit the
order to the Distributor promptly. Investor C Shares are currently offered only
to (i) employee benefit plans qualified under Section 401 of the Code, subject
to requirements established by the Distributor, and (ii) retail investors that
purchase Investor C Shares through a broker or dealer that has entered into a
sales agreement with the Distributor.
BY MAIL
To purchase Investor C Shares of any of the Funds by mail, complete an Account
Application Form and return it along with a check or money order made payable to
The Parkstone Group of Funds at the following address:
The Parkstone Group of Funds
P.O. Box 50551
Kalamazoo, MI 49005-0551
An Account Application Form can be obtained by calling the Group at (800)
451-8377.
BY TELEPHONE OR BY WIRE
To purchase Investor C Shares of any of the Funds by telephone or by wire, your
Account Application Form must have been previously received by the Distributor.
To place an order by telephone or by wire, call the Group's toll-free number
(800) 451-8377. Payment for such Investor C Shares ordered by telephone may be
made by check and must be received by the Group's Custodian within seven
calendar days of the telephone order. If payment for such Investor C Shares is
not received within seven days, or if a check timely received does not clear,
the purchase may be canceled and the investor could be liable for any losses or
fees incurred. When purchasing Investor C Shares by wire, contact the
Distributor for wire instructions.
OTHER INFORMATION REGARDING PURCHASES
Investor C Shares may also be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by FABC or one of its
affiliates. Investor C Shares of the Funds sold to FABC or the affiliate acting
in a fiduciary, advisory, custodial, or other similar capacity on behalf of
Customers will normally be held of record by FABC or the affiliate. With respect
to such Investor C Shares so sold, it is the responsibility of the holder of
record to transmit purchase or redemption orders to the Distributor and to
deliver funds for the purchase thereof on a timely basis. Beneficial ownership
of such Investor C Shares of the Funds will be recorded by FABC or one of its
affiliates and reflected in the account statements provided to Customers. FABC
or one of its affiliates may exercise voting authority for those Investor C
Shares for which it has been granted authority by the Customer.
Investor C Shares of the Funds are purchased at the net asset value per share
(see "HOW SHARES ARE VALUED") next determined after receipt by the Distributor
of an order to purchase shares plus any applicable sales charge as described
below. Purchases of Investor C Shares in any of the Funds will be effected only
on a Business Day (as defined in "HOW SHARES ARE VALUED") of the applicable
Fund. An
41 PROSPECTUS--Investor C Shares
<PAGE> 185
order received prior to the Valuation Time on any Business Day will be executed
at the net asset value determined as of the Valuation Time on the date of
receipt. An order received after the Valuation Time on any Business Day will be
executed at the net asset value determined as of the Valuation Time on the next
Business Day of that Fund. Investor C Shares of the Funds are eligible to earn
dividends on the first Business Day after the purchase is executed. Investor C
Shares continue to be eligible to earn dividends through the day before
redemption.
The minimum initial investment amount of $1,000 referred to above may be waived
if purchases are made in connection with Individual Retirement Accounts (IRAs),
Keoghs or similar plans. For information on IRAs, Keoghs or similar plans,
contact FABC at (800) 544-6155. Due to the relatively high cost of handling
small investments, the Group reserves the right to redeem involuntarily, at net
asset value, the Investor C Shares of any shareholder if, because of redemptions
of Investor C Shares by or on behalf of the shareholder (but not as a result of
a decrease in the market price of such Investor C Shares, the deduction of any
sales charge or the establishment of an account with less than $1,000 using the
Auto Invest Plan), the account of such shareholder in that Fund has a value of
less than $1,000. Accordingly, an investor purchasing Investor C Shares of a
Fund in only the minimum investment amount may be subject to such involuntary
redemption if the investor thereafter redeems any such Investor C Shares. If at
any time a shareholder's account balance falls below $1,000, upon 30 days'
notice, the Group may exercise its right to redeem such Investor C Shares and to
send the proceeds to the shareholder.
Depending upon the terms of a particular Customer account, FABC or one of its
affiliates may charge a Customer account fees for services provided in
connection with investment in a Fund. Information concerning these services and
any charges may be obtained from FABC or the affiliate. This Prospectus should
be read in conjunction with any such information so received.
The Group reserves the right to reject any order for the purchase of Investor C
Shares in whole or in part.
Every shareholder will receive a confirmation of each new transaction in the
shareholder's account, which will also show the total number of Investor C
Shares of the respective Fund of the Group owned by the shareholder.
Confirmation of purchases and redemptions of Investor C Shares of the Funds by
FABC or one of its affiliates on behalf of a Customer may be obtained from FABC
or the affiliate. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Investor C Shares of the Funds will not
be issued.
AUTO INVEST PLAN
The Parkstone Group of Funds Auto Invest Plan (the "Auto Invest Plan") enables
shareholders to make regular monthly or quarterly purchases of Investor C Shares
through automatic deduction from their bank accounts. With shareholder
authorization, the Group's Transfer Agent will deduct the amount specified
(subject to the applicable minimums) from the shareholder's bank account which
will automatically be invested in shares at the public offering price on the
date of such deduction (or the next Business Day thereafter, as defined under
"HOW SHARES ARE VALUED" below). The required minimum initial investment when
opening an account using the Auto Invest Plan is $100; the minimum amount for
subsequent investments in a Fund is $50. To participate in the Auto Invest Plan,
shareholders should complete the appropriate section of the Account Application
Form or a supplemental Auto Invest Plan application that can be acquired by
calling the Group at (800) 451-8377. For a shareholder to change the Auto Invest
Plan instructions, the request must be made in writing to the Group's
Distributor, BISYS Fund Services, c/o The Parkstone Group of Funds, 3435 Stelzer
Road, Columbus, Ohio 43219 and may take up to 15 days to implement.
SALES CHARGES
There is no sales charge imposed upon purchases of Investor C Shares, but
investors may be subject to a contingent deferred sales charge of up to 1.00%
when Investor C Shares are redeemed prior to one year from the date of purchase.
See "CONTINGENT DEFERRED SALES CHARGE" below.
PROSPECTUS--Investor C Shares 42
<PAGE> 186
From time to time dealers who receive dealer discounts and brokerage commissions
from the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers.
In addition to amounts paid to dealers as a dealer concession out of the sales
charge paid by investors, if any, the Distributor may, from time to time, at its
expense or as an expense for which it may be reimbursed under the Investor C
Plan, pay a bonus or other consideration or incentive to dealers who sell a
minimum dollar amount of shares of a Fund during a specified period of time. The
Distributor also may, from time to time, arrange for the payment of additional
consideration to dealers not to exceed 6.25% of the offering price per share on
all sales of Investor C Shares as an expense of the Distributor or for which the
Distributor may be reimbursed under the Investor C Plan or upon receipt of a
contingent deferred sales charge. Any such additional consideration or incentive
program may be terminated at any time by the Distributor.
The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of any of the Funds of the Group.
Compensation may include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Group, and/or
other dealer-sponsored special events. In some instances, this compensation may
be made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of such shares. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to exotic locations within or outside of the United States for meetings or
seminars of a business nature. The Distributor, at its expense, currently
conducts an annual sales contest for dealers in connection with their sales of
shares of the Funds. Dealers may not use sales of a Fund's shares to qualify for
this compensation to the extent such may be prohibited by the laws of any state
or any self-regulatory agency, such as the National Association of Securities
Dealers, Inc.
CONTINGENT DEFERRED SALES CHARGE
Investor C Shares which are redeemed prior to one year from the date of purchase
will be subject to a contingent deferred sales charge equal to 1.00% of the
lesser of net asset value at the time of purchase of the Investor C Shares being
redeemed or net asset value of such shares at the time of redemption. For an
indefinite period of time, however, which may be discontinued upon notice by the
Distributor in a supplement to this Prospectus, Investor C Shares are available
for investment without the imposition of a contingent deferred sales charge upon
redemption.
Accordingly, a contingent deferred sales charge will not be imposed on amounts
representing increases in net asset value above the net asset value at the time
of purchase. In addition, a charge will not be assessed on Investor C Shares
purchased through reinvestment of dividends or capital gains distributions.
Solely for purposes of determining the number of years which have elapsed from
the time of purchase of any Investor C Shares, all purchases during a month will
be aggregated and deemed to have been made on the last day of the month. In
determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for more than one year or shares acquired
pursuant to reinvestment of dividends or distributions.
For example, assume an investor purchased 100 Investor C Shares with a net asset
value of $10 per share (i.e., at an aggregate net asset value of $1,000) and in
the eleventh month after purchase, the net asset value per share is $12 and,
during such time, the investor has acquired five additional Investor C Shares
through dividend reinvestment. If at such time the investor makes his first
redemption of 50 Investor C Shares (producing proceeds of $600), five of such
shares will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 45 Investor C Shares being redeemed, the charge will be
applied only to the original cost of $10 per share and not to the increase in
net asset value of
43 PROSPECTUS--Investor C Shares
<PAGE> 187
$2 per share. Therefore, only $450 of the $600 redemption proceeds will be
subject to the charge of 1.00%, totalling $4.50.
The contingent deferred sales charge is waived on redemptions of Investor C
Shares (i) following the death or disability (as defined in the Code) of a
shareholder (or both shareholders in the case of joint accounts), (ii) to the
extent that the redemption represents a minimum required distribution from an
IRA or a Custodial Account under Code Section 403(b)(7) to a shareholder who has
reached age 70 1/2, and (iii) to the extent the redemption represents the
minimum distribution from retirement plans under Code Section 401(a) where such
redemptions are necessary to make distributions to plan participants.
DIRECTED DIVIDEND OPTION
A shareholder may elect to have all income dividends and capital gains
distributions paid by check, reinvested in the Fund or reinvested in any of the
Group's other Funds, without the payment of a sales charge (provided the other
Fund is maintained at the minimum required balance). If you elect to receive
distributions paid by check and the check (1) is returned and marked as
"undeliverable" or (2) remains uncashed for six months, your payment election
will be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks that remain uncashed for six months will be cancelled and
reinvested in the Fund at the per share net asset value determined as of the
date of cancellation.
The Directed Dividend Option may be modified or terminated by the Group at any
time after notice to participating shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the shareholder at any time by
writing the Distributor.
EXCHANGE PRIVILEGE
The exchange privilege enables shareholders of Investor C Shares to acquire
Investor C Shares that are offered by another Fund of the Group with a different
investment objective. This exchange privilege does not apply to other classes of
shares of a Fund. For example, holders of a Fund's Investor C Shares may not
exchange their shares for Investor A Shares, and holders of a Fund's Investor A
Shares may not exchange their shares for Investor C Shares.
Holders of Investor C Shares of one of the Group's Funds (including Investor C
Shares acquired through reinvestment of dividends and distributions on such
shares) may exchange those Investor C Shares at net asset value without the
imposition of a contingent deferred sales charge for Investor C Shares offered
by any of the Group's other Funds, provided that the amount to be exchanged
meets the applicable minimum investment requirements and the exchange is made in
states where it is legally authorized.
An exchange is considered a sale of shares on which a shareholder may realize a
capital gain or loss for federal income tax purposes. A shareholder may not
include any sales charge on shares of a Fund as a part of the cost of those
shares for purposes of calculating the gain or loss realized on an exchange of
those shares within 90 days of their purchase. An exchange of will not be
considered a redemption on which a contingent deferred sales charge will be
applicable. Redemptions of Investor C Shares which have been exchanged will be
subject to contingent deferred sales charges based upon the date of the purchase
of the original Investor C Shares.
A shareholder wishing to exchange his or her shares may do so by contacting the
Group at (800) 451-8377 or by providing written instructions to the Transfer
Agent. Any shareholder who wishes to make an exchange should obtain and review
the current Prospectus of the Fund of the Group in which the shareholder wishes
to invest before making the exchange. For a discussion of risks associated with
unauthorized telephone exchanges, see "HOW TO REDEEM YOUR INVESTOR C SHARES--By
Telephone" below.
PROSPECTUS--Investor C Shares 44
<PAGE> 188
FACTORS TO CONSIDER WHEN SELECTING INVESTOR C SHARES
Before purchasing Investor C Shares of a Fund, investors should consider
whether, during the anticipated life of their investment in the Fund, the
accumulated Rule 12b-1 fees and potential contingent deferred sales charges on
Investor C Shares prior to conversion (as described below) would be less than
the initial sales charge and accumulated Rule 12b-1 fees on shares of a
traditionally-priced fund (the Group's Investor A Shares are an example of such
a fund) purchased at the same time, and to what extent such differential would
be offset by the higher yield of a traditionally-priced fund. To the extent that
the sales charge for the Investor A Shares is waived or reduced by one of the
methods described above, investments in Investor A Shares become more desirable.
Although Investor A Shares are subject to Rule 12b-1 fees, they are not subject
to the higher Rule 12b-1 fees applicable to Investor C Shares. For this reason,
Investor A Shares can be expected to pay correspondingly higher dividends per
share. However, because initial sales charges are deducted at the time of
purchase, purchasers of Investor A Shares that do not qualify for waivers of or
reductions in the initial sales charge would have less of their purchase price
initially invested in a Fund than purchasers of Investor C Shares.
As described above, purchasers of Investor C Shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor C Shares. Because the Group's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor C Shares would, however, own shares that are subject to
higher annual expenses and, for a one-year period, such shares would be subject
to a contingent deferred sales charge of 1.00% upon redemption. Investors
expecting to redeem during this one-year period should compare the cost of the
contingent deferred sales charge plus the aggregate annual Investor C Shares'
Rule 12b-1 fees to the cost of the initial sales charge and Rule 12b-1 fees on
the Investor A Shares. Over time, the expenses of the annual Rule 12b-1 fees on
the Investor C Shares may equal or exceed the initial sales charge and annual
Rule 12b-1 fees applicable to Investor A Shares. For example, if net asset value
remains constant, the aggregate Rule 12b-1 fees with respect to Investor C
Shares on the Funds would equal or exceed the initial sales charge and aggregate
Rule 12b-1 fees of Investor A Shares approximately seven years after the
purchase. In order to reduce such fees for investors that hold Investor C Shares
for more than nine years, Investor C Shares will be automatically converted to
Investor A Shares, as described below, at the end of such nine-year period. This
example assumes that the initial purchase of Investor A Shares would be subject
to the maximum initial sales charge of 4.50%. This example does not take into
account the time value of money which reduces the impact of the Investor C
Shares' administrative and Rule 12b-1 fees on the investment, the benefit of
having the additional initial purchase price invested during the period before
it is effectively paid out as administrative and Rule 12b-1 fees, fluctuations
in net asset value or the effect of different performance assumptions.
CONVERSION FEATURE
Investor C Shares which have been outstanding for nine years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A Shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fees of the Investor C Plan. Such conversion will be on the
basis of the relative net asset values of the two classes, without the
imposition of any sales charge or other charge except that the Rule 12b-1 fees
applicable to Investor A Shares shall thereafter be applied to such converted
shares. Such investors will then benefit from the lower Rule 12b-1 fees of
Investor A Shares. Because the per share net asset value of the Investor A
Shares may be higher than that of the Investor C Shares at the time of
conversion, a shareholder may receive fewer Investor A Shares than the number of
Investor C Shares converted, although the dollar value will be the same.
Reinvestments of dividends and distributions in Investor C Shares will not be
considered new purchases for purposes of the conversion feature.
The Investor A Shares into which the Investor C Shares will convert will differ
only in the amount of the Rule 12b-1 fees assessed to the shareholders. The Rule
12b-1 fees which may be assessed to holders of
45 PROSPECTUS--Investor C Shares
<PAGE> 189
Investor A Shares is equal to 0.25% of the average daily net assets of the
Investor A Shares owned, rather than 1.00% of the average daily net assets
assessed to holders of Investor C Shares.
If a shareholder effects one or more exchanges among Investor C Shares of the
Funds during the nine-year period, the holding period for shares so exchanged
will be counted toward such period.
HOW TO REDEEM YOUR INVESTOR C SHARES
Shareholders may redeem their Investor C Shares, subject to the contingent
deferred sales charge described above, on any day that net asset value is
calculated (see "HOW SHARES ARE VALUED"). Redemptions will be effected at the
net asset value per share next determined after receipt of a redemption request.
Redemptions may be requested by mail or by telephone.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to honor the request. The Transfer Agent's address is: BISYS Fund Services Ohio,
Inc., c/o The Parkstone Group of Funds, Department L-1270, Columbus, Ohio
43260-1270. The Transfer Agent will require a signature guarantee by an eligible
guarantor institution. The signature guarantee requirement will be waived if all
of the following conditions apply: (1) the redemption check is payable to the
shareholder(s) of record, and (2) the redemption check is mailed to the
shareholder(s) at the address of record. The shareholder may also have the
proceeds mailed to a commercial bank account previously designated on the
Account Application Form. There is no charge for having redemption proceeds
mailed to a designated bank account. To change the address to which a redemption
check is to be mailed, a written request therefor must be received by the
Transfer Agent. In connection with such request, the Transfer Agent will require
a signature guarantee by an eligible guarantor institution.
For purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations as those terms are
defined in the Securities Exchange Act of 1934. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that neither is a member of a clearing corporation nor maintains net
capital of at least $100,000.
BY TELEPHONE
Investor C Shares may be redeemed by telephone if the Account Application Form
reflects that the shareholder has that capability. The shareholder may have the
proceeds mailed to his or her address or mailed or wired to a commercial bank
account previously designated on the Account Application Form. Under most
circumstances, payments will be transmitted on the next Business Day. Wire
redemption requests may be made by the shareholder by telephone to the Group at
(800) 451-8377. While the Transfer Agent currently does not charge a wire
redemption fee, the Transfer Agent reserves the right to impose such a fee in
the future.
The Group's Account Application Form provides that neither BISYS, the Transfer
Agent, the Group or any of their affiliates or agents will be liable for any
loss, expense or cost when acting upon any oral, wired or electronically
transmitted instructions or inquiries believed by them to be genuine. While
precautions will be taken, shareholders bear the risk of any loss as the result
of unauthorized telephone redemptions or exchanges believed by the Transfer
Agent to be genuine. If the telephone feature was not originally selected, the
shareholder must provide written instructions to the Group to add it. The Group
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine; if these procedures are not followed, the Group may be
liable for any losses due to unauthorized or fraudulent instructions. These
procedures include recording all phone conversations, sending confirmations to
shareholders within 72 hours of the telephone transaction, verifying the account
name and a shareholder's account number or tax identification number and sending
redemption proceeds only to the address of record or to a previously authorized
bank account. If, due to temporary adverse conditions, investors are
PROSPECTUS--Investor C Shares 46
<PAGE> 190
unable to effect telephone transactions, shareholders may mail the request to
the Transfer Agent. In addition, redemption by telephone will be suspended for a
period of 10 days following any change in the applicable telephone number.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables shareholders of a Fund to make regular monthly
or quarterly redemptions of Investor C Shares, subject to applicable contingent
deferred sales charges. With shareholder authorization, the Transfer Agent will
automatically redeem such Investor C Shares at the net asset value on the
fifteenth day of the month or quarter (or the next Business Day thereafter) and
have the amount specified transferred according to the written instructions of
the shareholder. Shareholders participating in this plan must maintain a minimum
account balance of $1,000. The required minimum withdrawal is $100, monthly or
quarterly.
The Auto Withdrawal Plan may be modified or terminated without notice. In
addition, the Group may suspend a shareholder's withdrawal plan without notice
if the account contains insufficient funds to effect a withdrawal or in the
event that the account balance is less than the minimum $1,000 amount.
To participate in the Auto Withdrawal Plan, shareholders should call (800)
451-8377 for more information. Purchases of additional Investor C Shares
concurrently with withdrawals may be disadvantageous to certain shareholders
because of tax liabilities and sales charges. For a shareholder to change the
Auto Withdrawal Plan instructions, the request must be made in writing to the
Distributor and may take up to 15 days to implement.
OTHER INFORMATION REGARDING REDEMPTION OF SHARES
All or part of a Customer's Investor C Shares may be redeemed in accordance with
instructions and limitations pertaining to his or her account at FABC or one of
its affiliates.
All redemption orders are effected at the net asset value per share next
determined after the Investor C Shares are properly tendered for redemption, as
described above. The proceeds paid upon redemption of such Investor C Shares in
the Funds, less any applicable contingent deferred sales charge, may be more or
less than the amount invested. Payment to shareholders for such Investor C
Shares redeemed will be made within seven days after receipt by the Transfer
Agent of the request for redemption. However, to the greatest extent possible,
requests from shareholders for next day payments upon redemption of Investor C
Shares will be honored if received by the Transfer Agent before 4:00 p.m.
(Eastern Time) on a Business Day or, if received after 4:00 p.m. (Eastern Time),
within two Business Days, unless it would be disadvantageous to the Group or the
shareholders of a Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner.
At various times, the Group may be requested to redeem Investor C Shares for
which it has not yet received good payment. In such circumstances, the
forwarding of proceeds may be delayed until payment has been collected for the
purchase of such Investor C Shares which delay may be for 15 days or more. Such
delay may be avoided if such Investor C Shares are purchased by wire transfer of
federal funds. The Group intends to pay cash for all Investor C Shares redeemed,
but under abnormal conditions which make payment in cash unwise, payment may be
made wholly or partly in portfolio securities at their then market value equal
to the redemption price. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
See the Statement of Additional Information ("ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION") for examples of when the right of redemption may be suspended.
HOW SHARES ARE VALUED
The net asset value of Investor C Shares of the Funds is determined and the
shares are priced as of the close of trading on the New York Stock Exchange (the
"NYSE") on each Business Day (generally 4:00 p.m. Eastern Time) (the "Valuation
Time"). A "Business Day" is a day on which the NYSE and the
47 PROSPECTUS--Investor C Shares
<PAGE> 191
Federal Reserve Board of Chicago are open for trading and any other day (other
than a day on which no shares are tendered for redemption and no order to
purchase any shares is received) during which there is sufficient trading in a
Fund's portfolio instruments that its net asset value per share might be
materially affected. Currently, the NYSE or the Federal Reserve Board of Chicago
will not open in observance of the following holidays: New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving and
Christmas.
Net asset value per share for a particular class for purposes of pricing sales
and redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund allocable to such class, less the liabilities charged
to that Fund allocable to such class and any liabilities charged directly to
that class, by the number of outstanding shares of such class. The net asset
value per share will fluctuate as the value of the investment portfolio of a
Fund changes.
The securities in each Fund will be valued at market value. If market quotations
are not available, the securities will be valued by a method which the Board of
Trustees believes accurately reflects fair value. Foreign securities are valued
based on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. For further information about valuation of investments, see "NET ASSET
VALUE" in the Statement of Additional Information.
DIVIDENDS AND TAXES
GENERAL
Net income is declared monthly as a dividend to shareholders at the close of
business on the day of declaration and is paid monthly. Distributable net
realized capital gains are distributed at least annually. A shareholder will
automatically receive all income dividends and capital gains distributions in
additional full and fractional shares at net asset value as of the date of
declaration, unless the shareholder elects to receive dividends or distributions
in cash or elects to participate in the Directed Dividend Option. Such election,
or any revocation thereof, must be made in writing to the Transfer Agent at 3435
Stelzer Road, Columbus, Ohio 43219, and will become effective with respect to
dividends and distributions having record dates after its receipt by the
Transfer Agent.
Each Fund's net investment income available for distribution to the holders of
Investor C Shares will be reduced by the amount of Rule 12b-1 fees payable to
Participating Organizations under the Investor C Plan. Each Fund's net
investment income available for distribution to the holders of Investor C Shares
may also be reduced by the amount of retail transfer agency fees payable to the
Transfer Agent applicable to the Investor C Shares.
Each of the Funds of the Group is treated as a separate entity for federal
income tax purposes. Each Fund intends to qualify as a "regulated investment
company" under the Code, for so long as such qualification is in the best
interest of its shareholders and each intends to distribute all of its net
income and capital gains so that it is not required to pay federal income taxes
on amounts so distributed to shareholders.
To avoid federal income tax, the Code requires each Fund to distribute each
taxable year at least 90% of its investment company taxable income and at least
90% of its exempt-interest income. In addition, to avoid imposition of a
non-deductible 4% excise tax, each Fund is required annually to distribute,
prior to calendar year end, 98% of taxable ordinary income on a calendar year
basis, 98% of capital gain net income realized in the twelve months preceding
October 31, and the balance of undistributed taxable ordinary income and capital
gain net income from the prior calendar year.
A shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term loss would treat it as a receipt of
ordinary income. The dividends-received deduction for corporations will apply to
the aggregate of such ordinary income distributions in the same proportion as
the aggregate dividends from domestic corporations, if any, received by that
Fund bear to its gross income. A shareholder will not be able to take the
dividends-received deduction unless that shareholder holds the shares for at
least 46 days.
PROSPECTUS--Investor C Shares 48
<PAGE> 192
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to its shareholders as long-term capital gain
in the year in which it is received, regardless of how long the shareholder has
held shares. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares prior to the record
date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to taxation.
Taxes may be imposed on the Funds, particularly the Balanced Fund and
International Fund, by foreign countries with respect to income received on
foreign securities. If more than 50% of the value of a Fund's assets at the
close of its taxable year consists of stocks or securities of foreign
corporations, the Fund may elect to treat any foreign income taxes it paid as
paid by its shareholders. In this case, shareholders generally will be required
to include in income their pro rata share of such taxes, but will then be
entitled to claim a credit or deduction for their share of such taxes. However,
a particular shareholder's ability to utilize such a credit will be subject to
certain limitations imposed by the Code. The Funds will report to their
shareholders each year the amount, if any, of foreign taxes per share that they
have elected to have treated as paid by their shareholders.
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made during the year.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors are advised to consult their tax advisers concerning state and local
taxes, which may differ from the federal income taxes described above.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing their average
annual total return, aggregate total return and/or yield may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return of a class of shares in a Fund will be
calculated for the period since the establishment of the Funds and will reflect
the imposition of the maximum sales charge, if any. Average annual total return
is measured by comparing the value of an investment in a class of shares in a
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of annualized.
Yield of a class of shares will be computed by dividing a class of shares' net
investment income per share earned during a recent one-month period by that
class of shares' per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) on the last day of the
period and annualizing the result. Each Fund may also present its average annual
total return, aggregate total return and yield, as the case may be, excluding
the effect of a sales charge, if any.
In addition, from time to time the Funds may present their respective
distribution rates for a class of shares in shareholder reports and supplemental
sales literature which is accompanied or preceded by a prospectus. Distribution
rates will be computed by dividing the distribution per share of a class made by
a Fund over a twelve-month period by the maximum offering price per share. The
calculation of income in the distribution rate includes both income and capital
gains dividends and does not reflect unrealized gains or losses, although a Fund
may also present a distribution rate excluding the effect of capital gains. The
distribution rate differs from the yield, because it includes capital gains
which are often non-recurring in nature, whereas yield does not include such
items. Distribution rates may also be presented excluding the effect of a sales
charge, if any.
49 PROSPECTUS--Investor C Shares
<PAGE> 193
Standardized yield and total return quotations will be computed separately for
Investor C Shares and the other classes of the Funds. Because of differences in
the fees and/or expenses borne by different classes of shares of the Funds, the
net yield and total return on Investor C Shares may be different from that for
another class of the same Fund. For example, net yield and total return on
Investor C Shares is expected, at any given time, to be lower than the net yield
and total return on Institutional Shares for the same period.
Investors may also judge the performance of any class of shares or Fund by
comparing or referencing it to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices such as those prepared by various services and published by such
services or by other services or publications, including, but not limited to,
ratings published by Morningstar, Inc. In addition to performance information,
general information about the Funds that appears in such publications may be
included in advertisements, in sales literature and in reports to shareholders.
For further information regarding such services and publications, see
"ADDITIONAL INFORMATION--Performance Comparisons" in the Statement of Additional
Information.
Total return and yield are functions of the type and quality of instruments held
in the portfolio, levels of operating expenses and changes in market conditions.
Consequently, total return and yield will fluctuate and are not necessarily
representative of future results. Any fees charged by FABC or any of its
affiliates with respect to customer accounts for investing in shares of the
Funds will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted. In addition, if First of
America and BISYS voluntarily reduce all or a part of their respective fees, as
further discussed above, the total return of such Fund will be higher than it
would otherwise be in the absence of such voluntary fee reductions.
FUNDATA(R)
Shareholders of the Group may obtain current price, yield and other performance
information on any of the Group's Funds through FUNDATA(R), an Automated Voice
Response System, 24 hours a day by calling (800) 451-8377 from any touch-tone
phone. Shareholders may also speak directly with a Group representative,
employed by BISYS, during regular business hours.
GENERAL INFORMATION
ORGANIZATION OF THE GROUP
The Group was organized as a Massachusetts business trust in 1987 and currently
offers sixteen Funds. The shares of each of the Funds of the Group, other than
its four Money Market Funds, the Municipal Bond Fund and the Michigan Bond Fund,
are offered in four separate classes: Investor A Shares, Investor B Shares,
Investor C Shares and Institutional Shares. Shares of the Municipal Bond Fund
and the Michigan Bond Fund are offered in three classes: Investor A Shares,
Investor B Shares and Institutional Shares. Shares of each of the four Money
Market Funds are offered in two separate classes: Investor A Shares and
Institutional Shares. Each share represents an equal proportionate interest in a
Fund with other shares of the same Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Trustees. Shares do not have a par value.
Shareholders are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested.
Shareholders will vote in the aggregate and not by Fund except as otherwise
expressly required by law. For example, shareholders of the Funds will vote in
the aggregate with other shareholders of the Group with respect to the election
of Trustees and ratification of the selection of independent accountants.
However, shareholders of a Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of that Fund's
investment advisory agreement. In addition, holders of Investor C Shares of a
Fund will vote as a class and not with holders of another class of that Fund
with respect to the approval of its Investor C Plan.
PROSPECTUS--Investor C Shares 50
<PAGE> 194
An annual or special meeting of shareholders to conduct necessary business is
not required by the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to elect Trustees, amend the Declaration of
Trust, approve an investment and sub-investment advisory agreements and to
satisfy certain other requirements. To the extent that such a meeting is not
required, the Group may elect not to have an annual or special meeting.
The Group has represented to the SEC that the Trustees will call a special
meeting of shareholders for purposes of considering the removal of one or more
Trustees upon written request therefor from shareholders holding not less than
10% of the outstanding votes of the Group. At such a meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Group), by majority vote, has the power to remove one or more
Trustees.
As of June 30, 1996, FABC, through its wholly owned subsidiaries, possessed on
behalf of its underlying accounts voting or investment power with respect to
more than 25% of the shares of each of the Funds, and therefore may be presumed
to control each Fund within the meaning of the 1940 Act.
MULTIPLE CLASSES OF SHARES
In addition to Investor C Shares, the Group also offers Investor A Shares,
Investor B Shares and Institutional Shares of the Funds pursuant to a Multiple
Class Plan adopted by the Group's Trustees under Rule 18f-3 of the 1940 Act. A
salesperson or other person entitled to receive compensation for selling or
servicing the shares may receive different compensation with respect to one
particular class of shares over another in the same Fund. The amount of
dividends payable with respect to other classes of shares will differ from
dividends on Investor C Shares as a result of the different Investor C Plan fees
applicable to Investor C Shares and because Investor C Shares may bear different
retail transfer agency expenses. For further details regarding these other
classes of shares, call the Group at (800) 451-8377.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
Inquiries regarding the Group may be directed in writing to The Parkstone Group
of Funds at P.O. Box 50551, Kalamazoo, MI 49005-0551, or by calling toll-free
(800) 451-8377.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by their Distributor in any jurisdiction in which such offering may not
lawfully be made.
51 PROSPECTUS--Investor C Shares
<PAGE> 195
THE PARKSTONE GROUP OF FUNDS
Investor C Shares
INVESTMENT ADVISER (AND SUB-ADMINISTRATOR)
First of America Investment Corporation
Suite 500
303 North Rose Street
Kalamazoo, Michigan 49007
SUBADVISER (INTERNATIONAL FUND AND BALANCED FUND)
Gulfstream Global Investors, Ltd.
Suite 550
100 Crescent Court
Dallas, Texas 75201
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
San Francisco, California 94111
LEGAL COUNSEL
Howard & Howard Attorneys, P.C.
Suite 400
107 West Michigan Avenue
Kalamazoo, Michigan 49007
<PAGE> 196
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
INSTITUTIONAL SHARES
THE PARKSTONE GROWTH FUNDS
THE PARKSTONE GROWTH AND INCOME FUNDS
THE PARKSTONE INCOME FUNDS
THE PARKSTONE TAX-FREE INCOME FUNDS
THE PARKSTONE MONEY MARKET FUNDS
FORM N-1A
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM NO. RULE 404(a) CROSS REFERENCE
- ---------------------------------------------------------------------------
<S> <C> <C>
1. Cover Page......................... Cover Page
2. Synopsis........................... Prospectus Summary; Fee Tables
3. Condensed Financial Information.... Financial Highlights; Performance Information
4. General Description of Registrant.. Cover Page; Investment Objectives and Policies;
Investment Restrictions; Risk Factors and
Investment Techniques; General Information -
Organization of the Group
5. Management of the Fund............. Management of the Funds; Fee Tables
5A. Management's Discussion of Fund
Performance........................ Not Applicable
6. Capital Stock and Other Securities. Dividends and Taxes; General Information -
Organization of the Group; General
Information - Multiple Classes of Shares;
General Information - Miscellaneous
7. Purchase of Securities Being
Offered......................... How to Buy Institutional Shares; Exchange
Privilege; How Shares are Valued
8. Redemption or Repurchase........... How to Redeem Your Institutional Shares
9. Pending Legal Proceedings.......... Inapplicable
PROSPECTUS - INVESTOR A SHARES
</TABLE>
<PAGE> 197
- --------------------------------------------------------------------------------
THE PARKSTONE
GROUP OF FUNDS
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
GROWTH FUNDS
PARKSTONE EQUITY FUND
PARKSTONE SMALL CAPITALIZATION FUND
PARKSTONE LARGE CAPITALIZATION FUND
PARKSTONE INTERNATIONAL DISCOVERY FUND
GROWTH AND INCOME FUNDS
PARKSTONE BALANCED FUND
PARKSTONE HIGH INCOME EQUITY FUND
INCOME FUNDS
PARKSTONE BOND FUND
PARKSTONE LIMITED MATURITY BOND FUND
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
PARKSTONE U.S. GOVERNMENT INCOME FUND
TAX-FREE INCOME FUNDS
PARKSTONE MUNICIPAL BOND FUND
PARKSTONE MICHIGAN MUNICIPAL BOND FUND
MONEY MARKET FUNDS
PARKSTONE PRIME OBLIGATIONS FUND
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND
PARKSTONE TREASURY FUND
PARKSTONE TAX-FREE FUND
Prospectus dated October 8, 1996
[PARKSTONE MUTUAL FUNDS LOGO]
-------------------------
NOT FDIC INSURED
<PAGE> 198
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 199
THE PARKSTONE GROUP OF FUNDS
INSTITUTIONAL SHARES PROSPECTUS DATED OCTOBER 8, 1996
GROWTH FUNDS For more information call:
Parkstone Equity Fund (800) 451-8377
Parkstone Small Capitalization Fund or write to:
Parkstone Large Capitalization Fund 3435 Stelzer Road
Parkstone International Discovery Fund Columbus, Ohio 43219
GROWTH AND INCOME FUNDS THESE SECURITIES HAVE NOT
Parkstone Balanced Fund BEEN APPROVED OR
Parkstone High Income Equity Fund DISAPPROVED BY THE
INCOME FUNDS SECURITIES AND EXCHANGE
Parkstone Bond Fund COMMISSION OR ANY STATE
Parkstone Limited Maturity Bond Fund SECURITIES COMMISSION NOR
Parkstone Intermediate Government Obligations HAS THE COMMISSION OR ANY
Fund STATE SECURITIES COMMISSION
Parkstone U.S. Government Income Fund PASSED UPON THE ACCURACY
TAX-FREE INCOME FUNDS OR ADEQUACY OF THIS
Parkstone Municipal Bond Fund PROSPECTUS. ANY
Parkstone Michigan Municipal Bond Fund REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
MONEY MARKET FUNDS OFFENSE
Parkstone Prime Obligations Fund
Parkstone U.S. Government Obligations Fund
Parkstone Treasury Fund
Parkstone Tax-Free Fund
The funds listed above are each of the sixteen currently-offered series (the
"Funds") of The Parkstone Group of Funds (the "Group") which offer Institutional
Shares. This Prospectus explains concisely what you should know before investing
in the Institutional Shares of the Funds listed above. Please read it carefully
and keep it for future reference. Institutional Shares are offered only to
accounts that have a fiduciary or agency relationship with a financial
institution. You can find more detailed information about the Funds in the
October 8, 1996 Statement of Additional Information, as amended from time to
time. For a free copy of the Statement of Additional Information or other
information, contact the Group at the number specified above. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated into this Prospectus by reference.
THE SHARES OF THE PARKSTONE GROUP OF FUNDS ARE NOT OBLIGATIONS OR DEPOSITS OF
FIRST OF AMERICA INVESTMENT CORPORATION OR ITS PARENT, AND THE INVESTMENTS
DESCRIBED IN THIS PROSPECTUS ARE NOT ENDORSED, INSURED OR GUARANTEED BY FIRST OF
AMERICA INVESTMENT CORPORATION, ITS PARENT OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. INVESTMENTS IN THE PARKSTONE GROUP OF FUNDS
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVOLVED.
PROSPECTUS -- Institutional Shares
<PAGE> 200
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Roadmap........................................................... 3
Prospectus Summary........................................................... 4
Fee Tables................................................................... 8
Financial Highlights......................................................... 10
Investment Objectives and Policies........................................... 25
Risk Factors and Investment Techniques....................................... 37
Investment Restrictions...................................................... 49
Management of the Funds...................................................... 50
How to Buy Institutional Shares.............................................. 54
Exchange Privilege........................................................... 55
How to Redeem Your Institutional Shares...................................... 55
How Shares are Valued........................................................ 56
Dividends and Taxes.......................................................... 56
Performance Information...................................................... 59
Fundata(R)................................................................... 60
General Information.......................................................... 60
</TABLE>
PROSPECTUS--Institutional Shares 2
<PAGE> 201
PROSPECTUS ROADMAP
For information about the following subjects, consult the pages indicated on the
table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT
FINANCIAL OBJECTIVES RISK FACTORS AND
FUND HIGHLIGHTS AND POLICIES INVESTMENT TECHNIQUES
<S> <C> <C> <C>
Balanced Fund 14 27 29
Bond Fund 16 30 31
Equity Fund 11 25 26
Government Income Fund 19 32 33
High Income Equity Fund 15 29 30
International Discovery Fund 13 26 27
Intermediate Government Obligations Fund 18 31 32
Large Capitalization Fund 13 25 26
Limited Maturity Bond Fund 17 30 31
Michigan Municipal Bond Fund 20 33 35
Municipal Bond Fund 21 33 35
Prime Obligations Fund 22 35 37
Small Capitalization Fund 12 25 26
Tax-Free Fund 23 35 37
Treasury Fund 24 35 37
U.S. Government Obligations 24 35 37
</TABLE>
The Parkstone Group of Funds (the "Group") is an open-end management investment
company which offers to the public sixteen separate investment portfolios,
fifteen of which are diversified portfolios and one of which is a
non-diversified portfolio, each with different investment objectives. These
Funds enable the Group to meet a wide range of investment needs.
This Prospectus relates only to the Institutional Shares of the following Funds:
Parkstone Equity Fund (the "Equity Fund")
Parkstone Small Capitalization Fund (the "Small Capitalization Fund")
Parkstone Capitalization Fund (the "Large Capitalization Fund")
Parkstone International Discovery Fund (the "International Fund")
Parkstone Balanced Fund (the "Balanced Fund")
Parkstone High Income Equity Fund (the "High Income Equity Fund")
Parkstone Bond Fund (the "Bond Fund")
Parkstone Limited Maturity Bond Fund (the "Limited Maturity Bond Fund")
Parkstone Intermediate Government Obligations Fund (the "Intermediate
Government Obligations Fund")
Parkstone U.S. Government Income Fund (the "Government Income Fund")
Parkstone Municipal Bond Fund (the "Municipal Bond Fund")
Parkstone Michigan Municipal Bond Fund (the "Michigan Bond Fund")
Parkstone Prime Obligations Fund (the "Prime Obligations Fund")
3 PROSPECTUS--Institutional Shares
<PAGE> 202
Parkstone U.S. Government Obligations Fund (the "U.S. Government
Obligations Fund")
Parkstone Treasury Fund (the "Treasury Fund")
Parkstone Tax-Free Fund (the "Tax-Free Fund")
For convenience of reference, the above Funds are sometimes referred to as part
of a general grouping. The Equity Fund, Small Capitalization Fund, Large
Capitalization Fund and International Fund are collectively referred to as the
"Growth Funds." The Balanced Fund and High Income Equity Fund are collectively
referred to as the "Growth and Income Funds." The Bond Fund, Limited Maturity
Bond Fund, Intermediate Government Obligations Fund and Government Income Fund
are collectively referred to as the "Income Funds." The Michigan Bond Fund and
Municipal Bond Fund are collectively referred to as "Tax-Free Income Funds."
Finally, the Prime Obligations Fund, Treasury Fund, Tax-Free Fund and U.S.
Government Obligations Fund are collectively referred to as the "Money Market
Funds."
The Trustees of the Group have divided beneficial ownership of each of the Funds
into an unlimited number of transferable units called shares. Each Fund of the
Group offers multiple classes of shares. This Prospectus describes one class of
shares of each Fund, Institutional Shares. Interested persons who wish to obtain
a copy of the Prospectus of the other classes of shares of the Funds or a copy
of the Group's most recent Annual Report may contact the Group at the telephone
number shown above.
The investment objectives of each of the Funds are described in this Prospectus
and are summarized in the Prospectus Summary. First of America Investment
Corporation, Kalamazoo, Michigan ("First of America" or the "Investment
Adviser"), acts as the investment adviser to each of the Funds of the Group. To
provide investment advisory services for the International Fund and Balanced
Fund for investments in foreign securities, First of America has entered into a
sub-investment advisory agreement with Gulfstream Global Investors, Ltd.,
Dallas, Texas ("Gulfstream" or the "Subadviser").
PROSPECTUS SUMMARY
Shares Offered
This Prospectus relates to Institutional Shares of the following Funds of the
Group:
GROWTH FUNDS
Equity Fund
Small Capitalization Fund
Large Capitalization Fund
International Fund
GROWTH AND INCOME FUNDS
Balanced Fund
High Income Equity Fund
INCOME FUNDS
Bond Fund
Limited Maturity Bond Fund
Intermediate Government Obligations Fund
Government Income Fund
TAX-FREE INCOME FUNDS
Municipal Bond Fund
Michigan Bond Fund
MONEY MARKET FUNDS
Prime Obligations Fund
U.S. Government Obligations Fund
Treasury Fund
Tax-Free Fund
PROSPECTUS--Institutional Shares 4
<PAGE> 203
These Funds represent sixteen separate investment portfolios of The Parkstone
Group of Funds, a Massachusetts business trust which is registered as an
open-end, management investment company.
Purchase and Redemption of Shares
The public offering price of Institutional Shares of each Fund is equal to the
net asset value per share, which, in the case of the Money Market Funds, the
Group will seek to maintain at $1.00. There are no initial or contingent
deferred sales charges on Institutional Shares. Shares may be purchased through
procedures established by the Group's distributor, BISYS Fund Services, L.P.
("BISYS" or the "Distributor"). Institutional Shares of one Fund of the Group
may be exchanged for Institutional Shares of another Fund of the Group at net
asset value, provided certain conditions are met. Shareholders may redeem their
shares by contacting their trust administrator or financial consultant
responsible for the account. See "HOW TO BUY INSTITUTIONAL SHARES," "EXCHANGE
PRIVILEGE," "HOW TO REDEEM INSTITUTIONAL SHARES" and "HOW SHARES ARE VALUED."
Minimum Purchase
For financial institutions and other institutional investors, there is a
$100,000 minimum initial purchase (based on the public offering price) per Fund
with no minimum subsequent investment. Such minimum initial investment may be
waived for certain purchasers. There is no minimum requirement for individual
shareholders on whose behalf the financial institutions or other institutional
investors are purchasing Institutional Shares.
Investment Objectives
[CAPTION]
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT OBJECTIVE
<S> <C>
Balanced Fund seeks current income, long-term capital growth and
conservation of capital
Bond Fund seeks to provide current income and preservation of
capital by investing in a portfolio of high- and
medium-grade fixed-income securities
Equity Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks
Government Income Fund seeks to provide shareholders with a high level of
current income consistent with prudent investment risk
High Income Equity Fund primarily seeks current income by investing in a
diversified portfolio of high quality, dividend-paying
stocks and securities convertible into common stocks; a
secondary objective is growth of capital
Intermediate Government seeks to provide current income with preservation of
Obligations Fund capital by investing in a diversified portfolio of U.S.
government securities with remaining maturities of 12
years or less
International Fund seeks long-term growth of capital
Large Capitalization Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks of companies with large
market capitalization
Limited Maturity Bond Fund seeks to provide current income and preservation of
capital by investing in a portfolio of high- and
medium-grade fixed-income securities, the remaining
maturities on which will be six years or less
</TABLE>
5 PROSPECTUS--Institutional Shares
<PAGE> 204
[CAPTION]
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT OBJECTIVE
Michigan Bond Fund seeks income which is exempt from federal income tax
and Michigan state income and intangibles tax, although
such income may be subject to the federal alternative
minimum tax when received by certain shareholders; also
seeks preservation of capital
Municipal Bond Fund seeks to provide current interest income which is
exempt from federal income taxes as well as
preservation of capital
Prime Obligations Fund seeks to provide current income, with liquidity and
stability of principal
Small Capitalization Fund seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks of small- to
medium-sized companies
Tax-Free Fund seeks to provide current income free from federal
income taxes, preservation of capital and relative
stability of principal
Treasury Fund seeks to provide current income, with liquidity and
stability of principal
U.S. Government seeks to provide current income, with liquidity and
Obligations Fund stability of principal
</TABLE>
Investment Policies
Under normal market conditions, each Fund will invest as described in the
following table:
[CAPTION]
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT POLICY
<S> <C>
Balanced Fund in any type or class of securities, including all types
of common stocks, fixed-income securities and
securities convertible into common stocks. At least 25%
of the value of the Fund's total assets will be
invested in fixed-income senior securities and up to
15% of the Fund's total assets may be invested in
foreign securities
Bond Fund at least 80% of its total assets in bonds, debentures
and certain other debt securities specified herein
Equity Fund at least 80% of its total assets in common stocks,
and securities convertible into common stocks, of
companies believed by the investment adviser to be
characterized by sound management and the ability to
finance expected growth
Government Income Fund at least 65% of its total assets in obligations issued
or guaranteed by the U.S. government or its agencies or
instrumentalities; under current market conditions, up
to 80% of its total assets in mortgage-related
securities, which are issued or guaranteed by the U.S.
government, its agencies and instrumentalities and by
non-governmental entities, or greater amounts as
conditions warrant
High Income Equity Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized
by sound management, the ability to finance expected
growth and the ability to pay above-average dividends
</TABLE>
PROSPECTUS--Institutional Shares 6
<PAGE> 205
[CAPTION]
<TABLE>
<CAPTION>
<S> <C>
FUND INVESTMENT POLICY
Intermediate Government at least 80% of its total assets in obligations issued
Obligations Fund or guaranteed by the U.S. government or its agencies or
instrumentalities and with remaining maturities of
twelve years or less
International Fund at least 65% of its total assets in an internationally
diversified portfolio of equity securities which trade
on markets in countries other than the United States
and which are issued by companies (i) domiciled in
countries other than the United States, or (ii) that
derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States,
and (iii) which are ranked as small- or medium-sized
companies on the basis of their capitalization
Large Capitalization Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed to be characterized by sound management and
the ability to finance expected long-term growth.
Limited Maturity Bond Fund at least 80% of the value of its total assets in bonds,
debentures and certain other debt securities specified
herein with remaining maturities of six years or less
Michigan Bond Fund at least 80% of its total assets in debt securities of
all types; at least 65% of the net assets in municipal
securities issued by or on behalf of the State of
Michigan, its political subdivisions, municipalities
and public authorities
Municipal Bond Fund at least 80% of its total assets in tax-exempt
obligations
Prime Obligations Fund invests in high quality money market instruments and
other comparable investments
Small Capitalization Fund at least 80% of its total assets in common stocks, and
securities convertible into common stocks, of companies
believed by the investment adviser to be characterized
by sound management and the ability to finance expected
growth
Tax-Free Fund at least 80% of its total assets in municipal
obligations the interest on which is both exempt from
federal income tax and not treated as a preference item
for alternative minimum tax purposes
Treasury Fund exclusively in obligations issued or guaranteed by the
U.S. Treasury and in repurchase agreements backed by
such securities
U.S. Government at least 65% of its total assets in short-term U.S.
Obligations Fund Treasury bills, notes and other obligations issued by
the U.S. government or its agencies or
instrumentalities
</TABLE>
Risk Factors and Special Considerations
An investment in a mutual fund such as any of the Funds involves a certain
amount of risk and may not be suitable for all investors. In addition, some
investment policies of the Funds may entail certain risks. See "RISK FACTORS AND
INVESTMENT TECHNIQUES."
Management of the Funds
First of America serves as investment adviser, and, with respect to the
International Fund and a portion of the Balanced Fund, Gulfstream serves as
subadviser. First of America also serves as sub-administrator.
7 PROSPECTUS--Institutional Shares
<PAGE> 206
BISYS, a partnership owned by The BISYS Group, Inc., serves as distributor and
administrator. BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Transfer
Agent"), serves as transfer agent, dividend paying agent and fund accountant.
Union Bank of California, N.A. ("Union Bank" or the "Custodian"), formerly known
as The Bank of California, N.A., serves as custodian.
Dividends and Taxes
Dividends from net income are declared and paid monthly, except with respect to
the Money Market Funds which are declared daily and paid monthly. Net realized
capital gains are distributed at least annually. Each of the Funds is treated as
a separate entity for federal income tax purposes and intends to qualify as a
"regulated investment company." Shareholders will be advised at least annually
as to the federal income tax consequences of distributions made during the year.
FEE TABLES (INSTITUTIONAL SHARES)
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge (as a percentage of the offering price)................. None
Sales Charge on Reinvested Distributions..................................... None
Deferred Sales Charge on Redemptions......................................... None
Redemption Fees.............................................................. None
Exchange Fees................................................................ None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)*
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES EXPENSES
---------- ---- ------- -------
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund........................................ 1.00% 0.00% 0.29% 1.29%
Small Capitalization Fund.......................... 1.00% 0.00% 0.29% 1.29%
Large Capitalization Fund.......................... 0.80% 0.00% 1.39% 2.19%
International Fund................................. 1.17% 0.00% 0.38% 1.55%
GROWTH AND INCOME FUNDS:
Balanced Fund...................................... 0.75% 0.00% 0.41% 1.16%
High Income Equity Fund............................ 1.00% 0.00% 0.32% 1.32%
INCOME FUNDS:
Bond Fund.......................................... 0.70% 0.00% 0.24% 0.94%
Limited Maturity Bond Fund......................... 0.55% 0.00% 0.29% 0.84%
Intermediate Government Obligations Fund........... 0.70% 0.00% 0.26% 0.96%
Government Income Fund............................. 0.45% 0.00% 0.31% 0.76%
TAX-FREE INCOME FUNDS:
Municipal Bond Fund................................ 0.55% 0.00% 0.25% 0.80%
Michigan Bond Fund................................. 0.55% 0.00% 0.22% 0.77%
MONEY MARKET FUNDS:
Prime Obligations Fund............................. 0.40% 0.00% 0.24% 0.64%
U.S. Government Obligations Fund................... 0.40% 0.00% 0.24% 0.64%
Treasury Fund...................................... 0.40% 0.00% 0.20% 0.60%
Tax-Free Fund...................................... 0.40% 0.00% 0.26% 0.66%
</TABLE>
- ------------
* after expense reductions
Management Fees and Total Expenses as a percentage of average net assets for the
Balanced Fund, absent the voluntary reduction of advisory fees, would have been
1.00% and 1.41%, respectively.
PROSPECTUS--Institutional Shares 8
<PAGE> 207
Management Fees, Other Expenses and Total Expenses as a percentage of average
net assets for the Bond Fund absent the voluntary reduction of administration
fees and advisory fees, would have been 0.74%, 0.29% and 1.03%, respectively.
For the Limited Maturity Bond Fund they would have been 0.74%, 0.34% and 1.08%,
respectively. For the Intermediate Government Obligations Fund they would have
been 0.74%, 0.31% and 1.05%, respectively. For the Government Income Fund they
are estimated to be 0.74%, 0.36% and 1.10%, respectively. For the Municipal Bond
Fund they would have been 0.74%, 0.35% and 1.09%, respectively. For the Michigan
Bond Fund they would have been 0.74%, 0.32% and 1.06%, respectively. Other
Expenses and Total Fund Operating Expenses as a percentage of average net assets
for the Prime Obligations Fund absent the voluntary reduction of administration
fees, would have been 0.26% and 0.66%, respectively. For the U.S. Government
Obligations Fund, they would have been 0.26% and 0.66%, respectively. For the
Treasury Fund they would have been 0.30% and 0.70%, respectively. For the
Tax-Free Fund, they would be have been 0.28% and 0.68%, respectively. The annual
percentages of Management Fees and Other Expenses for the Large Capitalization
Fund are based on such fees and expenses incurred since commencement of
operations and expected voluntary reductions. Absent the expected voluntary
reduction of administrative and advisory fees, Management Fees, Other Expenses
and Total Expenses would be 0.80%, 1.46% and 2.26%, respectively. (See
"MANAGEMENT OF THE FUNDS--Investment Adviser and Subadviser" and "Administrator,
Sub-Administrator and Distributor").
EXPENSE EXAMPLES
You would pay the following expenses rounded to the nearest dollar on a $1,000
investment in Institutional Shares, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
--- ---- ---- ----
<S> <C> <C> <C> <C>
GROWTH FUNDS:
Equity Fund.................................................. $ 13 $41 $71 $ 156
Small Capitalization Fund.................................... $ 13 $41 $71 $ 156
Large Capitalization Fund*................................... $ 22 $69 -- --
International Fund........................................... $ 16 $49 $84 $ 185
GROWTH AND INCOME FUNDS:
Balanced Fund................................................ $ 12 $37 $64 $ 141
High Income Equity Fund...................................... $ 13 $42 $72 $ 159
INCOME FUNDS:
Bond Fund.................................................... $ 10 $30 $52 $ 115
Limited Maturity Bond Fund................................... $ 9 $27 $47 $ 104
Intermediate Government Obligations Fund..................... $ 10 $31 $53 $ 118
Government Income Fund....................................... $ 8 $24 $42 $ 94
TAX-FREE INCOME FUNDS:
Municipal Bond Fund.......................................... $ 8 $26 $44 $ 99
Michigan Bond Fund........................................... $ 8 $25 $43 $ 95
MONEY MARKET FUNDS:
Prime Obligations Fund....................................... $ 7 $20 $36 $ 80
U.S. Government Obligations Fund............................. $ 7 $20 $36 $ 80
Treasury Fund................................................ $ 6 $19 $33 $ 75
Tax-Free Fund................................................ $ 7 $21 $37 $ 82
</TABLE>
- ------------
* Because the Large Capitalization Fund has been in operation for less than 10
months, expense example information is provided only for 1-year and 3-year
periods.
The information set forth in the foregoing Fee Tables and expense examples
relates only to Institutional Shares of the Funds. Each of the Funds also may
offer other classes of shares. The other classes of
9 PROSPECTUS--Institutional Shares
<PAGE> 208
shares of the Funds are subject to the same expenses except that Rule 12b-1 fees
and sales charges may apply.
The purpose of the above tables is to assist a potential purchaser of
Institutional Shares of any Fund in understanding the various costs and expenses
that an investor in a Fund will bear directly or indirectly. Such expenses do
not include any fees charged by a financial institution, including First of
America or any of its affiliates, to its customer accounts which may invest in
Institutional Shares of the Funds. See "MANAGEMENT OF THE FUNDS" and "GENERAL
INFORMATION" for a more complete discussion of the annual operating expenses of
each of the Funds. The expense information for Institutional Shares reflects
current fees. THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
FINANCIAL HIGHLIGHTS
The table on the following pages set forth certain information concerning the
investment results of the Institutional Shares of each of the Funds since its
inception. Further financial information is included in the Statement of
Additional Information and the Group's June 30, 1996 Annual Report to
Shareholders which may be obtained free of charge.
The Financial Highlights for the periods presented below have been derived from
financial statements audited by Coopers & Lybrand L.L.P., independent auditors
for the Group, whose report thereon is incorporated by reference in the
Statement of Additional Information.
On March 31, 1993, the shareholders of all of the then existing Funds of the
Group approved the reclassification of such Funds' outstanding shares into
Investor A Shares and Institutional Shares. The financial information provided
below and in the Annual Report includes periods prior to such reclassification.
PROSPECTUS--Institutional Shares 10
<PAGE> 209
EQUITY FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
------------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD........... $16.62 $14.70 $15.10 $12.80 $11.69 $12.37 $11.48 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income (Loss) (0.16) (0.08) (0.11) (0.01) 0.17 0.45 0.30 0.20
Net Realized
and
Unrealized
Gains
(Losses) on
Investments... 5.03 3.47 (0.25) 2.73 1.59 (0.53) 1.86 1.47
----- ----- ----- ----- ----- ----- ----- ---------
Total from
Investment
Activities... 4.87 3.39 (0.36) 2.72 1.76 (0.08) 2.16 1.67
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment
Income....... (0.02) (0.17) (0.45) (0.28) (0.19)
Net Realized
Gains........ (0.66) (0.49) (0.04) (0.40) (0.48) (0.15) (0.99)
In Excess of
Net Realized
Gains........ (0.98)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions... (0.66) (1.47) (0.04) (0.42) (0.65) (0.60) (1.27) (0.19)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE,
END OF PERIOD.... $20.83 $16.62 $14.70 $15.10 $12.80 $11.69 $12.37 $11.48
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return
(excluding sales
and redemption
charges)......... 29.83% 25.20% (2.44)% 21.34% 15.18% (0.45)% 19.23% 16.83%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End
of Period
(000)........ $650,495 $683,320 $533,260 $595,127 $407,782 $298,655 $247,683 $180,124
Ratio of
Expenses to
Average Net
Assets....... 1.29% 1.29% 1.28% 1.24% 1.18% 1.10% 1.07% 1.06%(c)
Ratio of Net
Investment
Income (Loss)
to Average
Net Assets... (0.68)% (0.64)% (0.65)% (0.09)% 1.24% 3.87% 2.51% 2.80%(c)
Ratio of
Expenses to
Average Net
Assets*...... 1.29% 1.29% 1.28% 1.27% 1.26% 1.28% 1.29% 1.31%(c)
Ratio of Net
Investment
Income (Loss)
to Average Net
Assets*...... (0.68)% (0.65)% (0.65)% (0.11)% 1.15% 3.69% 2.29% 2.55%(c)
Portfolio
Turnover
Rate(d)...... 49.27% 46.39% 70.87% 66.48% 93.76% 189.26% 136.95% 87.30%
Average Commission
Rate Paid(g)..... $0.0796
</TABLE>
11 PROSPECTUS--Institutional Shares
<PAGE> 210
SMALL CAPITALIZATION FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
------------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD............ $26.08 $19.83 $20.31 $14.64 $13.58 $14.82 $11.59 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income (Loss). (0.27) (0.25) (0.28) (0.14) (0.08) 0.14 0.04 0.06
Net Realized and
Unrealized
Gains (Losses)
on
Investments... 12.34 8.65 0.30 6.76 1.89 (1.24) 3.23 1.59
----- ----- ----- ----- ----- ----- ----- ---------
Total from
Investment
Activities... 12.07 8.40 0.02 6.62 1.81 (1.10) 3.27 1.65
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment
Income........ (0.14)
Net Realized
Gains......... (3.65) (2.15) (0.50) (0.95) (0.75)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions... (3.65) (2.15) (0.50) (0.95) (0.75) (0.14) (0.04) (0.06)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE,
END OF PERIOD..... $34.50 $26.08 $19.83 $20.31 $14.64 $13.58 $14.82 $11.59
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return
(excluding sales
and redemption
charges).......... 50.03% 45.32% (0.15)% 45.77% 12.95% (6.76)% 28.28% 16.60%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End
of Period
(000)......... $528,866 $354,825 $271,425 $291,462 $180,079 $107,500 $94,517 $53,917
Ratio of
Expenses to
Average Net
Assets........ 1.29% 1.33% 1.30% 1.26% 1.19% 1.15% 1.11% 1.29%(c)
Ratio of Net
Investment
Income (Loss)
to Average Net
Assets........ (0.93)% (1.06)% (1.14)% (0.98)% (0.61)% 1.08% 0.37% 0.80%(c)
Ratio of
Expenses to
Average Net
Assets*....... 1.29% 1.33% 1.30% 1.28% 1.28% 1.33% 1.33% 1.54%(c
Ratio of Net
Investment
Income (Loss)
to Average Net
Assets*....... (0.93)% (1.06)% (1.14)% (1.01)% (0.70)% 0.90% 0.15% 0.55%(c)
Portfolio
Turnover
Rate(d)....... 67.22% 50.53% 72.64% 71.21% 95.02% 139.66% 83.10% 51.79%
Average
Commission
Rate Paid(g).. $0.0800
</TABLE>
PROSPECTUS--Institutional Shares 12
<PAGE> 211
LARGE CAPITALIZATION FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
DEC. 28, 1995
TO
JUNE 30, 1996(a)
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................................. $10.00
----------
Investment Activities
Net Investment Income............................................................. 0.03
Net Realized and Unrealized Gains on Investments.................................. 1.25
----------
Total from Investment Activities............................................. 1.28
----------
Distributions
Net Investment Income............................................................. (0.03)
Net Realized Gains
----------
Total Distributions.......................................................... (0.03)
----------
NET ASSET VALUE, END OF PERIOD........................................................ $11.25
----------
----------
Total Return (excluding sales and redemption charges)................................. 12.86%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)................................................... $274,150
Ratio of Expenses to Average Net Assets........................................... 2.19%(c)
Ratio of Net Investment Income to Average Net Assets.............................. 1.26%(c)
Ratio of Expenses to Average Net Assets*.......................................... 2.26%(c)
Ratio of Net Investment Income to Average Net Assets*............................. 1.19%(c)
Portfolio Turnover Rate(d)........................................................ 0.86%
Average Commission Rate Paid(g)................................................... $0.0800
</TABLE>
INTERNATIONAL FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------
INSTITUTIONAL SHARES DEC. 29, 1992
---------------------------- TO
1996 1995(f) 1994 JUNE 30, 1993(a)(b)
-------- -------- -------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $12.33 $13.24 $11.54 $10.00
----- ----- ----- ----------
Investment Activities
Net Investment Income (Loss).............................. 0.02 0.04 (0.01) 0.04
Net Realized and Unrealized Gains (Losses) on Investments
and Foreign Currency Transactions....................... 1.80 (0.33) 1.75 1.51
----- ----- ----- ----------
Total from Investment Activities...................... 1.82 (0.29) 1.74 1.55
----- ----- ----- ----------
Distributions
Net Investment Income..................................... (0.02) (0.02) (0.01)
Net Realized Gains........................................ (0.02)
In Excess of Net Realized Gains........................... (0.02) (0.62)
----- ----- ----- ----------
Total Distributions................................... (0.04) (0.62) (0.04) (0.01)
----- ----- ----- ----------
NET ASSET VALUE, END OF PERIOD................................ $14.11 $12.33 $13.24 $11.54
----- ----- ----- ----------
----- ----- ----- ----------
Total Return (excluding sales and redemption charges)......... 14.76% (1.86)% 15.12% 15.52%
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)........................... $364,095 $264,759 $261,798 $114,822
Ratio of Expenses to Average Net Assets................... 1.55% 1.56% 1.52% 1.58%(c)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................. 0.12% 0.31% (0.30)% 0.82%(c)
Ratio of Expenses to Average Net Assets*.................. 1.55% 1.59% 1.57% 1.63%(c)
Ratio of Net Investment Income (Loss) to Average Net
Assets*................................................. 0.12% 0.28% (0.35)% (0.77)%
Portfolio Turnover Rate(d)................................ 54.47% 104.39% 37.23% 12.47%
Average Commission Rate Paid(g)........................... $0.0321
</TABLE>
13 PROSPECTUS--Institutional Shares
<PAGE> 212
BALANCED FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
INSTITUTIONAL SHARES JAN. 31, 1992
------------------------------------------ TO
1996 1995(f) 1994 1993(b) JUNE 30, 1992(a)
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $12.19 $10.67 $11.08 $ 9.68 $10.00
------ ------ ------ ------ ----------
Investment Activities
Net Investment Income (Loss)............. 0.36 0.31 0.27 0.28 0.14
Net Realized and Unrealized Gains
(Losses) on Investments................ 1.74 1.68 (0.41) 1.41 (0.34)
------ ------ ------ ------ ----------
Total from Investment Activities.... 2.10 1.99 (0.14) 1.69 (0.20)
------ ------ ------ ------ ----------
Distributions
Net Investment Income.................... (0.35) (0.31) (0.27) (0.29) (0.12)
Net Realized Gains....................... (0.57) (0.03)
In Excess of Net Realized Gains.......... (0.13)
------ ------ ------ ------ ----------
Total Distributions................. (0.92) (0.47) (0.27) (0.29) (0.12)
------ ------ ------ ------ ----------
NET ASSET VALUE, END OF PERIOD............... $13.37 $12.19 $10.67 $11.08 $ 9.68
------ ------ ------ ------ ----------
------ ------ ------ ------ ----------
Total Return (excluding sales and redemption
charges)................................... 17.81% 19.22% (1.44)% 17.66% (2.06)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000).......... $113,493 $89,294 $71,427 $42,318 $38,136
Ratio of Expenses to Average Net
Assets................................. 1.16% 1.25% 1.09% 1.15% 1.19%(c)
Ratio of Net Investment Income to
Average Net Assets..................... 2.62% 2.75% 2.49% 2.70% 3.46%(c)
Ratio of Expenses to Average Net
Assets*................................ 1.41% 1.52% 1.39% 1.46% 1.50%(c)
Ratio of Net Investment Income to
Average Net Assets*.................... 2.37% 2.47% 2.18% 2.40% 3.13%(c)
Portfolio Turnover Rate(d)............... 437.90% 250.66% 192.39% 177.99% 47.58%
Average Commission Rate Paid(g).......... $0.0848
</TABLE>
PROSPECTUS--Institutional Shares 14
<PAGE> 213
HIGH INCOME EQUITY FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
----------------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD............ $14.49 $13.50 $14.69 $13.14 $12.48 $12.19 $11.35 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income........ 0.34 0.39 0.39 0.45 0.54 0.57 0.56 0.35
Net Realized and
Unrealized
Gains (Losses)
on
Investments... 3.26 1.00 (0.56) 1.69 0.99 0.38 1.04 1.32
----- ----- ----- ----- ----- ----- ----- ---------
Total from
Investment
Activities... 3.60 1.39 (0.17) 2.14 1.53 0.95 1.60 1.67
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment
Income........ (0.34) (0.39) (0.39) (0.45) (0.54) (0.59) (0.54) (0.32)
In Excess of Net
Investment
Income........ (0.01)
Net Realized
Gains.......... (0.45) (0.24) (0.14) (0.33) (0.07) (0.22)
In Excess of Net
Realized
Gains......... (0.39)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions... (0.79) (0.40) (1.02) (0.59) (0.87) (0.66) (0.76) (0.32)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE,
END OF PERIOD..... $17.30 $14.49 $13.50 $14.69 $13.14 $12.48 $12.19 $11.35
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return
(excluding sales
and redemption
charges).......... 25.30% 10.55% (1.53)% 16.73% 12.56% 8.22% 14.37% 16.97%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End
of Period
(000)......... $337,318 $346,164 $355,538 $384,240 $270,549 $150,980 $96,344 $66,367
Ratio of
Expenses to
Average Net
Assets........ 1.32% 1.32% 1.30% 1.26% 1.19% 1.13% 1.11% 1.16%(c)
Ratio of Net
Investment
Income to
Average Net
Assets........ 2.11% 2.86% 2.64% 3.28% 4.12% 4.75% 4.69% 4.92%(c)
Ratio of
Expenses to
Average Net
Assets*....... 1.32% 1.32% 1.30% 1.28% 1.27% 1.31% 1.33% 1.41%(c)
Ratio of Net
Investment
Income to
Average Net
Assets*....... 2.11% 2.86% 2.64% 3.25% 4.03% 4.57% 4.47% 4.67%(c)
Portfolio
Turnover
Rate(d)....... 40.75% 77.70% 69.35% 67.26% 68.42% 115.68% 53.08% 29.55%
Average
Commission
Rate Paid(g).. $0.0800
</TABLE>
15 PROSPECTUS--Institutional Shares
<PAGE> 214
BOND FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
----------------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD........... $9.72 $9.29 $10.53 $10.54 $10.07 $10.00 $10.11 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income....... 0.59 0.61 0.60 0.71 0.75 0.77 0.78 0.53
Net Realized
and
Unrealized
Gains
(Losses) on
Investments... (0.16) 0.43 (0.72) 0.46 0.56 0.08 (0.11) 0.09
----- ----- ----- ----- ----- ----- ----- ---------
Total From
Investment
Activities... 0.43 1.04 (0.12) 1.17 1.31 0.85 0.67 0.62
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment
Income....... (0.59) (0.61) (0.58) (0.73) (0.76) (0.78) (0.78) (0.51)
In Excess of
Net
Investment
Income
Net Realized
Gains........ (0.45) (0.08)
In Excess of
Net Realized
Gains........ (0.54)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions... (0.59) (0.61) (1.12) (1.18) (0.84) (0.78) (0.78) (0.51)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE,
END OF PERIOD.... $9.56 $9.72 $9.29 $10.53 $10.54 $10.07 $10.00 $10.11
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return
(excluding sales
and redemption
charges)......... 4.49% 11.78% (1.52)% 11.84% 13.47% 8.80% 6.94% 6.42%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
End of Period
(000)........ $549,336 $509,189 $469,903 $442,29 $477,526 $432,225 $316,477 $123,928
Ratio of
Expenses to
Average Net
Assets....... 0.94% 1.02% 0.88% 0.87% 0.87% 0.84% 0.81% 0.82%(c)
Ratio of Net
Investment
Income to
Average Net
Assets....... 5.96% 6.54% 5.97% 6.50% 7.19% 7.72% 8.04% 8.06%(c)
Ratio of
Expenses to
Average Net
Assets*...... 1.03% 1.14% 1.02% 1.01% 1.01% 1.02% 1.02% 1.06%(c)
Ratio of Net
Investment
Income to
Average Net
Assets*...... 5.87% 6.42% 5.83% 6.36% 7.05% 7.54% 7.83% 7.82%(c)
Portfolio
Turnover
Rate(d)...... 1189.27% 1010.64% 893.27% 443.98% 289.38% 339.74% 314.71% 121.08%
</TABLE>
PROSPECTUS--Institutional Shares 16
<PAGE> 215
LIMITED MATURITY BOND FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
------------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD............. $ 9.71 $ 9.57 $10.18 $10.25 $ 9.93 $ 9.88 $10.08 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income......... 0.65 0.58 0.64 0.65 0.71 0.72 0.83 0.53
Net Realized and
Unrealized
Gains (Losses)
on
Investments.... (0.21) 0.13 (0.59) 0.13 0.35 0.10 (0.15) 0.02
----- ----- ----- ----- ----- ----- ----- ---------
Total From
Investment
Activities... 0.44 0.71 0.05 0.78 1.06 0.82 0.68 0.55
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment
Income......... (0.65) (0.57) (0.62) (0.69) (0.71) (0.73) (0.83) (0.47)
Net Realized
Gains.......... (0.16) (0.03) (0.04) (0.05)
In Excess of Net
Realized
Gains.......... (0.01) (0.04)
Total Return of
Capital........ (0.01)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions... (0.67) (0.57) (0.66) (0.85) (0.74) (0.77) (0.88) (0.47)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE, END
OF PERIOD.......... $ 9.48 $ 9.71 $ 9.57 $10.18 $10.25 $ 9.93 $ 9.88 $10.08
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return
(excluding sales
and redemption
charges)........... 4.65% 7.76% 0.43% 7.98% 11.00% 8.66% 7.10% 5.70%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at End
of Period
(000).......... $136,681 $141,781 $156,678 $141,706 $117,241 $70,870 $43,696 $71,627
Ratio of Expenses
to Average Net
Assets......... 0.84% 0.84% 0.76% 0.72% 0.83% 0.91% 0.92% 0.88%(c)
Ratio of Net
Investment
Income to
Average Net
Assets......... 6.32% 6.11% 6.32% 6.45% 7.13% 7.47% 8.01% 8.19%(c)
Ratio of Expenses
to Average Net
Assets*........ 1.08% 1.11% 1.05% 1.01% 1.05% 1.10% 1.14% 1.12%(c)
Ratio of Net
Investment
Income to
Average Net
Assets*........ 6.08% 5.84% 6.03% 6.16% 6.91% 7.28% 7.79% 7.95%(c)
Portfolio
Turnover
Rate(d)........ 618.60% 397.97% 353.28% 123.10% 87.75% 161.32% 319.11% 117.37%
</TABLE>
17 PROSPECTUS--Institutional Shares
<PAGE> 216
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
------------------------------------------ TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD........... $ 9.93 $ 9.62 $10.53 $10.42 $10.05 $ 9.91 $10.05 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income....... 0.62 0.52 0.60 0.68 0.71 0.74 0.79 0.50
Net Realized
and
Unrealized
Gains
(Losses) on
Investments... (0.24) 0.31 (0.66) 0.22 0.46 0.15 (0.11) (0.02)
----- ----- ----- ----- ----- ----- ----- ---------
Total From
Investment
Operations... 0.38 0.83 (0.06) 0.90 1.17 0.89 0.68 0.48
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment
Income....... (0.60) (0.52) (0.60) (0.73) (0.71) (0.75) (0.79) (0.43)
Net Realized
Gains........ (0.06) (0.09) (0.03)
In Excess of
Net Realized
Gains........ (0.25)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions... (0.60) (0.52) (0.85) (0.79) (0.80) (0.75) (0.82) (0.43)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE,
END OF PERIOD.... $ 9.71 $ 9.93 $ 9.62 $10.53 $10.42 $10.05 $ 9.91 $10.05
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return
(excluding sales
and redemption
charges)......... 3.95% 9.02% (0.80)% 8.94% 12.03% 9.32% 7.07% 4.92%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
End of Period
(000)........ $225,313 $249,169 $281,232 $272,607 $234,906 $142,864 $100,205 $83,212
Ratio of
Expenses to
Average Net
Assets....... 0.96% 1.04% 0.90% 0.87% 0.87% 0.86% 0.85% 0.87%(c)
Ratio of Net
Investment
Income to
Average
Net Assets... 5.76% 5.43% 5.90% 6.54% 7.07% 7.48% 8.04% 7.79%(c)
Ratio of
Expenses to
Average Net
Assets*...... 1.05% 1.16% 1.04% 1.01% 1.01% 1.04% 1.06% 1.11%(c)
Ratio of Net
Investment
Income to
Average Net
Assets*...... 5.67% 5.31% 5.76% 6.40% 6.93% 7.30% 7.83% 7.55%(c)
Portfolio
Turnover
Rate(d)...... 916.39% 549.13% 546.06% 225.90% 114.76% 164.59% 294.62% 111.96%
</TABLE>
PROSPECTUS--Institutional Shares 18
<PAGE> 217
GOVERNMENT INCOME FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
INSTITUTIONAL SHARES NOVEMBER 12, 1992
-------------------------------- TO
1996 1995 1994 JUNE 30, 1993(a)(b)
-------- -------- -------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $9.42 $9.41 $10.04 $10.00
----- ------ ------ ------------
Investment Activities
Net Investment Income......................... 0.75 0.76 0.74 0.48
Net Realized and Unrealized Gains on
Investments................................. (0.17) 0.01 (0.63) 0.04
----- ------ ------ ------------
Total From Investment Activities......... 0.58 0.77 0.11 0.52
----- ------ ------ ------------
Distributions
Net Investment Income......................... (0.67) (0.68) (0.73) (0.48)
Tax Return of Capital......................... (0.08) (0.08) (0.01)
----- ------ ------ ------------
Total Distributions...................... (0.75) (0.76) (0.74) (0.48)
----- ------ ------ ------------
NET ASSET VALUE, END OF PERIOD.................... $9.25 $9.42 $9.41 $10.04
----- ----- ------ ------------
----- ----- ------ ------------
Total Return (excluding sales and redemption
charges)........................................ 6.34% 8.70% 1.04% 5.37%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000)............. $130,615 $110,190 $101,506 $71,862
Ratio of Expenses to Average Net Assets....... 0.76% 0.83% 0.72% 0.70%(c)
Ratio of Net Investment Income to
Average Net Assets.......................... 7.94% 8.25% 7.51% 7.49%(c)
Ratio of Expenses to Average Net Assets*...... 1.10% 1.19% 1.11% 1.09%(c)
Ratio of Net Investment Income to
Average Net Assets*......................... 7.60% 7.89% 7.12% 7.09%(c)
Portfolio Turnover Rate (d)................... 348.01% 114.71% 102.24% 135.06%
</TABLE>
19 PROSPECTUS--Institutional Shares
<PAGE> 218
MICHIGAN BOND FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
INSTITUTIONAL SHARES JULY 2, 1990
----------------------------------------------- TO
1996 1995 1994 1993(b) 1992 JUNE 30, 1991(a)
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $10.76 $10.53 $10.97 $10.58 $10.14 $10.00
------ ------ ------ ------ ------ ----------
Investment Activities
Net Investment Income... 0.50 0.50 0.48 0.50 0.52 0.55
Net Realized and
Unrealized Gains
(Losses) on
Investments........... 0.04 0.25 (0.36) 0.47 0.44 0.11
------ ------ ------ ------ ------ ----------
Total From
Investment
Activities....... 0.54 0.75 0.12 0.97 0.96 0.66
------ ------ ------ ------ ------ ----------
Distributions
Net Investment Income... (0.50) (0.50) (0.46) (0.54) (0.52) (0.52)
In Excess of Net
Investment Income..... (0.02)
Net Realized Gains...... (0.03) (0.01) (0.04)
In Excess of Net
Realized Gains........ (0.09)
------ ------ ------ ------ ------ ----------
Total
Distributions.... (0.53) (0.52) (0.56) (0.58) (0.52) (0.52)
------ ------ ------ ------ ------ ----------
NET ASSET VALUE, END OF
PERIOD.................... $10.77 $10.76 $10.53 $10.97 $10.58 $10.14
------ ------ ------ ------ ------ ----------
------ ------ ------ ------ ------ ----------
Total Return (excluding
sales and redemption
charges).................. 5.12% 7.33% 1.02% 9.42% 9.73% 6.77%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of
Period (000).......... $185,191 $176,068 $181,051 $165,414 $146,782 $90,182
Ratio of Expenses to
Average Net Assets.... 0.77% 0.78% 0.75% 0.76% 0.84% 0.57%(c)
Ratio of Net Investment
Income to Average
Net Assets............ 4.57% 4.79% 4.35% 4.70% 5.15% 5.67%(c)
Ratio of Expenses to
Average Net Assets*... 1.06% 1.07% 1.04% 1.05% 1.05% 1.15%(c)
Ratio of Net Investment
Income to Average
Net Assets*........... 4.28% 4.50% 4.06% 4.41% 4.93% 5.18%(c)
Portfolio Turnover Rate
(d)................... 27.66% 26.06% 6.69% 35.81%(d) 19.97% 45.30%
</TABLE>
PROSPECTUS--Institutional Shares 20
<PAGE> 219
MUNICIPAL BOND FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------
INSTITUTIONAL SHARES OCT. 31, 1988
-------------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 JUNE 30, 1989(a)
-------- -------- -------- -------- -------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $10.39 $10.29 $10.92 $10.58 $10.20 $10.03 $10.18 $10.00
----- ----- ----- ----- ----- ----- ----- ---------
Investment Activities
Net Investment Income... 0.43 0.46 0.41 0.49 0.52 0.55 0.57 0.40
Net Realized and
Unrealized Gains
(Losses) on
Investments........... 0.04 0.27 (0.31) 0.48 0.39 0.18 (0.12) 0.14
----- ----- ----- ----- ----- ----- ----- ---------
Total From
Investment
Operations........ 0.47 0.73 0.10 0.97 0.91 0.73 0.45 0.54
----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net Investment Income... (0.43) (0.46) (0.40) (0.53) (0.52) (0.56) (0.58) (0.36)
Net Realized Gains...... (0.21) (0.10) (0.01) (0.02)
In Excess of Net
Realized Gains........ (0.17) (0.12)
----- ----- ----- ----- ----- ----- ----- ---------
Total
Distributions..... (0.43) (0.63) (0.73) (0.63) (0.53) (0.56) (0.60) (0.36)
----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE, END OF
PERIOD.................... $10.43 $10.39 $10.29 $10.92 $10.58 $10.20 $10.03 $10.18
----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ---------
Total Return (excluding
sales and redemption
charges).................. 4.55% 7.25% 0.81% 9.48% 9.11% 7.51% 4.57% 5.52%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of
Period (000).......... $132,527 $134,784 $147,687 $146,302 $130,788 $98,186 $100,445 $68,256
Ratio of Expenses to
Average Net Assets.... 0.80% 0.80% 0.77% 0.73% 0.81% 0.87% 0.85% 0.85%(c)
Ratio of Net Investment
Income to Average
Net Assets............ 4.10% 4.21% 3.83% 4.61% 5.09% 5.49% 5.78% 6.11%(c)
Ratio of Expenses to
Average Net Assets*... 1.09% 1.08% 1.06% 1.02% 1.03% 1.06% 1.06% 1.09%(c)
Ratio of Net Investment
Income to Average
Net Assets*........... 3.81% 3.93% 3.53% 4.31% 4.88% 5.29% 5.57% 5.87%(c)
Portfolio Turnover Rate
(d)................... 47.46% 35.15% 44.39% 67.26% 66.31% 76.55% 113.12% 82.22%
</TABLE>
21 PROSPECTUS--Institutional Shares
<PAGE> 220
PRIME OBLIGATIONS FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES AUGUST 24, 1987
-------------------------------------------- TO
1996 1995 1994 1993(b) 1992 1991 1990 1989 JUNE 30, 1988(a)
-------- -------- -------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD...... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net
Investment
Income... 0.051 0.048 0.028 0.029 0.046 0.069 0.080 0.083 0.056
----- ----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net
Investment
Income... (0.051) (0.048) (0.028) (0.029) (0.046) (0.069) (0.080) (0.083) (0.056)
----- ----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET
VALUE, END
OF PERIOD... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ----- ---------
Total
Return...... 5.17% 4.91% 2.85% 2.91% 4.75% 7.15% 8.32% 8.58% 5.76%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets
at End
of
Period
(000)... $596,075 $640,380 $561,697 $478,821 $690,908 $702,340 $547,351 $526,450 $241,545
Ratio of
Expenses
to
Average
Net
Assets... 0.64% 0.65% 0.64% 0.64% 0.64% 0.64% 0.65% 0.62% 0.60%(c)
Ratio of
Net
Investment
Income
to
Average
Net
Assets... 5.05% 4.83% 2.84% 2.88% 4.61% 6.86% 8.03% 8.26% 6.48%(c)
Ratio of
Expenses
to
Average
Net
Assets*... 0.66% 0.67% 0.66% 0.66% 0.66% 0.66% 0.67% 0.66% 0.70%(c)
Ratio of
Net
Investment
Income
to
Average
Net
Assets*... 5.03% 4.81% 2.82% 2.86% 4.59% 6.84% 8.01% 8.22% 6.38%(c)
</TABLE>
PROSPECTUS--Institutional Shares 22
<PAGE> 221
TAX-FREE FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------
INSTITUTIONAL SHARES
------------------------------- JULY 30, 1987
1996 TO
========== 1995 1994 1993(b) 1992 1991 1990 1989 JUNE 30, 1988(a)
------- ------- ------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net Investment
Income....... 0.030 0.030 0.019 0.019 0.033 0.046 0.054 0.055 0.040
Distributions
Net Investment
Income....... (0.030) (0.030) (0.019) (0.019) (0.033) (0.046) (0.054) (0.055) (0.040)
----- ----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE,
END OF PERIOD.... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- ----- ---------
Total Return..... 3.02% 3.00% 1.92% 2.10% 3.34% 4.73% 5.75% 5.62% 4.08%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
End of
Period
(000)........ $106,154 $98,489 $84,465 $86,292 $141,913 $139,615 $142,004 $120,031 $107,199
Ratio of
Expenses to
Average Net
Assets....... 0.66% 0.64% 0.58% 0.55% 0.59% 0.60% 0.61% 0.63% 0.64%(c)
Ratio of Net
Investment
Income
to Average
Net Assets... 2.97% 2.97% 1.90% 2.08% 3.29% 4.63% 5.43% 5.46% 4.34%(c)
Ratio of
Expenses to
Average Net
Assets*...... 0.68% 0.70% 0.68% 0.65% 0.69% 0.70% 0.70% 0.73% 0.75%(c)
Ratio of Net
Investment
Income
to Average
Net Assets*.. 2.95% 2.91% 1.80% 1.98% 3.19% 4.53% 5.34% 5.36% 4.23%(c)
</TABLE>
23 PROSPECTUS--Institutional Shares
<PAGE> 222
TREASURY FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 1, 1993
--------------------- TO
1996 1995 JUNE 30, 1994(A)
-------- -------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $1.000 $1.000 $1.000
Investment Activities
Net Investment Income..................................... 0.050 0.048 0.017
------ ------ ----------
Distributions
Net Investment Income..................................... (0.050) (0.048) (0.017)
------ ------ ----------
NET ASSET VALUE, END OF PERIOD................................ $1.000 $1.000 $1.000
------ ------ ----------
------ ------ ----------
Total Return.................................................. 5.14% 4.91% 1.72%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000)......................... $223,416 $192,232 $76,035
Ratio of Expenses to Average Net Assets................... 0.60% 0.64% 0.54%(c)
Ratio of Net Investment Income to Average Net
Assets.................................................. 4.98% 4.95% 3.15%(c)
Ratio of Expenses to Average Net Assets*.................. 0.70% 0.78% 0.74%(c)
Ratio of Net Investment Income to Average Net
Assets*................................................. 4.88% 4.81% 2.95%(c)
</TABLE>
U.S. GOVERNMENT OBLIGATIONS FUND - INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
INSTITUTIONAL SHARES AUGUST 24, 1987
----------------------------------- TO
1996 1995 1994 1993(B) 1992 1991 1990 1989 JUNE 30, 1988(A)
-------- -------- -------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD....... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
Investment
Activities
Net
Investment
Income... 0.050 0.048 0.028 0.028 0.044 0.066 0.078 0.080 0.055
----- ----- ----- ----- ----- ----- ----- ----- ---------
Distributions
Net
Investment
Income... (0.050) (0.048) (0.028) (0.028) (0.044) (0.066) (0.078) (0.080) (0.055)
----- ----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET
VALUE, END OF
PERIOD....... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ---------
----- ----- ----- ----- ----- ----- ----- -----
Total
Return....... 5.10% 4.87% 2.79% 2.86% 4.78% 6.82% 8.10% 8.31% 5.66%(e)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets
at End of
Period
(000).... $207,451 $227,565 $192,612 $223,855 $400,242 $341,903 $248,671 $201,012 $136,823
Ratio of
Expenses
to
Average
Net
Assets... 0.64% 0.67% 0.67% 0.64% 0.64% 0.65% 0.65% 0.63% 0.62%(c)
Ratio of
Net
Investment
Income
to
Average
Net
Assets... 4.99% 4.76% 2.74% 2.81% 4.43% 6.54% 7.79% 8.00% 6.25%(c)
Ratio of
Expenses
to
Average
Net
Assets*... 0.66% 0.69% 0.69% 0.66% 0.66% 0.67% 0.67% 0.68% 0.73%(c)
Ratio of
Net
Investment
Income
to
Average
Net
Assets*... 4.97% 4.74% 2.72% 2.79% 4.41% 6.52% 7.77% 7.95% 6.14%(c)
</TABLE>
- ------------
NOTES TO FINANCIAL HIGHLIGHTS:
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) On April 1, 1993 the shareholders of the Group exchanged their shares for
either the Group's Investor A Shares or Institutional Shares. For the year
ended June 30, 1993 the Financial Highlights ratios of expenses, ratios of
net investment income, total return and the per share investment activities
and distributions are presented on the basis whereby the Fund's net
investment income, expenses, and distributions for the period July 1, 1992
through March 31, 1993 were allocated to each class of shares based upon the
relative net assets of each class of shares as of April 1, 1993 and the
results combined therewith the results of operations and distributions for
each applicable class for the period April 1, 1993 through June 30, 1993.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(e) Not annualized.
(f) As of January 1, 1995, Gulfstream assumed the role of subadviser with
respect to the International Fund and the portion of the Balanced Fund
invested in foreign securities. Prior to that date, Ivory & Sime
International, Inc. and Ivory & Sime plc served as subadvisers to the
International Fund and the Balanced Fund had no subadviser.
(g) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of Shares purchased and sold by the
Fund for which commissions were charged.
PROSPECTUS--Institutional Shares 24
<PAGE> 223
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The investment objective of each of the Funds is set forth below under the
headings describing the Funds. The investment objective of each Fund is
fundamental and may not be changed without a vote of the holders of a majority
of the outstanding shares of that Fund (as defined in the Statement of
Additional Information). The investment policies of a Fund may be changed
without a vote of the holders of a majority of outstanding shares of that Fund
unless the policy is expressly deemed to be a fundamental policy or changeable
only by such majority vote. There can be no assurance that the investment
objectives of any Fund will be achieved. Depending upon the performance of a
Fund's investments, the net asset value per share of that Fund may decrease
instead of increase.
During temporary defensive periods as determined by First of America or
Gulfstream, as the case may be, each of the Funds may hold up to 100% of its
total assets in short-term obligations including domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by bank
instruments. However, to the extent that a Fund is so invested, its investment
objective may not be achieved during that time. Uninvested cash reserves will
not earn income.
GROWTH FUNDS
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
The investment objective of the Equity Fund is to seek growth of capital by
investing primarily in a diversified portfolio of common stocks and securities
convertible into common stocks. The investment objective of the Small
Capitalization Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stocks of small- to medium-sized companies. The investment objective of the
Large Capitalization Fund is to seek growth of capital by investing primarily in
a diversified portfolio of common stocks and securities convertible into common
stocks of companies with large market capitalization.
Under normal market conditions, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund will invest at least 80% of the value of its
total assets in common stocks and securities convertible into common stocks of
companies believed by First of America to be characterized by sound management
and the ability to finance expected long-term growth. In addition, under normal
market conditions, the Small Capitalization Fund will invest at least 65% of the
value of its total assets in common stocks and securities convertible into
common stocks of companies considered by First of America to have a market
capitalization of less than $1 billion and the Large Capitalization Fund will do
the same with companies considered by First of America to have a market
capitalization of greater than $5 billion. Each of the Equity Fund, Small
Capitalization Fund and Large Capitalization Fund may also invest up to 20% of
the value of its total assets in preferred stocks, corporate bonds, notes, units
of real estate investment trusts, warrants, and short-term obligations (with
maturities of 12 months or less) consisting of commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit, repurchase agreements, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and demand and time deposits of
domestic and foreign banks and savings and loan associations. Each of the Equity
Fund, Small Capitalization Fund and Large Capitalization Fund may also hold
securities of other investment companies and depository or custodial receipts
representing beneficial interests in any of the foregoing securities.
Subject to the foregoing policies, each of the Equity Fund, Small Capitalization
Fund and Large Capitalization Fund may also invest up to 25% of its net assets
in foreign securities either directly or through the purchase of American
depository receipts ("ADRs") or European depository receipts ("EDRs") and may
also invest in securities issued by foreign branches of U.S. banks and foreign
banks, in Canadian commercial paper ("CCP"), and in Europaper (U.S.
dollar-denominated commercial paper of a foreign issuer). For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Foreign Securities" herein.
25 PROSPECTUS--Institutional Shares
<PAGE> 224
The Equity Fund anticipates investing in growth-oriented, medium-sized
capitalization companies. Medium-sized companies are considered to be those with
a market capitalization of between $1 billion and $5 billion. The Large
Capitalization Fund anticipates investing in growth-oriented companies with
large market capitalization, defined as capitalization of over $5 billion. For
both the Equity Fund and Large Capitalization Fund, investments will be in
companies that have typically exhibited consistent, above-average growth in
revenues and earnings, strong management, and sound and improving financial
fundamentals. Often, these companies are market or industry leaders, have
excellent products and/or services, and exhibit the potential for growth. Core
holdings of the Equity Fund and Large Capitalization Fund are in companies that
participate in long-term growth industries, although these will be supplemented
by holdings in non-growth industries that exhibit the desired characteristics.
The Small Capitalization Fund anticipates investing in dynamic small- to
medium-sized companies that exhibit outstanding potential for superior growth.
Small-sized companies are considered to be those with capitalization of less
than $1 billion. The Small Capitalization Fund will limit its investment in
securities of medium-sized companies to not more than 35% of the value of its
total assets. Companies that participate in sectors that are identified as
having long-term growth potential generally make up a substantial portion of
such Fund's holdings. These companies often have established a market niche or
have developed unique products or technologies that are expected to produce
superior growth in revenues and earnings. As smaller capitalization stocks are
quite volatile and subject to wide fluctuations in both the short and medium
term, the Small Capitalization Fund may be fairly characterized more aggressive
than a general equity fund such as the Equity Fund.
Consistent with the foregoing, each of the Equity Fund and Small Capitalization
Fund and Large Capitalization Fund will focus its investments in those companies
and types of companies that First of America believes will enable such Fund to
achieve its investment objective.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE EQUITY FUND, THE SMALL CAPITALIZATION FUND AND THE LARGE CAPITALIZATION FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency
Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio
Securities
- -Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
- -Put and Call Options -Repurchase Agreements -Restricted Securities
- -Reverse Repurchase Agreements -When-Issued and
and
Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
THE INTERNATIONAL FUND
The investment objective of the International Fund is to seek long-term growth
of capital.
Under normal market conditions the International Fund will invest at least 65%
of its total assets in an internationally diversified portfolio of equity
securities which trade on markets in countries other than the United States and
which are issued by companies (i) domiciled in countries other than the United
States, or (ii) that derive at least 50% of either their revenues or pre-tax
income from activities outside of the United States, and (iii) which are small-
or medium-sized companies on the basis of their capitalization.
Equity securities include common and preferred stock, securities (bonds and
preferred stock) convertible into common stock, warrants and securities
representing underlying international securities such as ADRs and EDRs.
For purposes of investment by the International Fund only, companies are deemed
to be small- or medium-sized if, at the time of purchase, they are of a size
which would rank them in the lower half of a major market index in the
applicable country by weighted market capitalization and in the lower half of
all equity securities listed in recognized secondary markets where such markets
exist. In addition, in countries with less well-developed stock markets, where
the range of investment opportunities is more
PROSPECTUS--Institutional Shares 26
<PAGE> 225
restrictive, the equity securities of all listed companies will be eligible for
investment. In major markets, issuers could have capitalizations of up to
approximately $10 billion while in smaller markets issuers would be eligible
with capitalizations as low as approximately $200 million.
The International Fund may invest in securities of issuers in, but not limited
to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Malaysia, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Normally the
International Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries, including the countries listed
above. It is possible, although not currently anticipated, that up to 35% of the
International Fund's assets could be invested in the securities of U.S.
companies. In addition, the International Fund temporarily may invest cash in
short-term debt instruments of U.S. and foreign issuers for cash management
purposes or pending investment.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE INTERNATIONAL FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency Transactions
- -Futures Contracts -Government Obligations -Other Mutual Funds
- -Portfolio Turnover -Lending Portfolio Securities -Repurchase Agreements
- -Restricted -Put and Call Options -When-Issued and
Securities Delayed-Delivery
-Reverse Repurchase Agreements Transactions
and
Dollar Roll Agreements
</TABLE>
GROWTH AND INCOME FUNDS
THE BALANCED FUND
The investment objective of the Balanced Fund is to seek current income,
long-term capital growth and conservation of capital.
The Balanced Fund may invest in any type or class of security. Under normal
market conditions the Balanced Fund will invest in common stocks, fixed-income
securities and securities convertible into common stocks (i.e., warrants,
convertible preferred stock, fixed-rate preferred stock, convertible fixed-
income securities, options and rights). At least 25% of the value of the
Balanced Fund's total assets will be invested in fixed-income senior securities.
Up to 15% of the value of the Balanced Fund's total assets may be invested in
foreign securities.
The Balanced Fund's common stocks are held for the purpose of providing dividend
income and long-term growth of capital. The Balanced Fund will invest in the
common and preferred stocks of companies with capitalization of at least $100
million and which are traded either in established over-the-counter markets or
on national exchanges. The Balanced Fund intends to invest primarily in those
companies which are growth-oriented and have exhibited consistent, above-average
growth in revenues and earnings. When choosing such stocks, the potential for
long-term capital appreciation will be the primary basis for selection.
The Balanced Fund's fixed-income securities consist of bonds, debentures, notes,
zero-coupon securities, mortgage-related securities, state, municipal or
industrial revenue bonds, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, certificates of deposit, time
deposits, high quality commercial paper, bankers' acceptances and variable
amount master demand notes. In addition, a portion of the Balanced Fund's assets
may from time to time be invested in first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Some of the securities in which the
Balanced Fund invests may have warrants or options attached. The Balanced Fund
may also invest in repurchase agreements.
The Balanced Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, as well as
"stripped" U.S. Treasury obligations ("Stripped
27 PROSPECTUS--Institutional Shares
<PAGE> 226
Treasury Obligations"), such as Treasury receipts issued by the U.S. Treasury
representing either future interest or principal payments and other obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities. See "RISK FACTORS AND INVESTMENT TECHNIQUES--Government
Obligations" below.
The Balanced Fund also expects to invest in bonds, notes and debentures of a
wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, in the case of notes and
bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance.
The Balanced Fund will invest only in corporate fixed-income securities which
are rated at the time of purchase within the four highest rating groups assigned
by a nationally-recognized statistical rating organization ("NRSRO") or, if
unrated, which First of America deems present attractive opportunities and are
of comparable quality. For a description of the rating symbols of the NRSROs,
see the Appendix to the Statement of Additional Information. For a discussion of
fixed-income securities rated within the fourth highest rating group assigned by
an NRSRO, see "RISK FACTORS AND INVESTMENT TECHNIQUES-- Medium-Grade Securities"
herein.
The Balanced Fund may hold some short-term obligations (with maturities of 12
months or less) consisting of domestic and foreign commercial paper, variable
amount master demand notes, bankers' acceptances, certificates of deposit and
time deposits of domestic and foreign branches of U.S. banks and foreign banks,
and repurchase agreements. The Balanced Fund may also invest in securities of
other investment companies.
The Balanced Fund may also invest in obligations of the ExportImport Bank of the
United States, in U.S. dollar-denominated international bonds for which the
primary trading market is in the United States ("Yankee Bonds"), or for which
the primary trading market is abroad ("Eurodollar Bonds"), and in Canadian bonds
and bonds issued by institutions, such as the World Bank and the European
Economic Community, organized for a specific purpose by two or more sovereign
governments ("Supranational Agency Bonds"). The Balanced Fund's investments in
foreign securities may be made either directly or through the purchase of ADRs
and the Balanced Fund may also invest in securities issued by foreign branches
of U.S. banks and foreign banks, in CCP, and in Europaper.
The amount invested in stock, bonds and cash reserves may be varied from time to
time, depending upon First of America's assessment of business, economic and
market conditions, including any potential advantage of price shifts between the
stock market and the bond market. The Balanced Fund reserves the right to hold
short-term securities in whatever proportion deemed desirable for temporary
defensive periods during adverse market conditions as determined by First of
America. However, to the extent that the Balanced Fund is so invested, its
investment objectives may not be achieved during that time.
Like any investment program, the Balanced Fund entails certain risks. As a Fund
investing primarily in common stocks the Balanced Fund is subject to stock
market risk, i.e., the possibility that stock prices in general will decline
over short or even extended periods.
Since the Balanced Fund also invests in bonds, investors in the Balanced Fund
are also exposed to bond market risk, i.e., fluctuations in the market value of
bonds. Bond prices are influenced primarily by changes in interest rate levels.
When interest rates rise, the prices of bonds generally fall; conversely, when
interest rates fall, bond prices generally rise. While bonds normally fluctuate
less in price than stock, there have been extended periods of cyclical increases
in interest rates that have caused significant declines in bond prices.
From time to time, the stock and bond markets may fluctuate independently of one
another. In other words, a decline in the stock market may in certain instances
be offset by a rise in the bond market, or vice versa. As a result the Balanced
Fund, with its balance of common stock and bond investments, is expected to
entail less investment risk (and a potentially smaller investment return) than a
mutual fund investing exclusively in common stocks.
PROSPECTUS--Institutional Shares 28
<PAGE> 227
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE BALANCED FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency
Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio
Securities
- -Medium-Grade -Mortgage-Related Securities -Other Mutual Funds
Securities
- -Portfolio Turnover -Put and Call Options -Repurchase Agreements
- -Restricted Securities -Reverse Repurchase -When-Issued and Delayed-
Agreements Delivery Transactions
and Dollar Roll
Agreements
</TABLE>
THE HIGH INCOME EQUITY FUND
The investment objective of the High Income Equity Fund is to seek current
income by investing in a diversified portfolio of high quality, dividend-paying
common stocks and securities convertible into common stocks. A secondary
investment objective of High Income Equity Fund is growth of capital.
The High Income Equity Fund, under normal market conditions, will invest at
least 80% of the value of its total assets in common stocks and securities
convertible into common stocks of companies believed by First of America to be
characterized by sound management, the ability to finance expected growth and
the ability to pay above-average dividends. The High Income Equity Fund may also
invest up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. The
High Income Equity Fund may also hold securities of other investment companies
and depository or custodial receipts representing beneficial interests in any of
the foregoing securities.
Subject to the foregoing policies, the High Income Equity Fund may also invest
up to 25% of its net assets in foreign securities either directly or through the
purchase of ADRs and may also invest in securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper. For a discussion of
risks associated with foreign securities, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Foreign Securities" herein.
The High Income Equity Fund anticipates investing in securities that currently
have a high dividend yield, with the anticipation that the dividend will remain
constant or be increased in the future. These securities generally represent the
core holdings of this Fund. However, these holdings are balanced with lower
yielding but higher growth-oriented securities to achieve portfolio balance. All
securities must provide current income. Given its bias towards income, the High
Income Equity Fund may be considered more conservative than growth-oriented
equity funds such as the Group's Equity Fund and Small Capitalization Fund.
Consistent with the foregoing, the High Income Equity Fund will focus its
investments in those companies and types of companies that First of America
believes will enable such Fund to achieve its investment objective.
29 PROSPECTUS--Institutional Shares
<PAGE> 228
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE HIGH INCOME EQUITY FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Foreign Currency
Transactions
- -Futures Contracts -Government Obligations -Lending Portfolio
Securities
- -Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
- -Put and Call Options -Repurchase Agreements -Restricted Securities
- -Reverse Repurchase -When-Issued and
Agreements and Dollar Delayed-Delivery
Roll Agreements Transactions
</TABLE>
INCOME FUNDS
THE BOND FUND AND THE LIMITED MATURITY BOND FUND
The investment objective of the Bond Fund is to seek current income as well as
preservation of capital by investing in a portfolio of high- and medium-grade
fixed-income securities. The investment objective of the Limited Maturity Bond
Fund is to seek current income as well as preservation of capital by investing
in a portfolio of high- and medium-grade fixed-income securities with remaining
maturities of six years or less.
Under normal market conditions, the Bond Fund will invest at least 80% of the
value of its total assets in bonds, debentures, notes with remaining maturities
at the time of purchase of one year or more, zero-coupon securities,
mortgage-related securities, state, municipal or industrial revenue bonds,
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, debt securities convertible into, or exchangeable for, common
stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Bond Fund will invest in state and municipal securities
when, in the opinion of First of America, their yields are competitive with
comparable taxable debt obligations. In addition, up to 20% of the value of the
Bond Fund's total assets may be invested in preferred stocks, notes with
remaining maturities at the time of purchase of less than one year, short-term
debt obligations consisting of domestic and foreign commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit and time deposits of domestic and foreign branches of U.S. banks and
foreign banks, repurchase agreements, securities of other investment companies,
and guaranteed investment contracts ("GICs") issued by insurance companies, as
more fully described below. The Bond Fund intends that under normal market
conditions its portfolio will maintain an average weighted maturity of
approximately eight to twelve years. However, the Bond Fund may extend or
shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. Some of
the securities in which the Bond Fund invests may have warrants or options
attached.
Under normal market conditions, the Limited Maturity Bond Fund will invest at
least 80% of the value of its total assets in the following securities which
have remaining maturities of six years or less: bonds, debentures, notes with
remaining maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial revenue
bonds, obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, debt securities convertible into, or exchangeable for,
common stocks, first mortgage loans and participation certificates in pools of
mortgages issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Limited Maturity Bond Fund will invest in state and
municipal securities when, in the opinion of First of America, their yields are
competitive with comparable taxable debt obligations. In addition, up to 20% of
the value of the Limited Maturity Bond Fund's total assets may be invested in
the debt securities listed above without regard to maturity, as well as
preferred stocks, short-term debt obligations consisting of domestic and foreign
commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, repurchase agreements, securities of
other investment companies and GICs. Under normal market conditions, the Limited
Maturity Bond Fund expects to maintain a dollar-weighted average portfolio
PROSPECTUS--Institutional Shares 30
<PAGE> 229
maturity of its debt securities of three years or less. By seeking to maintain a
dollar-weighted average portfolio maturity of three years or less, the Limited
Maturity Bond Fund attempts to minimize the fluctuation in its shares' net asset
value relative to funds which invest in longer-term obligations. Some of the
securities in which the Limited Maturity Bond Fund invests may have warrants or
options attached.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Bond Fund or the Limited
Maturity Bond Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The Bond Fund and Limited Maturity Bond Fund each expects to invest in a variety
of U.S. Treasury obligations, differing in their interest rates, maturities, and
times of issuance, as well as Stripped Treasury Obligations, and other
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. See "RISK FACTORS AND INVESTMENT TECHNIQUES--Government
Obligations" below.
The Bond Fund and the Limited Maturity Bond Fund each also expects to invest in
bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures will represent unsecured promises to pay,
and in the case of notes and bonds, may be secured by mortgages on real property
or security interests in personal property and will in most cases differ in
their interest rates, maturities and times of issuance.
The Bond Fund and the Limited Maturity Bond Fund each will invest only in
corporate debt securities which are rated at the time of purchase within the
four highest rating groups assigned by an NRSRO or, if unrated, which First of
America deems present attractive opportunities and are of comparable quality.
For a discussion of debt securities rated within the fourth highest rating
groups assigned by the NRSROS, see "RISK FACTORS AND INVESTMENT
TECHNIQUES--Medium-Grade Securities" herein.
The Bond Fund and the Limited Maturity Bond Fund each may also invest in
obligations of the Export-Import Bank of the United States, in Yankee Bonds, in
Eurodollar Bonds, in Canadian Bonds and in Supranational Agency Bonds. Each of
the Bond Fund and Limited Maturity Bond Fund may also invest up to 25% of its
net assets in foreign securities either directly or through the purchase of ADRs
and may also invest in securities issued by foreign branches of U.S. banks and
foreign banks, in CCP, and in Europaper.
An increase in interest rates will generally reduce the value of the investments
in the Bond Fund and the Limited Maturity Bond Fund and a decline in interest
rates will generally increase the value of those investments. Depending upon the
prevailing market conditions, First of America may purchase debt securities at a
discount from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value, the
yield will be lower than the coupon rate. In making investment decisions for the
Bond Fund, First of America will consider many factors other than current yield,
including the preservation of capital, the potential for realizing capital
appreciation, maturity, and yield to maturity. In making investment decisions
for the Limited Maturity Bond Fund, First of America will consider many factors
other than current yield, including the preservation of capital, maturity, and
yield to maturity.
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THE BOND FUND AND THE LIMITED MATURITY BOND FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
-Complex Securities -Foreign Currency Transactions -Foreign Securities
-Futures Contracts -Government Obligations -Lending Portfolio Securities
-Medium-Grade Securities -Mortgage-Related Securities -Municipal Securities
-Other Mutual Funds -Portfolio Turnover -Put and Call Options
-Repurchase Agreements -Restricted Securities -Reverse Repurchase Agreements
-When-Issued and Delayed and Dollar Roll Agreements
Delivery
Transactions
</TABLE>
THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
The investment objective of the Intermediate Government Obligations Fund is to
seek current income with preservation of capital by investing in U.S. government
securities with remaining maturities of twelve years or less.
31 PROSPECTUS--Institutional Shares
<PAGE> 230
Under normal market conditions, the Intermediate Government Obligations Fund
will invest at least 80% of its total assets in obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities and with remaining
maturities of twelve years or less, although up to 20% of the value of its total
assets may be invested in debt securities, preferred stocks and other
investments without regard to maturity, except as set forth below. Under normal
market conditions, the Intermediate Government Obligations Fund expects to
maintain a dollar-weighted average portfolio maturity of its debt securities of
three to ten years. By seeking to maintain a dollar-weighted average portfolio
maturity of three to ten years, the Intermediate Government Obligations Fund
attempts to minimize the fluctuation in its shares' net asset value relative to
funds which invest in longer-term obligations.
Certain debt securities including, but not limited to, mortgage-related
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, may be repaid prior
to their maturity dates. As a result, effective maturity of these securities
may be deemed to be shorter than the stated maturity. For purposes of
calculating the weighted average maturity of the Intermediate Government
Obligations Fund, the effective maturity of such securities, as determined by
the Investment Adviser, will be used.
The types of U.S. government obligations invested in by the Intermediate
Government Obligations Fund will include obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Treasury, such as Treasury bills, notes, bonds and certificates of indebtedness,
and government securities, as described below in "RISK FACTORS AND INVESTMENT
TECHNIQUES-- Government Obligations."
The Intermediate Government Obligations Fund may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, as more fully described below under "RISK FACTORS AND
INVESTMENT TECHNIQUES -- Government Obligations."
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THE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Futures Contracts
- -Government Obligations -Lending Portfolio Securities -Mortgage-Related
Securities
- -Municipal Securities -Other Mutual Funds -Portfolio Turnover
- -Put and Call Options -Repurchase Agreements -Restricted Securities
- -Reverse Repurchase Agreements -When-Issued and
and Dollar Roll Agreements Delayed-Delivery
Transactions
</TABLE>
THE GOVERNMENT INCOME FUND
The investment objective of the Government Income Fund is to provide
shareholders with a high level of current income consistent with prudent
investment risk.
Under normal market conditions, the Government Income Fund will invest at least
65% of its total assets in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, although up to 35% of the value
of its total assets may be invested in debt securities and preferred stocks of
non-governmental issuers. Consistent with the foregoing, under current market
conditions, the Government Income Fund intends to invest up to 80% of the value
of its total assets in mortgage-related securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. The Government Income Fund
also may invest up to 35% of its total assets in mortgage-related securities
issued by non-governmental entities and in other securities described below. For
more information, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Mortgage-Related
Securities," below.
The types of U.S. government obligations, including mortgage-related securities,
invested in by the Government Income Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes and bonds, Stripped Treasury
Obligations and government securities, as described below in "RISK FACTORS AND
INVESTMENT TECHNIQUES--Government Obligations".
The Government Income Fund may also hold short-term obligations (with maturities
of 12 months or less) consisting of domestic and foreign commercial paper
(including variable amount master demand notes), rated at the time of purchase
within the top two rating groups assigned by an NRSRO or, if unrated, which
First of America deems present attractive opportunities and are of comparable
quality bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of
PROSPECTUS--Institutional Shares 32
<PAGE> 231
U.S. banks and foreign banks, and repurchase and reverse repurchase agreements.
The Government Income Fund may also invest in corporate debt securities which
are rated at the time of purchase within the top three rating groups assigned by
an NRSRO or, if unrated, which First of America deems present attractive
opportunities and are of comparable quality.
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THE GOVERNMENT INCOME FUND
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Future Contracts
- -Government Obligations -Lending Portfolio Securities -Put and Call Options
- -Mortgage-Related Securities -Other Mutual Funds -Portfolio Turnover
- -Reverse Repurchase Agreements -Repurchase Agreements -Restricted Securities
and Dollar Roll Agreements -When-Issued and Delayed-Delivery
Transactions
</TABLE>
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TAX-FREE INCOME FUNDS
THE MUNICIPAL BOND FUND AND THE MICHIGAN BOND FUND
The investment objective of the Municipal Bond Fund is to seek current interest
income which is exempt from federal income taxes and preservation of capital.
The investment objective of the Michigan Bond Fund is to seek income which is
exempt from federal income tax and Michigan state income and intangibles taxes,
although such income may be subject to the federal alternative minimum tax when
received by certain shareholders, and preservation of capital.
Under normal market conditions and as a fundamental policy, at least 80% of the
net assets of the Municipal Bond Fund will be invested in a diversified
portfolio of Municipal Securities and at least 80% of the net assets of the
Michigan Bond Fund will be invested in a portfolio of Michigan Municipal
Securities.
"Municipal Securities" include obligations consisting of bonds, notes and
commercial paper, issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and other political subdivisions,
agencies, instrumentalities and authorities, the interest on which is both
exempt from federal income taxes and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax. "Michigan
Municipal Securities" include debt obligations, consisting of notes, bonds and
commercial paper, issued by or on behalf of the State of Michigan, its political
subdivisions, municipalities and public authorities, the interest on which is,
in the opinion of bond counsel to the issuer, exempt from federal income tax and
Michigan state income and intangibles taxes (but may be treated as a preference
item for individuals for purposes of the federal alternative minimum tax) and
debt obligations issued by the government of Puerto Rico, the U.S. territories
and possessions of Guam, the U.S. Virgin Islands or such other governmental
entities whose debt obligations, either by law or treaty, generate interest
income which is exempt from federal and Michigan state income and intangibles
taxes. For more information regarding Municipal Securities and Michigan
Municipal Securities, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Municipal
Securities," below.
Under normal market conditions, at least 65% of the net assets of each of the
Municipal Bond Fund and the Michigan Bond Fund will be invested in Municipal
Securities (Michigan Municipal Securities in the case of the Michigan Bond Fund)
consisting of bonds and notes with remaining maturities at the time of purchase
of one year or more. Quality is the primary consideration in selecting Michigan
Municipal Securities for investment by the Michigan Bond Fund.
The Municipal Bond Fund also intends that under normal market conditions its
portfolio will maintain an average weighted maturity of approximately eight to
ten years and an average weighted rating of AA/Aa. The Michigan Bond Fund
intends that, under normal market conditions, it will be invested in long-term
Michigan Municipal Securities and that the average weighted maturity of such
investments will be 5 to 12 years, although the Michigan Bond Fund may invest in
Michigan Municipal Securities of any maturity and First of America may extend or
shorten the average weighted maturity of its portfolio depending upon
33 PROSPECTUS--Institutional Shares
<PAGE> 232
anticipated changes in interest rates or other relevant market factors. In
addition, the average weighted rating of a Tax-Free Income Fund's portfolio may
vary depending upon the availability of suitable Municipal Securities or other
relevant market factors.
The Michigan Bond Fund invests in Michigan Municipal Securities which are rated
at the time of purchase within the four highest rating groups assigned by an
NRSRO or, in the case of notes, tax-exempt commercial paper or variable rate
demand obligations, rated within the two highest rating groups assigned by an
NRSRO. The Michigan Bond Fund may also purchase Michigan Municipal Securities
which are unrated at the time of purchase but are determined to be of comparable
quality by First of America pursuant to guidelines approved by the Group's Board
of Trustees. The applicable Michigan Municipal Securities ratings are described
in the Appendix to the Statement of Additional Information. For a description of
debt securities rated within the fourth highest rating groups assigned by the
NRSROs, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Medium-Grade Securities"
herein.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Tax-Free Income Funds will not treat these
bonds as "Municipal Securities" or "Michigan Municipal Securities" for purposes
of measuring compliance with the 80% tests described above. To the extent the
Tax-Free Income Funds invest in these bonds, individual shareholders, depending
on their own tax status, may be subject to alternative minimum tax on that part
of the Tax-Free Income Funds' distributions derived from these bonds. For
further information relating to the types of municipal securities which will be
included in income subject to alternative minimum tax, see "ADDITIONAL
INFORMATION-- Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information.
Investments of the Tax-Free Income Funds may be made in taxable obligations if,
for example, suitable tax-exempt obligations are unavailable or if acquisition
of U.S. government or other taxable securities is deemed appropriate for
temporary defensive purposes as determined by First of America to be warranted
due to market conditions. Such taxable obligations consist of government
securities, certificates of deposit, time deposits and bankers' acceptances of
selected banks, commercial paper meeting the Tax-Free Income Funds' quality
standards for tax-exempt commercial paper (as described above), and such taxable
obligations as may be subject to repurchase agreements. These obligations are
described further in the Statement of Additional Information. Under such
circumstances and during the period of such investment, the affected Tax-Free
Income Fund may not achieve its stated investment objectives.
Although the Municipal Bond Fund may invest more than 25% of its net assets in
(i) Municipal Securities whose issuers are in the same state, (ii) Municipal
Securities the interest on which is paid solely from revenues of similar
projects, and (iii) private activity bonds, it does not presently intend to do
so on a regular basis. To the extent the Municipal Bond Fund's assets are
concentrated in Municipal Securities that are payable from the revenues of
similar projects or are issued by issuers located in the same state, or are
concentrated in private activity bonds, the Municipal Bond Fund will be subject
to the peculiar risks presented by the laws and economic conditions relating to
such states, projects and bonds to a greater extent than it would be if its
assets were not so concentrated.
Because the Michigan Bond Fund invests primarily in securities issued by the
State of Michigan and its political subdivisions, municipalities and public
authorities, the Michigan Bond Fund's performance is closely tied to the general
economic conditions within the State as a whole and to the economic conditions
within particular industries and geographic areas represented or located within
the State. However, the Michigan Bond Fund attempts to diversify, to the extent
First of America deems appropriate, among issuers and geographic areas in the
State of Michigan.
The Michigan Bond Fund is classified as a "non-diversified" investment company,
which means that the amount of assets of the Michigan Bond Fund that may be
invested in the securities of a single issuer is not limited by the Investment
Company Act of 1940, as amended ("1940 Act"). Nevertheless, the Michigan Bond
Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which requires the Michigan Bond Fund generally to invest,
with respect to 50% of its total assets, not more than 5% of such assets in the
obligations of a single issuer; as to the remaining 50% of its total assets, the
Michigan
PROSPECTUS--Institutional Shares 34
<PAGE> 233
Bond Fund is not so restricted. In no event, however, may the Michigan Bond Fund
invest more than 25% of its total assets in the obligations of any one issuer.
Compliance with this requirement is measured at the close of each quarter of the
Michigan Bond Fund's taxable year. Since a relatively high percentage of the
Michigan Bond Fund's assets may be invested in the obligations of a limited
number of issuers, some of which may be within the same economic sector, the
Michigan Bond Fund's portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio securities of a
diversified investment company.
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TAX-FREE INCOME FUNDS
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Currency Transactions -Futures Contracts (Municipal
- -Government Obligations -Lending Portfolio Securities Bond Fund only)
- -Medium-Grade Securities -Mortgage-Related Securities -Municipal Securities
- -Other Mutual Funds -Portfolio Turnover -Private Activity Bonds
- -Put and Call Options -Repurchase Agreements -Restricted Securities
- -Reverse Repurchase Agreements -When-Issued and Delayed-Delivery
and Dollar Roll Agreements Transactions
</TABLE>
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
THE U.S. GOVERNMENT OBLIGATION FUND, THE PRIME OBLIGATIONS FUND, THE TREASURY
FUND AND THE TAX-FREE FUND
The investment objective of each of the U.S. Government Obligations Fund, the
Prime Obligations Fund and the Treasury Fund is to seek current income with
liquidity and stability of principal. The investment objective of the Tax-Free
Fund is to seek as high a level of current interest income free from federal
income taxes as is consistent with the preservation of capital and relative
stability of principal.
Under normal market conditions, the U.S. Government Obligations Fund invests at
least 65% of the value of its total assets in short-term U.S. Treasury bills,
notes, and other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities. The Prime Obligations Fund invests in high-
quality money market instruments, including Municipal Securities and other
instruments deemed to be of comparable high quality as determined by the Board
of Trustees. Under normal market conditions, the Treasury Fund invests
exclusively in obligations issued or guaranteed by the U.S. Treasury, its
agencies or instrumentalities and in repurchase agreements related to such
securities. As a matter of fundamental policy, under normal market conditions,
at least 80% of the Tax-Free Fund's total assets will be invested in Municipal
Securities.
The U.S. Government Obligations Fund may invest up to 35% of the value of its
total assets in high-quality money market instruments, including Municipal
Securities, bankers' acceptances, certificates of deposit, time deposits, and
other instruments deemed to be of comparable high quality as determined by the
Board of Trustees.
The Tax-Free Fund may invest up to 20% of its total assets in obligations the
interest on which is either subject to federal income taxation or treated as a
preference item for purposes of the federal alternative minimum tax ("Taxable
Obligations"). If deemed appropriate for temporary defensive purposes, the Tax-
Free Fund may increase its holdings in Taxable Obligations to over 20% of its
total assets and may also hold uninvested cash reserves pending investment.
Taxable Obligations may include obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities (some of which may be subject to
repurchase agreements), certificates of deposit and bankers' acceptances of
selected banks, and commercial paper meeting the Tax-Free Fund's quality
standards for tax-exempt commercial paper (as described below). These
obligations are described further in the Statement of Additional Information.
As a money market fund, each Money Market Fund invests exclusively in United
States dollar-denominated instruments which the Trustees of the Group and First
of America determine present
35 PROSPECTUS--Institutional Shares
<PAGE> 234
minimal credit risks and which at the time of acquisition are rated by one or
more NRSROs in one of the two highest rating groups for short-term debt
obligations or, if unrated, are of comparable quality. In addition, each of the
U.S. Government Obligations Fund, the Prime Obligations Fund and the Treasury
Fund diversifies its investments so that, with minor exceptions and except for
United States government securities, not more than 5% of its total assets is
invested in the securities of any one issuer, not more than 5% of its total
assets is invested in securities of all issuers rated by an NRSRO at the time of
investment in the second highest rating group for short-term debt obligations or
deemed to be of comparable quality to securities rated in the second highest
rating group for short-term debt obligations (either referred to as "Second Tier
Securities") and not more than the greater of 1% of total assets or $1 million
is invested in the Second Tier Securities of one issuer. All securities or
instruments in which a Money Market Fund invests have remaining maturities of
397 calendar days (thirteen months) or less. The dollar-weighted average
maturity of the obligations in a Money Market Fund will not exceed 90 days.
The Prime Obligations Fund and, within the limitations described above, the U.S.
government Obligations Fund may invest in short-term promissory notes issued by
corporations (including variable amount master demand notes) rated at the time
of purchase within the two highest rating groups assigned by an NRSRO or, if not
rated, found by the Group's Board of Trustees to be of comparable quality.
Instruments may be purchased in reliance upon a rating only when the rating
organization is not affiliated with the issuer or guarantor of the instrument.
For a description of the rating groups of the NRSROs, see the Appendix to the
Statement of Additional Information. The Prime Obligations Fund may also invest
in CCP, Europaper, bankers' acceptances, certificates of deposit and time
deposits.
Each of the Money Market Funds may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying security, a dealer in the security, or by another
third party, and may not be transferred separately from the underlying security.
The Money Market Funds use these arrangements to provide liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership, or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable after a payment
default on the underlying security may be treated as a form of credit
enhancement.
Certain of the Money Market Funds' permitted investments may have received
credit enhancement by a guaranty, letter of credit, or insurance. The Money
Market Funds may evaluate the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the entity
providing the credit enhancement, rather than the issuer. The bankruptcy,
receivership, or default of an entity providing credit enhancement may adversely
affect the quality and marketability of the underlying security.
Pursuant to the requirements of Rule 2a-7 adopted under the 1940 Act, each of
the Money Market Funds will limit its investment, with respect to 75% of its
assets, in the demand features of a single issuer to 10% of the Fund's assets.
With respect to the remaining 25% of a Money Market Fund's assets, the Fund may
invest in securities subject to demand features from, or directly issued by, one
or more institutions, provided they are rated in the highest rating category
assigned by an NRSRO and are issued by a "non-controlled person," as defined in
the Rule. In addition, a demand feature, other than a standby commitment, may be
acquired by a Money Market Fund only if the demand feature or its issuer has
received a short-term rating from an NRSRO and not more than 5% of the Fund's
assets are invested in demand features from a single issuer rated in the second
highest short-term rating category assigned by an NRSRO.
Each of the Money Market Funds intends to follow the operational policies
described above, as well as other non-fundamental policies that will enable the
Fund to comply with the laws and regulations applicable to money market mutual
funds, particularly Rule 2a-7 under the 1940 Act. Each of the Money Market Funds
shall determine the effective maturity of its investments, the applicable credit
rating of securities, and adequate diversification by reference to Rule 2a-7.
Each of the Money Market Funds may
PROSPECTUS--Institutional Shares 36
<PAGE> 235
change its operational policies to reflect changes in the laws and regulations
applicable to money market mutual funds without shareholder approval.
The Tax-Free Fund may acquire zero-coupon obligations, which have greater price
volatility than coupon obligations and which will not result in the payment of
interest until maturity. Additionally, the Tax-Free Fund, within the limitations
described above and subject to the quality standards for tax-exempt commercial
paper described below, may invest in commercial paper.
Although the Tax-Free Fund presently does not intend to do so on a regular
basis, it may invest more than 25% of its assets in Municipal Securities which
are related in such a way that an economic, business, or political development
or change affecting one such security would likewise affect the other Municipal
Securities. Examples of such securities are obligations the repayment of which
is dependent upon similar types of projects or projects located in the same
state. Such investments would be made only if deemed necessary or appropriate by
the Investment Adviser. To the extent that the Tax-Free Fund's assets are
concentrated in Municipal Securities that are so related, the Tax-Free Fund will
be subject to the peculiar risks presented by such Municipal Securities, such as
negative developments in a particular industry or state, to a greater extent
than it would be if the Tax-Free Fund's assets were not so concentrated.
Variable amount master demand notes in which the U.S. Government Obligations
Fund and the Prime Obligations Fund may invest are unsecured demand notes that
permit the indebtedness thereunder to vary, and that provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. First of America will consider the
earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand. The period of time remaining until the principal
amount can be recovered under a variable master demand note shall not exceed
seven days.
<TABLE>
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MONEY MARKET FUNDS
See the following Sections in RISK FACTORS AND INVESTMENT TECHNIQUES
- -Complex Securities -Foreign Securities -Government Obligations
(except Treasury Fund) -Municipal Securities -Portfolio Turnover
- -Lending Portfolio (except Treasury Fund) -Repurchase Agreements
Securities -Put and Call Options -When-Issued and Delayed-Delivery
- -Private Activity Bonds (Tax-Free Fund Only) Transactions
(Tax-Free Fund only) -Reverse Repurchase Agreements -Guaranteed Investment Contracts
- -Restricted Securities and Dollar Roll Agreements (Prime Obligation Fund Only)
(except Treasury Fund)
</TABLE>
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RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in a Fund entails certain risks. The
Funds will not acquire portfolio securities issued by, make savings deposits in,
or enter into repurchase, reverse repurchase or dollar roll agreements with
First of America Bank-Michigan, N.A. ("FOA-Michigan," the parent corporation of
First of America), BISYS, or their affiliates, and will not give preference to
FOA-Michigan's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements, reverse repurchase agreements and
dollar roll agreements.
37 PROSPECTUS--Institutional Shares
<PAGE> 236
COMPLEX SECURITIES
Some of the investment techniques utilized by First of America and in the case
of the International Fund and Balanced Fund, Gulfstream, in the management of
each of the Funds (with the exception of the Treasury Fund) involve complex
securities sometimes referred to as "derivatives." Among such securities are put
and call options, foreign currency transactions and futures contracts, all of
which are described below. The Investment Adviser and Subadviser believe that
such complex securities may, in some circumstances, play a valuable role in
successfully implementing each Fund's investment strategy and achieving its
goals. However, because complex securities and the strategies for which they are
used, are by their nature complicated, they present substantial opportunities
for misunderstanding and misuse. To guard against these risks, the Investment
Adviser and Subadviser will utilize complex securities primarily for hedging,
not speculative, purposes and only after careful review of the unique risk
factors associated with each such security.
FOREIGN SECURITIES
The International Fund invests primarily in the securities of foreign issuers.
The Balanced Fund may invest up to 15% of its total assets in foreign
securities. The Equity Fund, Small Capitalization Fund, Large Capitalization
Fund and High Income Equity Fund may also invest in foreign securities as
permitted by their respective investment policies. Each of the Bond Fund and
Limited Maturity Bond Fund may also invest up to 25% of its net assets in
foreign securities either directly or through the purchase of ADRs and may also
invest in securities issued by foreign branches of U.S. banks and foreign banks,
in CCP, and in Europaper. The Government Income Fund, the U.S. Government
Obligations Fund, the Prime Obligations Fund and the Tax-Free Fund may invest in
foreign securities by purchasing Eurodollar certificates of deposit ("ECDs"),
which are U.S. dollar-denominated certificate of deposit issued by offices of
foreign and domestic banks outside the U.S.; Eurodollar time deposits ("ETDs"),
("CTDs"), which are essentially the same as ETDs except that they are issued by
Canadian offices of major Canadian banks; Yankee certificates of deposit
("Yankee CDs") which are U.S. dollar-denominated certificates of deposit issued
by a U.S. branch of a foreign bank but held in the U.S.; CCP, and Europaper.
Investment in foreign securities is subject to special investment risks that
differ in some respects from those related to investments in securities of U.S.
domestic issuers. Such risks include political, social or economic instability
in the country of the issuer, the difficulty of predicting international trade
patterns, the possibility of the imposition of exchange controls, expropriation,
limits on removal of currency or other assets, nationalization of assets,
foreign withholding and income taxation, and foreign trading practices
(including higher trading commissions, custodial charges and delayed
settlements). Such securities may be subject to greater fluctuations in price
than securities issued by U.S. corporations or issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The markets on which such
securities trade may have less volume and liquidity, and may be more volatile
than securities markets in the U.S. In addition, there may be less publicly
available information about a foreign company than about a U.S.-domiciled
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the U.S.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries. In addition, foreign branches of U.S. banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and record keeping standards than
those applicable to domestic branches of U.S. banks and U.S. domestic issuers.
In many instances, foreign debt securities may provide higher yields than
securities of domestic issuers which have similar maturities and quality. Under
certain market conditions these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Finally, in the event of a default of any such foreign debt obligations, it may
be more difficult for a Fund to obtain or to enforce a judgment against the
issuers of such securities. If a security is denominated in foreign currency,
the value of the security to the Fund will be affected by changes in currency
exchange rates and in exchange control
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regulations, and costs will be incurred in connection with conversions between
currencies. A change in the value of any foreign currency against the U.S.
dollar will result in a corresponding change in the U.S. dollar value of a
Fund's securities denominated in that currency. Such changes will also affect a
Fund's income and distributions to shareholders. In addition, although a Fund
will receive income on foreign securities in such currencies, such Fund will be
required to compute and distribute its income in U.S. dollars. Therefore, if the
exchange rate for any such currency declines materially after such Fund's income
has been accrued and translated into U.S. dollars, the Fund could be required to
liquidate portfolio securities to make required distributions. Similarly, if an
exchange rate declines between the time a Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater.
U.S. dollar-denominated ADRs, which are traded in the United States on exchanges
or over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate all of the risk inherent in investing
in the securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, a Fund can avoid currency risks during the
settlement period for either purchases or sales. In general, there is a large,
liquid market in the United States for many ADRs. The information available for
ADRs is subject to the accounting, auditing and financial reporting standards of
the domestic market or exchange on which they are traded, standards which are
more uniform and more exacting than those to which many foreign issuers may be
subject. The International Fund and Balanced Fund may also invest in European
Depository Receipts, or EDRs, which are receipts evidencing an arrangement with
a European bank similar to that for ADRs and designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency of the
underlying security.
Certain of the ADRs and EDRs, typically those categorized as unsponsored,
require their holders to bear most of the costs of such facilities while issuers
of sponsored facilities normally pay more of the costs. The depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through the voting rights to facility holders with respect to the deposited
securities, whereas the depository of a sponsored facility typically distributes
shareholder communications and passes through the voting rights.
Subject to its applicable investment policies, each of the Growth Funds and
Growth and Income Funds may invest in debt securities denominated in the ECU,
which is a "basket" unit of currency consisting of specified amounts of the
currencies of certain of the member states of the European Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies. Such adjustments may adversely affect holders of
ECU-denominated obligations or the marketability of such securities. European
governments and supranationals, in particular, issue ECU-denominated
obligations.
FOREIGN CURRENCY TRANSACTIONS
Each of the Funds, with the exception of the Money Market Funds and the Tax-Free
Income Funds, may utilize foreign currency transactions in its portfolio. The
value of the assets of a Fund as measured in United States dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and a Fund may incur costs in connection with
conversions between various currencies. A Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through forward contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract ("forward currency contracts") involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These forward currency contracts are traded directly
between currency traders (usually large commercial banks) and their customers.
The Funds may enter into forward currency contracts in order to hedge against
adverse movements in exchange rates between currencies.
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For example, when a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the United
States dollar cost or proceeds, as the case may be. By entering into a forward
currency contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, such
Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the United States dollar and such foreign currency. Additionally, for example,
when a Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward currency sale contract to
sell an amount of that foreign currency approximating the value of some or all
of that Fund's portfolio securities or other assets denominated in such foreign
currency, or when a Fund believes that the U.S. dollar may suffer a substantial
decline against a foreign currency. Alternatively, it may enter into a forward
currency purchase contract to buy that foreign currency for a fixed U.S. dollar
amount; however, this tends to limit potential gains which might result from a
positive change in such currency relationships. A Fund may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.
The forecasting of short-term currency market movement is extremely difficult
and whether such a short-term hedging strategy will be successful is highly
uncertain. It is impossible to forecast with precision the market value of
portfolio securities at the expiration of a forward currency contract.
Accordingly, it may be necessary for a Fund to purchase additional currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency such Fund is obligated
to deliver when a decision is made to sell the security and make delivery of the
foreign currency in settlement of a forward contract. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency such Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward currency contract prices. If the
Fund engages in an offsetting transaction, it may subsequently enter into a new
forward currency contract to sell the foreign currency. Should forward prices
decline during the period between a Fund's entering into a forward currency
contract for the sale of foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, such Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, such Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
The Funds will have to convert their holdings of foreign currencies into United
States dollars from time to time. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies.
The International Fund does not intend to enter into forward currency contracts
if more than 15% of the value of its total assets would be committed to such
contracts on a regular or continuous basis. The International Fund does not
intend to enter into forward currency contracts or to maintain a net exposure in
such contracts where the International Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
For further information about the characteristics, risks and possible benefits
of options, futures and foreign currency transactions, see "INVESTMENT
OBJECTIVES AND POLICIES--Additional Information on Portfolio Instruments" in the
Statement of Additional Information.
FUTURES CONTRACTS
The Growth Funds, the Growth and Income Funds, the Income Funds and the
Municipal Bond Fund may also enter into contracts for the future delivery of
securities or foreign currencies and futures contracts based on a specific
security, class of securities, foreign currency or an index, purchase or sell
options on
PROSPECTUS--Institutional Shares 40
<PAGE> 239
any such futures contracts and engage in related closing transactions. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index.
A Fund may engage in such futures contracts in an effort to hedge against market
risks. For example, when interest rates are expected to rise or market values of
portfolio securities are expected to fall, a Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
a Fund, through the purchase of such contracts, can attempt to secure better
rates or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
The acquisition of put and call options on futures contracts will, respectively,
give a Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of a Fund's total assets, and the value of
securities that are the subject of such futures and options (both for receipt
and delivery) may not exceed one-third of the market value of a Fund's total
assets. Futures transactions will be limited to the extent necessary to maintain
each Fund's qualification as a regulated investment company.
Futures transactions involve brokerage costs and require a Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of a Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities or foreign currencies,
limiting the Fund's ability to hedge effectively against interest rate, exchange
rate and/or market risk and giving rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.
GOVERNMENT OBLIGATIONS
The U.S. Government Obligations Fund will invest primarily in obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities.
Subject to the investment parameters described above, each of the remaining
Funds may also invest in such obligations. The Treasury Fund, however, will
invest exclusively in obligations issued or guaranteed by the U.S. Treasury and
in repurchase agreements backed by such securities.
The types of U.S. government obligations in which each of these Funds may invest
include U.S. Treasury notes, bills, bonds, and any other securities directly
issued by the U.S. government for public investment, which differ only in their
interest rates, maturities, and times of issuance. Stripped Treasury Obligations
are also permissible investments. Stripped securities are issued at a discount
to their "face value" and may exhibit greater price volatility than ordinary
debt securities because of the manner in which their principal and interest are
returned to investors. The Stripped Treasury Obligations in which the Money
Market Funds may invest do not include certificates of accrual on Treasury
securities ("CATS") or Treasury income growth receipts ("TIGRs").
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association ("GNMA"), are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Federal National Mortgage Association ("FNMA"), are supported by the right of
the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association ("SLMA"), are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks or the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Funds which may
invest
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in these government obligations will invest in the obligations of such agencies
or instrumentalities only when First of America believes that the credit risk
with respect thereto is minimal.
GUARANTEED INVESTMENT CONTRACTS
The Bond Fund, the Limited Maturity Bond Fund and the Prime Obligations Fund may
invest in guaranteed investment contracts ("GICs"). When investing in GICs, the
Bond Fund and the Limited Maturity Bond Fund and the Prime Obligations Fund make
cash contributions to a deposit fund of an insurance company's general account.
The insurance company then credits guaranteed interest to the deposit fund on a
monthly basis. The GICs provide that this guaranteed interest will not be less
than a certain minimum rate. The insurance company may assess periodic charges
against a GIC for expenses and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. The Bond Fund and the
Limited Maturity Bond Fund may invest in GICs of insurance companies without
regard to the ratings, if any, assigned to such insurance companies' outstanding
debt securities. The Prime Obligations Fund may only invest in GICs that have
received the requisite ratings by one or more NRSROs, see "Money Market Funds"
in this Prospectus. Because a Fund may not receive the principal amount of a GIC
from the insurance company on seven days' notice or less, the GIC is considered
an illiquid investment. For each of the Bond Fund and Limited Maturity Bond
Fund, no more than 15% of its total assets will be invested in instruments which
are considered to be illiquid. For the Prime Obligations Fund, no more than 10%
of its total assets may be invested in instruments which are considered to be
illiquid. In determining average portfolio maturity, GICs will be deemed to have
a maturity equal to the period of time remaining until the next readjustment of
the guaranteed interest rate.
MEDIUM-GRADE SECURITIES
Each of the Balanced Fund, Bond Fund, Limited Maturity Bond Fund, Municipal Bond
Fund and the Michigan Bond Fund may invest in fixed-income securities rated
within the fourth highest rating group assigned by an NRSRO (i.e., BBB or Baa by
S&P and Moody's, respectively) and comparable unrated securities as determined
by the Investment Adviser. These types of fixed-income securities are considered
by the NRSROs to have some speculative characteristics, and are more vulnerable
to changes in economic conditions, higher interest rates or adverse
issuer-specific developments which are more likely to lead to a weaker capacity
to make principal and interest payments than comparable higher rated debt
securities.
Should subsequent events cause the rating of a fixed-income security purchased
by any of the Funds listed above to fall below the fourth highest rating, First
of America will consider such an event in determining whether the Fund should
continue to hold that security. In no event, however, would the Fund be required
to liquidate any such portfolio security where the Fund would suffer a loss on
the sale of such security.
MORTGAGE-RELATED SECURITIES
The Government Income Fund intends to invest up to 80% of the value of its total
assets in mortgage-related securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. However, the Government Income
Fund may invest greater amounts as conditions warrant. Each of the remaining
Funds, except the International Fund, may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Such agencies or instrumentalities include GNMA, FNMA and
FHLMC. Each of the Balanced Fund, Bond Fund, Limited Maturity Bond Fund,
Intermediate Government Obligations Fund, Government Income Fund, Prime
Obligations Fund and U.S. Government Obligations Fund may also invest in
mortgage-related securities issued by non-governmental entities which are rated,
at the time of purchase, within the three highest bond rating categories
assigned by an NRSRO or, if unrated, which First of America deems present
attractive opportunities and are of comparable quality.
The mortgage-related securities in which the these Funds may invest have
mortgage obligations backing such securities, consisting of conventional
thirty-year fixed-rate mortgage obligations, graduated payment mortgage
obligations, fifteen-year mortgage obligations and adjustable-rate mortgage
obligations. All of
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these mortgage obligations can be used to create passthrough securities. A
pass-through security is created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgage
obligations vary, it is not possible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayment
rates are important because of their effect on the yield and price of the
securities. Accelerated prepayments have an adverse impact on yields for
pass-throughs purchased at a premium (i.e., a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-throughs purchased at a discount. The Fund may
purchase mortgage-related securities at a premium or at a discount.
If a Fund purchases a mortgage-related security at a premium, that portion may
be lost if there is a decline in the market value of the security, whether
resulting from changes in interest rates or prepayments in the underlying
mortgage collateral. As with other interest-bearing securities, the prices of
such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-related security may decline when interest rates
rise, the converse is not necessarily true, since in periods of declining
interest rates the mortgages underlying the securities are prone to prepayment,
thereby shortening the average life of the security and shortening the period of
time over which income at the higher rate is received. When interest rates are
rising, though, the rate of prepayment tends to decrease, thereby lengthening
the period of time over which income at the lower rate is received. For these
and other reasons, a mortgage-related security's average maturity may be
shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return to the
Fund. In addition, regular payments received with respect to mortgage-related
securities include both interest and principal. No assurance can be given as to
the return a Fund will receive when these amounts are reinvested.
The principal governmental (i.e., backed by the full faith and credit of the
United States government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned United States government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the United States government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of mortgages insured by the Federal Housing Administration
or guaranteed by the Veterans Administration.
Government-related (i.e., not backed by the full faith and credit of the United
States government) guarantors include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States government. FHLMC is a corporate instrumentality of the
United States government whose stock is owned by the twelve Federal Home Loan
Banks. Participation certificates issued by FHLMC are guaranteed as to the
timely payment of interest and ultimate collection of principal but are not
backed by the full faith and credit of the United States government.
The Government Income Fund also may invest up to 35% of its total assets in
mortgage-related securities issued by non-governmental entities and in other
securities described below. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issues also create pass-through pools of conventional residential
mortgage loans. Such issuers may also be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these
43 PROSPECTUS--Institutional Shares
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pools is supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance. The insurance and guarantees
are issued by government entities, private insurers and the mortgage poolers.
Such insurance and guarantees and the creditworthiness of the issuers will be
considered in determining whether a mortgage-related security meets a Fund's
investment quality standards. There can be no assurance that the private
insurers can meet their obligations under the policies. The Government Income
Fund may buy mortgage-related securities without insurance or guarantees if,
through an examination of the loan experience and practices of the poolers,
First of America determines that the securities meet the Government Income
Fund's quality standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The Government Income Fund will not purchase mortgage-
related securities or any other assets which in First of America's opinion are
illiquid if, as a result, more than 15% of the value of the Government Income
Fund's total assets will be illiquid.
Mortgage-related securities in which the above-named Funds may invest may also
include collateralized mortgage obligations ("CMOs"). CMOs are debt obligations
issued generally by finance subsidiaries or trusts that are secured by
mortgage-backed certificates, including, in many cases, certificates issued by
government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations.
The Government Income Fund expects that governmental, government-related or
private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments; that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may differ from customary long-term fixed-rate mortgages. As new types
of mortgage-related securities are developed and offered to investors, First of
America will, consistent with the Government Income Fund's investment objective,
policies and quality standards, consider making investments in such new types of
securities.
MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities (Michigan Municipal
Securities, in the case of the Michigan Bond Fund) which may be held by the Bond
Fund, Limited Maturity Bond Fund, Municipal Bond Fund, Michigan Bond Fund, Prime
Obligations Fund, U.S. Government Obligations Fund and Tax-Free Fund are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by the Municipal Bond Fund and Michigan Bond Fund are in
most cases revenue securities and are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
The above-named Funds may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Each of the above-named Funds invests primarily in Municipal Securities which
are rated at the time of purchase within the four highest rating groups assigned
by an NRSRO or in the highest rating group assigned by an NRSRO in the case of
notes, tax-exempt commercial paper or variable rate demand obligations. These
Funds may also purchase Municipal Securities which are unrated at the time of
purchase but are determined to be of comparable quality by First of America
pursuant to guidelines approved by the Group's Board of Trustees. The applicable
Municipal Securities ratings are described in
PROSPECTUS--Institutional Shares 44
<PAGE> 243
the Appendix to the Statement of Additional Information. For a discussion of
debt securities rated within the fourth highest rating group assigned by an
NRSRO, see "RISK FACTORS AND INVESTMENT TECHNIQUES--Medium Grade Securities."
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Funds nor First of
America will review the proceedings relating to the issuance of Municipal
Securities or the basis for such opinions.
Municipal Securities and Michigan Municipal Securities purchased by the Tax-Free
Income Funds may include rated and unrated variable and floating rate tax-exempt
notes. A variable rate note is one whose terms provide for the adjustment of its
interest rate on set dates and which, upon such adjustment, can reasonably be
expected to have a market value that approximates its par value. A floating rate
note is one whose terms provide for the adjustment of its interest rate whenever
a specified interest rate changes and which, at any time, can reasonably be
expected to have a market value that approximates its par value. Such notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by the Tax-Free Income Funds will be determined by
First of America, under guidelines established by the Group's Board of Trustees,
to be of comparable quality at the time of purchase to rated instruments
eligible for purchase under the Funds' investment policies. In making such
determinations, First of America will consider the earning power, cash flow and
other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. There may be no active secondary
market with respect to a particular variable or floating rate note.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to the Tax-Free Income Funds will approximate their par value.
The Tax-Free Income Funds will not purchase variable and floating rate notes or
any other securities which in First of America's opinion are illiquid if, as a
result, more than 15% of either Tax-Free Income Fund's total assets will be
illiquid.
OTHER MUTUAL FUNDS
Each of the Funds, except the Money Market Funds, may invest up to 5% of the
value of its total assets in the securities of any one money market mutual fund
(including shares of the Parkstone Money Market Funds, provided that no more
than 10% of a Fund's total assets may be invested in the securities of mutual
funds in the aggregate. In order to avoid the imposition of additional fees as a
result of investments by a Fund in shares of the Money Market Funds of the
Group, the Investment Adviser, Administrator and their affiliates (See
"MANAGEMENT OF THE FUNDS--Investment Adviser and Subadviser" and "Administrator,
Sub-Administrator and Distributor" and "GENERAL INFORMATION-- Transfer Agency
and Fund Accounting Services") will not retain any portion of their usual
asset-based service fees from a Fund that is attributable to investments by the
Fund in shares of those Money Market Funds if the fee is being taken in the
Non-Money Market Fund. The Investment Adviser and the Administrator will
promptly forward such fees to the appropriate Fund. Each Fund will incur
additional expenses due to the duplication of expenses as a result of any
investment in securities of unaffiliated mutual funds. Additional restrictions
regarding the Funds' investments in securities of unaffiliated mutual funds
and/or Money Market Funds of the Group are contained in the Statement of
Additional Information.
PRIVATE ACTIVITY BONDS
The Tax-Free Income Funds and the Tax-Free Fund may invest in private activity
bonds. It should be noted that the Tax Reform Act of 1986 substantially revised
provisions of prior federal law affecting the issuance and use of proceeds of
certain tax-exempt obligations. A new definition of private activity bonds
applies to many types of bonds, including those which were industrial
development bonds under prior law. Any reference herein to private activity
bonds includes industrial development bonds. Interest on private activity bonds
is tax-exempt (and such bonds will be considered Municipal Securities for
purposes of this Prospectus) only if the bonds fall within certain defined
categories of qualified private activity bonds and meet the requirements
specified in those respective categories. If a Fund invests in private activity
bonds
45 PROSPECTUS--Institutional Shares
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which fall outside these categories, shareholders may become subject to the
alternative minimum tax on that part of the Fund's distributions derived from
interest on such bonds. The Tax Reform Act generally does not change the federal
tax treatment of bonds issued to finance government operations. For further
information relating to the types of private activity bonds which will be
included in income subject to the alternative minimum tax, see "ADDITIONAL
INFORMATION--Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information.
PUT AND CALL OPTIONS
Each of the Growth Funds, the Growth and Income Funds, the Income Funds and the
Tax-Free Income Funds may purchase put and call options on securities and on
foreign currencies, subject to its applicable investment policies, for the
purposes of hedging against market risks related to its portfolio securities and
adverse movements in exchange rates between currencies, respectively. Purchasing
options is a specialized investment technique that entails a substantial risk of
a complete loss of the amounts paid as premiums to writers of options. Each Fund
may also engage in writing call options from time to time as First of America or
Gulfstream, as the case may be with respect to the Balanced Fund or
International Fund, deem appropriate. The Funds will write only covered call
options (options on securities or currencies owned by the particular Fund). In
order to close out a call option it has written, the Fund will enter into a
"closing purchase transaction" (the purchase of a call option on the same
security or currency with the same exercise price and expiration date as the
call option which such Fund previously has written). When a portfolio security
or currency subject to a call option is sold, the Fund will effect a closing
purchase transaction to close out any existing call option on that security or
currency. If such Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security or currency until the option
expires or that Fund delivers the underlying security or currency upon exercise.
In addition, upon the exercise of a call option by the option holder, the Fund
will forego the potential benefit represented by market appreciation over the
exercise price. Under normal conditions, it is not expected that the Funds will
cause the underlying value of portfolio securities and currencies subject to
such options to exceed 50% of its net assets, and with respect to each of the
Balanced Fund and International Fund, 20% of its net assets.
Each of the Growth Funds, the Growth and Income Funds and the Government Income
Fund, as part of its options transactions, also may purchase index put and call
options and write index options. As with options on individual securities, a
Fund will write only covered index call options. Through the writing or purchase
of index options a Fund can achieve many of the same objectives as through the
use of options on individual securities. Options on securities indices are
similar to options on a security except that, rather than the right to take or
make delivery of a security at a specified price, an option on a securities
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the securities index upon which the
option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option.
Price movements in securities which a Fund owns or intends to purchase probably
will not correlate perfectly with movements in the level of an index and,
therefore, a Fund bears the risk of a loss on an index option that is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities. A Fund may be
required to segregate assets or provide an initial margin to cover index options
that would require it to pay cash upon exercise.
In addition, the Tax-Free Fund, the Municipal Bond Fund and the Michigan Bond
Fund may each acquire "puts" with respect to Municipal Securities (or Michigan
Municipal Securities, as the case may be), held in its portfolio. Under a put,
such Fund would have the right to sell a specified Municipal Security (or
Michigan Municipal Security, as the case may be) within a specified period of
time at a specified price. A put would be sold, transferred, or assigned only
with the underlying security. The Municipal Bond Fund,
PROSPECTUS--Institutional Shares 46
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the Michigan Bond Fund and the Tax-Free Fund will acquire puts solely to
facilitate portfolio liquidity, shorten the maturity of the underlying
securities, or permit the investment of its funds at a more favorable rate of
return. Each of the Municipal Bond Fund, the Michigan Bond Fund and the Tax-Free
Fund expects that it will generally acquire puts only where the puts are
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, such Fund may pay for a put either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the puts (thus reducing the yield to maturity otherwise available for the
same securities).
REPURCHASE AGREEMENTS
Securities held by a Fund may be subject to repurchase agreements. Under the
terms of a repurchase agreement, a Fund would acquire securities from financial
institutions such as member banks of the Federal Deposit Insurance Corporation
or registered broker-dealers which First of America or Gulfstream, as the case
may be, deem creditworthy under guidelines approved by the Group's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price would generally equal
the price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. Securities subject to repurchase agreements will be held
in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by that Fund were delayed pending court action. Repurchase
agreements are considered to be loans by an investment company under the 1940
Act. For further information about repurchase agreements, see "INVESTMENT
OBJECTIVES AND POLICIES--Additional Information on Portfolio
Instruments--Repurchase Agreements" in the Statement of Additional Information.
RESTRICTED SECURITIES
Securities in which each of the Funds, with the exception of the Treasury Fund,
may invest include securities issued by corporations without registration under
the Securities Act of 1933, as amended (the "1933 Act"), in reliance on the
exemption from such registration afforded by Section 3(a)(3) thereof, and
securities issued in reliance on the so-called "private placement" exemption
from registration which is afforded by Section 4(2) of the 1933 Act ("Section
4(2) securities"). Section 4(2) securities are restricted as to disposition
under the federal securities laws, and generally are sold to institutional
investors such as the Funds who agree that they are purchasing the securities
for investment and not with a view to public distribution. Any resale must also
generally be made in an exempt transaction. Section 4(2) securities are normally
resold to other institutional investors through or with the assistance of the
issuer or investment dealers who make a market in such Section 4(2) securities,
thus providing liquidity. Pursuant to procedures adopted by the Board of
Trustees of the Group, First of America may determine Section 4(2) securities to
be liquid if such securities are eligible for resale under Rule 144A under the
1933 Act and are readily saleable.
Subject to the limitations described above, the Funds may acquire investments
that are illiquid or of limited liquidity, such as private placements or
investments that are not registered under the 1993 Act. An illiquid investment
is any investment that cannot be disposed of within seven (7) days in the normal
course of business at approximately the amount at which it is valued by a Fund.
The price a Fund pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly, the valuation of these securities will reflect any
limitations on their liquidity. For each of the Non-Money Market Funds, a Fund
may not invest in additional illiquid securities if, as a result, more than 15%
of the market value of its net assets would be invested in illiquid securities.
For each of the Money Market Funds, a Fund may not invest in additional illiquid
securities if, as a result, more than 10% of the market value of its net assets
would be invested in illiquid securities.
47 PROSPECTUS--Institutional Shares
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REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS
Each of the Funds may borrow money by entering into reverse repurchase
agreements and, in the case of the Income Funds and the Tax-Free Income Funds,
dollar roll agreements, in accordance with the investment restrictions described
below. Pursuant to reverse repurchase agreements, a Fund would sell certain of
its securities to financial institutions such as banks and brokerdealers, and
agree to repurchase the securities at a mutually agreed upon date and price.
Dollar roll agreements utilized by the Income Funds and Tax-Free Income Funds
are identical to reverse repurchase agreements except for the fact that
substantially similar securities may be repurchased. At the time a Fund enters
into a reverse repurchase agreement or a dollar roll agreement, it will place in
a segregated custodial account assets such as U.S. government securities or
other liquid high-grade debt securities consistent with its investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently continually monitor the account to ensure that
such equivalent value is maintained at all times. Reverse repurchase agreements
and dollar roll agreements involve the risk that the market value of securities
sold by a Fund may decline below the price at which it is obligated to
repurchase the securities. Reverse repurchase agreements and dollar roll
agreements are considered to be borrowings by an investment company under the
1940 Act and therefore a form of leverage. A Fund may experience a negative
impact on its net asset value if interest rates rise during the term of a
reverse repurchase agreement or dollar roll agreement. A Fund generally will
invest the proceeds of such borrowings only when such borrowings will enhance a
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction. For further information about reverse repurchase
agreements and dollar roll agreements, see "INVESTMENT OBJECTIVES AND
POLICIES--Additional Information on Portfolio Instruments-- Reverse Repurchase
Agreements and Dollar Roll Agreements" in the Statement of Additional
Information.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delayed-delivery
basis. Such Funds will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage although such
transactions represent a form of leveraging. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those available in the market when delivery takes
place. A Fund will not pay for such securities or start earning interest on them
until they are received. When a Fund agrees to purchase such securities, its
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a separate account. Securities purchased on a when-issued basis
are recorded as an asset and are subject to changes in the value based upon
changes in the general level of interest rates. In when-issued and
delayed-delivery transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause such Fund to miss a price
or yield considered to be advantageous.
No Fund's commitments to purchase "when-issued" securities will exceed 25% of
the value of its total assets under normal market conditions, and a commitment
by a Fund to purchase "when-issued" securities will not exceed 60 days. In the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
the value of its assets, a Fund's liquidity and the ability of First of America
or Gulfstream, as the case may be, to manage it might be adversely affected. The
Funds intend only to purchase "when-issued" securities for the purpose of
acquiring portfolio securities, not for investment leverage although such
transactions represent a form of leveraging.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, each Fund may, from time to time, lend
its portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral will be valued daily by First of America
or by Gulfstream, as the case may be. Should the market value of the loaned
securities increase, the borrower
PROSPECTUS--Institutional Shares 48
<PAGE> 247
must furnish additional collateral to that Fund. During the time portfolio
securities are on loan, the borrower pays that Fund any dividends or interest
received on such securities. Loans are subject to termination by the Fund or the
borrower at any time. While a Fund does not have the right to vote securities on
loan, each Fund intends to terminate the loan and regain the right to vote if
that is considered important with respect to the investment. In the event the
borrower defaults in its obligation to a Fund, such Fund bears the risk of delay
in the recovery of its portfolio securities and the risk of loss of rights in
the collateral. The Funds will enter into loan agreements only with
broker-dealers, banks, or other institutions that First of America or
Gulfstream, as the case may be, have determined are creditworthy under
guidelines established by the Group's Board of Trustees.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the lesser
of a Fund's purchases or sales of portfolio securities for the year by the
monthly average value of the portfolio securities. The SEC requires that the
calculation exclude all securities whose remaining maturities at the time of
acquisition are one year or less.
Because the Money Market Funds intend to invest in securities with maturities of
less than one year and because the SEC requires such securities to be excluded
from the calculation of portfolio turnover rate, the portfolio turnover rate
with respect to the Money Market Funds is expected to be zero for regulatory
purposes. For portfolio turnover rates for each of the Non-Money Market Funds,
see "FINANCIAL HIGHLIGHTS" above.
The portfolio turnover rate for a Fund may vary greatly from year to year, as
well as within a particular year, and may also be affected by cash requirements
for redemptions of shares. High portfolio turnover rates will generally result
in higher transaction costs, including brokerage commissions, to a Fund and may
result in additional tax consequences to a Fund's shareholders. Portfolio
turnover will not be a limiting factor in making investment decisions.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding shares of that Fund (as defined
in the Statement of Additional Information).
None of the Funds, with the exception of the Michigan Bond Fund, may:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
if, immediately after such purchase, more than 5% of the value of the
Fund's total assets would be invested in such issuer, or the Fund would
hold more than 10% of the outstanding voting securities of the issuer,
except that 25% or less of the value of such Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes,
or other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
Irrespective of the investment restriction above, and pursuant to Rule 2a-7
under the 1940 Act, the U.S. Government Obligations Fund, the Prime Obligations
Fund, the Tax-Free Fund and the Treasury Fund each will, with respect to 100% of
its total assets, limit its investment in the securities of any one issuer in
the manner provided by such Rule, which limitations are referred to above under
the caption "INVESTMENT OBJECTIVES AND POLICIES--The Money Market Funds."
The Michigan Bond Fund may not:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
if, immediately after such purchase, (a) more than 5% of the value of the
Fund's total assets (taken at current value) would be invested in such
issuer (except that up to 50% of the value of the Fund's total assets may
be invested without regard to such 5% limitation), and (b) more than 25%
of its total assets (taken at current value) would be invested in the
securities of a single issuer.
49 PROSPECTUS--Institutional Shares
<PAGE> 248
For purposes of the investment limitations above, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security and, with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, a security is considered to
be issued by such non-governmental user.
None of the Funds will:
1. Purchase any securities which would cause more than 25% of the value of the
Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the
U.S. government or its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities of
their parents; and (c) utilities will be divided according to their services.
For example, gas, gas transmission, electric and gas, electric, and telephone
will each be considered a separate industry.
2. (a) Borrow money (not including reverse repurchase agreements or dollar roll
agreements), except that each Fund may borrow from banks for temporary or
emergency purposes and then only in amounts up to 30% (10% in the case of the
Money Market Funds) of its total assets at the time of borrowing (and
provided that such bank borrowings and reverse repurchase agreements and
dollar roll agreements do not exceed in the aggregate one-third of the Fund's
total assets less liabilities other than the obligations represented by the
bank borrowings, reverse repurchase agreements and dollar roll agreements),
or mortgage, pledge or hypothecate any assets except in connection with a
bank borrowing in amounts not to exceed 30% of the Fund's net assets at the
time of borrowing; (b) enter into reverse repurchase agreements, dollar roll
agreements and other permitted borrowings in amounts exceeding in the
aggregate one-third of the Fund's total assets less liabilities other than
the obligations represented by such reverse repurchase and dollar roll
agreements; and (c) issue senior securities except as permitted by the 1940
Act rule, order or interpretation thereunder.
3. Make loans, except that a Fund may purchase or hold debt instruments and lend
portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.
For purposes of investment limitation number 1 above only, such limitation shall
not apply to Municipal Securities or governmental guarantees of Municipal
Securities, and industrial development bonds or private activity bonds that are
backed only by the assets and revenues of a non-governmental user shall not be
deemed to be Municipal Securities.
The following additional investment restriction may be changed without the vote
of a majority of the outstanding shares of a Fund.
Each Fund may not:
1. Purchase or otherwise acquire any securities, if as a result, more than 15%
(10% in the case of the Money Market Funds) of the Fund's net assets would be
invested in securities that are illiquid.
In addition to the above investment restrictions, the Funds are subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES--Investment Restrictions" in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
TRUSTEES
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of all of the Group's Funds. The
Group will be managed by the Trustees in accordance with the laws of the
Commonwealth of Massachusetts governing business trusts. There are currently
four Trustees, three of whom are not "interested persons" of the Group within
the meaning of that term under
PROSPECTUS--Institutional Shares 50
<PAGE> 249
the 1940 Act. The Trustees, in turn, elect the officers of the Group to
supervise actively its day-to-day operations.
The Trustees of the Group are George R. Landreth* (Chairman), Robert M. Beam,
Lawrence D. Bryan and Adrian Charles Edwards. The addresses, and principal
occupations during the past five years of the Trustees are set forth in the
Statement of Additional Information. The Trustee designated with an asterisk (*)
is considered to be an "interested person" of the Group as defined in the 1940
Act.
The Trustees of the Group receive quarterly fees and fees and expenses for each
meeting of the Board of Trustees attended. However, no officer or employee of
BISYS, The BISYS Group, Inc. or BISYS Ohio receives any compensation from the
Group for acting as a Trustee of the Group. The officers of the Group receive no
compensation directly from the Group for performing the duties of their offices.
BISYS receives fees from the Group for acting as Administrator. BISYS Ohio, an
affiliate of BISYS, receives fees from the Group for acting as Transfer Agent
and for providing certain fund accounting services. Mr. Landreth is an employee
of BISYS.
INVESTMENT ADVISER AND SUBADVISER
First of America was established in 1932 and is the investment adviser of the
Group. First of America, a registered investment adviser, is a wholly owned
subsidiary of FOA-Michigan, which is a wholly-owned subsidiary of First of
America Bank Corporation ("FABC"). FABC currently has over $22 billion in assets
and provides financial services to over 300 communities in Michigan, Indiana,
Illinois and Florida. As of June 30, 1996, First of America managed over $13
billion on behalf of both taxable and tax-exempt clients, including pensions,
endowments, corporations and individual portfolios. First of America acts as
subadviser to the Trust Division of FABC with respect to $5.7 billion in
discretionary assets, providing equity, fixed income, balanced and money
management services.
Subject to such policies as the Group's Board of Trustees may determine, First
of America, either directly or, with respect to the International Fund and the
Balanced Fund, through Gulfstream, furnishes a continuous investment program for
each Fund and makes investment decisions on behalf of each Fund.
First of America utilizes a team approach to the investment management of the
Funds, with up to three professionals working as a team to ensure a disciplined
investment process designed to result in long-term performance consistent with
each Fund's investment objectives. Roger H. Stamper, Managing Director of First
of America, is primarily responsible for the day-to-day management of each of
the Growth Funds (except the International Fund) and the Growth and Income
Funds. Mark R. Kummerer, Managing Director--Fixed Income of First of America, is
primarily responsible for the day-to-day management of the Income Funds.
Christian S. Swantek, Vice President of First of America, is primarily
responsible for the day-to-day management of the Tax-Free Income Funds. Messrs.
Stamper and Kummerer have held their respective positions with First of America
since 1988 and 1986, respectively. Prior to June 1993, Mr. Swantek was a
portfolio manager at PNC Investment Management & Research and its various
investment management affiliates.
For the services provided and expenses assumed pursuant to its Investment
Advisory Agreement with the Group, First of America receives a fee from the
Large Capitalization Fund, computed daily and paid monthly, at the annual rate
of 0.80% of the Fund's average daily net assets. For its services in connection
with each of the Equity Fund, Small Capitalization Fund, High Income Equity Fund
and Balanced Fund, First of America's fee is computed daily and paid monthly at
the annual rate of 1.00% of the applicable Fund's average daily net assets. For
its services in connection with the International Fund, First of America's fee
is computed daily and paid monthly at the annual rate of 1.25% of the first $50
million of the International Fund's average daily net assets, 1.20% of average
daily net assets between $50 million and $100 million, 1.15% of average daily
net assets between $100 million and $400 million and 1.05% of average daily net
assets above $400 million. For its services in connection with each Income Fund
and Tax-Free Income Fund, First of America's fee is computed daily and paid
monthly at the annual rate of 0.74% of each Income Fund's and Tax-Free Income
Fund's average daily net assets. For its services in connection with the Money
Market Funds, First of America's fee is computed daily and paid monthly, at
51 PROSPECTUS--Institutional Shares
<PAGE> 250
the annual rate of 0.40% of each Money Market Fund's average daily net assets.
First of America may periodically voluntarily reduce all or a portion of its
advisory fee with respect to a Fund to increase the net income of that Fund
available for distribution as dividends. The voluntary fee reduction will cause
the yield of that Fund to be higher than it would otherwise be in the absence of
such a reduction.
Pursuant to the terms of its Investment Advisory Agreement with the Group, First
of America has entered into a Sub-Investment Advisory Agreement with Gulfstream
100 Crescent Court, Suite 550, Dallas, Texas 75201. Pursuant to the terms of
such Sub-Investment Advisory Agreement Gulfstream has been retained by First of
America to manage the investment and reinvestment of the assets of the
International Fund and to manage the investment and reinvestment of those assets
of the Balanced Fund which are invested in foreign securities, subject to the
direction and control of the Group's Board of Trustees.
Under this arrangement, Gulfstream is responsible for day-to-day management of
the International Fund's assets and the applicable portion of the Balanced Fund,
reviewing investment performance policies and guidelines and maintaining certain
books and records, and First of America is responsible for selecting and
monitoring the performance of Gulfstream and for reporting the activities of
Gulfstream in managing these Funds to the Group's Board of Trustees. First of
America may also render advice with respect to the International Fund's
investments in the U.S. Gulfstream utilizes a team approach to investment
management to ensure a disciplined investment process designed to result in
long-term performance consistent with a Fund's investment objective. No one
person is responsible for a Fund's management. For its services provided and
expenses assumed pursuant to its Sub-Investment Advisory Agreement with First of
America, Gulfstream receives from First of America a fee, computed daily and
paid monthly, at the annual rate of 0.50% of the first $50 million of the
International Fund's average daily net assets and the average daily net assets
of the Balanced Fund which are invested in foreign securities, 0.45% of such
average daily net assets between $50 million and $100 million, 0.40% of such
average daily net assets between $100 million and $400 million and 0.30% of such
average daily net assets above $400 million, provided the minimum annual fee
shall be $75,000.
Gulfstream was organized in 1991 as a Texas limited partnership by Tull, Doud,
Marsh & Triltsch, Inc., a Texas corporation ("TDMT"). TDMT is the sole general
partner of Gulfstream. TDMT is owned by C. Thomas Tull, Stephen C. Doud, James
P. Marsh and Reiner M. Triltsch. Messrs. Tull, Doud and Triltsch are the
portfolio managers and Mr. Marsh is responsible for client services with
Gulfstream. First of America is the sole limited partner, and as of August 31,
1996 exercised options to increase its interest in Gulfstream from 49% to 72%.
As of June 30, 1996, Gulfstream had over $596 million in international assets of
institutional, investment company, governmental, pension fund and high net worth
individual clients under its investment management. Gulfstream's portfolio
management personnel average 20 years of investment experience and 9 years of
international investment experience.
Under Gulfstream's partnership agreement, First of America possesses veto
authority over the general budgetary affairs of Gulfstream. Because of its
current 72% ownership interest, First of America is deemed to control
Gulfstream for purposes of the 1940 Act.
For further information regarding the relationship between Gulfstream and First
of America, see "MANAGEMENT OF THE GROUP--Investment Adviser" in the Statement
of Additional Information.
ADMINISTRATOR, SUB-ADMINISTRATOR AND DISTRIBUTOR
BISYS, 3435 Stelzer Road, Columbus, Ohio 43219, is the administrator for each
Fund of the Group, and also acts as the Group's principal underwriter and
distributor (the "Administrator" or the "Distributor," as the context
indicates). First of America serves as Sub-Administrator for each Fund of the
Group and provides certain services as may be requested by BISYS from time to
time. BISYS and its affiliated companies, including BISYS Ohio are wholly-owned
by The BISYS Group, Inc., a publicly-held company which is a provider of
information processing, loan servicing and 401(k) administration and record
keeping services to and through banking and other financial organizations.
PROSPECTUS--Institutional Shares 52
<PAGE> 251
The Administrator generally assists in all aspects of the Funds' administration
and operation. For expenses assumed and services provided as administrator
pursuant to its Administration Agreement with the Group, the Administrator
receives a fee from each Fund equal to the lesser of a fee, computed daily and
paid periodically at an annual rate of 0.20% of the Fund's average daily net
assets, or such other fee as may be agreed upon from time to time in writing by
the Group and the Administrator. For its services as Sub-Administrator First of
America receives, from the Administrator, pursuant to its Sub-Administration
Agreement with BISYS, a fee not to exceed 0.05% of each Fund's average daily net
assets. The Administrator may periodically voluntarily reduce all or a portion
of its administrative fee with respect to a Fund to increase the net income of
that Fund available for distribution as dividends. The voluntary fee reduction
will cause the return of that Fund to be higher than it would otherwise be in
the absence of such reduction.
The Distributor acts as agent for the Funds in the distribution of each of their
shares and, in such capacity, solicits orders for the sale of shares,
advertises, and pays the cost of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group.
EXPENSES
First of America, Gulfstream and BISYS each bear all expenses in connection with
the performance of its services as Investment Adviser, Subadviser and
Administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Group. Each Fund will bear the
following expenses relating to its operation: organizational expenses, taxes,
interest, brokerage fees and commissions, fees of the Trustees of the Group, SEC
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
shareholders, outside auditing and legal expenses, advisory and administration
fees, fees and out-of-pocket expenses of the Custodian, Transfer Agent and Fund
Accountant, certain insurance premiums, costs of maintenance of the Group's
existence, costs of shareholders' reports and meetings, and any extraordinary
expenses incurred in each Fund's operation. As a general matter, expenses are
allocated to the Institutional Shares and the other classes of shares of the
Funds on the basis of the relative net asset value of each class. The various
classes may bear certain additional retail transfer agency expenses and may also
bear certain additional shareholder service and distribution costs incurred
pursuant to a Distribution and Shareholder Service Plan.
The Trustees reserve the right, subject to the receipt of relevant regulatory
approvals or rulings, if needed, to allocate certain other expenses to the
shareholders of a particular class, including Institutional Shares, on a basis
other than relative net asset value, as they deem appropriate ("Class
Expenses"). In such event, Class Expenses would be limited to: transfer agency
fees identified by the Transfer Agent as attributable to a specific class;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
Blue Sky registration fees incurred by a class of shares; SEC registration fees
incurred by a class of shares; expenses related to administrative personnel and
services as required to support the shareholders of a specific class; litigation
or other legal expenses relating solely to one class of shares; and Trustees'
fees incurred as a result of issues relating solely to one class of shares.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Ohio, 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Group's
transfer agent pursuant to a Transfer Agency Agreement with the Group and
receives a fee for such services. BISYS Ohio also provides certain accounting
services for each of the Funds and receives a fee for such services. See
"MANAGEMENT OF THE GROUP--Custodian, Transfer Agent and Fund Accounting
Services" in the Statement of Additional Information for further information.
While BISYS Ohio is a distinct legal entity from BISYS (the Group's
administrator and distributor), BISYS Ohio is considered to be an affiliated
person of BISYS under the 1940 Act due to, among other things, the fact that
BISYS Ohio and BISYS are both owned by The BISYS Group, Inc.
53 PROSPECTUS--Institutional Shares
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BANKING LAWS
First of America believes that it may perform the investment advisory services
for the Group's Funds contemplated by the Investment Advisory Agreement and by
this Prospectus without violating applicable banking laws or regulations. Future
changes in federal or state statutes and regulations relating to permissible
activities of banks or bank holding companies and their subsidiaries and
affiliates as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations could change the
manner in which First of America could continue to perform such services for the
Group. See the Statement of Additional Information ("MANAGEMENT OF THE
GROUP--Glass-Steagall Act") for further discussion.
HOW TO BUY INSTITUTIONAL SHARES
Institutional Shares may be purchased through procedures established by the
Distributor in connection with the requirements of customer accounts maintained
by or on behalf of certain financial institution customers ("Customer
Accounts"). These procedures may include instructions under which a Customer
Account is "swept" automatically no less frequently than weekly and amounts in
excess of a minimum amount agreed upon by the financial institution and the
customer are invested by the Distributor in Institutional Shares of the Money
Market Funds, depending upon the type of Customer Account and/or the
instructions of the customer.
Institutional Shares of the Group sold to financial institutions acting in a
fiduciary, advisory, custodial, or other similar capacity on behalf of customers
will normally be held of record by the financial institution. With respect to
Institutional Shares of the Group so sold, it is the responsibility of the
particular financial institution to transmit purchase or redemption orders to
the Distributor and to deliver federal funds for purchase on a timely basis.
Beneficial ownership of Institutional Shares of the Group will be recorded by
the financial institution and reflected in the account statements provided by
the financial institution to customers. A financial institution may exercise
voting authority for those Institutional Shares for which it is granted
authority by the customer.
Institutional Shares of each Fund are purchased at the net asset value per share
(see "HOW SHARES ARE VALUED") next determined after receipt by the Distributor
of an order to purchase Institutional Shares. Purchases of Institutional Shares
of a Fund will be effected only on a Business Day (as defined in "HOW SHARES ARE
VALUED") of the applicable Fund. An order received prior to a Valuation Time on
any Business Day will be executed at the net asset value determined as of the
next Valuation Time on the date of receipt. An order received after the last
Valuation Time on any Business Day will be executed at the net asset value
determined as of the next Valuation Time on the next Business Day of that Fund.
Institutional Shares of all Funds, except the Money Market Funds, are eligible
to earn dividends on the first Business Day following the execution of the
purchase. Institutional Shares of the Money Market Funds purchased before 12:00
noon, Eastern Time, begin earning dividends on the same Business Day. All
Institutional Shares continue to be eligible to earn dividends through the day
before their redemption.
An order to purchase Institutional Shares will be deemed to have been received
by the Distributor only when federal funds are available to the Group's
Custodian for investment. Federal funds are monies credited to a bank's account
within a Federal Reserve Bank. Payment for an order to purchase Institutional
Shares which is transmitted by federal funds wire will be available the same day
for investment by the Group's Custodian, if received prior to the last Valuation
Time (see "HOW SHARES ARE VALUED"). Payments transmitted by other means (such as
by check drawn on a member of the Federal Reserve System) will normally be
converted into federal funds within two banking days after receipt. The Group
strongly recommends that investors of substantial amounts use federal funds to
purchase Institutional Shares.
There is no sales charge imposed by the Group in connection with the purchase of
Institutional Shares in the Funds. Depending upon the terms of a particular
Customer Account, the financial institution may charge a customer account fees
for automatic investment and other cash management services provided in
connection with investment in the Group. Information concerning these services
and any charges may
PROSPECTUS--Institutional Shares 54
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be obtained from the banks. This Prospectus should be read in conjunction with
any such information received from the financial institution.
The Group reserves the right to reject any order for the purchase of
Institutional Shares in whole or in part.
Confirmations of purchases and redemption of Institutional Shares of the Group
by financial institutions on behalf of their customers may be obtained from the
financial institutions. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Institutional Shares of the Funds will
not be issued.
EXCHANGE PRIVILEGE
The exchange privilege enables shareholders of Institutional Shares to acquire
Institutional Shares that are offered by another Fund of the Group with a
different investment objective. This exchange privilege does not apply to other
classes of shares of a Fund. For example, holders of a Fund's Investor B Shares
may not exchange their shares for Investor A Shares, and holders of Investor A
Shares may not exchange their shares for Investor B Shares.
Holders of Institutional Shares of any of the Group's Funds may exchange those
Institutional Shares at net asset value without any sales charge for
Institutional Shares offered by any of the Group's other Funds, provided that
the shareholder making the exchange is eligible on the date of the exchange to
purchase Institutional Shares and the exchange is made in states where it is
legally authorized.
A financial institution should notify the Group of its desire to make an
exchange on behalf of a customer, and the Distributor will furnish the
shareholder with a current Prospectus of the Group and the appropriate
authorization form. Shareholders wishing to exercise their exchange privilege
should contact their trust administrator or financial consultant responsible for
the account. An exchange is considered to be a sale of Institutional Shares on
which a shareholder may realize a capital gain or loss for federal income tax
purposes.
HOW TO REDEEM YOUR INSTITUTIONAL SHARES
Shareholders may redeem their Institutional Shares without charge on any day
that net asset value is calculated (see "HOW SHARES ARE VALUED"). Redemptions
will be effected at the net asset value per share next determined after receipt
of a redemption request. Shareholders may request redemptions by contacting
their trust administrator or other financial consultant responsible for the
account.
OTHER INFORMATION REGARDING REDEMPTION OF SHARES
All or part of a customer's Institutional Shares may be redeemed in accordance
with instructions and limitations pertaining to his or her account with a
financial institution. For example, if a customer has agreed with a bank to
maintain a minimum balance in his or her account with the bank, and the balance
in that account falls below that minimum, the customer may be obliged to redeem,
or the bank may redeem for and on behalf of the customer, all or part of the
customer's Institutional Shares of a Fund of the Group to the extent necessary
to maintain the required minimum balance.
Redemption orders are effected at the net asset value per share next determined
after the Institutional Shares are properly tendered for redemption, as
described above. Payment to shareholders for Institutional Shares redeemed will
be made within seven days after receipt by the Transfer Agent of the request for
redemption. However, to the greatest extent possible, requests from financial
institutions for next day payments upon redemption of Institutional Shares will
be honored if the request for redemption is received by the Transfer Agent
before 4:00 p.m., (Eastern Time), on a Business Day or, if received after 4:00
p.m., (Eastern Time), within two Business Days, unless it would be
disadvantageous to the Group or the shareholders of a Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner. Also to the greatest extent possible, requests for same day
payments upon redemption of Institutional Shares of the Money Market Funds will
be honored if the request for redemption is received by the Transfer Agent
before 12:00 p.m. noon, (Eastern Time), on a
55 PROSPECTUS--Institutional Shares
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Business Day or, if received after 12:00 p.m. noon, (Eastern Time), on the next
Business Day, unless it would be disadvantageous to the Group or the
shareholders of a Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner. Shareholders should
contact their trust administrator or other financial consultant responsible for
the account to determine the financial institution's requirements for
effectuating redemptions.
At various times, the Group may be requested to redeem Institutional Shares for
which it has not yet received good payment. In such circumstances, the
forwarding of proceeds may be delayed until payment has been collected for the
purchase of such Institutional Shares which delay may be for 15 days or more.
Such delay may be avoided if such Institutional Shares are purchased by wire
transfer of federal funds. The Group intends to pay cash for all Institutional
Shares redeemed, but under abnormal conditions which make payment in cash
unwise, payment may be made wholly or partly in portfolio securities at their
then market value equal to the redemption price. In such cases, an investor may
incur brokerage costs in converting such securities to cash.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Group may suspend the right of
redemption or redeem Institutional Shares involuntarily if it appears
appropriate to do so in light of the Group's responsibilities under the 1940
Act.
HOW SHARES ARE VALUED
The net asset value of Institutional Shares of the Funds, with the exception of
the Money Market Funds, is determined and priced as of the close of trading on
the New York Stock Exchange ("NYSE") on each Business Day (generally 4:00 p.m.
Eastern Time) (with respect to the Non-Money Market Funds, the "Valuation
Time"). The net asset value of the Institutional Shares of the Money Market
Funds is determined and the shares are priced as of 12:00 p.m. noon (Eastern
Time) and as of the close of trading on the NYSE on each Business Day (with
respect to the Money Market Funds, the "Valuation Times"). A "Business Day" is a
day on which the NYSE is open for trading and the Federal Reserve Board of
Chicago is open, and any other day (other than a day on which no shares are
tendered for redemption and no order to purchase any shares is received) during
which there is sufficient trading in a Fund's portfolio instruments that its net
asset value per share might be materially affected. Currently, the NYSE or the
Federal Reserve Board of Chicago will not open in observance of the following
holidays: New Year's Day, President's Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving and Christmas.
Net asset value per share for a particular class for purposes of pricing sales
and redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund allocable to such class, less the liabilities charged
to that Fund allocable to such class and any liabilities charged directly to
that class, by the number of outstanding shares of such class.
The net asset value per share will fluctuate as the value of the investment
portfolio of a Fund changes. However, the assets in each Money Market Fund are
valued based upon the amortized cost method. Pursuant to the rules and
regulations of the SEC regarding the use of the amortized cost method, each
Money Market Fund will maintain a dollar-weighted average portfolio maturity of
90 days or less. Although the Group seeks to maintain each Money Market Fund's
net asset value per share at $1.00, there can be no assurance that net asset
value will not vary.
The securities in each Fund will be valued at market value. If market quotations
are not available, the securities will be valued by a method which the Board of
Trustees believes accurately reflects fair value. Foreign securities are valued
based on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. For further information about valuation of investments, see "NET ASSET
VALUE" in the Statement of Additional Information.
DIVIDENDS AND TAXES
GENERAL
Net income for each Fund is declared monthly as a dividend to shareholders at
the close of business on the day of declaration and is paid monthly, except with
regard to the Money Market Funds which are declared daily and paid monthly.
Distributable net realized capital gains are distributed at least annually. A
shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional shares at net asset value as of
the date of declaration, unless the shareholder elects to receive dividends or
distributions in cash. Such election, or any revocation thereof, must be made in
PROSPECTUS--Institutional Shares 56
<PAGE> 255
writing to the Transfer Agent at 3435 Stelzer Road, Columbus, Ohio 43219, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent.
Each of the Funds of the Group is treated as a separate entity for federal
income tax purposes. Each Fund intends to qualify as a "regulated investment
company" under the Code for so long as such qualification is in the best
interest of its shareholders and each intends to distribute all of its net
income and capital gains so that it is not required to pay federal income taxes
on amounts so distributed to shareholders.
To avoid federal income tax, the Code requires each Fund to distribute each
taxable year at least 90% of its investment company taxable income and at least
90% of its exempt-interest income. In addition, to avoid imposition of a
non-deductible 4% excise tax, each Fund is required annually to distribute,
prior to calendar year end, 98% of taxable ordinary income on a calendar year
basis, 98% of capital gain net income realized in the twelve months preceding
October 31, and the balance of undistributed taxable ordinary income and capital
gain net income from the prior calendar year. Finally, in order to permit the
Municipal Bond Fund and the Michigan Bond Fund each to distribute
exempt-interest dividends which shareholders may exclude from their gross
taxable income for federal income tax purposes, at least 50% of such Fund's
total assets must consist of obligations the interest on which is exempt from
federal income tax as of the close of each fiscal quarter of such Fund.
A shareholder receiving a distribution of ordinary income and/or an excess of
short-term capital gain over net long-term loss would treat it as a receipt of
ordinary income. The dividends-received deduction for corporations will apply to
the aggregate of such ordinary income distributions in the same proportion as
the aggregate dividends from domestic corporations, if any, received by that
Fund bear to its gross income. A shareholder will not be able to take the
dividends-received deduction unless that shareholder holds the shares for at
least 46 days.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to its shareholders as long-term capital gain
in the year in which it is received, regardless of how long the shareholder has
held shares. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares prior to the record
date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to taxation.
Taxes may be imposed on the Funds, particularly the Balanced Fund and
International Fund, by foreign countries with respect to income received on
foreign securities. If more than 50% of the value of a Fund's assets at the
close of its taxable year consists of stocks or securities of foreign
corporations, the Fund may elect to treat any foreign income taxes it paid as
paid by its shareholders. In this case, shareholders generally will be required
to include in income their pro rata share of such taxes, but will then be
entitled to claim a credit or deduction for their share of such taxes. However,
a particular shareholder's ability to utilize such a credit will be subject to
certain limitations imposed by the Code. The Funds will report to their
shareholders each year the amount, if any, of foreign taxes per share that they
have elected to have treated as paid by their shareholders.
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made during the year.
THE MUNICIPAL BOND FUND, THE MICHIGAN BOND FUND AND THE TAX-FREE FUND (THE
"EXEMPT FUNDS")
Dividends derived from exempt-interest income may be treated by an Exempt Fund's
shareholders as items of interest excludable from their gross income. However,
such dividends may be taxable to shareholders of the Municipal Bond Fund and the
Tax-Free Fund under state or local law as ordinary
57 PROSPECTUS--Institutional Shares
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income even though all or a portion of the amounts may be derived from interest
on tax-exempt obligations which, if realized directly, would be exempt from such
taxes. In determining net exempt-interest income, expenses of the Exempt Fund
are allocated to gross tax-exempt interest income in the proportion that the
gross amount of such interest income bears to the Exempt Fund's total gross
income, excluding net capital gains. (Shareholders are advised to consult a tax
adviser with respect to whether exempt-interest dividends retain the exclusion
if such shareholder would be treated as a "substantial user" or a "related
person" to such user under the Code). Interest on indebtedness incurred or
continued by a shareholder to purchase or carry shares is not deductible for
federal income tax purposes if an Exempt Fund distributes exempt-interest
dividends during the shareholder's taxable year. It is anticipated that
distributions from the Exempt Funds will not be eligible for the
dividends-received deduction for corporations.
Under the Code, if a shareholder receives an exempt-interest dividend with
respect to any share and such share is held for six months or less, any loss on
the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend, although the Treasury Department is
authorized to issue regulations reducing the period to not less than 31 days for
regulated investment companies that regularly distribute at least 90% of their
net tax-exempt interest. No such regulations have been issued as of the date of
this Prospectus. In addition, dividends attributable to interest on certain
private activity bonds may have to be included in shareholders' income for
purposes of calculating alternative minimum tax. See "ADDITIONAL
INFORMATION--Additional Tax Information Concerning the Tax-Free Fund, the
Municipal Bond Fund and the Michigan Bond Fund" in the Statement of Additional
Information for more information regarding the federal alternative minimum tax.
To the extent dividends paid to shareholders are derived from taxable income
(for example, from interest on certificates of deposit or repurchase agreements)
or from long-term or short-term capital gains, such dividends will be subject to
federal income tax. A shareholder should consult his or her own tax adviser for
any special advice.
Distributions by the Michigan Bond Fund to holders of shares who are subject to
the Michigan personal income tax and/or single business tax will not be subject
to the Michigan personal income tax, single business tax or any Michigan city
income tax to the extent that the distributions are attributable to income
received by the Michigan Bond Fund as interest from Michigan Municipal
Securities or to the extent that the distributions are attributable to interest
income and gains from the sale or disposal of United States obligations exempted
from state taxation by the United States Constitution, treaties, and statutes.
However, some or all of the other distributions by the Michigan Bond Fund may be
taxable by the State of Michigan or subject to applicable city income taxes,
even if the distributions are attributable to income of the Michigan Bond Fund
derived from obligations of the United States or its agencies and
instrumentalities. In addition, to the extent that a shareholder of the Michigan
Bond Fund is obligated to pay state or local taxes outside of Michigan,
dividends earned by an investment in the Michigan Bond Fund may represent
taxable income. Investments held in the Michigan Bond Fund by a Michigan
resident are not subject to the Michigan intangible personal property tax to the
extent that the investments are attributable to bonds or other similar
obligations of the State of Michigan or a political subdivision thereof, or
obligations of the United States.
The Michigan Department of Treasury in a 1986 Revenue Administrative Bulletin
has taken the position that the tax attributes of the securities held by a
mutual fund flow through to the investors. Based on this position, the Michigan
Department of Treasury has stated that mutual fund distributions attributable to
interest from the fund's investment in direct U.S. government securities, as
well as Municipal Securities, will not be subject to the Michigan personal
income tax. The Michigan Department of Treasury also has stated that an owner of
a share of a mutual fund will not be subject to intangible personal property tax
to the extent that the pro rata share of the securities underlying the mutual
fund would be exempt.
For Michigan personal income tax and intangible personal property tax purposes,
taxable distributions from investment income and short-term capital gains, if
any, are taxable as ordinary income, whether received in cash or additional
shares, and are subject to the Michigan intangible personal property tax and to
applicable Michigan city income taxes. The Michigan single business tax, a
modified value added tax, is
PROSPECTUS--Institutional Shares 58
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computed by applying the tax rate to a tax base determined by making certain
adjustments to federal taxable income. Taxable distributions from investment
income and gains, if any, may be included in federal taxable income or may
comprise one of the adjustments made to the tax base. Distributions of cash,
other property or additional shares by the Michigan Bond Fund to a Michigan
single business taxpayer attributable to any gain realized from the sale,
exchange or other disposition of Michigan Municipal Securities are includable in
the Michigan single business taxpayer's adjusted tax base for purposes of the
Michigan single business tax to the extent included in federal taxable income.
Distributions of cash, other property or additional shares by the Michigan Bond
Fund to a Michigan single business taxpayer are not subject to the Michigan
single business tax to the extent that the distributions are attributable to
interest income from and any gain realized from the sale, exchange or other
disposition of U.S. Securities. Taxable long-term capital gains distributions
are taxable as long-term capital gains for Michigan purposes irrespective of how
long a shareholder has held the shares, except that such distributions
reinvested in shares of the Michigan Bond Fund are exempt from the Michigan
intangible personal property tax.
THE U.S. GOVERNMENT OBLIGATIONS FUND, THE PRIME OBLIGATIONS FUND AND THE
TREASURY FUND
Since all of the net investment income of the U.S. Government Obligations Fund,
the Prime Obligations Fund and the Treasury Fund is expected to be derived from
earned interest, it is anticipated that no part of any distribution will be
eligible for the dividends-received deduction for corporations. The U.S.
Government Obligations Fund, the Prime Obligations Fund and the Treasury Fund do
not expect to realize any long-term capital gains and, therefore, do not foresee
paying any "capital gains dividends" as described in the Code.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors are advised to consult their tax advisers concerning state and local
taxes, which may differ from the federal, state and local income taxes described
above.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing their average
annual total return, aggregate total return and/or yield may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return of a class of shares in a Fund will be
calculated for the period since the establishment of the Funds and will reflect
the imposition of the maximum sales charge, if any. Average annual total return
is measured by comparing the value of an investment in a class of shares in a
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of annualized.
Yield of a class of shares will be computed by dividing a class of shares' net
investment income per share earned during a recent one-month period by that
class of shares' per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) on the last day of the
period and annualizing the result. Each Fund may also present its average annual
total return, aggregate total return and yield, as the case may be, excluding
the effect of a sales charge, if any.
In addition, from time to time the Funds may present their respective
distribution rates for a class of shares in shareholder reports and in
supplemental sales literature which is accompanied or preceded by a prospectus.
Distribution rates will be computed by dividing the distribution per share of a
class made by a Fund over a twelve-month period by the maximum offering price
per share. The calculation of income in the distribution rate includes both
income and capital gains dividends and does not reflect unrealized gains or
losses, although a Fund may also present a distribution rate excluding the
effect of capital gains. The distribution rate differs from the yield, because
it includes capital gains which are often non-recurring in
59 PROSPECTUS--Institutional Shares
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nature, whereas yield does not include such items. Distribution rates may also
be presented excluding the effect of a sales charge, if any.
Standardized yield and total return quotations will be computed separately for
Institutional Shares and the other classes of the Funds. Because of differences
in the fees and/or expenses borne by different classes of shares of the Funds,
the net yield and total return on Institutional Shares may be different from
that for another class of the same Fund. For example, net yield and total return
on Investor A Shares is expected, at any given time, to be lower than the net
yield and total return on Institutional Shares for the same period.
Investors may also judge the performance of any class of shares or Fund by
comparing or referencing it to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices such as those prepared by various services and published by such
services or by other services or publications, including, but not limited to,
ratings published by Morningstar, Inc. In addition to performance information,
general information about the Funds that appears in such publications may be
included in advertisements, in sales literature and in reports to shareholders.
For further information regarding such services and publications, see
"ADDITIONAL INFORMATION--Performance Comparisons" in the Statement of Additional
Information.
Total return and yield are functions of the type and quality of instruments held
in the portfolio, levels of operating expenses and changes in market conditions.
Consequently, total return and yield will fluctuate and are not necessarily
representative of future results. Any fees charged by FABC or any of its
affiliates with respect to customer accounts for investing in shares of the
Funds will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted. In addition, if First of
America and BISYS voluntarily reduce all or a part of their respective fees, as
further discussed above, the total return of such Fund will be higher than it
would otherwise be in the absence of such voluntary fee reductions.
FUNDATA(R)
Shareholders of the Group may obtain current price, yield and other performance
information on any of the Group's Funds through FUNDATA(R), an Automated Voice
Response System, 24 hours a day by calling (800) 451-8377 from any touch-tone
phone. Shareholders may also speak directly with a Group representative,
employed by BISYS, during regular business hours.
GENERAL INFORMATION
ORGANIZATION OF THE GROUP
The Group was organized as a Massachusetts business trust in 1987 and currently
offers sixteen Funds. The shares of each of the Funds of the Group, other than
its four Money Market Funds and two Tax-Free Income Funds, are offered in four
separate classes: Investor A Shares, Investor B Shares, Investor C Shares and
Institutional Shares. Shares of each of the two Tax-Free Income Funds are
offered in three separate classes: Investor A Shares, Investor B Shares and
Institutional Shares. Shares of each of the four Money Market Funds of the Group
are offered in two separate classes: Investor A Shares and Institutional Shares.
Each share represents an equal proportionate interest in a Fund with other
shares of the same Fund, and is entitled to such dividends and distributions out
of the income earned on the assets belonging to that Fund as are declared at the
discretion of the Trustees. Shares do not have a par value.
Shareholders are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested.
Shareholders will vote in the aggregate and not by Fund except as otherwise
expressly required by law. For example, shareholders of the Funds will vote in
the aggregate with other shareholders of the Group with respect to the election
of Trustees and ratification of the selection of independent accountants.
However, shareholders of a Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of that Fund's
investment advisory agreement.
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An annual or special meeting of shareholders to conduct necessary business is
not required by the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to elect Trustees, amend the Declaration of
Trust, approve an investment and sub-investment advisory agreements and to
satisfy certain other requirements. To the extent that such a meeting is not
required, the Group may elect not to have an annual or special meeting.
The Group has represented to the SEC that the Trustees will call a special
meeting of shareholders for purposes of considering the removal of one or more
Trustees upon written request therefor from shareholders holding not less than
10% of the outstanding votes of the Group. At such a meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Group), by majority vote, has the power to remove one or more
Trustees.
As of June 30, 1996, FABC, through its wholly-owned subsidiaries, possessed on
behalf of its underlying accounts voting or investment power with respect to
more than 25% of the shares of each of the Funds, and therefore may be presumed
to control each Fund within the meaning of the 1940 Act.
MULTIPLE CLASSES OF SHARES
In addition to Institutional Shares, the Group also offers Investor A Shares,
Investor B Shares and Investor C Shares of the Funds pursuant to a Multiple
Class Plan adopted by the Group's Trustees under Rule 18f-3 of the 1940 Act. A
salesperson or other person entitled to receive compensation for selling or
servicing shares may receive different compensation with respect to one
particular class of shares over another in the same Fund. The amount of
dividends payable with respect to other classes of shares will differ from
dividends on Institutional Shares as a result of the Distribution and
Shareholder Service Plan fees applicable to such other classes of shares and
because the different classes of shares may bear different retail transfer
agency expenses. For further details regarding these other classes of Shares,
call the Group at (800) 451-8377.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
Inquiries regarding the Group may be directed in writing to The Parkstone Group
of Funds at P.O. Box 50551, Kalamazoo, MI 49005-0551, or by calling toll-free
(800) 451-8377.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their Distributor. This Prospectus does not constitute an offering by the
Funds or by their Distributor in any jurisdiction in which such offering may not
lawfully be made.
61 PROSPECTUS--Institutional Shares
<PAGE> 260
THE PARKSTONE GROUP OF FUNDS
Institutional Shares
INVESTMENT ADVISER (AND SUB-ADMINISTRATOR)
First of America Investment Corporation
Suite 500
303 North Rose Street
Kalamazoo, Michigan 49007
SUBADVISER (INTERNATIONAL FUND AND BALANCED FUND)
Gulfstream Global Investors, Ltd.
Suite 550
100 Crescent Court
Dallas, Texas 75201
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
Union Bank of California, N.A.
475 Sansome Street
San Francisco, California 94111
LEGAL COUNSEL
Howard & Howard Attorneys, P.C.
Suite 400
107 West Michigan Avenue
Kalamazoo, Michigan 49007
<PAGE> 261
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
INVESTOR A SHARES
INVESTOR B SHARES
INVESTOR C SHARES
INSTITUTIONAL SHARES
THE PARKSTONE GROWTH FUNDS
THE PARKSTONE GROWTH AND INCOME FUNDS
THE PARKSTONE INCOME FUNDS
THE PARKSTONE TAX-FREE INCOME FUNDS
THE PARKSTONE MONEY MARKET FUNDS
FORM N-1A
CROSS-REFERENCE SHEET
PART B. INFORMATION REQUIRED STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NO. RULE 404(A) CROSS REFERENCE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10. Cover Page . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . Table of Contents
12. General Information and History . . . . . . . . Not Applicable
13. Investment Objectives and Policies . . . . . . . Investment Objectives and Policies;
Investment Restrictions; Portfolio Turnover
14. Management of the Fund . . . . . . . . . . . . . Management of the Group
15. Control Persons and Principal Holders of
Securities . . . . . . . . . . . . . . . . . . . Principal Holders of Voting Securities
16. Investment Advisory and Other Services . . . . . Investment Adviser; Administrator and Sub-Administrator;
Distributor; Custodian, Transfer Agent and Fund Accounting
Services; Independent Auditors; Legal Counsel
17. Brokerage Allocations and Other Practices . . . Portfolio Transactions; Distributor
18. Capital Stock and Other Securities . . . . . . . Description of Shares
19. Purchase, Redemption and Pricing of
of Securities Being Offered . . . . . . . . . . Net Asset Value; Additional Purchase and Redemption Information
20. Tax Status . . . . . . . . . . . . . . . . . . . Additional Tax Information; Additional Tax Information
Concerning the Exempt Funds; Additional Tax Information
Concerning the International Fund and Emerging
Markets Fund
21. Underwriters . . . . . . . . . . . . . . . . . . Distributor
22. Calculation of Performance Data . . . . . . . . Yields of the Money Market Funds; Yields of the Non-Money
Market Funds; Calculation of Total Return; Distribution Rates
23. Financial Statements . . . . . . . . . . . . . . Financial Statements
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 262
THE PARKSTONE GROUP OF FUNDS
Statement of Additional Information
October 8, 1996
GROWTH FUNDS
Parkstone Equity Fund
Parkstone Small Capitalization Fund
Parkstone Large Capitalization Fund
Parkstone International Discovery Fund
Parkstone Emerging Markets Fund*
GROWTH AND INCOME FUNDS
Parkstone Balanced Fund
Parkstone High Income Equity Fund
INCOME FUNDS
Parkstone Bond Fund
Parkstone Limited Maturity Bond Fund
Parkstone Intermediate Government Obligations Fund
Parkstone Government Income Fund
TAX-FREE INCOME FUNDS
Parkstone Municipal Bond Fund
Parkstone Michigan Municipal Bond Fund
MONEY MARKET FUNDS
Parkstone Prime Obligations Fund
Parkstone U.S. Government Obligations Fund
Parkstone Treasury Fund
Parkstone Tax-Free Fund
Parkstone Municipal Investor Fund*
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectuses (the "Prospectuses") of the Funds
dated October 8, 1996 as supplemented from time to time. This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectuses. Copies of each of the Prospectuses may be obtained by writing
the Group at 3435 Stelzer Road, Columbus, Ohio 43219, or by telephoning toll
free (800) 451-8377.
*As of the date of this Statement of Additional Information, the Parkstone
Emerging Markets Fund and the Parkstone Municipal Investor Fund were not being
offered to the public.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 263
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . .
Additional Information on Portfolio Instruments . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . .
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . .
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation of the Money Market Funds . . . . . . . . . . . . . . . .
Valuation of the Non-Money Market Funds . . . . . . . . . . . . . .
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . .
MANAGEMENT OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . .
Investment Adviser and Subadviser . . . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . .
Glass-Steagall Act . . . . . . . . . . . . . . . . . . . . . . . . .
Administrator and Sub-Administrator . . . . . . . . . . . . . . . .
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian, Transfer Agent and Fund Accounting Services . . . . . . .
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . .
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Shares . . . . . . . . . . . . . . . . . . . . . . .
Vote of a Majority of the Outstanding Shares . . . . . . . . . . . .
Shareholder and Trustee Liability . . . . . . . . . . . . . . . . .
Additional Tax Information . . . . . . . . . . . . . . . . . . . . .
Additional Tax Information Concerning the Exempt Funds . . . . . . .
Additional Tax Information Concerning the International
Fund and Emerging Markets Fund . . . . . . . . . . . . . . . . . .
Yields of the Money Market Funds . . . . . . . . . . . . . . . . . .
Yields of the Non-Money Market Funds . . . . . . . . . . . . . . . .
Calculation of Total Return . . . . . . . . . . . . . . . . . . . .
Distribution Rates . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Comparisons . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL HOLDERS OF VOTING SECURITIES . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 264
STATEMENT OF ADDITIONAL INFORMATION
THE PARKSTONE GROUP OF FUNDS
The Parkstone Group of Funds (the "Group") is an open-end management
investment company composed of eighteen separate investment portfolios,
seventeen of which are diversified portfolios and one of which is a
non-diversified portfolio, each with different investment objectives. The
separate investment portfolios of the Group enable the Group to meet a wide
range of investment needs. This Statement of Additional Information contains
information about each of the eighteen portfolios (collectively, the "Funds"
and singly, a "Fund").
The Group includes five money market funds: the U.S. Government
Obligations Fund, the Prime Obligations Fund, the Treasury Fund, the Municipal
Investor Fund and the Tax-Free Fund (collectively the "Money Market Funds"),
each of which seeks current income consistent with liquidity and stability of
principal by investing in high quality money market instruments. The U.S.
Government Obligations Fund invests primarily in short-term U.S. Treasury
bills, notes, and other obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities. The Prime Obligations Fund
invests in high quality money market instruments. The Tax-Free Fund invests in
high quality tax-exempt obligations and seeks to produce a high level of income
which is exempt from federal income taxes. The Treasury Fund invests
exclusively in obligations issued or guaranteed by the U.S. Treasury and in
repurchase agreements backed by such. The Municipal Investor Fund invests in
high-quality money market instruments.
In addition, the Group has thirteen variable net asset value Funds:
the Equity Fund, the Small Capitalization Fund, the Large Capitalization Fund,
the High Income Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the Municipal Bond Fund, the Michigan
Municipal Bond Fund, the Balanced Fund, the Government Income Fund, the
International Fund and the Emerging Markets Fund (collectively, the "Non-Money
Market Funds"). The Equity Fund seeks capital growth by investing primarily in
a diversified portfolio of common stocks and securities convertible into common
stocks. The Small Capitalization Fund seeks capital growth by investing
primarily in a portfolio of common stocks and securities convertible into
common stocks of small- to medium-sized companies. The Large Capitalization
Fund seeks growth of capital by investing primarily in a diversified portfolio
of common stocks and securities of companies with large market capitalization.
The High Income Equity Fund seeks current income as well as capital growth by
investing in high quality dividend-paying stocks and securities convertible
into common stocks. The Bond Fund seeks current income with preservation of
capital by investing in a portfolio of high- and medium-grade fixed-income
securities. The Limited Maturity Bond Fund seeks current income with
preservation of capital by investing in a portfolio of high and medium-grade
fixed-income securities with maturities of six years or less. The Intermediate
Government Obligations Fund seeks current income with preservation of capital
by investing in a portfolio of U.S. government obligations with maturities of
12 years or less. The Municipal Bond Fund seeks federal tax-exempt income with
preservation of capital by investing in tax-exempt fixed-income securities.
The Michigan Municipal Bond Fund (the "Michigan Bond Fund") seeks income which
is exempt from federal income tax and Michigan state income and intangibles
taxes, although such income may be subject to the federal alternative minimum
tax when received by certain shareholders. The Michigan Bond Fund also seeks
preservation of capital. The Balanced Fund seeks current income, long-term
capital growth and conservation of capital. The Government Income Fund
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 265
seeks to provide shareholders with a high level of current income consistent
with prudent investment risk. The International Discovery Fund (the
"International Fund") and the Emerging Markets Fund seek the long-term growth
of capital. The Equity Fund, Small Capitalization Fund, Large Capitalization
Fund, International Fund and Emerging Markets Fund are sometimes herein
referred to as the Growth Funds. The High Income Equity Fund and Balanced Fund
are sometimes referred to as the Growth and Income Funds. The Bond Fund,
Limited Maturity Bond Fund, Intermediate Government Obligations Fund and
Government Income Fund are sometimes herein referred to as the Income Funds.
The Michigan Bond Fund and Municipal Bond Fund are sometimes referred to as the
Tax-Free Income Funds.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectuses of the sixteen
Funds described above which are currently being offered to the public. As of
the date of this Statement of Additional Information, neither the Emerging
Markets Fund nor the Municipal Investor Fund were being offered to the public.
Capitalized terms not defined herein are defined in the Prospectuses. No
investment in shares of a Fund should be made without first reading the Fund's
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
The following policies supplement the investment objectives and
policies of each Fund of the Group as set forth in the respective Prospectus
for that Fund.
Bank Obligations. Each of the U.S. Government Obligations Fund, Prime
Obligations Fund, Tax-Free Fund, Municipal Investor Fund, Equity Fund, Small
Capitalization Fund, Large Capitalization Fund, High Income Equity Fund, Bond
Fund, Limited Maturity Bond Fund, Municipal Bond Fund, Michigan Bond Fund,
Balanced Fund, and Government Income Fund may invest in bank obligations
consisting of bankers' acceptances, certificates of deposit, and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of
deposit and time deposits will be those of domestic and foreign banks and
savings and loan associations, if (a) at the time of investment the depository
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full
by the Federal Deposit Insurance Corporation.
Each of the Prime Obligations Fund, U.S. Government Obligations Fund,
Tax-Free Fund, Equity Fund, Small Capitalization Fund, Large Capitalization
Fund, International Fund, Balanced
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 266
Fund, High Income Equity Fund, Bond Fund, Government Income Fund and Limited
Maturity Bond Fund may also invest in Eurodollar certificates of deposit ("Euro
CDs"), which are U.S. dollar-denominated certificates of deposit issued by
offices of foreign and domestic banks located outside the United States; Yankee
certificates of deposit ("Yankee CDs"), which are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States; Eurodollar time deposits ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; and Canadian time deposits, which are basically the same as ETDs except
they are issued by Canadian offices of major Canadian banks.
Commercial Paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Except as noted below with respect to variable
amount master demand notes, issues of commercial paper normally have maturities
of less than 9 months and fixed rates of return.
Subject to the limitations described in their respective Prospectuses,
the Municipal Investor Fund, the Prime Obligations Fund, the U.S. Government
Obligations Fund, the Tax-Free Fund, the Michigan Bond Fund and the Government
Income Fund will purchase commercial paper consisting of issues rated at the
time of purchase within the two highest rating categories assigned by a
nationally recognized statistical rating organization ("NRSRO"). The Tax-Free
Fund may purchase commercial paper rated in the highest rating category
assigned by an NRSRO. These Funds may also invest in commercial paper that is
not rated but that is determined by First of America Investment Corporation
("First of America" or the "Investment Adviser"), under guidelines established
by the Group's Board of Trustees, to be of comparable quality to instruments
that are so rated by an NRSRO that is neither controlling, controlled by, or
under common control with the issuer of, or any issuer, guarantor, or provider
of credit support for, the instruments. The Equity Fund, Small Capitalization
Fund, Large Capitalization Fund, High Income Equity Fund, Bond Fund, Limited
Maturity Bond Fund, Municipal Bond Fund and Balanced Fund may invest in
commercial paper rated in any rating category or not rated by an NRSRO. In
general, investment in lower-rated instruments is more risky than investment in
instruments in higher-rated categories. For a description of the rating
symbols of each NRSRO, see the Appendix. The U.S. Government Obligations Fund,
Prime Obligations Fund, Tax-Free Fund, Equity Fund, Small Capitalization Fund,
High Income Equity Fund, Bond Fund, Limited Maturity Bond Fund, Balanced Fund,
Government Income Fund and International Fund may also invest in Canadian
commercial paper, which is commercial paper issued by a Canadian corporation or
a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S.
dollar-denominated commercial paper of a foreign issuer.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Prime Obligations Fund, U.S. Government Obligations Fund,
Tax-Free Fund, Equity Fund, Small Capitalization Fund, Large Capitalization
Fund, High Income Equity Fund, Bond Fund, Limited Maturity Bond Fund, Balanced
Fund, Government Income Fund, Municipal Bond Fund and Michigan Bond Fund may
invest, are unsecured demand notes that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate according to the
terms of the instrument. Because master demand notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there is no secondary market in the notes, a Fund may demand payment
of principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial, and other
business concerns) must satisfy the same criteria as set forth above for
commercial paper. First of America will consider the
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 267
earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining dollar average maturity, a variable amount
master demand note will be deemed to have a maturity equal to the longer of the
period of time remaining until the next interest rate adjustment or the period
of time remaining until the principal amount can be recovered from the issuer
through demand.
Foreign Investments. Investment in foreign securities is subject to
special investment risks that differ in some respects from those related to
investments in securities of U.S. domestic issuers. Since investments in the
securities of foreign issuers may involve currencies of foreign countries, and
since the International Fund and the Emerging Markets Fund may from time to
time temporarily hold funds in bank deposits in foreign currencies, the
International Fund and the Emerging Markets Fund may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations
and may incur costs in connection with conversions between various currencies.
Since foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a U.S. company.
Volume and liquidity in most foreign bond markets are less than in the U.S. and
securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on U.S.
exchanges, although the Funds endeavor to achieve the most favorable net
results in their portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers, dealers and listed
companies than in the U.S., thus increasing the risk of delayed settlements of
portfolio transactions or loss of certificates for portfolio securities.
Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Such delays in settlement could result
in temporary periods when a portion of the assets of a Fund is uninvested and
no return is earned thereon. The inability of a Fund to make intended security
purchases due to settlement problems could cause such Fund to miss attractive
investment opportunities. Losses to a Fund due to subsequent declines in the
value of portfolio securities, or losses arising out of the Fund's inability to
fulfill a contract to sell such securities, could result in potential liability
to the Fund. In addition, with respect to certain foreign countries, there is
the possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect a Fund's investments
in those countries. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Each of the Prime Obligations Fund, U.S. Government Obligations Fund,
Tax-Free Fund, Equity Fund, Small Capitalization Fund, Large Capitalization
Fund, High Income Equity Fund, Bond Fund and Limited Maturity Bond Fund will
acquire such securities only when First of America or Gulfstream Global
Investors Ltd. ("Gulfstream" or the "Subadviser"), the Subadviser
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 268
of the International Fund, Emerging Markets Fund and Balanced Fund, believes
the risks associated with such investments are minimal.
Variable and Floating Rate Notes. The Prime Obligations Fund, U.S.
Government Obligations Fund, Tax-Free Fund, Bond Fund, Limited Maturity Bond
Fund, Government Income Fund, Municipal Bond Fund and Michigan Bond Fund may
acquire variable and floating rate notes, subject to each such Fund's
investment objective, policies and restrictions. A variable rate note is one
whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate note is one whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a
market value that approximates its par value. Such notes are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
notes purchased by a Fund will be determined by First of America under
guidelines established by the Group's Board of Trustees to be of comparable
quality at the time of purchase to rated instruments eligible for purchase
under the Fund's investment policies. In making such determinations, First of
America will consider the earning power, cash flow and other liquidity ratios
of the issuers of such notes (such issuers include financial, merchandising,
bank holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, the Fund may
resell the note at any time to a third party. The absence of an active
secondary market, however, could make it difficult for the Fund to dispose of a
variable or floating rate note in the event the issuer of the note defaulted on
its payment obligations and the Fund could, as a result, or for other reasons,
suffer a loss to the extent of the default. To the extent that the Fund is not
entitled to receive the principal amount of a note within 7 days, such note
will be treated as an illiquid security for purposes of calculation of the
limitation on the Fund's investment in illiquid securities as set forth in that
Fund's investment restrictions. Variable or floating rate notes may be secured
by bank letters of credit.
Variable or floating rate notes invested in by the Prime Obligations
Fund, U.S. Government Obligations Fund and the Tax-Free Fund may have
maturities of more than 397 days, as follows:
1. An instrument that is issued or guaranteed by the United States
government or any agency thereof which has a variable rate of interest
readjusted no less frequently than every 397 days will be deemed by a Fund to
have a maturity equal to the period remaining until the maturity date or the
next readjustment of the interest rate, whichever is less.
2. A variable rate note, the principal amount of which is scheduled
on the face of the instrument to be paid in 397 days or less, will be deemed by
a Fund to have a maturity equal to the period remaining until the maturity date
of the next readjustment of the interest rate, whichever is less.
3. A variable rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 269
4. A floating rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the Fund
is entitled to receive the principal amount of the note either at any time on
no more than 30 days' notice or at specified intervals not exceeding 397 days.
Money Market Mutual Funds. Each of the Non-Money Market Funds may
invest up to 5% of the value of its total assets in the securities of any one
money market mutual fund (including shares of the Money Market Funds or another
affiliated money market fund), provided that no more than 10% of a Non-Money
Market Fund's total assets may be invested in the securities of money market
mutual funds in the aggregate. In order to avoid the imposition of additional
fees as a result of investments by a Non-Money Market Fund in shares of the
Money Market Funds of the Group, the Investment Adviser, Administrator and
their affiliates (See "MANAGEMENT OF THE GROUP - Investment Adviser,"
"Administrator and Sub- Administrator," "Distributor" and "Custodian, Transfer
Agent and Fund Accounting Services") will not retain any portion of their usual
service fees from a Non-Money Market Fund that are attributable to investments
by such Fund in shares of the Money Market Funds if the fee is being taken in
the Non-Money Market Fund. The Investment Adviser and the Administrator will
promptly forward such fees to the Non-Money Market Fund. Each Non-Money Market
Fund will incur additional expenses due to the duplication of expenses as a
result of any investment in securities of unaffiliated money market mutual
funds.
The Non-Money Market Funds will incur no sales charges, contingent
deferred sales charges, 12b-1 fees, or other underwriting or distribution fees
in connection with their investments in the Money Market Funds of the Group.
The Non-Money Market Funds of the Group will vote their shares of each of the
Money Market Funds of the Group in proportion to the vote by all other
shareholders of such Money Market Fund. Moreover, no single Non-Money Market
Fund of the Group may own more than 3% of the outstanding shares of any single
Money Market Fund of the Group.
Municipal Securities. As stated in the Prospectuses of the Tax-Free
Fund and Municipal Bond Fund, the assets of such Funds will be primarily
invested in bonds and notes issued by or on behalf of states (including the
District of Columbia), territories, and possessions of the United States and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which is both exempt from federal income tax and
not treated as a preference item for purposes of the federal alternative
minimum tax ("Municipal Securities"). With respect to the Tax-Free Fund,
Municipal Securities are expected to have remaining maturities of 397 days or
less. Under normal market conditions, at least 80% of the total assets of each
such Fund will be invested in Municipal Securities. The U.S. Government
Obligations Fund may invest up to 35% of the value of its total assets in
Municipal Securities. In addition, the Bond Fund, Limited Maturity Bond Fund
and Prime Obligations Fund may invest in Municipal Securities but shall limit
such investment to the extent necessary to preclude them from paying
"exempt-interest dividends" as that term is defined in the Internal Revenue
Code of 1986, as amended (the "Code").
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Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by
or on behalf of public authorities to finance various privately-operated
facilities are included within the term Municipal Securities if the interest
paid thereon is exempt from both federal income tax and not treated as a
preference item for purposes of the federal alternative minimum tax.
Among other types of Municipal Securities, the Tax-Free Fund and
Municipal Bond Fund may purchase short-term general obligation notes, tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
project notes, tax-exempt commercial paper, construction loan notes and other
forms of short-term tax-exempt loans. Such instruments are issued with a
short-term maturity in anticipation of the receipt of tax funds, the proceeds
of bond placements or other revenues. In addition, these Funds may invest in
other types of tax-exempt instruments, such as municipal bonds, private
activity bonds, and pollution control bonds.
Project notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its project notes, the notes
are also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the project notes.
The assets of the Michigan Bond Fund will be invested in obligations
consisting of bonds, notes, commercial paper, and certificates of indebtedness,
issued by or on behalf of the State of Michigan, its political subdivisions,
municipalities and public authorities, the interest on which is exempt from
federal income tax and Michigan state income and intangibles taxes (but may be
treated as a preference item for purposes of the federal alternative minimum
tax) and in debt obligations issued by the government of Puerto Rico, the U.S.
territories and possessions of Guam, the U.S. Virgin Islands or such other
governmental entities whose debt obligations, either by law or treaty, generate
interest income which is exempt from federal and Michigan state income and
intangible taxes ("Michigan Municipal Securities"). Under normal market
conditions, at least 80% of the net assets of the Michigan Bond Fund will be
invested in Michigan Municipal Securities, and at least 65% of the net assets
of the Michigan Bond Fund will be invested in Michigan Municipal Securities
issued by or on behalf of the State of Michigan, its political subdivisions,
municipalities and public authorities.
Michigan Municipal Securities include debt obligations issued by
governmental entities to obtain funds for various public purposes, such as the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses, and the extension of
loans to other public institutions and facilities. Private activity bonds that
are issued by or on behalf of public authorities to finance various
privately-operated facilities are included within the term Michigan Municipal
Securities if the interest paid thereon is exempt from both federal and
Michigan state income and intangibles taxes although such interest may be
treated as a preference item for purposes of the federal alternative minimum
tax.
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Other types of Michigan Municipal Securities which the Michigan Bond
Fund may purchase are short-term general obligation notes, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, tax-exempt
commercial paper, construction loan notes and other forms of short-term
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.
The two principal classifications of Municipal Securities and Michigan
Municipal Securities (collectively, "Exempt Securities") consist of "general
obligation" and "revenue" issues. The Tax-Free Fund, Municipal Bond Fund and
Michigan Bond Fund (collectively the "Exempt Funds" and singly, an "Exempt
Fund") may also acquire "moral obligation" issues, which are normally issued by
special purpose authorities. There are, of course, variations in the quality
of Exempt Securities, both within a particular classification and between
classifications, and the yields on Exempt Securities depend upon a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The ratings of an NRSRO represent their opinions as to the quality of
Exempt Securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and Exempt Securities with the same
maturity, interest rate and rating may have different yields, while Exempt
Securities of the same maturity and interest rate with different ratings may
have the same yield. Subsequent to purchase, an issue of Exempt Securities may
cease to be rated or its rating may be reduced below the minimum rating
required for purchase. First of America will consider such an event in
determining whether a Fund should continue to hold the obligation.
An issuer's obligations under Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of Exempt Securities may be materially
adversely affected by litigation or other conditions.
Government Obligations. Each of the Funds may invest in obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
including bills, notes and bonds issued by the U.S. Treasury, as well as
"stripped" U.S. Treasury obligations ("Stripped Treasury Obligations") such as
Treasury receipts issued by the U.S. Treasury representing either future
interest or principal payments. Stripped securities are issued at a discount
to their "face value," and may exhibit greater price volatility than ordinary
debt securities because of the manner in which their principal and interest are
returned to investors. The Stripped Treasury Obligations in which the Money
Market Funds may invest do not include certificates of accrual on Treasury
securities ("CATS") or Treasury income growth receipts ("TIGRs").
Obligations of certain agencies and instrumentalities of the U.S.
government are supported by the full faith and credit of the U.S. Treasury;
others are supported by the right of the issuer to borrow from the Treasury;
others are supported by the discretionary authority of the U.S. government to
purchase the agency's obligations; and still others are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government-sponsored
agencies or instrumentalities if it is not obligated to do so by law.
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Taxable Obligations. Under normal market conditions, each of the
Exempt Funds may invest up to 20% of its total assets in Taxable Obligations.
Taxable Obligations may include: (1) obligations of the United States
Treasury; (2) obligations of agencies and instrumentalities of the United
States government; (3) money market instruments, such as certificates of
deposit issued by domestic banks, corporate commercial paper, and bankers'
acceptances; and (4) taxable instruments subject to repurchase agreements
(agreements under which the seller agrees at the time of sale to repurchase the
securities it is selling at an agreed time and price). Certificates of deposit
will be those of domestic branches of U.S. banks which are members of the
Federal Reserve System or the Federal Deposit Insurance Corporation and which
have total assets at the time of purchase in excess of $100,000,000, or of
savings and loan associations which are members of the Federal Deposit
Insurance Corporation and which have total assets at the time of purchase in
excess of $100,000,000. Bankers' acceptances will be guaranteed by U.S.
commercial banks having total assets at the time of purchase in excess of
$100,000,000. Obligations of the U.S. Treasury and U.S. government agencies
and instrumentalities, bankers' acceptances, and certificates of deposit are
described in this Statement of Additional Information.
Options Trading. Each of the Non-Money Market Funds may purchase put
and call options. A call option gives the purchaser the right to buy, and a
writer has the obligation to sell, the underlying security or foreign currency
at the stated exercise price at any time prior to the expiration of the option,
regardless of the market price or exchange rate of the security or foreign
currency, as the case may be. The premium paid to the writer is consideration
for undertaking the obligations under the option contract. A put option gives
the purchaser the right to sell the underlying security or foreign currency at
the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price or exchange rate of the security or
foreign currency, as the case may be. Put and call options purchased by the
Non-Money Market Funds will be valued at the last sale price, or in the absence
of such a price, at the mean between bid and asked price.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the
traded option is the last sale price or, in the absence of a sale, the average
of the closing bid and asked prices. If an option expires on the stipulated
expiration date or if the Fund enters into a closing purchase transaction, it
will realize a gain (or a loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option is exercised,
the Fund may deliver the underlying security in the open market. In either
event, the proceeds of the sale will be increased by the net premium originally
received and the Fund will realize a gain or loss.
Each of the Equity Fund, Small Capitalization Fund, Large
Capitalization Fund, High Income Equity Fund, Balanced Fund, Government Income
Fund, International Fund and Emerging Markets Fund may also purchase or sell
index options. Index options (or options on securities indices) are similar in
many respects to options on securities except that an index option gives the
holder the right to receive, upon exercise, cash instead of securities, if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option.
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Puts. Each Exempt Fund may acquire "puts" with respect to Exempt
Securities held in its portfolio. A put is a right to sell a specified
security (or securities) within a specified period of time at a specified
exercise price. Such Funds may sell, transfer, or assign a put only in
conjunction with the sale, transfer, or assignment of the underlying security
or securities.
The amount payable to an Exempt Fund upon its exercise of a put is
normally: (i) the Exempt Fund's acquisition cost of the Exempt Securities
(excluding any accrued interest which the Exempt Fund paid on the acquisition),
less any amortized market premium or plus any amortized market or original
issue discount during the period the Exempt Fund owned the securities, plus
(ii) all interest accrued on the Exempt Securities since the last interest
payment date during that period.
Puts may be acquired by the Exempt Funds to facilitate the liquidity
of their respective portfolio assets. Puts may also be used to facilitate the
reinvestment of a Fund's assets at a rate of return more favorable than that of
the underlying security. Puts may, under certain circumstances, also be used
to shorten the maturity of underlying variable rate or floating rate securities
for purposes of calculating the remaining maturity of those securities and the
dollar weighted average portfolio maturity of the Tax-Free Fund's assets
pursuant to Rule 2a-7 under the Investment Company Act of 1940, as amended (the
"1940 Act"). See "INVESTMENT OBJECTIVES AND POLICIES - Additional Information
on Portfolio Instruments-Variable and Floating Rate Notes" and "NET ASSET
VALUE" in this Statement of Additional Information.
The Exempt Funds expect that each such Fund will generally acquire
puts only where the puts are available without the payment of any direct or
indirect consideration. However, if necessary or advisable, such Funds may pay
for puts either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
The Exempt Funds intend to enter into puts only with dealers, banks,
and broker-dealers which, in First of America's opinion, present minimal credit
risks.
When-Issued and Delayed-Delivery Securities. Each Fund may purchase
securities on a "when-issued" or "delayed-delivery" basis (i.e., for delivery
beyond the normal settlement date at a stated price and yield). When the Fund
agrees to purchase securities on a "when-issued" or "delayed-delivery" basis,
the Fund's Custodian will set aside cash or liquid securities equal to the
amount of the commitment in a separate account. Normally, the Custodian will
set aside securities to satisfy the purchase commitment, and in such a case,
the Fund may be required subsequently to place additional assets in the
separate account in order to assure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside securities to
cover such purchase commitments than when it sets aside cash. In addition,
because the Fund will set aside cash or liquid securities to satisfy its
purchase commitments in the manner described above, the Fund's liquidity and
the ability of First of America or Gulfstream, as the case may be, to manage it
might be affected in the event its commitments to purchase "when-issued" or
"delayed-delivery" securities ever exceeded 25% of the value of its assets.
Under normal market conditions, however, a Fund's commitments to purchase
"when-issued" or "delayed-delivery" securities will not exceed 25% of the value
of its assets.
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If the Fund sells a "when-issued" or "delayed-delivery" security
before a delivery, any gain would not be tax-exempt. When the Fund engages in
"when-issued" or "delayed-delivery" transactions, it relies on the seller to
consummate the trade. Failure of the seller to do so may result in the Fund
incurring a loss or missing the opportunity to obtain a price considered to be
advantageous. The Funds will engage in "when-issued" or "delayed-delivery"
transactions only for the purpose of acquiring securities consistent with the
Funds' investment objectives and policies and not for investment leverage,
although such transactions represent a form of leveraging.
Mortgage-Related Securities. Each of the Funds, except the
International Fund, may, consistent with its investment objective and policies,
invest in mortgage-related securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The Bond Fund, Limited Maturity
Bond Fund, Balanced Fund, Intermediate Government Obligations Fund, Government
Income Fund, Prime Obligations Fund and U.S. Government Obligations Fund, may,
in addition, invest in mortgage-related securities issued by non-governmental
entities, including collateralized mortgage obligations structured on pools of
mortgage pass-through certificates or mortgage loans, subject to the rating
limitations described in the Prospectuses.
Mortgage-related securities, for purposes of the Funds' Prospectuses
and this Statement of Additional Information, represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as the
Government National Mortgage Association ("GNMA") and government-related
organizations such as the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by
non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
are otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market
value of the security whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the
mortgages underlying the securities are prone to prepayment, thereby shortening
the average life of the security and shortening the period of time over which
income at the higher rate is received. When interest rates are rising, though,
the rate of prepayment tends to decrease, thereby lengthening the period of
time over which income at the lower rate is received. For these and other
reasons, a mortgage-related security's average maturity may be shortened or
lengthened as a result of interest rate fluctuations and, therefore, it is not
possible to predict accurately the security's return to the Funds. In
addition, regular payments received in respect of mortgage-related securities
include both interest and principal. No assurance can be given as to the
return the Funds will receive when these amounts are reinvested.
There are a number of important differences among the agencies
and instrumentalities of the U.S. government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related
securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also
known as "Ginnie Maes") which are guaranteed as to the timely payment of
principal and interest by GNMA and such guarantee is backed by the full faith
and credit of the United States. GNMA is a wholly-owned U.S. government
corporation within the
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 275
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by
or entitled to the full faith and credit of the United States. FNMA is a
government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to the timely payment of the principal and
interest by FNMA. Mortgage-related securities issued by FHLMC include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs").
FHLMC is a corporate instrumentality of the United States, created pursuant to
an Act of Congress, which is owned entirely by Federal Home Loan Banks.
Freddie Macs are not guaranteed by the United States or by any Federal Home
Loan Banks and do not constitute a debt or obligation of the United States or
of any Federal Home Loan Bank. Freddie Macs entitle the holder to the timely
payment of interest, which is guaranteed by FHLMC. FHLMC guarantees either
ultimate collection or the timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Medium-Grade Securities. The Bond Fund, Limited Maturity Bond Fund,
Municipal Bond Fund, Michigan Bond Fund, and Balanced Fund may each invest in
securities which are rated within the four highest rating groups assigned by an
NRSRO (e.g., including securities rated BBB by S&P or Baa by Moody's) or, if
not rated, are of comparable quality as determined by First of America.
("Medium-Grade Securities").
As with other fixed-income securities, Medium-Grade Securities are
subject to credit risk and market risk. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit risk relates
to the ability of the issuer to make payments of principal and interest.
Medium-Grade Securities are considered by Moody's to have speculative
characteristics.
Medium-Grade Securities are generally subject to greater credit risk
than comparable higher-rated securities because issuers are more vulnerable to
economic downturns, higher interest rates or adverse issuer-specific
developments. In addition, the prices of Medium-Grade Securities are generally
subject to greater market risk and therefore react more sharply to changes in
interest rates. The value and liquidity of Medium-Grade Securities may be
diminished by adverse publicity and investor perceptions.
Because certain Medium-Grade Securities are traded only in markets
where the number of potential purchasers and sellers, if any, is limited, the
ability of those Funds to sell such securities at their fair market value
either to meet redemption requests or to respond to changes in the financial
markets may be limited.
Particular types of Medium-Grade Securities may present special
concerns. The prices of payment-in-kind or zero-coupon securities may react
more strongly to changes in interest rates than the prices of other
Medium-Grade Securities. Some Medium-Grade Securities in which such Funds may
invest may be subject to redemption or call provisions that may limit increases
in market value that might otherwise result from lower interest rates while
increasing the risk that
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 276
those Funds may be required to reinvest redemption or call proceeds during a
period of relatively low interest rates.
The credit ratings issued by Moody's and S&P are subject to various
limitations. For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of Medium-Grade Securities. In
certain circumstances, the ratings may not reflect in a timely fashion adverse
developments affecting an issuer. For these reasons, First of America conducts
its own independent credit analysis of Medium- Grade Securities.
Restricted Securities. Each of Funds, except the Treasury Fund, may
invest in Section 4(2) securities. "Section 4(2) securities," as described in
the Prospectuses, are securities which are issued in reliance on the "private
placement" exemption from registration which is afforded by Section 4(2) of the
Securities Act of 1933 (the "1933 Act"). The Funds will not purchase Section
4(2) securities which have not been determined to be liquid in excess of 15%
(10% in the case of the Money Market Funds) of the total assets of that Fund.
The Group's Board of Trustees has delegated to First of America the day-to-day
authority to determine whether a particular issue of Section 4(2) securities
that are eligible for resale under Rule 144A under the 1933 Act should be
treated as liquid. Rule 144A provides a safe-harbor exemption from the
registration requirements of the 1933 Act for resales to "qualified
institutional buyers" as defined in the Rule. With the exception of registered
broker-dealers, a qualified institutional buyer must generally own and invest
on a discretionary basis at least $100 million in securities.
First of America may deem Section 4(2) securities liquid if it
believes that, based on the trading markets for such security, such security
can be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the security. In making
such determination, First of America generally considers any and all factors
that it deems relevant, which may include: (i) the credit quality of the
issuer; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security; and (v) the nature of the security and the nature of market-place
trades.
Treatment of Section 4(2) securities as liquid could have the effect
of decreasing the level of a Fund's liquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
Repurchase Agreements. Securities held by each of the Group's Funds
may be subject to repurchase agreements. Under the terms of a repurchase
agreement, a Fund would acquire securities from member banks of the Federal
Deposit Insurance Corporation and registered broker- dealers which First of
America deems creditworthy under guidelines approved by the Group's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price would generally
equal the price paid by the Fund plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller under a repurchase agreement will
be required to maintain at all times the value of collateral held pursuant to
the agreement at not less than the repurchase price (including accrued
interest). If the seller were to default on its repurchase obligation or
become insolvent, the Fund holding such obligation would suffer a loss to the
extent that the proceeds from a sale of the underlying portfolio securities
were less than the repurchase price under the agreement, or to the extent that
the
STATEMENT OF ADDITIONAL INFORMATION
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disposition of such securities by the Fund were delayed pending court action.
Additionally, there is no controlling legal precedent confirming that a Fund
would be entitled, as against a claim by such seller or its receiver or trustee
in bankruptcy, to retain the underlying securities, although the Board of
Trustees of the Group believes that, under the regular procedures normally in
effect for custody of a Fund's securities subject to repurchase agreements and
under federal laws, a court of competent jurisdiction would rule in favor of
the Group if presented with the question. Securities subject to repurchase
agreements will be held by the Group's Custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements
are considered to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements and Dollar Roll Agreements. As
discussed in the Prospectuses, each of the Group's Funds may borrow money by
entering into reverse repurchase agreements and, with respect to the Income and
Tax-Free Income Funds, dollar roll agreements in accordance with that Fund's
investment restrictions. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase the securities, or substantially
similar securities in the case of a dollar roll agreement, at a mutually agreed
upon date and price. A dollar roll agreement is identical to a reverse
repurchase agreement except for the fact that substantially similar securities
may be repurchased. At the time a Fund enters into a reverse repurchase
agreement or a dollar roll agreement, it will place in a segregated custodial
account assets such as U.S. government securities or other liquid, high grade
debt securities consistent with the Fund's investment restrictions having a
value equal to the repurchase price (including accrued interest), and will
subsequently continually monitor the account to ensure that such equivalent
value is maintained. Reverse repurchase agreements and dollar roll agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which a Fund is obligated to repurchase the
securities. Reverse repurchase agreements and dollar roll agreements are
considered to be borrowings by a Fund under the 1940 Act.
Futures Contracts. Each of the Growth Funds, Growth and Income Funds,
Income Funds and the Municipal Bond Fund may enter into futures contracts.
This investment technique is designed primarily to hedge against anticipated
future changes in market conditions or foreign exchange rates which otherwise
might adversely affect the value of securities which a Fund holds or intends to
purchase. For example, when interest rates are expected to rise or market
values of portfolio securities are expected to fall, a Fund can seek through
the sale of futures contracts to offset a decline in the value of its portfolio
securities. When interest rates are expected to fall or market values are
expected to rise, a Fund, through the purchase of such contracts, can attempt
to secure better rates or prices for the Fund than might later be available in
the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. A Fund may lose the expected benefit of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Fund had
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 278
not entered into any futures transactions. In addition, the value of a Fund's
futures positions may not prove to be perfectly or even highly correlated with
the value of its portfolio securities and foreign currencies, limiting the
Fund's ability to hedge effectively against interest rate, foreign exchange
rate and/or market risk and giving rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.
Forward Foreign Currency Exchange Contracts. Each of the Funds,
except the Money Market Funds and the Tax-Free Income Funds, may invest in
forward foreign currency exchange contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers.
No Fund intends to enter into such forward contracts if such Fund
would have more than 15% of the value of its total assets committed to such
contracts on a regular or continuous basis. A Fund also will not enter into
such forward contracts or maintain a net exposure in such contracts where such
Fund would be obligated to deliver an amount of foreign currency in excess of
the value of such Fund's securities or other assets denominated in that
currency. First of America and Gulfstream believe that it is important to have
the flexibility to enter into such forward contracts when it determines that to
do so is in the best interests of a Fund. The Group's Custodian segregates
cash or liquid high- grade securities in an amount not less than the value of
the Fund's total assets committed to forward foreign currency exchange
contracts entered into for the purchase of a foreign security. If the value of
the securities segregated declines, additional cash or securities are added so
that the segregated amount is not less than the amount of such Fund's
commitments with respect to such contracts. The Funds generally do not enter
into a forward contract with a term longer than one year.
Foreign Currency Options. Each of the Funds, except the Money Market
Funds and the Tax-Free Income Funds, may invest in forward foreign currency
options. A foreign currency option provides the option buyer with the right to
buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives
its owner the right, but not the obligation, to sell the currency. The option
seller (writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect a Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if a Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, such
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 279
Foreign Currency Futures Transactions. Each of the Funds, except the
Money Market Funds and the Tax-Free Income Funds, may invest in forward foreign
currency futures transactions. As part of its financial futures transactions,
the Funds may use foreign currency futures contracts and options on such
futures contracts. Through the purchase or sale of such contracts, a Fund may
be able to achieve many of the same objectives as through forward foreign
currency exchange contracts more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and may be traded on boards of
trade and commodities exchanges or directly with a dealer which makes a market
in such contracts and options. It is anticipated that such contracts may
provide greater liquidity and lower cost than forward foreign currency exchange
contracts.
Regulatory Restrictions. To the extent required to comply with
Securities and Exchange Commission (the "SEC") Release No. IC-10666, when
purchasing a futures contract or writing a put option or entering into a
forward foreign currency exchange purchase, a Fund will maintain in a
segregated account cash or liquid high-grade securities equal to the value of
such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for
futures contracts held by such Fund plus premiums paid by it for open options
on futures would exceed 5% of such Fund's total assets. Such Fund will not
engage in transactions in financial futures contracts or options thereon for
speculation, but only to attempt to hedge against changes in market conditions
affecting the values of securities which such Fund holds or intends to
purchase. When futures contracts or options thereon are purchased to protect
against a price increase on securities intended to be purchased later, it is
anticipated that at least 25% of such intended purchases will be completed.
When other futures contracts or options thereon are purchased, the underlying
value of such contracts will at all times not exceed the sum of: (1) accrued
profit on such contracts held by the broker; (2) cash or high quality money
market instruments set aside in an identifiable manner; and (3) cash proceeds
from investments due in 30 days.
Lending of Portfolio Securities. In order to generate additional
income, each of the Funds may from time to time lend its portfolio securities
to broker-dealers, banks or institutional borrowers of securities. A Fund must
receive 100% collateral in the form of cash or U.S. government securities.
This collateral must be valued daily by First of America or Gulfstream and,
should the market value of the loaned securities increase, the borrower must
furnish additional collateral to the Fund. During the time portfolio
securities are on loan, the borrower pays the Fund any dividends or interest
paid on such securities. Loans are subject to termination by the Fund or the
borrower at any time. While the Fund does not have the right to vote
securities on loan, it intends to terminate the loan and regain the right to
vote if that is considered important with respect to the investment. In the
event the borrower defaults in its obligation to a Fund, the Fund bears the
risk of delay in the recovery of its portfolio securities and the risk of loss
of rights in the collateral. A Fund will only enter into loan arrangements
with broker-dealers, banks or other institutions which First of America or
Gulfstream has determined are creditworthy under guidelines established by the
Group's Board of Trustees.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 280
Investment Restrictions
Each Fund's investment objective is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares.
In addition, the following investment restrictions may be changed with respect
to a particular Fund only by a vote of a majority of the outstanding shares of
that Fund (as defined under "ADDITIONAL INFORMATION - Vote of a Majority of the
Outstanding Shares" in this Statement of Additional Information).
None of the Money Market Funds may:
Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities.
None of the Non-Money Market Funds may:
Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of securities and except as may be
necessary to make margin payments in connection with foreign currency futures
and other derivative securities transactions.
None of the Funds, with the exception of the Michigan Bond Fund, may:
Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in such issuer, or the Fund would hold more than 10%
of the outstanding voting securities of the issuer, except that 25% or less of
the value of such Fund's total assets may be invested without regard to such
limitations. There is no limit to the percentage of assets that may be
invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Irrespective of this investment restriction, and pursuant to Rule 2a-7
under the 1940 Act, the U.S. Government Obligations Fund, the Prime Obligations
Fund and the Treasury Fund each will, with respect to 100% of its total assets,
limit its investment in the securities of any one issuer in the manner provided
by such Rule, which limitations are referred to above under the caption
"INVESTMENT OBJECTIVES AND POLICIES - The Money Market Funds."
The Michigan Bond Fund may not:
Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, (a) more than 5% of the value of the Fund's
total assets (taken at current value) would be invested in such issuer (except
that up to 50% of the value of the Fund's total assets may be invested without
regard to such 5% limitation), and (b) more than 25% of its total assets (taken
at current value) would be invested in the securities of a single issuer.
For purposes of this investment limitation, a security is considered
to be issued by the governmental entity (or entities) whose assets and revenues
back the security and, with respect
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 281
to a private activity bond that is backed only by the assets and revenues of a
non-governmental user, a security is considered to be issued by such
non-governmental user.
None of the Funds will:
1. Underwrite the securities issued by other persons, except to the
extent that a Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities";
2. Purchase or sell commodities or commodities contracts, except to
the extent disclosed in the current Prospectus of the Fund;
3. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction);
4. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business
activities in the same industry, provided that: (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities and repurchase agreements secured by obligations
of the U.S. government or its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services. For
example, gas, gas transmission, electric and gas, electric, and telephone will
each be considered a separate industry;
5. Borrow money (not including reverse repurchase agreements or
dollar roll agreements), except that each Fund may borrow from banks for
temporary or emergency purposes and then only in amounts up to 30% of its total
assets at the time of borrowing (and provided that such bank borrowings and
reverse repurchase agreements and dollar roll agreements do not exceed in the
aggregate one-third of the Fund's total assets less liabilities other than the
obligations represented by the bank borrowings, reverse repurchase agreements
and dollar roll agreements), or mortgage, pledge or hypothecate any assets
except in connection with a bank borrowing in amounts not to exceed 30% of the
Fund's net assets at the time of borrowing;
6. Enter into reverse repurchase agreements, dollar roll agreements
and other permitted borrowings in amounts exceeding in the aggregate one-third
of the Fund's total assets less liabilities other than the obligations
represented by such reverse repurchase and dollar roll agreements;
7. Issue senior securities except as permitted by 1940 Act rule,
order or interpretation thereunder; or
8. Make loans, except that a Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions and
enter into repurchase agreements.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 282
9. Write any call options on securities unless the securities are
held by the Fund or unless the Fund is entitled to such securities in
deliverable form in exchange for cash in an amount which has been segregated
for payment or without further payment. In no event will a Fund write call
options in excess of 5% of its total assets.
For purposes of investment limitation number 4 above only, such
limitation shall not apply to Municipal Securities or governmental guarantees
of Municipal Securities, and industrial development bonds or private activity
bonds that are backed only by the assets and revenues of a non-governmental
user shall not be deemed to be Municipal Securities.
The following additional investment restrictions may be changed
without the vote of a majority of the outstanding shares of a Fund. None of
the Funds may:
1. Engage in any short sales;
2. Invest more than 10% of the Fund's total assets in the securities
of issuers which, together with any predecessors, have a record of less than
three years of continuous operation;
3. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act or pursuant to any exemptions
therefrom;
4. Purchase or retain securities of any issuer if the officers or
Trustees of the Group and the officers or directors of its Investment Adviser
and of its Administrator, who each owns beneficially more than one-half of 1%
of the outstanding securities of such issuer, together own beneficially more
than 5% of such securities;
5. Purchase participations or direct interests in oil, gas or other
mineral exploration or development programs (although investments by the Fund
in marketable securities of companies engaged in such activities are not
prohibited by this restriction); or
6. Purchase or otherwise acquire any securities, if as a result, more
than 15% (10% in the case of the Money Market Funds) of the Fund's net assets
would be invested in securities that are illiquid.
In addition, the Tax-Free Fund may not:
1. Acquire a put, if, immediately after such acquisition, over 5% of
the total amortized cost value of the Fund's assets would be subject to puts
from the same institution (except that (i) up to 25% of the value of the Fund's
total assets may be subject to puts without regard to such 5% limitation and
(ii) the 5% limitation is inapplicable to puts that, by their terms, would be
readily exercisable in the event of a default in payment of principal or
interest on the underlying securities). For the purpose of this investment
restriction and investment restriction number 2 below, a put will be considered
to be from the party to whom the Fund will look for payment of the exercise
price; or
2. Acquire a put that, by its terms, would be readily exercisable in
the event of a default in payment of principal and interest on the underlying
security or securities if, immediately after
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 283
that acquisition, the amortized cost value of the security or securities
underlying that put, when aggregated with the amortized cost value of any other
securities issued or guaranteed by the issuer of the put, would exceed 10% of
the total amortized cost value of the Fund's assets.
The Municipal Bond Fund may not:
1. Acquire a put, if, immediately after such acquisition, over 5% of
the total value of the Fund's assets would be subject to puts from the same
institution (except that (i) up to 25% of the value of the Fund's total assets
may be subject to puts without regard to such 5% limitation and (ii) the 5%
limitation is inapplicable to puts that, by their terms, would be readily
exercisable in the event of a default in payment of principal or interest on
the underlying securities). For the purpose of this investment restriction and
investment restriction number 2 below, a put will be considered to be from the
party to whom the Fund will look for payment of the exercise price; or
2. Acquire a put that, by its terms, would be readily exercisable in
the event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the value of the
security or securities underlying that put, when aggregated with the value of
any other securities issued or guaranteed by the issuer of the put, would
exceed 10% of the total value of the Fund's assets.
The Michigan Bond Fund may not:
Purchase securities of any one issuer if, at the time of purchase, the
Fund would hold more than 10% of the voting securities of such issuer except
that up to 25% of the value of the Fund's total assets may be invested without
regard to such limitation.
If any percentage restriction described above is satisfied at the time
of purchase, a later increase or decrease in such percentage resulting from a
change in net asset value will not constitute a violation of such restriction.
However, should a change in net asset value or other external events cause a
Fund's investments in illiquid securities to exceed the limitation set forth
above, that Fund will act to cause the aggregate amount of illiquid securities
to come within such limit as soon as reasonably practicable. In such an event,
however, that Fund would not be required to liquidate any portfolio securities
where the Fund would suffer a loss on the sale of such securities.
The Group has represented to the Texas State Securities Board, on
behalf of each investment portfolio, that none of those investment portfolios
will invest in oil, gas or mineral leases or purchase or sell real property
(including limited partnership interests, but excluding readily marketable
securities of companies which invest in real estate). The Group intends to
comply with these representations for as long as the Group has the shares of
its investment portfolios registered for sale in the State of Texas.
In addition, the Group has represented to the Wisconsin Securities
Bureau: (1) on behalf of the Equity Fund, High Income Equity Fund, Small
Capitalization Fund and Large Capitalization Fund that each of those Funds will
not invest more than 5% of its total assets in securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years and will not invest more than 5% of its total assets in equity
securities of
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 284
issuers which are not readily marketable; (2) on behalf of the Balanced Fund,
that the Fund will not invest: (a) more than 5% of its total assets in
securities of unseasoned issuers, including their predecessors, which have been
in operation for less than three years, (b) more than 5% of its total assets in
equity securities of issuers which are not readily marketable, (c) in options,
financial futures or stock index futures, other than hedging positions or
positions that are covered by cash or securities, if as a result thereof, more
than 5% of its assets would be so invested; (3) on behalf of the International
Fund, that the Fund will not invest: (i) more than 5% of its total assets in
securities of unseasoned issuers, including their predecessors, which have been
in operation for less than three years, and (ii) more than 5% of its net assets
in warrants valued at the lower of cost or market, provided that included
within that amount, but not to exceed 2% of net assets, may be warrants which
are not listed on the New York or American Stock Exchanges, and that for
purposes of this restriction, warrants acquired in units or attached to
securities are deemed to be without value; and (4) on behalf of each of the
Balanced Fund and the International Fund, that these Funds would not invest
more than 5% of its total assets in securities of issuers which the Group is
restricted from selling to the public without registration under the 1933 Act
and excluding restricted securities eligible for resale pursuant to Rule 144A
under the 1933 Act that the Group's Board has determined to be liquid, or
including those that are subject to legal or contractual restrictions on
disposition; provided, however, that upon appropriately amending the Funds'
Prospectuses, such Funds reserve the right to increase such 5% limitation
described in this subparagraph to 10%. The Group intends to comply with these
representations for so long as the Group has its shares registered for sale in
the State of Wisconsin.
In addition, the Group has represented to the Texas State Securities
Board, on behalf of each investment portfolio, that each investment portfolio
will not invest more than 5% of its net assets in warrants valued at the lower
of cost or market value; provided that included within that amount, but not to
exceed 2% of net assets, may be warrants which are not listed on the New York
or American Stock Exchanges. For the purposes of this restriction, warrants
acquired in units or attached to securities are deemed to be without value.
The Group intends to comply with this representation with respect to a Fund
provided the Group has shares of that Fund registered for sale in the State of
Texas.
Finally, the Group, on behalf of the Government Income Fund, has
adopted the following non-fundamental policies (and therefore may be changed
without the vote of shareholders) pursuant to its representations to the Texas
State Securities Board:
The Government Income Fund may not:
1. Partnership Interests. Invest in limited partnership interests,
but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in
real estate; and
2. Warrants. Invest more than 5% of the value of its net assets in
warrants valued at the lower of cost or market, including within such
amount, but not to exceed 2% of the value of such Fund's net assets,
investments in warrants which are not listed on the New York or
American Stock Exchanges.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 285
Portfolio Turnover
The portfolio turnover rate for each of the Group's Funds is
calculated by dividing the lesser of a Fund's purchases or sales of portfolio
securities for the year by the monthly average value of the securities. The
SEC requires that the calculation exclude all securities whose remaining
maturities at the time of acquisition are one year or less.
Because each Money Market Fund intends to invest entirely in
securities with maturities of less than one year and because the SEC requires
such securities to be excluded from the calculation of portfolio turnover rate,
the portfolio turnover with respect to each of the Money Market Funds is
expected to be zero for regulatory purposes. Portfolio turnover rates for each
of the other Funds for the fiscal years ended June 30, 1996 and 1995, were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
Fund (Percent) (Percent)
---- ------------- -------------
<S> <C> <C>
Equity 49.27 46.39
Small Capitalization 67.22 50.53
Large Capitalization(1) 0.86 N/A
High Income Equity 40.75 77.70
Bond 1,189.27 1,010.64
Limited Maturity Bond 618.60 397.97
Intermediate Government Obligations 916.39 549.13
Municipal Bond 47.46 35.15
Michigan Bond 27.66 26.06
Balanced 437.90 250.66
Government Income 348.01 114.71
International 54.47 104.39
</TABLE>
(1) Portfolio turnover rates were only available for the Large Capitalization
Fund since its inception on December 28, 1995.
The portfolio turnover rates for the Funds of the Group may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of shares and, in the case of the
Municipal Bond Fund and the Michigan Bond Fund, by requirements which enable
those Funds to receive certain favorable tax treatments. With respect to the
Large Capitalization Fund, the Investment Adviser anticipates that annual
portfolio turnover rates will remain below 100%. High portfolio turnover rates
will generally result in higher transaction costs to a Fund, including
brokerage commissions, and may result in additional tax consequences to a
Fund's shareholders. Portfolio turnover will not be a limiting factor in
making investment decisions.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 286
NET ASSET VALUE
As indicated in the Prospectuses, the net asset value of each Fund is
determined and the shares of each Fund are priced as of the Valuation Times
defined in the Prospectuses on each Business Day of the Group. A "Business
Day" is a day on which the New York Stock Exchange (the "NYSE") is open for
trading and the Federal Reserve Bank of Chicago is open and, any other day
(other than a day on which no shares of the Fund are tendered for redemption
and no order to purchase any shares is received) during which there is
sufficient trading in portfolio instruments that the Fund's net asset value per
share might be materially affected. Currently, the NYSE or the Federal Reserve
Bank of Chicago will not be open in observance of the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving, and Christmas.
The offering prices for Investor A Shares of the Non-Money Market
Funds as of June 30, 1996 were calculated as illustrated in this example using
the Small Capitalization Fund:
<TABLE>
<S> <C>
Net Assets $187,015,468.21
Outstanding Shares 5,472,669.954
Net Asset Value Per Share $34.17
Sales Charge, 4.50% of
the offering price (4.71% of NAV) per share $1.61
Offering Price $35.78
==============
</TABLE>
The offering prices for Investor B Shares of the Funds as of June 30,
1996 were calculated as illustrated in this example using the Small
Capitalization Fund:
<TABLE>
<S> <C>
Net Assets $30,309,759.77
Outstanding Shares 897,147.521
Net Asset Value Per Share $33.78
Sales Charge $0.00
Offering Price $33.78
==============
</TABLE>
The offering prices for Investor C Shares of the Funds as of June 30,
1996 were calculated as illustrated in this example using the Small
Capitalization Fund:
<TABLE>
<S> <C>
Net Assets $5,751,343.14
Outstanding Shares 170,011.391
Net Asset Value Per Share $33.83
Sales Charge $0.00
Offering Price $33.83
=============
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 287
The offering prices for Institutional Shares of the Non-Money Market
Funds as of June 30, 1996 were calculated as illustrated in this example using
the Small Capitalization Fund:
<TABLE>
<S> <C>
Net Assets $528,866,186.41
Outstanding Shares 15,328,738,672
Net Asset Value Per Share $34.50
Sales Charge $0.00
Offering Price $34.50
===============
</TABLE>
Valuation of the Money Market Funds
The Money Market Funds have elected to use the amortized cost method
of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing
an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. This
method may result in periods during which value, as determined by amortized
cost, is higher or lower than the price one of these Funds would receive if it
sold the instrument. The value of securities in these Funds can be expected to
vary inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Funds will maintain a
dollar-weighted average maturity appropriate to each Fund's objective of
maintaining a stable net asset value per share, provided that no Fund will
purchase any security with a remaining maturity of more than 397 days (thirteen
months) (securities subject to repurchase agreements may bear longer
maturities) nor will it maintain a dollar-weighted average maturity which
exceeds 90 days. The Group's Board of Trustees has also undertaken to
establish procedures reasonably designed, taking into account current market
conditions and the investment objective of each of these Funds, to stabilize
the net asset value per share of each Fund for purposes of sales and
redemptions at $1.00. These procedures include review by the Trustees, at such
intervals as they deem appropriate, to determine the extent, if any, to which
the net asset value per share of each Fund calculated by using available market
quotations deviates from $1.00 per share. In the event such deviation exceeds
0.5%, Rule 2a-7 requires that the Board of Trustees promptly consider what
action, if any, should be initiated. If the Trustees believe that the extent
of any deviation from a Fund's $1.00 amortized cost price per share may result
in material dilution or other unfair results to new or existing investors, they
will take such steps as they consider appropriate to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair results. These
steps may include selling portfolio instruments prior to maturity, shortening
the dollar-weighted average maturity, withholding or reducing dividends,
reducing the number of the Fund's outstanding shares without monetary
consideration, or utilizing a net asset value per share determined by using
available market quotations. As permitted by Rule 2a-7 and the procedures
adopted by the Board, certain of the Board's responsibilities under the Rule
may be delegated to the Investment Adviser.
Valuation of the Non-Money Market Funds
Portfolio securities, the principal market for which is a securities
exchange, will be valued at the closing sales price on that exchange on the day
of computation, or, if there have been no sales during such day, at the latest
bid quotation. Portfolio securities, the principal market for
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 288
which is not a securities exchange, will be valued at their latest bid
quotation in such principal market. In either case, if no such bid price is
available, then such securities will be valued in good faith at their
respective fair market values using methods determined by or under the
supervision of the Board of Trustees of the Group. Portfolio securities with a
remaining maturity of 60 days or less will be valued either at amortized cost
or original cost plus accrued interest, which approximates current value.
All other assets and securities including securities for which market
quotations are not readily available will be valued at their fair market value
as determined in good faith under the general supervision of the Board of
Trustees of the Group.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each of the classes of shares of the Group's Funds is sold on a
continuous basis by the Group's distributor, BISYS Fund Services Limited
Partnership d/b/a BISYS Fund Services (the "Distributor" or "BISYS"), and BISYS
has agreed to use appropriate efforts to solicit all purchase orders. In
addition to purchasing shares directly from BISYS, Institutional Shares may be
purchased at net asset value through procedures established by BISYS in
connection with the requirements of financial institutions, including the Trust
Department of First of America Bank-Michigan, N.A. ("FOA-Michigan"), the parent
of the Group's Investment Adviser, First of America, or FOA-Michigan's
affiliated entities acting on behalf of customers for investment of funds that
are held by such Trust Department in a fiduciary, agency, custodial or similar
capacity, although currently Institutional Shares are only being offered to the
trust departments of FOA-Michigan and its affiliates.
As stated in the relevant Prospectuses, the public offering price of
Investor A Shares of the Money Market Funds is their net asset value per share
which they will seek to maintain at $1.00. The public offering price of
Investor A Shares of each of the other Funds is their net asset value per share
next computed after the sale plus a sales charge which varies based upon the
quantity purchased. The public offering price of such Investor A Shares of the
Group is calculated by dividing net asset value by the difference (expressed as
a decimal) between 100% and the sales charge percentage of offering price
applicable to the purchase (see "HOW TO BUY INVESTOR A SHARES" in the relevant
Prospectus). The offering price is rounded to two decimal places each time a
computation is made. The sales charge scale set forth in the Investor A Share
Prospectus applies to purchases of Investor A Shares of a Fund.
The public offering price of Investor B Shares of each Fund is their
net asset value per share, although Investor B Shares redeemed prior to four
years from the date of purchase may be subject to a contingent deferred sales
charge of 1.00 to 4.00%.
The public offering price of the Investor C Shares of each Fund is
their net asset value per share. Investor C Shares redeemed prior to one year
from the date of purchase may be subject to a contingent deferred sales charge
of 1.00%.
The Group may suspend the right of redemption or postpone the date of
payment for shares during any period when: (a) trading on the NYSE is
restricted by applicable rules and regulations of the SEC; (b) the NYSE is
closed for other than customary weekend and holiday closings; (c) the SEC has
by order permitted such suspension; or (d) an emergency exists as a result of
which: (i) disposal by the Group of securities owned by it is not reasonably
practical, or (ii) it is not reasonably practical for the Group to determine
the fair market value of its net assets.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 289
The Money Market Funds may redeem shares involuntarily if redemption
appears appropriate in light of the Group's responsibilities under the 1940
Act. See "NET ASSET VALUE - Valuation of the Money Market Funds" in this
Statement of Additional Information.
MANAGEMENT OF THE GROUP
Trustees and Officers
Overall responsibility for management of the Group rests with its
Board of Trustees, who are elected by the shareholders of the Group's Funds.
The Trustees elect the officers of the Group to supervise actively its
day-to-day operations.
The Trustees of the Group, their addresses, and principal occupations
during the past five years are as follows:
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION
AND BIRTH DATE WITH THE GROUP DURING PAST 5 YEARS
-------------- -------------- -------------------
<S> <C> <C>
George R. Landreth* Chairman of the Board From December 1992 to present, employee
3435 Stelzer Road and Trustee of BISYS; from July 1991 to December
Columbus, Ohio 43219 1992, employee of PNC Financial
July 11, 1942 Corporation; from October 1984 to July
1991, employee of The Central Trust Co.,
N.A.
Robert M. Beam Trustee From 1985 to present, Vice President for
3080 Seibert Admin. Bldg. Business and Finance and Treasurer of
Western Michigan University Western Michigan University
Kalamazoo, Michigan 49008
August 2, 1943
Adrian Charles Edwards Trustee Since 1964, Professor of Finance and
College of Business Commercial Law, Western Michigan
Western Michigan University University; since 1977, owner, Economic
260 North Hall and Financial Analysis (financial
Kalamazoo, Michigan 49008 consulting)
April 22, 1936
Lawrence D. Bryan Trustee From August 1, 1996 to present, Self-
1200 Academy Street Employed Educational Consultant; From
Kalamazoo, Michigan 49006 1990 to July 31, 1996, President,
January 30, 1945 Kalamazoo College
</TABLE>
* Mr. Landreth is considered to be an "interested person" of the Group as
defined in the 1940 Act.
Stephen G. Mintos, Executive Vice President of BISYS Fund Services,
L.P., served as Chairman of the Board and Trustee until his resignation on May
23, 1996.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 290
The Group paid an aggregate of $44,500 in Trustees' fees and expenses
for the fiscal year ended June 30, 1996, to all Trustees of the Group
(excluding Mr. Landreth who receives no compensation). All of the Trustees
also serve as Trustees of The Parkstone Advantage Fund, an open-end investment
company managed by the Group's Investment Adviser as an investment vehicle for
insurance company separate accounts. The following table depicts, for the
fiscal year ended June 30, 1996, the compensation received by each of the
Trustees from the Group and in total from all investment companies managed by
the Investment Adviser to the Group.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OF TOTAL COMPENSATION
RETIREMENT BEMEFOTS ESTIMATED ANNUAL FROM GROUP AND THE
AGGREGATE COMPENSATION ACCRUED AS PART OF BENDFITS UPON PARKSTONE ADVANTAGE
NAME OF TRUSTEE FROM THE GROUP FUND EXPENSES RETIREMENT FUND PAID TO TRUSTEES
--------------- ---------------------- ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Stephen G. Mintos* none none none none
George R. Landreth none none none none
Robert M. Beam $13,500 none none $18,500
Lawrence D. Bryan $11,500 none none $18,500
Adrian Charles Edwards $13,500 none none $18,500
Wen Chao Chen* $3,000 none none $3,000
Howard D. Kalleward* $3,000 none none $3,000
<FN>
* Mr. Mintos served as Chairman of the Board and Trustee until his resignation
on May 23, 1996. Messrs. Chen and Kalleward served as Trustees until their
resignations on August 25, 1995.
</TABLE>
The officers of the Group, their addresses, and principal occupations
during the past five years are as follows:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH THE GROUP DURING PAST 5 YEARS
- --------------------- -------------- -------------------
<S> <C> <C>
Scott A. Englehart, 34 President From October, 1990 to present, employee
BISYS Fund Services of BISYS
3435 Stelzer Road
Columbus, Ohio 43219
J. David Huber, 50 Vice President From June, 1987 to present, Executive
BISYS Fund Services Vice President of BISYS
3435 Stelzer Road
Columbus, Ohio 43219
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 291
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH THE GROUP DURING PAST 5 YEARS
- --------------------- ---------------- --------------------
<S> <C> <C>
William J. Tomko, 37 Vice President From April, 1987 to present, employee of
BISYS Fund Services BISYS
3435 Stelzer Road
Columbus, Ohio 43219
George O. Martinez, 37 Vice President From March, 1995 to present, employee of
BISYS Fund Services BISYS; From June, 1989 to March, 1995,
3435 Stelzer Road Vice President and Associate General
Columbus, Ohio 43219 Counsel, Alliance Capital Management
Brian Barker, 38 Vice President From February 1993 to present, Client
BISYS Fund Services Services Manager, BISYS; from November
157 S. Mall Plaza 1989 to February 1993, Direct Lending
Kalamazoo, Michigan 49007 Manager, Bank One; From July 1984 to
November 1989, Regional Manager,
Jefferson Savings Bank
Timothy A. Thiebout, 29 Secretary From June 1992 to present, Client
BISYS Fund Services and Treasurer Services Manager, BISYS; from July 1990
157 S. Mall Plaza to June 1992, Mutual Fund Specialist,
Kalamazoo, Michigan 49007 First of America Brokerage Service
</TABLE>
The officers of the Group receive no compensation directly from the
Group for performing the duties of their offices. As Administrator, BISYS
receives fees from the Group. As Distributor, BISYS may retain all or a
portion of any sales charge on the shares sold and may receive fees under the
Distribution and Shareholder Service Plans described below. BISYS Fund
Services Ohio, Inc. ("BISYS Ohio," the "Transfer Agent" or the "Fund
Accountant") receives fees from the Group for acting as transfer agent and
providing certain fund accounting services. Messrs. Englehart, Huber, Tomko,
Martinez, Barker, and Thiebout are employees of BISYS or BISYS Ohio. No person
who is an officer, director or employee of First of America, or any of its
affiliates serves as a Trustee, officer or employee of the Group.
Investment Adviser and Subadviser
- ---------------------------------
Subject to the general supervision of the Group's Board of Trustees and
in accordance with the Funds' investment objectives and restrictions, investment
advisory services are provided to the Funds of the Group by First of America,
formerly Securities Counsel, Inc., pursuant to the Investment Advisory Agreement
dated July 9, 1987, as amended (with respect to the Money Market Funds) and the
Investment Advisory Agreement dated September 8, 1988, as amended (with respect
to the Equity Fund, Small Capitalization Fund, Large Capitalization Fund, High
Income Equity Fund, Bond Fund, Limited Maturity Bond Fund, Intermediate
Government Obligations Fund, Municipal Bond Fund, Michigan Municipal Bond Fund,
Balanced Fund and Government Income Fund) (the "First Investment Advisory
Agreements") and the Investment Advisory Agreement dated as of December 22,
1992, as amended (with respect to the
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 292
International Fund and Emerging Markets Fund) (the "Second Investment Advisory
Agreement") (together called the "Investment Advisory Agreements").
First of America is a wholly-owned subsidiary of FOA-Michigan which in
turn is a wholly-owned subsidiary of First of America Bank Corporation
("FABC"), a publicly-held bank holding company.
Under the Investment Advisory Agreements, First of America has agreed
to provide, either directly or through one or more subadvisers, investment
advisory services for each of the Group's Funds as described in their
Prospectuses. For the services provided and expenses assumed pursuant to the
Investment Advisory Agreements, each of the Group's Funds pays First of America
a fee, computed daily and paid monthly, at an annual rate calculated as a
percentage of the average daily net assets of that Fund. The annual rates for
the Funds are as follows: 0.40% for the Money Market Funds; 0.74% for the Bond
Fund, Limited Maturity Bond Fund, Intermediate Government Obligations Fund,
Municipal Bond Fund, Michigan Municipal Bond Fund and Government Income Fund;
1.00% for the Equity Fund, Small Capitalization Fund, Large Capitalization
Fund, High Income Equity Fund and Balanced Fund; for the International Fund;
1.25% of the first $50 million of the International Fund's average daily net
assets, 1.20% of average daily net assets between $50 million and $100 million
1.15% of average daily net assets between $100 million and $400 million, and
1.05% of average daily net assets above $400 million; and, for the Emerging
Markets Fund, 1.25% of the Fund's average daily net assets. While the fees
for these last seven Funds is higher than the advisory fees paid by most mutual
funds, the Board of Trustees of the Group believes them to be comparable to
advisory fees paid by many funds having objectives and policies similar to
those Funds. First of America may periodically voluntarily reduce all or a
portion of its advisory fee with respect to any Fund to increase the net income
of one or more of the Funds available for distribution as dividends.
Pursuant to each of the Investment Advisory Agreements, First of
America will pay all expenses, including, as applicable, the compensation of
any subadvisers directly appointed by it, incurred by it in connection with its
activities under the Investment Advisory Agreements other than the cost of
securities (including brokerage commissions, if any) purchased for the Group.
Pursuant to the terms of the Group's Second Investment Advisory
Agreement, First of America may retain a subadviser to manage the investment
and reinvestment of the assets of the International Fund and the Emerging
Markets Fund, subject to the direction and control of the Group's Board of
Trustees. Pursuant to an amendment to the Group's Investment Advisory
Agreement relating to the Balanced Fund approved by that Fund's shareholders on
February 28, 1995, First of America may also retain a subadviser to manage the
investment and reinvestment of the assets of the Balanced Fund which are
invested in foreign securities, subject to the direction and control of the
Group's Board of Trustees.
As of January 1, 1995, First of America entered into a Sub-Investment
Advisory Agreement between First of America and Gulfstream, 100 Crescent Court,
Suite 550, Dallas, Texas 75201 (the "Initial Sub-Investment Advisory
Agreement") which had been approved by the Trustees. Pursuant to the terms of
the Initial Sub-Investment Advisory Agreement, Gulfstream was retained by First
of America to manage the investment and reinvestment of the assets of the
International Fund, subject to the direction and control of First of America
and the Group's Board of Trustees. At a meeting of shareholders held on
February 28, 1995,
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 293
shareholders of the International Fund and the Balanced Fund approved both the
Initial Sub-Investment Advisory Agreement and the Sub-Investment Advisory
Agreement between First of America and Gulfstream which became effective upon
the acquisition by FABC of a controlling interest in Gulfstream (the "Current
Sub-Investment Advisory Agreement"). The terms of the Current Sub-Investment
Advisory Agreement, except for the addition of the Emerging Markets Fund and
the Balanced Fund, are identical to those of the Initial Sub-investment
Advisory Agreement. Pursuant to the Current Sub-Investment Advisory Agreement,
Gulfstream currently provides sub-investment advisory services to the
International Fund, Emerging Markets Fund and Balances Fund.
Under the Current Sub-Investment Advisory Agreement, Gulfstream is
responsible for the day-to-day management of the International Fund, the
Emerging Markets Fund and the portion of the Balanced Fund invested in foreign
securities. Gulfstream also has responsibility for reviewing investment
performance, policies and guidelines, and maintaining certain books and
records. First of America is responsible for selecting and monitoring the
performance of Gulfstream and for reporting the activities of Gulfstream in
managing these Funds to the Group's Board of Trustees. First of America may
also render advice with respect to these Funds' investments in the United
States and otherwise participate to the extent it deems necessary or desirable
in day-to-day management of the Funds.
For its services provided and expenses assumed pursuant to the Current
Sub-Investment Advisory Agreement, Gulfstream is entitled to receive from First
of America a fee, computed daily and paid monthly, at the annual rate of 0.50%
of the first $50 million of the International Fund's average daily net assets
and the average daily net assets of the Balanced Fund which are invested in
foreign securities, of 0.45% of such average daily net assets between $50
million and $100 million, 0.40% of such average daily net assets between $100
million and $400 million and 0.30% of such average daily net assets above $400
million, provided the minimum annual fee shall be $75,000. Gulfstream is also
entitled to receive from First of America a fee, computed daily and paid
monthly, at the annual rate of 0.50% of the Emerging Markets Fund's average
daily net assets. As of the date of this Statement of Additional Information,
shares of the Emerging Markets Fund were not being offered to the public.
Pursuant to the Current Sub-Investment Advisory Agreement, Gulfstream
will pay all expenses incurred by it in connection with its activities under
the Current Sub-Investment Advisory Agreement other than the cost of securities
(including brokerage commissions, if any) purchased for the Group.
Gulfstream was organized in 1991 as a Texas limited partnership by
Tull, Doud, Marsh & Triltsch, Inc., a Texas corporation ("TDMT"). TDMT is the
sole general partner of Gulfstream. TDMT is owned by C. Thomas Tull, Stephen
C. Doud, James P. Marsh and Reiner M. Triltsch. Messrs. Tull, Doud and
Triltsch are the portfolio managers and Mr. Marsh is responsible for client
services with Gulfstream. Prior to a series of transactions with First of
America, described below, the Sail Company, a Delaware corporation, ("Sail")
was the sole limited partner, holding a 49% interest in Gulfstream. Sail is a
wholly-owned subsidiary of Rosewood Investments, Inc., a Delaware corporation,
100 Crescent Court, Suite 550, Dallas, Texas 75201.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 294
On December 7, 1994, Gulfstream, Sail, TDMT and the Corporation
entered into a Partnership Interest Purchase Agreement (the "Acquisition
Agreement") under which First of America acquired a controlling interest in
Gulfstream. The Acquisition Agreement provided for the following transactions.
First, the Corporation acquired all of Sail's limited and preferred partnership
interests for a cash payment. Second, TDMT paid to Sail an additional amount
with the proceeds of a loan to TDMT by the FABC, which loan bears interest at
the annual rate of 10%. Third, the First of America committed to contribute
to Gulfstream additional working capital to be represented by an additional
preferred partnership interest. Fourth, TDMT granted to First of America
an irrevocable 3-year option to acquire up to an additional 20% partnership
interest in Gulfstream, which option became exercisable when Gulfstream's
annualized revenue derived from sources attributable to FABC satisfied
certain revenue targets. First of America's exercise price was established at
five times Gulfstream's annualized revenue not derived from sources
attributable to the FABC multiplied by the additional percentage partnership
interest acquired by the First of America. TDMT also granted First of
America another irrevocable 3-year option to acquire an additional 3%
partnership interest in Gulfstream exercisable upon First of America's
acquisition of an aggregate 69% partnership interest but not sooner than 1995.
Fifth, TDMT and First of America granted each other rights of first
refusal with respect to any sale or any other disposition of their respective
interests in Gulfstream. These transactions were consummated on February 28,
1995. On August 31, 1996, First of America exercised options to increase its
interest in Gulfstream to 72%.
As of June 30, 1996, Gulfstream had over $596 million in international
assets of institutional, governmental, pension fund and high net worth
individual clients under its investment management. Gulfstream personnel
average 20 years investment experience and 9 years of international investment
experience.
Gulfstream's investment process is designed to provide long-term growth
of capital. Like First of America, Gulfstream focuses on identifying companies
world-wide with strong balance sheets, superior operating margins and
consistent sales and earnings growth and endeavors to purchase the securities
of those companies at reasonable valuations. Gulfstream generally avoids
investments in the securities of cyclical, financial or turnaround companies,
whose earnings are less predictable and more volatile. These stock selection
criteria lead Gulfstream to invest in small to medium capitalization companies
in international markets in pursuit of superior returns from long-term growth
of capital. First of America and the Trustees of the Group believe that
Gulfstream's style of investment management is well-suited to the investment
objective and policies of the International Fund, Emerging Markets Fund and
Balanced Fund.
For the fiscal years ended June 30, 1996, 1995 and 1994, First of
America collected and voluntarily reduced the amounts indicated below which
were payable to it with respect to its investment advisory services to the
indicated Funds under the Investment Advisory Agreements:
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
- ------------------------------------------------------------------------------------------------------------------------------------
FUND 1996 1995 1994
---- ---- ----
Gross Fees Gross Fees Gross Fees
Fees Voluntarily Fees Voluntarily Fees Voluntarily
Collected Reduced Collected Reduced Collected Reduced
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Prime Obligations $3,144,270 84 $2,869,890 -- $2,500,897 --
U.S. Government Obligations 1,638,981 17 1,403,045 -- 1,697,301 --
Tax-Free 629,497 6 538,122 -- 527,451 --
Equity 8,178,104 2,655 6,316,594 11,380 6,532,034 --
Small Capitalization 5,765,210 8,667 3,748,619 3,257 3,607,545 --
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 295
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
- ------------------------------------------------------------------------------------------------------------------------------------
FUND 1996 1995 1994
---- ---- ----
Gross Fees Gross Fees Gross Fees
Fees Voluntarily Fees Voluntarily Fees Voluntarily
Collected Reduced Collected Reduced Collected Reduced
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Large Capitalization(2) 432,969 19,514 -- -- -- --
High Income Equity 4,277,488 206 4,261,431 -- 4,722,119 --
International 3,968,550 3,839 3,473,278 39,374 2,819,335 --
Bond 4,106,765 222,927 3,466,174 198,864 3,534,608 191,595
Limited Maturity Bond 1,155,348 296,518 934,167 322,257 1,315,801 338,089
Intermediate Government Obligations 1,982,604 106,662 2,030,855 115,234 2,366,043 128,052
Municipal Bond 1,079,024 276,973 827,634 285,574 1,198,100 307,704
Michigan Bond 1,653,555 424,702 1,193,600 412,165 1,621,093 416,624
Balanced 1,168,319 292,740 694,277 231,904 609,482 153,103
Government Income 1,384,056 542,801 707,946 456,489 1,024,207 402,042
Treasury(1) 1,300,994 1,189 838,130 -- 238,642 --
</TABLE>
(1)Commenced operations December 1, 1993
(2)Commenced operations December 27, 1995
No amounts were paid to First of America on behalf of the Municipal
Investor Fund or the Emerging Markets Fund under the Investment Advisory
Agreements for the year ended June 30, 1996, as such Funds had not commenced
operations as of that date.
Unless sooner terminated, each of the Investment Advisory Agreements
continues in effect as to a particular Fund for successive one-year periods
ending December 31 of each year if such continuance is approved at least
annually by the Group's Board of Trustees or by vote of a majority of the
outstanding shares of such Fund (as defined under "GENERAL INFORMATION -
Miscellaneous" in the Prospectuses), and a majority of the Trustees who are not
parties to the Investment Advisory Agreements or interested persons (as defined
in the 1940 Act) of any party to the Investment Advisory Agreements by votes
cast in person at a meeting called for such purpose. Unless sooner terminated,
the Current Sub- Investment Advisory Agreement continues in effect successive
one-year periods ending December 31, if such continuance is approved as
described above with respect to the Investment Advisory Agreements. The
Investment Advisory Agreements and the Current Sub-Investment Advisory
Agreement are terminable as to a particular Fund at any time on 60 days'
written notice without penalty by the Trustees, by vote of a majority of the
outstanding shares of that Fund, or by First of America or, in the case of
Gulfstream, on 150 days' prior written notice from Gulfstream. Such Agreements
also terminate automatically in the event of any assignment, as defined in the
1940 Act.
The Investment Advisory Agreements and the Current Sub-Investment
Advisory Agreement provide that neither First of America nor Gulfstream shall
be liable for any error of judgment or mistake of law or for any loss suffered
by the Group in connection with the performance of their duties, except a loss
suffered by a Fund resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the respective
investment adviser or subadviser in the performance of their duties, or from
reckless disregard of their duties and obligations thereunder.
From time to time, advertisements, supplemental sales literature, and
information furnished to present or prospective shareholders of the Funds may
include descriptions of the Investment Adviser or Subadviser including, but not
limited to, (i) descriptions of the Investment Adviser's
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 296
or Subadviser's operations; (ii) descriptions of certain personnel and their
functions; and (iii) statistics and rankings related to the Investment
Adviser's or Subadviser's operations.
Portfolio Transactions
With respect to all Funds of the Group other than the International
Fund and Emerging Markets Fund, pursuant to the First Investment Advisory
Agreements, First of America determines, subject to the general supervision of
the Board of Trustees of the Group and in accordance with each Fund's
investment objective and restrictions, which securities are to be purchased and
sold by a Fund, and which brokers are to be eligible to execute such Fund's
portfolio transactions. With respect to the International Fund, Emerging
Markets Fund and the portion of the Balanced Fund invested in foreign
securities, pursuant to the terms of the Current Sub-Investment Advisory
Agreement, Gulfstream determines, subject to the general supervision of First
of America, the Board of Trustees of the Group and in accordance with each of
the investment objectives and restrictions of these Funds, which securities are
to be purchased and sold by the International Fund, Emerging Markets Fund and
foreign securities portion of the Balance Fund, and which brokers are to be
eligible to execute the portfolio transactions of the International Fund,
Emerging Markets Fund and foreign securities portion of the Balanced Fund.
Purchases and sales of portfolio securities which are debt securities
usually are principal transactions in which portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. Transactions on stock exchanges involve the payment
of negotiated brokerage commissions. Transactions in the over-the-counter
market are generally principal transactions with dealers. With respect to the
over-the-counter market, the Group, where possible, will deal directly with
dealers who make a market in the securities involved except in those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various
brokers and dealers is determined by First of America or Gulfstream in their
best judgment and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. Subject to this consideration, brokers and dealers
who provide supplemental investment research to First of America or Gulfstream
may receive orders for transactions on behalf of the Group. Information so
received is in addition to and not in lieu of services required to be performed
by First of America or Gulfstream and does not reduce the fees payable to such
advisers by the Group or First of America, as the case may be. Such
information may be useful to First of America or Gulfstream in serving both the
Group and other clients and, conversely, supplemental information obtained by
the placement of business of other clients may be useful to such advisers in
carrying out their obligations to the Group.
While First of America and Gulfstream generally seek competitive
commissions, the Group may not necessarily pay the lowest commission available
on each brokerage transaction for reasons discussed above. For the fiscal
years ended June 30, 1996, 1995 and 1994, the Group paid an aggregate of
approximately $3,615,061, $9,577,000 and $3,528,301, respectively, as brokerage
commissions on behalf of the Funds.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 297
The Group will not acquire portfolio securities issued by, make
savings deposits in, or enter into repurchase or reverse repurchase agreements
with FOA-Michigan (the parent corporation of First of America), BISYS, or their
affiliates, and will not give preference to FOA-Michigan's correspondents with
respect to such transactions, securities, savings deposits, repurchase
agreements, and reverse repurchase agreements.
Investment decisions for each Fund of the Group are made independently
from those for the other Funds or any other portfolio, investment company or
account managed by First of America. Any such other portfolio, investment
company or account may also invest in the same securities as the Group. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a Fund and another Fund, portfolio, investment company or account,
the transaction will be averaged as to price and available investments will be
allocated as to amount in a manner which First of America believes to be
equitable to the Fund(s) and such other portfolio, investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by a Fund or the size of the position obtained by a
Fund. To the extent permitted by law, First of America may aggregate the
securities to be sold or purchased for a Fund with those to be sold or
purchased for the other Funds or for other portfolio, investment companies or
accounts in order to obtain best execution. As provided by the Investment
Advisory Agreements, in making investment recommendations for the Group, First
of America will not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Group is a customer of First of
America, its parent or its subsidiaries or affiliates and, in dealing with its
customers, First of America, its parent, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers are
held by the Group.
Each of the Prime Obligations Fund, Balanced Fund, Bond Fund, Limited
Maturity Bond Fund and U.S. Government Income Fund held, from time to time
during the fiscal year ended June 30, 1996, securities of its regular brokers
or dealers, as defined in Rule 10b-1 under the 1940 Act, or their parent
companies, including: with respect to the Prime Obligations Fund, those of
American Express, Associates Corp., Bank of America, Bank of California,
Barclays, Bear Stearns, Beneficial, Chase Securities, Chemical Bank, Citicorp,
Commerze Bank, Dean Witter, John Deere, First Boston, First Chicago, Ford Motor
Credit, GE Capital Corp., GMAC, Goldman Sachs, International Business Machines,
Lehman Brothers, Merrill Lynch, Mitsubishi Global, JP Morgan, Morgan Stanley,
Nomura Securities, Norwest, Paine Webber, Prudential Bache, Republic, Sanwa
Bank, Smith Barney, Societe Generale and Wachovia Bank; with respect to the
Balanced Fund, those of Dean Witter, GMAC and Goldman Sachs; with respect to
the Bond Fund, those of Associates Corp., John Deere, Dresdner, First Union,
Ford Motor Credit, GMAC, Goldman Sachs, Lehman Brothers, Morgan Stanley,
Prudential Bache and Salomon Brothers; with respect to the Limited Maturity
Bond Fund, those of American Express, Bank of America, Barclays, Goldman Sachs,
Lehman Brothers and Wachovia Bank; and with respect to the U.S. Government
Income Fund, those of Lehman Brothers and Prudential Bache. As of June 30,
1996, the Prime Obligations Fund held the following amounts of the securities
of American Express, Associates Corp., Bank of America, Bear Stearns, Chase,
Chemical Bank, Dean Witter, First Chicago, GE Capital Corp., GMAC, Goldman
Sachs, JP Morgan, Merrill Lynch, Mitsubishi Global, Morgan Stanley, Nomura,
Norwest, Paine Webber, Smith Barney and Societe Generale, respectively:
$4,966,937.50, $4,966,937.50, $5,000,000.00, $12,000,000.00, $4,891,055.56,
$6,986,525.00, $11,015,574.14, $5,034,393.43, $8,292,443.21, $9,750,333.33,
$45,046,947.22, $9,923,000.00, $6,967,570.56, $9,997,055.56, $35,000,000.00,
$19,000,000.00, $4,963,454.17, $25,000,000.00, $5,005,096.44 and $4,989,986.11.
As of June 30, 1996, the Balanced Fund held the following amounts of the
securities of Dean Witter, GMAC, Goldman Sachs and Lehman Brothers,
respectively: $496,875.00, $657,000.00, $3,579,000.00 and $2,331,031.00. As
of June 30, 1996, the Bond Fund held the following amounts of the securities of
Ford Motor Credit, GMAC, Goldman Sachs, Lehman Brothers, Morgan Stanley and
Prudential Bache, respectively: $3,011,250.00, $5,012,500.00, $970,000.00,
$9,482,282.50, $20,000,000.00 and $6,938,750.00. As of June 30, 1996, the
Limited Maturity Bond Fund held the following amounts of the securities of
American Express, Barclays, Goldman Sachs, Lehman Brothers and Wachovia Bank,
respectively: $3,247,500.00, $3,236,250.00, $5,717,000.00, $11,539,040.97 and
$1,001,250.00. As of June 30, 1996, the U.S. Government Income Fund held
$648,358.68 of the securities of Prudential Bache.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 298
from operating a mutual fund for the collective investment of managing agency
accounts. Subsequently, the Board of Governors of the Federal Reserve System
(the "Board") issued a regulation and interpretation to the effect that the
Glass-Steagall Act and such decision: (a) forbid a bank holding company
registered under the Federal Bank Holding Company Act of 1956 (the "Holding
Company Act") or any non-bank affiliate thereof from sponsoring, organizing, or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, but (b) do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent, and custodian to
such an investment company. In 1981, the United States Supreme Court held in
Board of Governors of the Federal Reserve System v. Investment Company
Institute that the Board did not exceed its authority under the Holding Company
Act when it adopted its regulation and interpretation authorizing bank holding
companies and their non-bank affiliates to act as investment advisers to
registered closed-end investment companies. In the Board of Governors case,
the Supreme Court also stated that if a national bank complied with the
restrictions imposed by the Board in its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to investment companies, a national bank performing
investment advisory services for an investment company would not violate the
Glass-Steagall Act. The Office of the Comptroller of the Currency, which has
jurisdiction over national banks and their subsidiaries, has specifically
permitted national banks and their subsidiaries to act as investment advisers
to investment companies.
First of America believes that it possesses the legal authority to
perform the services for the Funds contemplated by the Prospectuses, this
Statement of Additional Information and the Investment Advisory Agreements
without violation of applicable statutes and regulations. Future changes in
either Federal or state statutes and regulations relating to the permissible
activities of banks or bank holding companies and the subsidiaries or
affiliates of those entities, as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations,
could prevent or restrict First of America from continuing to perform such
services for the Group. Depending upon the nature of any changes in the
services which could be provided by First of America, the Board of Trustees of
the Group would review the Group's relationship with First of America and
consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of First of America and/or FABC's
affiliated and correspondent banks in connection with customer purchases of
shares of the Group, those banks might be required to alter materially or
discontinue the services offered by them to customers. It is not anticipated,
however, that any change in the Group's method of operations would affect its
daily net asset value per share or result in financial losses to any customer.
Administrator and Sub-Administrator
BISYS, formerly the Winsbury Company Limited Partnership, serves as
administrator (the "Administrator") to the Group pursuant to the Administration
Agreement dated January 1, 1995, as amended (the "Administration Agreement").
The Administrator assists in supervising all operations of each Fund (other
than those performed by First of America under the Investment Advisory
Agreements, by Gulfstream under its Sub-Investment Advisory Agreements, by
Union Bank of California, N.A. ("Union Bank" or the "Custodian") under the
Custody Agreement, and by BISYS Ohio under the Transfer Agency Agreement and
Fund Accounting Agreement). The
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 299
Administrator is a broker-dealer registered with the SEC, and is a member of
the National Association of Securities Dealers, Inc. The Administrator
provides financial services to institutional clients.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities for the Group; furnish statistical and research
data, clerical and certain bookkeeping services and stationery and office
supplies; prepare the periodic reports to the SEC on Form N-SAR or any
replacement forms therefor; compile data for, prepare for execution by the
Funds and file certain federal and state tax returns and required tax filings;
prepare compliance filings pursuant to state securities laws with the advice of
the Group's counsel; keep and maintain the financial accounts and records of
the Funds, including calculation of daily expense accruals; in the case of the
Money Market Funds, determine the actual variance from $1.00 of the Fund's net
asset value per share; and generally assist in all aspects of the Group's
operations other than those performed by First of America under the Investment
Advisory Agreements, by Gulfstream under its Sub-Investment Advisory
Agreements, by Union Bank under the Custody Agreements and by BISYS under the
Transfer Agency Agreement and Fund Accounting Agreement. Under the
Administration Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
Pursuant to its authority to delegate its responsibilities under the
Administration Agreement, the Administrator has engaged First of America to
provide certain services as Sub-Administrator to the Funds of the Group. First
of America serves as Sub-Administrator to the Group pursuant to a
Sub-Administration Agreement dated as of January 1, 1995, as amended, and
receives a fee from the Administrator for its services. Under the
Sub-Administration Agreement, First of America will assist the Administrator by
providing, upon the request of the Administrator, services which are incidental
to, but not included among, its duties as Investment Adviser to the Group.
These services include preparation of reports and documents necessary to
calculate daily expense accruals, to update the financial accounts and records
of the Funds and to prepare certain federal and state tax returns.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
calculated daily and paid periodically, equal to the lesser of (a) the fee
calculated at the annual rate of 0.20% of that Fund's average daily net assets,
or (b) such other fee as may from time to time be agreed upon in writing by the
Group and the Administrator. As Sub-Administrator, First of America is
entitled to receive a fee from the Administrator of not more than 0.05% of each
Fund's average daily net assets. The Administrator may voluntarily reduce all
or a portion of its fee with respect to any Fund in order to increase the net
income of one or more of the Funds available for distribution as dividends.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 300
For the fiscal years ended June 30, 1996, 1995 and 1994, the
Administrator collected and voluntarily reduced the amounts indicated below
which were payable to it with respect to its administrative services to the
indicated Funds:
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
- ------------------------------------------------------------------------------------------------------------------------------------
FUND 1996 1995 1994
---- ---- ---- ----
Gross Fees Gross Fees Gross Fees
Fees Voluntarily Fees Voluntarily Fees Voluntarily
Collected Reduced Collected Reduced Collected Reduced
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Prime Obligations $1,572,135 $157,229 $1,291,451 143,495 $1,250,448 $125,045
U.S. Government Obligations 819,490 81,957 631,370 70,152 848,651 84,868
Tax-Free 314,749 31,478 189,334 79,617 263,725 131,863
Equity 1,635,613 -- 1,263,319 2,276 1,306,414 --
Small Capitalization 1,153,042 1,736 749,724 651 721,500 --
Large Capitalization(2) 108,242 4,880 -- -- -- --
High Income Equity 855,486 28 852,286 -- 944,404 --
International 677,155 613 514,123 76,940 478,241 120,283
Bond 1,109,936 277,654 620,206 370,343 955,299 477,726
Limited Maturity Bond 312,256 78,030 210,022 129,552 355,622 177,872
Intermediate Government Obligations 535,839 133,851 358,684 221,339 639,471 319,758
Municipal Bond 291,628 145,801 164,782 136,085 323,811 176,224
Michigan Bond 446,907 223,479 217,018 216,973 438,133 219,139
Balanced 233,664 176 162,703 22,533 121,896 30,621
Government Income 374,069 93,652 196,323 118,390 276,813 138,554
Treasury(1) 649,909 324,958 121,978 297,087 119,319 119,319
</TABLE>
(1)Commenced operations December 1, 1993
(2)Commenced operations December 27, 1995
Unless sooner terminated as provided therein, the Administration
Agreement and the Sub-Administration Agreement will continue in effect until
December 31, 1999. The Administration Agreement and the Sub-Administration
Agreement thereafter shall be renewed automatically for successive five-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administration Agreement and the Sub-Administration Agreement are
each terminable with respect to a particular Fund only upon mutual agreement of
the parties to the Administration Agreement (or Sub-Administration Agreement,
as the case may be) and for cause (as defined in the Administration Agreement)
by the party alleging cause, on no less than 60 days' written notice by the
Group's Board of Trustees or by the Administrator (or Sub-Administrator, in the
case of the Sub-Administration Agreement).
The Administration Agreement and the Sub-Administration Agreement
provide that the Administrator and the Sub-Administrator shall not be liable
for any error of judgment or mistake of law or any loss suffered by the Group
in connection with the matters to which the Administration Agreement or the
Sub-Administration Agreement relate, except a loss resulting
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 301
from willful misfeasance, bad faith, or gross negligence in the performance of
its duties, or from the reckless disregard by the Administrator or the
Sub-Administrator of its obligations and duties thereunder.
Expenses
If total expenses borne by any of the Funds in any fiscal year exceed
expense limitations imposed by applicable state securities regulations, First
of America, Gulfstream (only with respect to the International Fund and
Emerging Markets Fund) and the Administrator will reimburse that Fund by the
amount of such excess in proportion to their respective fees. As of the date
of this Statement of Additional Information, the most restrictive expense
limitation applicable to the Group's Funds limits each Fund's aggregate annual
expenses, including management and advisory fees but excluding interest, taxes,
brokerage commissions, and certain other expenses, to 2 1/2% of the first $30
million of a Fund's average net assets, 2% of the next $70 million of a Fund's
average net assets, and 1 1/2% of a Fund's remaining average net assets. Any
expense reimbursements will be estimated daily and reconciled and paid on a
monthly basis. Fees imposed upon customer accounts by FABC or its affiliated
or correspondent banks for cash management services are not included within
Group expenses for purposes of any such expense limitation.
Distributor
BISYS, formerly the Winsbury Company Limited Partnership, serves as
Distributor to the Group pursuant to the Distribution Agreement dated October
1, 1993 (the "Distribution Agreement"), as amended. Unless otherwise
terminated, the Distribution Agreement remains in effect for successive
one-year periods ending December 31 of each year if approved at least annually
(i) by the Group's Board of Trustees or by the vote of a majority of the
outstanding shares of the Group, and (ii) by the vote of a majority of the
Trustees of the Group who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
For the Group's fiscal years ended June 30, 1996, 1995 and 1994, total
commissions paid in connection with sales of the Group's shares were
$4,099,106, $3,575,936 and $6,827,001, respectively. Of that amount BISYS
retained $3,814,505, $3,263,580 and $5,274,080, respectively.
As described in the Prospectuses, the Group has adopted an Investor A
Distribution and Shareholder Service Plan with respect to Investor A Shares
(the "Investor A Plan"), an Investor B Distribution and Shareholder Service
Plan with respect to Investor B Shares (the "Investor B Plan") and an Investor
C Distribution and Shareholder Service Plan with respect to the Investor C
Shares (the "Investor C Plan") (the Investor A Plan, Investor B Plan and
Investor C Plan together are hereinafter referred to as the "Plans") pursuant
to Rule 12b-1 of the 1940. Pursuant to these Plans, the Funds are authorized
to pay or reimburse BISYS, as Distributor, for certain expenses that are
incurred in connection with the provision of shareholder and distribution
services. Pursuant to the Investor A Plan, a Fund is authorized to pay BISYS,
as Distributor of Investor A Shares, a distribution and shareholder service fee
in an amount not to exceed on an annual
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 302
basis 0.25% of the average daily net assets of Investor A Shares of a Fund (the
"Distribution and Service Fee"). Such amount may be used by BISYS to pay banks
and their affiliates (including FOA-Michigan and its affiliates), and other
institutions, including broker-dealers (collectively, "Participating
Organizations") for distribution or shareholder services provided or expenses
incurred in provided such services pursuant to an agreement between BISYS and
the Participating Organization.
Pursuant to the Investor B Plan, each Fund is authorized to pay BISYS,
as Distributor of Investor B Shares, a distribution fee in an amount not to
exceed on an annual basis 0.75% of the average daily net asset value of
Investor B Shares of a Fund (the "Distribution Fee"). Such amounts may be used
by BISYS to pay Participating Organizations for distribution assistance or to
reimburse them for expenses incurred in providing distribution assistance
pursuant to an agreement between BISYS and the Participating Organization.
Also pursuant to the Investor B Plan, a Fund is authorized to pay BISYS a
service fee in an amount not to exceed on an annual basis 0.25% of the average
daily net asset value of the Investor B Shares of a Fund (the "Service Fee").
Such amounts may be used to pay Participating Organizations for shareholder
services provided or expenses incurred in providing such services.
Pursuant to the Investor C Plan, each Fund is authorized to pay BISYS,
as Distributor of Investor C Shares, a distribution fee in an amount not to
exceed on an annual basis 0.75% of the average daily net asset value of
Investor C Shares of a Fund (the "Distribution Fee"). Such amounts may be used
by BISYS to pay Participating Organizations for distribution assistance or to
reimburse them for expenses incurred in providing distribution assistance
pursuant to an agreement between BISYS and the Participating Organization.
Also pursuant to the Investor C Plan, a Fund is authorized to pay BISYS a
service fee in an amount not to exceed on an annual basis 0.25% of the average
daily net asset value of the Investor C Shares of a Fund (the "Service Fee").
Such amounts may be used to pay Participating Organizations for shareholder
services provided or expenses incurred in providing such services.
As required by Rule 12b-1, the Investor A Plan was approved by the
holders of the Investor A Shares and by the Board of Trustees, including a
majority of the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of that Plan
(the "Independent Trustees"). The Investor B Plan has been approved by the
Board of Trustees, including a majority of the Independent Trustees, and by the
initial Investor B Shareholders of each Fund. The Investor C Plan has been
approved by the Board of Trustees, including a majority of the Independent
Trustees, and by the initial Investor C Shareholders of each Fund.
For the fiscal year ended June 30, 1996, BISYS received $1,730,097
pursuant to the Investor A Plan to compensate dealers for their distribution and
shareholder service assistance. Of that amount, BISYS received $292,663 for
payments to FSI and $291,885 for payments to FABC under the Investor A Plan.
For the fiscal year ended June 30, 1996, BISYS received $732,799
pursuant to the Investor B Plan to compensate dealers for their distribution and
shareholder service assistance.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 303
For the fiscal year ended June 30, 1996, BISYS received $29,598
pursuant to the Investor C Plan to compensate dealers for their distribution and
shareholder service assistance. Of that amount, BISYS received $12,927 for
payments to FSI under the Investor C Plan.
The Plans may be terminated as to a Fund by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding shares of the
applicable class of the Fund. Any change in a Plan that would materially
increase the distribution cost to the Fund requires shareholder approval. The
Trustees review quarterly a written report of such costs and the purposes for
which such costs have been incurred. The Plan may be amended by vote of the
Trustees including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose. For so long as the Plans are in effect,
selection and nomination of those Trustees who are not interested persons of
the Group shall be committed to the discretion of such Independent Trustees.
All agreements with any person relating to the implementation of a Plan may be
terminated at any time on 60 days' written notice without payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of the
majority of the outstanding shares of the applicable class of the Fund. The
Plans will continue in effect for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the Independent Trustees, and (ii) by a vote of a majority of the entire Board
of Trustees cast in person at a meeting called for that purpose. The Board of
Trustees has a duty to request and evaluate such information as may be
reasonably necessary for them to make an informed determination of whether the
Plans should be implemented or continued. In addition the Trustees in
approving the Plans must determine that there is a reasonable likelihood that
the Plans will benefit the Funds and their shareholders.
The Board of Trustees of the Group believes that the Plans are in the
best interests of the Funds since they encourage Fund growth. As the Funds
grow in size, certain expenses, and therefore total expenses per share, may be
reduced and overall performance per share may be improved.
As authorized by the Investor A Plan, BISYS has entered into a
Participating Organization Agreement with First of America Securities, Inc.
("FSI"), a wholly-owned subsidiary of FABC and an affiliate of FOA Brokerage, as
a party and on behalf of FOA Brokerage, pursuant to which both FSI and FOA
Brokerage have agreed to provide certain distribution, administrative and
shareholder support services in connection with Investor A Shares purchased
through accounts of FSI and FOA Brokerage. Such services include, but are not
limited to, advertising and marketing the Investor A Shares, answering routine
questions concerning the Fund and distributing prospectuses to persons other
than shareholders of the Funds and providing such office space, equipment,
telephone and personnel as is necessary and appropriate to accomplish such
matters. In consideration for such services, BISYS has agreed to pay FSI a
monthly fee, computed at the annual rate of 0.10% for the Money Market Funds and
0.25% for the other Funds of the average aggregate net asset value of Investor A
Shares held during the period in customer accounts for which FSI or FOA
Brokerage has provided services under this Agreement. FSI is responsible for
making any applicable payments to FOA Brokerage. BISYS will be compensated by
each Fund in an amount equal to its payments to FSI under the Participating
Organization Agreement with respect to the Investor A Shares of that Fund. Such
fee may exceed the actual costs incurred by the FOA Brokerage and FSI in
providing the services.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 304
Also in accordance with the Investor A Plan, BISYS has entered into a
Participating Organization Agreement with FABC on behalf of its wholly-owned
subsidiary banks (the "Subsidiary Banks"), pursuant to which the Subsidiary
Banks have agreed to provide certain distribution, administrative and
shareholder support services in connection with Investor A Shares purchased
through their accounts. Such services include, but are not limited to,
advertising and marketing the Investor A Shares, answering routine questions
concerning the Fund and distributing prospectuses to persons other than
shareholders of the Funds and providing such office space, equipment, telephone
and personnel as is necessary and appropriate to accomplish such matters. In
consideration for such services, BISYS has agreed to pay FABC a monthly fee,
computed at the annual rate of up to 0.10% for the Money Market Funds and up to
0.25% for the Non-Money Market Funds of the average aggregate net asset value
of Investor A Shares held during the period in customer accounts for which the
Subsidiary Banks have provided services under this Agreement. FABC is
responsible for making any applicable payments to each Subsidiary Bank. BISYS
will be compensated by each Fund in an amount equal to its payments to FABC
under the Participating Organization Agreement with respect to the Investor A
Shares of that Fund. Such fee may exceed the actual costs incurred by the
Subsidiary Banks in providing the services.
As authorized by the Investor B Plan, BISYS has entered into a Service
and Commission Agreement with Security Distributors, Inc. ("SDI"), Security
Benefit Group, Inc. ("SBG") and First of America Brokerage Service, Inc.
("FOA-Brokerage") which relates to purchases of Investor B Shares made prior to
January 1, 1995. Pursuant to the Service and Commission Agreement,
FOA-Brokerage performs certain brokerage and related services in connection
with the purchase of Investor B Shares by its customers and maintains
shareholder accounts for such customers. Also pursuant to the Service and
Commission Agreement, SBG provides financing assistance, consistent with the
Investor B Plan, in connection with the services performed by FOA-Brokerage.
Services provided by FOA-Brokerage include placing orders to purchase Investor
B Shares, as agent for its customers, pursuant to the terms of its Dealer
Agreement; providing shareholder liaison services; responding to inquiries;
providing such information as FOA-Brokerage and SDI mutually determine to be
appropriate in order to properly maintain shareholder accounts; and providing
at its own expense such office space, equipment, facilities and personnel as
may be reasonably necessary or beneficial in order to provide such services to
customers. In consideration for such services, FOA-Brokerage receives from SBG
a commission rate of 4.00% of the net asset value of Investor B Shares
purchased by FOA-Brokerage as agent for its customers. SDI, either directly or
through an affiliate, receives amounts specified in the Shareholder Services
and Financing Agreement dated February 1, 1994 between BISYS and SDI. Under
that Agreement, SDI receives compensation for financing assistance at the
annual rate of up to 0.75% of the average daily net assets of Investor B Shares
of each Fund and compensation for shareholder support services at an annual
rate of up to 0.25% of the average daily net assets of the Investor B Shares of
each Fund.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 305
As authorized by the Investor C Plan, BISYS has entered into a
Participating Organization Agreement with FSI, pursuant to which FSI has agreed
to provide certain shareholder and distribution services in connection with
Investor C Shares of the Funds purchased and held by FSI for the accounts of
its customers and Investor C Shares of the Funds purchased through accounts of
FSI. Such services include, but are not limited to, printing and distributing
prospectuses to persons other than holders of Investor C Shares of the Funds
and printing and distributing advertising and sales literature in connection
with the sale of Investor C Shares; answering routine customer questions
concerning the Funds and providing such personnel and communication equipment
as is necessary and appropriate to accomplish such matters. In consideration
for such services BISYS has agreed to pay FSI a monthly fee, computed at the
annual rate of up to 1.00% of the average aggregate net asset value of Investor
C Shares held during the period in customer accounts for which FSI has provided
services under this Agreement. BISYS will be compensated by the Funds in an
amount equal to its payments to FSI under the Participating Organization
Agreement. Such fee may exceed the actual costs incurred by FSI in providing
the services.
Custodian, Transfer Agent and Fund Accounting Services
- ------------------------------------------------------
Union Bank, formerly The Bank of California, N.A., 475 Sansome Street,
San Francisco, California 94111, serves as custodian to the Group with respect
to each Fund, except the International Fund and Emerging Markets Fund, pursuant
to the Custody Agreement dated as of October 18, 1991, as amended. Union Bank
serves as custodian to the International Funds and Emerging Markets Fund
pursuant to a Custodian Agreement dated as of July 30, 1995 (the Custody
Agreement and the Custodian Agreement together referred to as the "Custody
Agreements"). Union Bank's responsibilities include safeguarding and
controlling the Funds' cash and securities, handling the receipt and delivery
of securities, and collecting interest and dividends on the Funds' investments.
BISYS Ohio, formerly the Winsbury Service Corporation, serves as
transfer agent and dividend disbursing agent (the "Transfer Agent") for all
Funds of the Group pursuant to the Transfer Agency Agreement dated as of August
8, 1990, as amended. Pursuant to such Agreement, the Transfer Agent, among
other things, performs the following services: maintenance of shareholder
records for each of the Group's shareholders of record; processing shareholder
purchase and redemption orders; processing transfers and exchanges of shares of
the Group on the shareholder files and records; processing dividend payments
and reinvestments; and assistance in the mailing of shareholder reports and
proxy solicitation materials. For such services, the Transfer Agent receives a
fee based on the number of shareholders of record. For
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 306
the fiscal years ended June 30, 1996, 1995 and 1994, the Transfer Agent
received $1,663,309, $1,862,374 and $932,574.74, respectively, from the Group
for services as transfer agent for all portfolios of the Group.
In addition, BISYS Ohio provides certain fund accounting services to
the Group pursuant to a Fund Accounting Agreement dated January 26, 1993, as
amended. BISYS Ohio receives a fee for such services, computed daily and paid
periodically at an annual rate of 0.016% of the average daily net assets of
each Money Market Fund and 0.022% of the average daily net assets of each of
the other Funds. Under such Agreement, BISYS Ohio maintains the accounting
books and records for the Funds, including journals containing an itemized
daily record of all purchases and sales of portfolio securities, all receipts
and disbursements of cash and all other debits and credits, general and
auxiliary ledgers reflecting all asset, liability, reserve, capital, income and
expense accounts, including interest accrued and interest received, and other
required separate ledger accounts; maintains a monthly trial balance of all
ledger accounts; performs certain accounting services for the Funds, including
calculation of the daily net asset value per share, calculation of the dividend
and capital gain distributions, if any, and of yield, reconciliation of cash
movements with the Funds' Custodian, affirmation to the Funds' Custodian of all
portfolio trades and cash settlements, verification and reconciliation with the
Funds' Custodian of all daily trade activity; provides certain reports; obtains
dealer quotations, prices from a pricing service or matrix prices on all
portfolio securities in order to mark the portfolio to the market; and prepares
an interim balance sheet, statement of income and expense, and statement of
changes in net assets for the Funds. For such services, for the three fiscal
years ended June 30, 1996, 1995 and 1994, BISYS Ohio received $1,491,244,
$1,024,476 and $1,245,655, respectively, from the Group.
Independent Auditors
The Financial Statements of the Group as of June 30, 1996, which
appear in the Group's Annual Report dated June 30, 1996, have been audited by
Coopers & Lybrand L.L.P., 100 East Broad Street, Columbus, Ohio 43215,
independent auditors. The Financial Statements are incorporated herein by
reference to the Annual Report in reliance upon such report and on the
authority of Coopers & Lybrand, L.L.P. as experts in auditing and accounting.
Legal Counsel
Howard & Howard Attorneys, P.C., 107 West Michigan Avenue, Kalamazoo,
Michigan 49007 is counsel to the Group and will pass upon certain legal
matters pertaining to the shares offered hereby. Howard & Howard serves as
legal counsel to the Investment Adviser and its parent and, from time to time,
its affiliates.
ADDITIONAL INFORMATION
Description of Shares
The Parkstone Group of Funds is a Massachusetts business trust. The
Group was organized on March 25, 1987, and the Group's Declaration of Trust was
filed with the Secretary of State of the Commonwealth of Massachusetts on March
27, 1987. The Declaration of Trust authorizes the Board of Trustees to issue
an unlimited number of Shares, which are units of
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 307
beneficial interest, without par value. The Group presently has eighteen
series of shares, representing interests in each series of the Group, which are
offered on a continuous basis. The shares of each of the Funds of the Group,
other than the Money Market Funds and the Tax-Free Income Funds are offered in
four separate classes: Investor A Shares, Investor B Shares, Investor C Shares
and Institutional Shares. Shares of the Money Market Funds are offered in two
separate classes: Investor A Shares and Institutional Shares, except for the
Municipal Investor Fund which offers only Investor A Shares. Shares of the
Tax-Free Income Funds are offered in three classes: Investor A Shares,
Investor B Shares and Institutional Shares. The Group's Declaration of Trust
authorizes the Board of Trustees to divide or redivide any unissued shares of
the Group into one or more additional series by setting or changing in any one
or more respects their respective preferences, conversion or other rights,
voting power, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Group's shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective series, of any general assets
not belonging to any particular series which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a series will be required
in connection with a matter, a series will be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical, or that the matter does not affect any interest of the series.
Under Rule 18f-2, the approval of an investment advisory agreement or any
change in investment policy submitted to shareholders would be effectively
acted upon with respect to a series only if approved by a majority of the
outstanding shares of such series. However, Rule 18f-2 also provides that the
ratification of independent accountants, the approval of principal underwriting
contracts, and the election of Trustees may be effectively acted upon by
shareholders of the Group voting without regard to series.
Vote of a Majority of the Outstanding Shares
As used in the Prospectuses and the Statement of Additional
Information, a "vote of a majority of the outstanding shares of the Group or
the Fund", means the affirmative vote, at an annual or special meeting of
shareholders duly called, of the lesser of: (a) 67% or more of the votes of
shareholders of the Group or the Fund present at such meeting at which the
holders of more than 50% of the votes attributable to the shareholders of
record of the Group or the Fund are represented in person or by proxy, or (b)
the holders of more than 50% of the outstanding votes of shareholders of the
Group or the Fund.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 308
Shareholder and Trustee Liability
Under Massachusetts law, holders of units of interest in a business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, the Group's Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the obligations of the Group, and that every written agreement, obligation,
instrument, or undertaking made by the Group shall contain a provision to the
effect that the shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any shareholder held personally liable solely by reason of his or her being or
having been a shareholder. The Declaration of Trust also provides that the
Group shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Group, and shall satisfy any
judgment thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Group
itself would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee, officer, or
agent of the Group shall be personally liable in connection with the
administration or preservation of the assets of the trust or the conduct of the
Group's business; nor shall any Trustee, officer, or agent be personally liable
to any person for any action or failure to act except for his own bad faith,
willful misfeasance, gross negligence, or reckless disregard of his duties.
The Declaration of Trust also provides that all persons having any claim
against the Trustees or the Group shall look solely to the assets of the trust
for payment.
Additional Tax Information
Individual federal income tax is computed on the basis of five
graduated tax rates of 15%, 28%, 31%, 36% and 39.6%. The benefit of the
personal exemptions and the benefit of itemized deductions are phased out by a
rate adjustment for taxpayers with gross income in excess of certain threshold
amounts resulting in a marginal federal tax rate in excess of 39.6%. The
maximum tax rate applicable to corporations is 35%. Although a corporation's
taxable income of less than $10 million is subject to tax at lower rates, the
benefit of these lower rates is phased out for corporations with income in
excess of $15 million resulting in a maximum effective marginal tax rate of
38%.
For non-corporate taxpayers, the maximum tax rate imposed on net
capital gains is 28%. The limitation on the deductibility of capital losses
has been retained. Capital losses may be used to offset capital gains.
Individual taxpayers may deduct up to $3,000 of net capital loss each year to
offset ordinary income and excess capital losses may be carried forward in
future years.
The Code generally permits a corporation to deduct 70% of dividends
received from domestic corporations. Each of the Group's Funds will designate
the portion of any dividend distributions for which the dividend received
deduction will be allowed. The amount so designated may not exceed the
aggregate amount of dividends from domestic corporations that otherwise qualify
for the dividends received deduction received by the Fund for its taxable year.
A non-deductible excise tax is also imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of
their ordinary income for the calendar year plus 98%
STATEMENT OF ADDITIONAL INFORMATION
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of their capital gain net income for the one-year period ending on October 31
of such calendar year. The balance of such income must be distributed during
the next calendar year. For the foregoing purposes, a Fund is treated as
having distributed any amount on which it is subject to income tax for any
taxable year ending in such calendar year. If distributions during a calendar
year were less than the required amount, a particular Fund would be subject to
a non-deductible excise tax equal to 4% of the deficiency.
Each of the Funds will be required in certain cases to withhold and
remit to the United States Treasury 31% of taxable dividends paid to any
shareholder who has provided either an incorrect tax identification number or
no number at all, or who is subject to withholding by the Internal Revenue
Service for failure properly to include on their return payments of interest or
dividends.
Although each of the Funds expects to qualify as a "regulated
investment company" ("RIC") and to be relieved of all or substantially all
Federal income taxes, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, each Fund may be subject to the tax laws of such states or
localities. In addition, if for any taxable year a Fund does not qualify for
the special tax treatment afforded RICs, all of its taxable income will be
subject to Federal tax at regular corporate rates without any deduction for
distributions to its shareholders. In such event, dividend distributions would
be taxable to shareholders to the extent of earnings and profits, and would be
eligible to receive the dividends-received deduction for corporations.
A portion of the difference between the issue price and the face
amount of zero coupon securities ("Original Issue Discount") will be treated as
income to any Fund holding securities with Original Issue Discount each year,
although no current payments will be received by such Fund with respect to such
income. This original issue discount will comprise a part of that investment
company taxable income of such Fund which must be distributed to shareholders
in order to maintain its qualification as a RIC and to avoid federal income tax
at the level of the relevant Fund. Taxable shareholders of such a Fund will be
subject to income tax on such original issue discount, whether or not they
elect to receive their distributions in cash. In the event that a Fund
acquires a debt instrument at a market discount, it is possible that a portion
of any gain recognized on the disposition of such instrument may be treated as
ordinary income.
A Fund's investment in options, futures contracts and forward
contracts, options on futures contracts and stock indices and certain other
securities, including transactions involving actual or deemed short sales or
foreign exchange gains or losses are subject to many complex and special tax
rules. For example, over-the-counter options on debt securities and certain
equity options, including options on stock and on narrow-based stock indexes,
will be subject to tax under Section 1234 of the Code, generally producing a
long-term or short-term capital gain or loss upon exercise, lapse, or closing
out of the option or sale of the underlying stock or security. By contrast, a
Fund's treatment of certain other options, futures and forward contracts
entered into by the Fund is generally governed by Section 1256 of the Code.
These "Section 1256" positions generally include regulated futures contracts,
foreign currency contracts, non-equity options and dealer equity options.
STATEMENT OF ADDITIONAL INFORMATION
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Absent a tax election to the contrary, each such Section 1256 position
held by a Fund will be marked-to-market (i.e., treated as if it were sold for
fair market value) on the last business day of the International Fund's fiscal
year, and all gain or loss associated with fiscal year transactions and
mark-to-market positions at fiscal year end (except certain currency gain or
loss covered by Section 988 of the Code) will generally be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. The
effect of Section 1256 mark-to-market rules may be to accelerate income or to
convert what otherwise would have been long-term capital gains into short-term
capital gains or short-term capital losses into long-term capital losses within
such Fund. The acceleration of income on Section 1256 positions may require
the Fund to accrue taxable income without the corresponding receipt of cash.
In order to generate cash to satisfy the distribution requirements of the Code,
a Fund may be required to dispose of portfolio securities that it otherwise
would have continued to hold or to use cash flows from other sources, such as
the sale of the Fund's shares. In these ways, any or all of these rules may
affect the amount, character and timing of income earned and in turn
distributed to shareholders by the Funds.
When a Fund holds options or contracts which substantially diminish
its risk of loss with respect to other positions (as might occur in some
hedging transactions), this combination of positions could be treated as a
"straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of securities owned by a Fund and conversion
of short-term capital losses into long-term capital losses. Certain tax
elections exist for mixed straddles, i.e., straddles comprised of at least one
Section 1256 position and at least one non-Section 1256 position which may
reduce or eliminate the operation of these straddle rules.
As a RIC, each Fund is also subject to the requirement that less than
30% of its annual gross income be derived from the sale or other disposition of
securities and certain other investments held for less than three months
("short-short income"). This requirement may limit a Fund's ability to engage
in options, spreads, straddles, hedging transactions, forward or futures
contracts or options on any of these positions because these transactions are
often consummated in less than three months, may require the sale of portfolio
securities held less than three months and may, as in the case of short sales
of portfolio securities, reduce the holding periods of certain securities
within such Fund, resulting additional short-short income for the Fund.
Each Fund will monitor its transactions in such options and contracts
and may make certain other tax elections in order to mitigate the effect of the
above rules and to prevent disqualification of a Fund as a RIC under Subchapter
M of the Code.
In order for a Fund to qualify as a RIC for any taxable year, at least
90% of the Fund's annual gross income must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities, including gains from foreign currencies,
and other income derived with respect to the business of investing in stock,
securities or currencies. Future Treasury regulations may provide that foreign
exchange gains may not qualify for purposes of 90% limitation if such gains are
not directly related to a Fund's principal business of investing in stock or
securities, or options or futures with respect to such stock or securities.
Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be indirectly
related to the Fund's principal business of investing in stock or securities
and related options or futures. Under current law, non-directly related gains
arising from foreign currency positions or instruments held
STATEMENT OF ADDITIONAL INFORMATION
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for less than three months are treated as derived from the disposition of
securities held less than three months in determining a Fund's compliance with
the 30% limitation. Each Fund will limit its activities involving foreign
exchange gains to the extent necessary to comply with the above requirements.
The Federal income tax treatment of interest rate and currency swaps
is unclear in certain respects and may in some circumstances result in the
realization of income not qualifying under the 90% limitation described above
or be deemed to be derived from the disposition of securities held less than
three months in determining a Fund's compliance with the 30% limitation. Each
Fund will limit its interest rate and currency swaps to the extent necessary to
comply with these requirements.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to Federal taxation is only a summary of
some of the important Federal tax considerations generally affecting purchasers
of shares of the Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of a Fund or its shareholders
and this discussion is not intended as substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult
their tax advisers with specific reference to their own tax situation. In
addition, the tax discussion in the Prospectuses and this Statement of
Additional Information is based on tax laws and regulations which are in effect
on the date of the Prospectuses and this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
Additional Tax Information Concerning the Exempt Funds
As indicated in the Prospectuses, the Exempt Funds are designed to
provide shareholders with current tax-exempt interest income. The Exempt Funds
are not intended to constitute balanced investment programs and are not
designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal, shares of the Exempt Funds
would not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plan, and
individual retirement accounts, since such plans and accounts are generally
tax-exempt and, therefore, would not gain any additional benefit from the
Exempt Funds' dividends being tax-exempt; furthermore, such dividends would be
ultimately taxable to the beneficiaries when distributed to them. In addition,
the Exempt Funds may not be appropriate investments for entities which are
"substantial users," or "related persons" thereof, of facilities financed by
private activity bonds held by an Exempt Fund. "Substantial user" is defined
under U.S. Treasury Regulations to include a non-exempt person who regularly
uses a part of such facilities in his or her trade or business and whose gross
revenues derived with respect to the facilities financed by the issuance of
bonds represent more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
The percentage of total dividends paid by an Exempt Fund with respect
to any taxable year which qualifies as federal exempt interest dividends will
be the same for all shareholders receiving dividends during such year. In
order for an Exempt Fund to pay exempt-interest
STATEMENT OF ADDITIONAL INFORMATION
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dividends during any taxable year, at the close of each fiscal quarter, at
least 50% of the aggregate value of the Exempt Fund must consist of
exempt-interest obligations. In addition, the Exempt Fund must distribute 90%
of the aggregate exempt-interest income and 90% of the investment company
taxable income earned by it during the taxable year. After the close of an
Exempt Fund's taxable year, the Exempt Fund will notify each shareholder of the
portion of the dividends paid by the Exempt Fund to the shareholder with
respect to such taxable year which constitutes an exempt-interest dividend.
However, the aggregate amount of dividends as designated cannot exceed the
excess of the amount of interest exempt from tax under Section 103 of the Code
received by the Exempt Fund during the taxable year over any amounts disallowed
as deductions under Section 265 and 171(a)(2) of the Code.
Under the Code, dividends attributable to interest on certain private
activity bonds issued after August 7, 1986, must be included in alternative
minimum taxable income for the purpose of determining liability (if any) for
the 24% alternative minimum tax for individuals and the 20% alternative minimum
tax for corporations. These private activity bonds include: certain bonds
issued to obtain funds to provide certain water, sewage and solid waste
facilities, qualified residential rental projects, certain local electric, gas
and other heating or cooling facilities, qualified hazardous waste facilities,
and government-owned airports, docks and wharves and mass commuting facilities;
certain qualified mortgage, student loan and redevelopment bonds; and certain
bonds issued as part of "small issues" for industrial facilities. In the case
of corporations, alternative minimum taxable income will also include an item
of tax preference consisting of 75% of the excess of the corporation's
"adjusted current earnings" over the corporation's other alternative minimum
taxable income, and for this purpose all tax-exempt interest dividends will be
included in the corporation's "adjusted current earnings. In addition,
tax-exempt interest dividends paid to corporate investors may be subject to an
environmental tax which is imposed at the rate of 0.12% on the excess of the
modified alternative minimum taxable income of a corporation over $2 million.
While each Exempt Fund does not expect to earn any investment company
taxable income, taxable income earned by each Exempt Fund will be distributed.
In general, the investment company taxable income will be the taxable income of
each Exempt Fund (for example, short-term capital gains) subject to certain
adjustments and excluding the excess of any net long-term capital gains for the
taxable year over the net short-term capital loss, if any, for such year. Each
Exempt Fund would be taxed on any undistributed investment company taxable
income. Since any such income will be distributed, it will be taxable to
shareholders as ordinary income (whether paid in cash or additional shares).
While each Exempt Fund does not expect to realize long-term capital gains, any
net realized long-term capital gains will be distributed annually. Each Exempt
Fund will have no federal tax liability and the Michigan Bond Fund will have no
state tax liability with respect to such gains and the distributions will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held the Exempt Fund's shares. Such distributions will be
designated as a capital gains dividend in a written notice mailed by each
Exempt Fund to shareholders after the close of each Exempt Fund's taxable year.
See "Additional Tax Information" above.
As indicated in the Prospectuses, each Exempt Fund may acquire rights
regarding specified portfolio securities under puts. See "INVESTMENT
OBJECTIVES AND POLICIES-Additional Information on Portfolio Instruments-Puts"
in this Statement of Additional Information. The policy of each Exempt Fund is
to limit its acquisition of puts to those under
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 313
which it will be treated for federal income tax purposes as the owner of the
Exempt Securities acquired subject to the put and the interest on the Exempt
Securities will be tax-exempt to it. Although the Internal Revenue Service has
issued a published ruling that provides some guidance regarding the tax
consequences of the purchase of puts, there is currently no guidance available
from the Internal Revenue Service that definitively establishes the tax
consequences of many of the types of puts that each Exempt Fund could acquire
under the 1940 Act. Therefore, although each Exempt Fund will only acquire a
put after concluding that it will have the tax consequences described above,
the Internal Revenue Service could reach a different conclusion.
Although each Exempt Fund expects to qualify as a RIC and to be
relieved of all or substantially all federal income taxes, depending upon the
extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located, or in
which it is otherwise deemed to be conducting business, each Exempt Fund may be
subject to the tax laws of such states or localities. In addition, if for any
taxable year an Exempt Fund does not qualify for the special tax treatment
afforded RICs, all of its taxable income will be subject to federal tax at
regular corporate rates (without any deduction for distributions to its
shareholders). In such event, dividend distributions would be taxable to
shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
Income itself exempt from federal income taxation may be considered in
addition to taxable income when determining whether social security payments
received by a shareholder are subject to federal income taxation.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of the Exempt Funds.
No attempt has been made to present a detailed explanation of the federal
income tax treatment of each Exempt Fund or its shareholders or of Michigan
state income or intangible taxes treatment of the Michigan Bond Fund or its
shareholders, and this discussion is not intended as a substitute for careful
tax planning. Accordingly, potential purchasers of shares of these Funds are
urged to consult their tax advisers with specific reference to their own tax
situation. In addition, the foregoing discussion is based on tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
Additional Tax Information Concerning the International Fund and Emerging
Markets Fund
The International Fund and Emerging Markets Fund may each invest in
non-U.S. corporations, which would be treated as "passive foreign investment
companies" ("PFICs") under the Code and which will result in adverse tax
consequences upon the disposition of, or the receipt of "excess distributions"
with respect to, such equity investments. To the extent the International Fund
and Emerging Markets Fund do invest in PFICs, each may adopt certain tax
strategies to reduce or eliminate the adverse effects of certain federal tax
provisions governing PFIC investments. Many non-U.S. banks and insurance
companies may not be treated as PFICs if they satisfy certain technical
requirements under the Code. To the extent that the International Fund and
Emerging Markets Fund do invest in foreign securities which are determined to
be PFIC securities and are required to pay a tax on such investments, a credit
for this tax would not be allowed to be passed through to the International
Fund and Emerging Markets Fund'
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 314
shareholders. Therefore, the payment of this tax would reduce the
International Fund's and Emerging Markets Fund's economic return from their
PFIC investments. Gains from dispositions of PFIC shares and excess
distributions received with respect to such shares are treated as ordinary
income rather than capital gains.
If, for any reason, either the International Fund or the Emerging
Markets Fund were treated as being a United Kingdom ("UK") resident, the
worldwide income and capital gains of the International Fund or the Emerging
Markets Fund would be subject to UK tax. If, for any reason, the International
Fund or the Emerging Markets Fund were treated as having a permanent
establishment in the UK, that Fund's UK source income (although not its capital
gains), if any, would become subject to UK tax and certain other advantages
otherwise available to the International Fund or the Emerging Markets Fund
under the double tax treaty between the UK and the U.S. would not be available.
Provided that the International Fund or the Emerging Markets Fund are not
treated as being resident or having a permanent establishment in the UK, such
Funds will not incur any UK tax liability with respect to the types of income
or gains that they are likely to receive, except with respect to income on UK
securities held in the portfolios of the International Fund and the Emerging
Markets Fund. The Group believes that it would be highly unlikely for either
Fund to be deemed or treated as being UK residents for UK tax purposes or
having a permanent establishment in the UK pursuant to the double tax treaty
between the U.S. and the UK as a result of the activities of both Funds'
Subadviser, Gulfstream.
Yields of the Money Market Funds
For the seven-day period ended June 30, 1996, the yield and compounded
effective yield for the Investor A Shares of the Prime Obligations Fund, the
U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund were,
respectively: 4.57% and 4.67%; 4.44% and 4.54%; 4.38% and 4.48%; and 2.51% and
2.54%. For the thirty-day period ended June 30, 1996, the yield and compounded
effective yield for the Investor A Shares of the Prime Obligations Fund, the
U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund were,
respectively: 4.70% and 4.81%; 4.59% and 4.70%; 4.61% and 4.72; and 2.59% and
2.62%.
For the seven-day period ended June 30, 1996, the yield and compounded
effective yield for the Institutional Shares of the Prime Obligations Fund, the
U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund were,
respectively: 4.82% and 4.94%; 4.69% and 4.80%; 4.63% and 4.74%; and 2.76% and
2.80%. For the thirty-day period ended June 30, 1996, the yield and compounded
effective yield for the Institutional Shares of the Prime Obligations Fund, the
U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund were,
respectively: 4.80% and 4.92%; 4.69% and 4.80%; 4.71% and 4.82%; and 2.69% and
2.72%.
Because the Municipal Investor Fund had not commenced operations during
this period, yield calculations for this Fund were unavailable as of the date
of this Statement of Additional Information.
The standardized seven-day yield for each of the Money Market Funds is
computed: (1) by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account in that Fund having a balance
of one share at the beginning of the seven-day base period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts; (2)
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return; and (3) annualizing the results (i.e.,
multiplying the base period return by (365/7)). The net change in the account
value of each of the Money Market Funds includes the value of additional shares
purchased with dividends from the original share, dividends declared on both the
original share and any additional shares, and all fees, other than non-recurring
account or sales charges charged to all shareholder accounts in proportion to
the length of the base period and assuming that Fund's average account size. The
capital changes to be excluded from the calculation of the net change in account
value are net realized gains and losses from the sale of securities and
unrealized appreciation and depreciation.
The effective yield for each of the Money Market Funds is computed by
compounding the base period return, as calculated above by adding one to the
base period return, raising the sum to a power equal to 365 divided by seven and
subtracting one from the result.
Each of the thirty-day yields and effective yields is calculated as
described above except that the base period is 30 days rather than 7 days.
For the seven-day period ended June 30, 1996, the tax-equivalent yield
(using a federal income tax rate of 39.6%) of the Investor A Shares of the
Tax-Free Fund was 4.16% and its tax-equivalent effective yield (using a federal
income tax rate of 39.6%) for the same period was 4.21%. For the thirty-day
period ended June 30, 1996, the tax-equivalent yield of the Investor A Shares
of the Tax-Free Fund (using a federal income tax rate of 39.6%) was 4.29% and
its tax-equivalent effective yield (using a federal income tax rate of 39.6%)
for the same period was 4.34%.
For the seven-day period ended June 30, 1996, the tax-equivalent yield
(using a federal income tax rate of 39.6%) of the Institutional Shares of the
Tax-Free Fund was 4.57% and its tax-equivalent effective yield (using a federal
income tax rate of 39.6%) for the same period was 4.64%. For the thirty-day
period ended June 30, 1996, the tax-equivalent yield of the Institutional
Shares of the Tax-Free Fund (using a federal income tax rate of 39.6%) was
4.45% and its tax-equivalent effective yield (using a federal income tax rate
of 39.6%) for the same period was 4.50%.
The Tax-Free Fund's tax-equivalent yields were computed by dividing
that portion of the Tax-Free Fund's yield which is tax-exempt by one minus the
stated income tax rate and adding the result to that portion, if any, of the
Tax-Free Fund's yield that is not tax-exempt. The Tax-Free Fund's
tax-equivalent effective yields were computed by dividing that portion of the
effective yield which is tax-exempt by one minus the stated income tax rate and
adding to that result the portion, if any, of the Tax-Free Fund's effective
yield that is not tax-exempt.
Yields of the Non-Money Market Funds
As summarized in the Prospectuses under the heading "PERFORMANCE
INFORMATION," yields of each of the Non-Money Market Funds will be computed by
analyzing net investment income per share for a recent thirty-day period and
dividing that amount by a Fund share's maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The yield of each of the Non-Money Market Funds will vary from
time to time depending upon market conditions, the composition of a Fund's
portfolio and operating expenses of the Group allocated to each Fund. These
factors and possible differences in the methods used in calculating yield
should be considered when comparing a Fund's yield to yields published for
other investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of each
of the Funds.
In addition, for the Municipal Bond Fund and the Michigan Bond Fund,
tax-equivalent yields will be computed by dividing that portion of a Fund's
yield (as computed above) which is tax-exempt by one minus a stated income tax
rate and adding that result to that portion, if any, of the yield of that Fund
which is not tax exempt.
Calculation of Total Return
As summarized in the Prospectuses under the heading "PERFORMANCE
INFORMATION," average annual total return is a measure of the change in value
of an
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 315
investment in a Fund over the period covered, which assumes any dividends or
capital gains distributions which are reinvested in the Fund immediately rather
than paid to the investor in cash. Average annual total return will be
calculated by: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Fund and (less the maximum sales charge,
if any) all additional shares which would have been purchased if all dividends
and distributions paid or distributed during the period had been immediately
reinvested; (2) calculating the value of the hypothetical initial investment of
$1,000 as of the end of the period by multiplying the total number of shares
owned at the end of the period by the net asset value per share on the last
trading day of the period; (3) assuming redemption at the end of the period;
and (4) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year.
For the one-year period ended June 30, 1996, the five-year period
ended June 30, 1996 and the period from the commencement of operations to June
30, 1996, the average annual total returns for the Investor A Shares of the
following Funds, assuming the imposition of the maximum sales load, were:
Equity Fund, 23.74%, 16.06% and 14.99%; Small Capitalization Fund, 43.18%,
27.71% and 22.48%; High Income Equity Fund, 19.45%, 11.23% and 12.48%; Bond
Fund, 0.13%, 6.75% and 7.29%; Limited Maturity Bond Fund, 0.24%, 5.32% and
6.26%; Intermediate Government Obligations Fund (0.43)%, 5.52% and 6.37%;
Municipal Bond Fund, 0.15%, 5.20% and 5.69% and Michigan Bond Fund, 0.37%,
5.41% and 5.63%. For the one-year period ended June 30, 1996 and the period
from the commencement of operations to June 30, 1996, the average annual total
returns for the Investor A Shares of the following Funds, assuming the
imposition of the maximum sales load, were: Balanced Fund, 12.27% and 9.85%;
Government Income Fund, 1.43% and 4.39%; and International Fund, 9.46% and
10.46%. For the period from the commencement of operations to June 30, 1996,
the aggregate annual total return for the Investor A shares of the Large
Capitalization Fund, assuming the imposition of the maximum sales load, was
4.05%.
For the one-year period ended June 30, 1996, the five-year period
ended June 30, 1996 and the period from the commencement of operations to June
30, 1996, the average annual total returns for the Investor A Shares of the
following Funds, excluding the effect of any sales charges, were: Equity Fund,
29.57%, 17.13% and 15.68%; Small Capitalization Fund, 49.93%, 28.89% and
23.22%; High Income Equity Fund, 25.05%, 12.26% and 13.16%; Bond Fund, 4.27%,
7.63% and 7.87%; Limited Maturity Bond Fund, 4.37%, 6.17% and 6.83%;
Intermediate Government Obligations Fund, 3.69%, 6.39% and 6.94%; Municipal
Bond Fund, 4.29%, 6.07% and 6.26%; and Michigan Bond Fund, 4.57%, 6.27% and
6.35%. For the one-year period ended June 30, 1996 and the period from the
commencement of operations to June 30, 1996, the average annual total returns
for the Investor A Shares of the following Funds, excluding the effect of any
sales charges, were: Balanced Fund, 17.51% and 11.00%; Government Income Fund,
5.63% and 5.58%; and International Fund, 14.65% and 11.92%. For the period
from the commencement of operations to June 30, 1996, the aggregate annual
total return for the Investor A Shares of the Large Capitalization Fund,
excluding the effect of any sales charges, was 8.99%.
For the one-year period ended June 30, 1996 and the period from the
commencement of operations to June 30, 1996, the average annual total returns
for the Investor B Shares of the following Funds, assuming the imposition of
the maximum contingent deferred sales charges, were: Equity Fund, 24.59% and
13.94%; Small Capitalization Fund, 44.87% and 28.82%; High
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 316
Income Equity Fund, 20.11% and 8.21%; Bond Fund (0.47)% and 2.47%; Limited
Maturity Bond Fund (0.47)% and 2.13%; Intermediate Government Obligations Fund
(0.95)% and 1.85%; Municipal Bond Fund (0.52)% and 1.33%; Balanced Fund, 12.71%
and 9.15%; Government Income Fund, 0.86% and 3.06%; Michigan Bond Fund (0.24)%
and 1.36%; and International Fund, 9.33% and (0.05)%. For the period from the
commencement of operations to June 30, 1996, the aggregate annual total return
for the Investor B Shares of the Large Capitalization Fund, assuming the
imposition of the maximum contingent deferred sales charge, was 4.77%.
For the one-year period ended June 30, 1996 and the period from the
commencement of operations to June 30, 1996, the average annual total returns
for the Investor B Shares of the following Funds, excluding the effect of any
contingent deferred sales charges, were: Equity Fund, 28.59% and 14.97%; Small
Capitalization Fund, 48.87% and 26.69%; High Income Equity Fund, 24.11% and
9.32%; Bond Fund, 3.46% and 3.62%; Limited Maturity Bond Fund, 3.43% and 3.26%;
Intermediate Government Obligations Fund, 2.93% and 3.00%; Municipal Bond Fund,
3.48% and 2.50%; Balanced Fund, 16.71% and 10.25%; Government Income Fund,
5.22% and 4.16%; Michigan Bond Fund, 4.13% and 2.53%; and International Fund,
13.33% and 1.16%. For the period from the commencement of operations to June
30, 1996, the aggregate annual total return for the Investor B Shares of the
Large Capitalization Fund, excluding the effect of any contingent deferred
sales charge, was 8.77%.
For the one-year period ended June 30, 1996, the five-year period ended
June 30, 1996 and the period from the commencement of operations to June 30,
1996, the average annual total returns for the Investor C shares of the
following Funds, assuming the imposition of the maximum contingent deferred
sales charges, were: Equity Fund, 28.69%, 16.74% and 15.43%; Small
Capitalization Fund, 48.32%, 28.62% and 23.05%; High Income Equity Fund, 24.17%,
12.00% and 12.99%; Bond Fund, 3.50%, 7.00% and 7.46%; Limited Maturity Bond
Fund, 3.71%, 5.27% and 6.24%; and Intermediate Government Obligations Fund,
2.86%, 5.55% and 6.39%. For the one-year period ended June 30, 1996 and the
period from the commencement of operations to June 30, 1996, the average annual
total returns for the Investor C Shares of the following Funds, assuming the
imposition of the maximum contingent deferred sales charges, were: Balanced
Fund, 16.61% and 10.53%; Government Income Fund, 5.25% and 4.55%; and
International Fund, 13.62% and 12.12%. For the period from the commencement of
operations to June 30, 1996, the aggregate annual total return for the Investor
C Shares of the Large Capitalization Fund, assuming the imposition of the
maximum contingent deferred sales charge, was 7.14%.
For the one-year period ended June 30, 1996, the five-year period ended
June 30, 1996, and the period from the commencement of operations to June 30,
1996, the average annual total returns for the Investor C Shares of the above
Funds, except for the Large Capitalization Fund, excluding the effect of any
contingent deferred sales charges, were the same as those assuming the
imposition of the maximum contingent deferred sales charges, due to the fact
that no charge is imposed upon shares held for one year or more. For the
period from the commencement of operations to June 30, 1996, the aggregate
annual total return for the Investor C Shares of the Large Capitalization Fund,
excluding the effect of any contingent deferred sales charge, was 8.14%.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 317
For the one-year period ended June 30, 1996, the five-year period
ended June 30, 1996 and the period from the commencement of operations to June
30, 1996, the average annual total returns for the Institutional Shares of the
following Funds were: Equity Fund, 29.93%, 17.26% and 15.76%; Small
Capitalization Fund, 50.03%, 29.09% and 23.24%; High Income Equity Fund,
25.30%, 12.38% and 13.23%; Bond Fund, 4.49%, 7.86% and 8.02%; Limited Maturity
Bond Fund, 4.65%, 6.30% and 6.91%; Intermediate Government Obligations Fund,
3.95%, 6.53% and 7.04%; Municipal Bond Fund, 4.55%, 6.19% and 6.33%; and
Michigan Bond Fund, 5.12%, 6.39% and 6.45%. For the one-year period ended June
30, 1996 and the period from the commencement of operations to June 30, 1996,
the average annual total returns of the Institutional Shares of the following
Funds were: Balanced Fund, 17.81% and 11.14%; Government Income Fund, 6.34%
and 5.75%; and International Fund, 14.76% and 12.21%. For the period from the
commencement of operations to June 30, 1996, the aggregate annual total return
for the Institutional Shares of the Large Capitalization Fund was 12.86%.
Distribution Rates
Each of the Funds may from time to time advertise current distribution
rates which are calculated in accordance with the method disclosed in the
Prospectuses. For the one-year period ended June 30, 1996, the distribution
rates for the Investor A Shares of the Funds, including the effect of sales
loads and capital gains, were as follows: Equity Fund, 3.03% Small
Capitalization Fund, 10.20%; High Income Equity Fund, 4.09%; International
Fund, 0.07% Balanced Fund, 6.34%; Bond Fund, 5.71%; Limited Maturity Bond Fund,
6.52%; Intermediate Government Obligations Fund, 5.75%; Government Income Fund,
7.56%; Municipal Bond Fund, 3.70%; and Michigan Bond Fund, 4.54%. For the
one-year period ended June 30, 1996, the distribution rates, including the
effect of sales loads but excluding the effect of capital gains, for the
Investor A Shares of the Funds were as follows: Equity Fund, 0.00%; Small
Capitalization Fund, 0.00%; High Income Equity Fund, 1.64%; International Fund,
0.07%; Balanced Fund, 2.25%; Bond Fund, 5.71%; Limited Maturity Bond Fund,
6.52%; Intermediate Government Obligations Fund, 5.75%; Government Income Fund,
7.56%; Municipal Bond Fund, 3.70%; and Michigan Bond Fund, 4.54%.
Excluding the effect of sales loads but including the effect of
capital gains, for the one-year period ended June 30, 1996, the distribution
rates for the Investor A Shares of the Funds were as follows: Equity Fund,
3.17%; Small Capitalization Fund, 10.69%; High Income Equity Fund, 4.28%;
International Fund, 0.07%; Balanced Fund, 2.35%; Bond Fund, 5.95%; Limited
Maturity Bond Fund, 6.79%; Intermediate Government Obligations Fund, 5.98%;
Government Income Fund, 7.87%; Municipal Bond Fund, 3.86%; and Michigan Bond
Fund, 4.73%. For the one-year period ended June 30, 1996, the distribution
rates, excluding the effect of capital gains and sales loads for the Investor A
Shares of the Funds were as follows: Equity Fund, 0.00%; Small Capitalization
Fund, 0.00%; High Income Equity Fund, 1.17%; International Discovery Fund,
0.07%; Balanced Fund, 6.64%; Bond Fund, 5.95%; Limited Maturity Bond Fund,
6.79%; Intermediate Government Obligations Fund, 5.98%; Government Income Fund,
7.87%; Municipal Bond Fund, 3.86%; and Michigan Bond Fund, 4.43%.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 318
Distribution rates for the Investor B Shares of the Funds, including
the effect of sales loads are not calculated by the Group, nor are they
advertised. Excluding the effect of sales loads but including the effect of
capital gains, for the one-year period ended June 30, 1996, the distribution
rates for the Investor B Shares of the Funds were as follows: Equity Fund,
3.24%; Small Capitalization Fund, 10.81%; High Income Equity Fund, 3.67%;
International Fund, 0.00%; Balanced Fund, 5.98%; Bond Fund, 5.27%; Limited
Maturity Bond Fund, 5.99%; Intermediate Government Obligations Fund, 5.27%;
Government Income Fund, 7.17%; Municipal Bond Fund, 3.16%; and Michigan Bond
Fund, 4.02%. For the one-year period ended June 30, 1996, the distribution
rates, excluding the effect of capital gains and sales loads for the Investor B
Shares of the Funds were as follows: Equity Fund, 0.00%; Small Capitalization
Fund, 0.00%; High Income Equity Fund, 1.10%; International Fund, 0.00%;
Balanced Fund, 1.68%; Bond Fund, 5.27%; Limited Maturity Bond Fund, 5.99%;
Intermediate Government Obligations Fund, 5.27%; Government Income Fund, 7.17%;
Municipal Bond Fund, 3.16%; and Michigan Bond Fund, 3.72%.
Excluding the effect of sales loads, but including the effect of
capital gains, for the one-year period ended June 30, 1996, the distribution
rates for the Investor C Shares of the Funds were as follows: Equity Fund,
3.23%; Small Capitalization Fund, 10.79%; High Income Equity Fund, 3.68%;
International Fund, 0.20%; Balanced Fund, 6.00%; Bond Fund, 5.32%; Limited
Maturity Bond Fund, 6.31%; Intermediate Government Obligations Fund, 5.41%; and
Government Income Fund, 7.20%. For the one-year period ended June 30, 1996,
the distribution rates, excluding the effect of capital gains and sales loads
for the Investor C Shares of the Funds were as follows: Equity Fund, 0.00%;
Small Capitalization Fund, 0.00%; High Income Equity Fund, 1.12%; International
Fund, 0.20%; Balanced Fund, 1.68%; Bond Fund, 5.32%; Limited Maturity Bond
Fund, 6.31%; Intermediate Government Obligations Fund, 5.41%; and Government
Income Fund, 7.20%.
For the one-year period ended June 30, 1996, the distribution rates,
including the effect of capital gains, for the Institutional Shares of the
Funds were as follows: Equity Fund, 3.16%; Small Capitalization Fund, 10.58%;
High Income Equity Fund, 4.52%; International Fund, 0.25%; Balanced Fund,
6.88%; Bond Fund, 6.16%; Limited Maturity Bond Fund, 7.06%; Intermediate
Government Obligations Fund, 6.23%; Government Income Fund, 8.12%; Municipal
Bond Fund, 4.10%; and Michigan Bond Fund, 4.97%. For the one-year period ended
June 30, 1996, the distribution rates, excluding the effect of capital gains,
for the Institutional Shares of the Funds were as follows: Equity Fund, 0.00%;
Small Capitalization Fund, 0.00%; High Income Equity Fund, 1.95%; International
Fund, 0.25%; Balanced Fund, 2.59%; Bond Fund, 6.16%; Limited Maturity Bond
Fund, 7.06%; Intermediate Government Obligations Fund, 6.23%; Government Income
Fund, 8.12%; Municipal Bond Fund, 4.10%; and Michigan Bond Fund, 4.67%.
Distribution rates for all classes of Shares of the Large
Capitalization Fund were not available, as that Fund had not been in existence
for one year as of June 30, 1996.
Performance Comparisons
Investors may judge the performance of the Funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as the Morgan Stanley
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 319
Capital International EAFE Index and those prepared by Dow Jones & Co., Inc.,
Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and The Russell
2000 Index and to data prepared by Lipper Analytical Services, Inc., a widely
recognized independent service which monitors the performance of mutual funds,
Morningstar, Inc. and the Consumer Price Index. Comparisons may also be made
to indices or data published in Donoghue's MONEY FUND REPORT of Holliston,
Massachusetts 01746, a nationally recognized money market fund reporting
service, Money Magazine, Forbes, Barron's, The Wall Street Journal, The Bond
Buyer's Weekly 20-Bond Index, The Bond Buyer's Index, The Bond Buyer, The New
York Times, Business Week, Pensions and Investments, and U.S.A. Today. In
addition to performance information, general information about these Funds that
appears in a publication such as those mentioned above may be included in
advertisements and in reports to shareholders.
From time to time, the Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (1) discussions of general economic or financial principles
(such as the effects of compounding and the benefits of dollar-cost averaging);
(2) discussions of general economic trends; (3) presentations of statistical
data to supplement such discussions; (4) descriptions past or anticipated
portfolio holdings for one or more of the funds within the Group; (5)
descriptions of investment strategies for one or more of the Funds; (6)
descriptions or comparisons of various savings and investment products
(including, but not limited to, insured bank products, annuities, qualified
retirement plans and individual stocks and bonds), which may or may not include
the Funds; (7) comparisons of investment products (including the Funds) with
relevant market or industry indices or other appropriate benchmarks; and (8)
discussions of fund rankings or ratings by recognized rating organizations.
The Funds may also include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in such
communications. Such performance examples will be based on an express set of
assumptions and are not indicative of the performance of any of the Funds.
Morningstar, Inc., Chicago, Illinois, rates mutual funds on a one- to
five-star rating scale with five stars representing the highest rating. Such
ratings are based upon a fund's historical risk/reward ratio as determined by
Morningstar relative to other funds in that fund's class. Funds are divided
into classes based upon their respective investment objectives. The one- to
five-star ratings represent the following ratings by Morningstar, respectively:
Lowest, Below Average, Neutral, Above Average and Highest.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield
or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a Fund's quality, composition, and maturity, as
well as expenses allocated to the Fund. Fees imposed upon customer accounts by
the Investment Adviser or its affiliated or correspondent banks for cash
management services will reduce a Fund's effective yield to customers.
Miscellaneous
Individual Trustees are elected by the shareholders and, subject to
removal by the vote of two-thirds of the Board of Trustees, serve for a term
lasting until the next meeting of shareholders at which Trustees are elected.
Such meetings are not required to be held at any
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 320
specific intervals. Individual Trustees may be removed by vote of the
shareholders voting not less than a majority of the shares then outstanding,
cast in person or by proxy at any meeting called for that purpose, or by a
written declaration signed by shareholders voting not less than two-thirds of
the shares then outstanding.
The Group is registered with the SEC as a management investment
company. Such registration does not involve supervision by the SEC of the
management or policies of the Group. The 1996 Annual Report and, when
available, the December 31, 1996 Semi-Annual Report to shareholders of the
Group are incorporated herein by reference. These reports include the
financial statements for the fiscal year ended June 30, 1996, and the six
months ended December 31, 1996, respectively.
The Prospectuses and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the SEC. Copies of such information may be obtained from the SEC upon payment
of the prescribed fee.
The Prospectuses and this Statement of Additional Information are not
an offering of the securities herein described in any state in which such
offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectuses and this Statement of Additional Information.
As of June 30, 1996, the Trustees and officers of the Group, as a
group, owned less than one percent of the shares of any Fund of the Group.
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of September 7, 1996, the following persons were the record owners
of more than 5% of the Investor A Shares, Investor B Shares and Investor C
Shares of each of the Group's Funds:
INVESTOR A SHARES
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares
Investor A Share Fund Record Owner Owned Percent of Class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Obligations National Financial Services 149,148,610.840 94.126
Corp.,
acting in various capacities on
behalf of its customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
U.S. Government Obligations National Financial Services 28,398,719.580 14.862
Corp., acting in various
capacities on behalf of
its customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 321
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares
Investor A Share Fund Record Owner Owned Percent of Class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Obligations First of America 162,341.162.630 84.963
Trust Operations
P.O. Box 4042
Kalamazoo, MI 49003-4042
Tax-Free First of America 16,131,848.250 37.072
Trust Operations
P.O. Box 4042
Kalamazoo, MI 49003-4042
Tax-Free National Financial Services 26,522,604.630 60.950
Corp., acting in various
capacities on
behalf of its customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
Small Capitalization BHC Securities 485,621.397 9.218
acting in various capacities on
behalf of its customers
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
Bond Premarc Corporation 168,212.437 7.339
Pension Plan
7505 Highway M-71
Durand, MI 48429-0000
Limited Maturity Bond Corelink Financial Inc. 233,859.763 13.842
P.O. Box 4054
Concord, CA 94524
Municipal Bond Rumsey & Company 45,643.765 5.946
P.O. Box 1207
Jacksonville, IL 62651-1207
Municipal Bond Corelink Financial Inc. 71,542.455 9.321
P.O. Box 4054
Concord, CA 94524
Treasury First of America 117,321,453.060 91.166
Trust Operations
acting in various capacities on
behalf of its customers
P.O. Box 4042
Kalamazoo, MI 49003-4042
Treasury National Financial Services 8,131,997.650 6.319
Corp.,
acting in various capacities on
behalf of its customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 322
INVESTOR B SHARES
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares Percent
Investor B Share Fund Record Owner Owned of Class
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited Maturity Bond Raymond James Assoc., Inc. 16,084.304 9.952
210 Ridge Ave.
Troy, OH 45373-2706
Limited Maturity Bond Ernesto Vaca Jr. for the benefit 8,243.181 5.100
of Martha Fajardo Vaca
6076 S. Fulton
Waukegan, IL 60085-0000
Limited Maturity Bond Isaac Walker Company 10,351.967 6.405
P.O. Box 3500
Peoria, IL 61612
Limited Maturity Bond Jonathan C. Bravo 17,527.691 10.845
Soliel Properties
3520 Martha S. Lane
Vero Beach, Florida 32967
Intermediate Government Horace Burton Gemmill 21,136.994 10.700
Obligations Joyce Louise Gemmill
2360 Mccomb Drive
Clio, MI 48420
Municipal Bond Conrad V. Davis for the benefit 14,703.049 17.992
of Lee Ann Davis
3206 W. Richwoods
Peoria, IL 61604
Municipal Bond Margil O. Weaver 8,908.569 10.901
6 Oakwood Dr.
Pontiac, IL 61764
Municipal Bond Frank A. Gregory 5,242.575 6.415
Thelma M. Gregory
3149 Shadow Brook Dr
Indianapolis, IN 46214
Municipal Bond Betty J. Bowen 11,723.284 14.346
2400 Country Club Drive
Springfield, IL 62704
Municipal Bond Charles A. Wright 4,837.819 5.920
Anna M. Wright
1605 Westview Ave.
Danville, IL 61832
Michigan Bond J. William Sumner, Trustee 19,390.064 5.847
J. William Sumner Living Trust
876 Edgemont Park
Grosse Pointe Park, MI 48230
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 323
INVESTOR C SHARES
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares Percent of
Investor C Share Fund Record Owner Owned Class
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Prime Obligations Nauman Inc. 401(k) Plan 20,842.910 8.525
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Prime Obligations Cord Construction Company 401(k) Plan 41,805.940 17.099
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Prime Obligations IMENCO Corporation 13,651.410 5.583
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Prime Obligations Ken Rock Community Center, Inc. 401(k) Plan 28,550.790 11.678
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Prime Obligations Sud's Motor Car Company 17,275.260 7.066
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
U.S. Government Nyfries, Inc. 401(k) Plan 69,420.210 62.207
Obligations 323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
U.S. Government Preferred Solutions, Inc. 24,538.685 21,989
Obligations 323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
U.S. Government Northern Michigan Fruit Co. 401(k) Plan 11,864.070 10.631
Obligations 323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Equity JB Printing Company 401(k) Plan 5,136.251 8.649
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Equity IMENCO Corporation 3,386,328 5.702
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Equity Nyfries, Inc. 401(k) Plan 6,910.145 11.636
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Equity Graftec of Rockford, Inc. 401(k) Plan 3,280.776 5.524
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Equity Klineman Rose and Wolf P.C. 401(k) Plan 4,127.402 6.950
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Small Capitalization John A. Swanson 56,637.275 23.842
P.O. Box 224
Houston, PA 15342-0224
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 324
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares Percent of
Investor C Share Fund Record Owner Owned Class
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Capitalization Roger Antonelli 28,921.219 12.175
Trust Medical Radiologists, Inc. Pension/PS
1880 Kettering Tower
Dayton, OH 45423
High Income Equity Cordes Excavating Inc. 401(k) Plan 880.858 7.749
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
High Income Equity Preferred Solutions, Inc. 5,566.099 48.968
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
High Income Equity Lincoln Precision Carbide 401(k) 628.503 5.529
600 S. Second
Lincoln, MI 48742-0000
High Income Equity Farmers Co. Operative Grain Co. of Kinde 796.105 7.003
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
High Income Equity R.C. Sales, Inc. 401(k) Plan 623.318 5.483
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
High Income Equity Seven Hills, Inc. 884,017 7.777
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Bond Cord Construction Company 401(k) Plan 3,845.161 14.810
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Bond Preferred Solutions, Inc. 1,867.629 7.193
BISYS Qualified Plan Services
Attn: Barb Brown
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Bond Nyfries, Inc. 401(k) Plan 2,010.541 7.744
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Bond Pegasus 401(k) Plan 2,689.948 10.361
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Bond JB Printing Company 401(k) Plan 2,178.116 8.389
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Limited Maturity Bond Continental Vending Inc. 401(k) Plan 148.407 11.945
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 325
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares Percent of
Investor C Share Fund Record Owner Owned Class
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited Maturity Bond Northern Michigan Fruit Co. 401(k) Plan 1,066.216 85.821
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Intermediate Rickard and Denny P C 401(k) Plan 1,986.925 21.436
Government 323 Norristown Rd./Springhse. Corp. Cntr. II
Obligations Ambler, PA 19002-0000
Intermediate All Tech Engineering 401(k) Plan 2,372.943 25.600
Government 323 Norristown Rd./Springhse. Corp. Cntr. II
Obligations Ambler, PA 19002-0000
Intermediate Lincoln Precision Carbide 401(k) 824.078 8.890
Government 600 S. Second
Obligations Lincoln, MI 48742-0000
Intermediate Ken Rock Community Center Inc. 401(k) Plan 2,773.307 29.920
Government 323 Norristown Rd./Springhse. Corp. Cntr. II
Obligations Ambler, PA 19002
Balanced Glass Distributors, Inc. 1,523.155 5.372
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002
Balanced All Tech Engineering 401(k) Plan 2,773.792 9.784
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Balanced Zazine Salon Ltd. 401(k) Plan 1,796.046 6.335
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Balanced Nauman, Inc. 401(k) Plan 1,711.028 6.035
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Balanced Klineman Rose and Wolf P.C. 401(k) Plan 1,466.410 5.172
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
Balanced Nyfries, Inc. 401(k) Plan 7,576.951 26.726
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
U.S. Government Income HMC Products 401(k) Plan 1,042.861 12.896
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
U.S. Government Income Ganna Construction, Inc. 1,697.549 20.993
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
U.S. Government Income Sud's Motor Car Company 641.651 7.935
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 326
<TABLE>
<CAPTION>
Title of Name and Address of # of Shares Percent of
Investor C Share Fund Record Owner Owned Class
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Income JEK Incorporated 2,684.131 33.194
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
U.S. Government Income Adpro 401(k) Plan 1,561.089 19.305
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
International Discovery JEK Incorporated 2,981.136 7.369
BISYS Qualified Plan Services
Attn: Barb Brown
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
International Discovery Preferred Solutions, Inc. 5,133.055 12.689
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
International Discovery Cordes Excavating Inc. 401(k) Plan 2,425.234 5.995
323 Norristown Rd./Springhse. Corp. Cntr. II
Ambler, PA 19002-0000
International Discovery Lincoln Precision Carbide 401(k) 2,421.202 5.985
600 S. Second
Lincoln, MI 48742-0000
</TABLE>
As of September 12, 1996, as a result of its possession of voting or
investment power with respect to such shares, through accounts for which
FOA-Michigan and other affiliates of FABC act in a fiduciary capacity,
FOA-Michigan and other affiliates were deemed to be the record and beneficial
owners of 61.0% of the Institutional Shares of the Group as follows:
INSTITUTIONAL SHARES BENEFICIALLY OWNED BY FOA-MICHIGAN AND ITS AFFILIATES:
<TABLE>
<CAPTION>
Amount of Percent of Percent of
Title of Institutional Share Fund Beneficial Ownership Fund Class Fund Class
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Obligations Fund $338,576,911 52.6% 42.2%
U.S. Government Obligations Fund $ 64,693,144 30.6% 16.4%
Treasury Fund $ 54,984,542 16.8% 11.7%
Tax-Free Fund $ 62,115,525 59.0% 41.1%
Equity Fund $ 25,594,324 86.7% 75.7%
Small Capitalization Fund $ 11,191,072 74.2% 51.5%
Large Capitalization Fund $ 23,667,939 86.0% 84.0%
International Fund $ 20,702,019 81.0% 70.9%
Balanced Fund $ 7,994,703 94.7% 79.1%
High Income Equity Fund $ 15,804,682 80.5% 62.7%
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 327
<TABLE>
<CAPTION>
Amount of Percent of Percent of
Title of Institutional Share Fund Beneficial Ownership Fund Class Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Fund $ 50,845,818 89.3% 85.1%
Limited Maturity Bond Fund $ 11,547,838 80.1% 70.9%
Intermediate Government Obligations Fund $ 17,628,239 78.2% 70.5%
Government Income Fund $ 11,397,129 80.1% 51.1%
Municipal Bond Fund $ 9,686,980 74.8% 70.2%
Michigan Bond Fund $ 11,511,738 66.5% 54.7%
</TABLE>
Therefore, FABC owned beneficially as of such date 44.6% the total
outstanding shares of the Group. FABC may be presumed to control both the
Group and each of the Funds, with the exception of the U.S. Government
Obligations Fund and Treasury Fund, because it possesses or shares investment
or voting power with respect to more than 25% of the total outstanding shares
of the Group and of each of the Funds, with the exception of the U.S.
Government Obligations Fund and Treasury Fund. As a result, FABC may have the
ability to elect the Trustees of the Group, approve the Investment Advisory
Agreements and Distribution Agreement for each of the Funds (except the U.S.
Government Obligations Fund and Treasury Fund) and to control any other matters
submitted to the shareholders of the Funds (except the U.S. Government
Obligations Fund and Treasury Fund) for their approval or ratification.
Because the Municipal Investor Fund and the Emerging Markets Fund had not
commenced operations as of the dates noted above, no such information was
available regarding these Funds.
With respect to all of the Funds, the Group's officers and directors
collectively owned less than 1% of the Funds' outstanding securities.
FINANCIAL STATEMENTS
Financial Statements depicting financial information for the each
Fund's operations since inception appear in the Group's Annual Report dated
June 30, 1996, and on file with the SEC (File Nos. 33-13283 and 811-5105) are
incorporated by reference herein. The report of Coopers & Lybrand L.L.P.,
independent auditors of the Group, appears therein.
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 328
APPENDIX
The nationally recognized statistical rating organizations (individually, an
"NRSRO") that may be utilized by First of America with regard to portfolio
investments for the Group include Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc. ("Duff"), Fitch
Investors Service, Inc. ("Fitch"), IBCA Limited and its affiliate, IBCA Inc.
(collectively, "IBCA"), and Thompson BankWatch, Inc. ("Thomson"). Set forth
below is a description of the relevant ratings of each such NRSRO. The NRSROs
that may be utilized by First of America are, and the description of each
NRSRO's ratings is, as of the date of this Statement of Additional Information,
and may subsequently change.
Long-Term Debt Ratings (May be assigned, for example, to corporate and
municipal bonds)
Description of the three highest long-term debt ratings by Moody's (Moody's
supplies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt-edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future.
Description of the three highest long-term debt ratings by S&P (S&P may apply a
plus (+) or a minus (-) to a particular rating classification to show relative
standing within that classification):
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 higher rated issues only
in small degree.
APPENDIX
<PAGE> 329
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.
Description of the three highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality protection factors are strong.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
Description of the three highest long-term debt ratings by Fitch (plus or minus
signs are used with a rating symbol to indicate the relative position of the
credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated "AAA." Because bonds rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issues is
generally rated F-1+ (see below)."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
IBCA's description of its three highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk
albeit not very significantly.
APPENDIX
<PAGE> 330
A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
Thomson's description of its three highest long-term debt ratings (Thomson may
include a plus (+) or minus (-) designation to indicate where within the
respective category the issue is placed):
AAA The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by many of the following
characteristics:
-Leading market positions in well-established
industries.
-High rates of return on funds employed.
-Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
-Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
-Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of
the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
APPENDIX
<PAGE> 331
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and
market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the
level of debt protection measurements and may require
relatively high financial, leverage. Adequate alternate
liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a plus
sign (+).
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors
qualify issues as investment grade. Risk factors are
larger and subject to more variation. Nevertheless,
timely payment is expected.
Fitch's description of its three highest short-term debt ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance
for timely payment.
APPENDIX
<PAGE> 332
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+ or
F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment
grade.
IBCA's description of its three highest short-term debt ratings:
A+ Obligations supported by the highest capacity for timely
repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
A2 Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
Thompson's description of its three highest short-term ratings:
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong,
the relative degree of safety is not as high as for issues
rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
Short-Term Loan/Municipal Note Ratings
Moody's description of its two highest short-term loan/municipal note ratings:
MIG-1/VMIG-1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 This designation denotes high quality. Margins of protection
are ample although not as large as in the preceding group.
APPENDIX
<PAGE> 333
S&P's description of its two highest municipal note ratings:
SP-1 Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
APPENDIX
<PAGE> 334
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
INVESTOR A SHARES
INVESTOR B SHARES
INVESTOR C SHARES
INSTITUTIONAL SHARES
THE PARKSTONE GROWTH FUNDS
THE PARKSTONE GROWTH AND INCOME FUNDS
THE PARKSTONE INCOME FUNDS
THE PARKSTONE TAX-FREE INCOME FUNDS
THE PARKSTONE MONEY MARKET FUNDS
THE PARKSTONE GROUP OF FUNDS
FORM N-1A
PART C. OTHER INFORMATION
ITEM NO.
- ----------------------------------------------------------------------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
-- Financial Highlights.
Incorporated by Reference to Annual Report in Part B:
-- Parkstone U.S. Government Obligations Fund, Parkstone Prime
Obligations Fund, Parkstone Tax-Free Fund, Parkstone Treasury Fund,
Parkstone Equity Fund, Parkstone Small Capitalization Fund, Parkstone
Large Capitalization Fund, Parkstone International Discovery Fund,
Parkstone Balanced Fund, Parkstone High Income Equity Fund, Parkstone
Bond Fund, Parkstone Limited Maturity Bond Fund, Parkstone
Intermediate Government Obligations Fund, Parkstone U.S. Government
Income Fund, Parkstone Municipal Bond Fund, and Parkstone Michigan
Municipal Bond Fund.
Independent Auditor's Report dated August 23, 1996.
Statements of Assets and Liabilities as of June 30, 1996.
Statements of Operations for the year ended June 30, 1996.
OTHER INFORMATION
<PAGE> 335
Statements of Changes in Net Assets for the years ended June 30, 1996
and June 30, 1995.
Schedules of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
All required financial statements are included or incorporated by
reference in Part B hereof. All other financial statements and
schedules are inapplicable.
(b) Exhibits:
(1) (a) Declaration of Trust dated March 25, 1987.
(i) Amendment dated April 7, 1987 to Declaration of Trust.
(ii) Amendment dated July 1, 1987 to Declaration of Trust.
(2) (a) Code of Regulations as approved and adopted by Registrant's
Board of Trustees.
(i) Amendment dated May 11, 1989 to Code of Regulations.
(ii) Amendment dated August 26, 1993 to Code of Regulations.
(3) Not applicable.
(4) Not applicable.
(5) (a) Investment Advisory Agreement between Registrant and
Securities Counsel, Inc., dated July 9, 1987, relating to the
U.S. Government Obligations Fund, the Prime Obligations Fund
and the Tax-Free Fund.
(i) Amendment dated August 26, 1993 to Schedule A adding the
Treasury Fund and Municipal Investor Fund.
(b) Investment Advisory Agreement between Registrant and
Securities Counsel, Inc. dated September 8, 1988, relating to
the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the Municipal Bond
Fund, the Equity Fund, the Small Capitalization Fund and the
High Income Equity Fund.
(i) First Amendment dated March 1, 1995 authorizing the use
of subadvisers with respect to the Balanced Fund.
OTHER INFORMATION
<PAGE> 336
(ii) Amendment dated November 8, 1995 to Schedule A adding the
Large Capitalization Fund and incorporating previous
amendments adding the Michigan Municipal Bond Fund, the
Balanced Fund and the U.S. Government Income Fund.
(c) Investment Advisory Agreement between the Registrant and First of
America Investment Corporation dated December 22, 1992, relating to
the International Discovery Fund.
(i) Amendment dated February 10, 1995 to Schedule A adding the
Emerging Markets Fund.
(d) Sub-Investment Advisory Agreement between First of America Investment
Corporation and Gulfstream Global Investors, Ltd. dated March 1,
1995, relating to the International Discovery Fund, the Balanced Fund
and the Emerging Markets Fund.
(6) (a) Distribution Agreement between Registrant and The Winsbury
Company Limited Partnership dated October 1, 1993, relating to
the U.S. Government Obligations Fund, the Prime Obligations Fund,
the Tax-Free Fund, the Treasury Fund, the Municipal Investor
Fund, the Equity Fund, the Small Capitalization Fund, the
International Discovery Fund, the Balanced Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government
Income Fund, the Municipal Bond Fund and the Michigan Municipal
Bond Fund.
(i) Amendment dated May 12, 1994 to the Distribution Agreement
adding Schedules H and I relating to Investor C Shares.
(ii) Amendment dated November 8, 1995 to Schedule A adding the
Large Capitalization Fund.
(iii) Amendment dated November 8, 1995 to Schedule B adding the
Large Capitalization Fund.
(iv) Amendment dated November 8, 1995 to Schedule D adding the
Large Capitalization Fund.
(v) Amendment dated November 8, 1995 to Schedule F adding the
Large Capitalization Fund.
(vi) Amendment dated November 8, 1995 to Schedule G adding the
Large Capitalization Fund.
OTHER INFORMATION
<PAGE> 337
(vii) Amendment dated November 8, 1995 to Schedule I adding the
Large Capitalization Fund.
(b) Specimen Dealer Agreement between BISYS Fund Services, L.P. and
dealers.
(c) Specimen Shareholder Service Agreement between BISYS Fund Services,
L.P. and organizations providing shareholder services.
(7) Not applicable.
(8) (a) Custody Agreement between Registrant and the Bank of California,
N.A., dated October 18, 1991, relating to the U.S. Government
Obligations Fund, the Prime Obligations Fund, the Tax-Free Fund, the
Bond Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the Municipal Bond Fund, the Equity
Fund, the Small Capitalization Fund, the High Income Equity Fund and
the Michigan Municipal Bond Fund.
(i) Amendment dated November 8, 1995 to Schedule A adding the Large
Capitalization Fund and incorporating amendments adding the
Balanced Fund, the U.S. Government Income Fund, the
International Discovery Fund, the Treasury Fund and the
Municipal Investor Fund.
(ii) Amendment dated November 20, 1992, to Schedule B of the Custody
Agreement.
(iii) Securities Lending and Reverse Repurchase Agreement Addendum
dated June 8, 1995.
(b) Custodian Agreement between Registrant and the Bank of California,
N.A., dated July 30, 1995, relating to the International Discovery
Fund, Emerging Markets Fund and portion of the Balanced Fund invested
in foreign securities.
(9) (a) Administration Agreement between Registrant and The Winsbury
Company Limited Partnership dated January 1, 1995, relating to the
U.S. Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free Fund, the Treasury Fund, the Municipal Investor Fund, the
Equity Fund, the Small Capitalization Fund, the International
Discovery Fund, the Balanced Fund, the High Income Equity Fund, the
Bond Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the U.S. Government Income Fund, the
Municipal Bond Fund and the Michigan Municipal Bond Fund.
OTHER INFORMATION
<PAGE> 338
(i) Amendment dated November 8, 1995 to Exhibit A adding the Large
Capitalization Fund.
(b) Transfer Agency Agreement between Registrant and The Winsbury
Service Corporation dated August 8, 1990.
(i) Amendment dated May 12, 1994 to Schedule B revising the fee
schedule.
(c) Fund Accounting Agreement between Registrant and The Winsbury
Service Corporation dated as of February 1, 1993, relating to the
U.S. Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free Fund, the Equity Fund, the Small Capitalization Fund, the
International Discovery Fund, the Balanced Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government
Income Fund, the Municipal Bond Fund and the Michigan Municipal
Bond Fund.
(i) Amendment dated November 8, 1995 to Schedule A adding the
Large Capitalization Fund and incorporating an amendment
adding the Treasury Fund and the Municipal Investor Fund.
(ii) Amendment dated April 1, 1993 to Schedule B revising the fee
schedule.
(d) Sub-Administration Agreement between First of America Investment
Corporation and The Winsbury Company Limited Partnership dated
January 1, 1995, relating to the U.S. Government Obligations Fund,
the Prime Obligations Fund, the Tax-Free Fund, the Treasury Fund,
the Municipal Investor Fund, the Equity Fund, the Small
Capitalization Fund, the International Discovery Fund, the Balanced
Fund, the High Income Equity Fund, the Bond Fund, the Limited
Maturity Bond Fund, the Intermediate Government Obligations Fund,
the U.S. Government Income Fund, the Municipal Bond Fund and the
Michigan Municipal Bond Fund.
(i) Amendment dated November 8, 1995 adding the Large
Capitalization Fund.
(e) Securities Lending Record Administration Agreement between The Bank
of California, N.A. and The Winsbury Company Limited Partnership
dated June 1, 1995.
(10) An opinion of Legal Counsel with respect to shares of the U.S. Government
Obligations Fund, the Prime Obligations Fund, the Treasury
OTHER INFORMATION
<PAGE> 339
Fund, the Tax-Free Fund, the Equity Fund, the Small Capitalization
Fund, the Large Capitalization Fund, International Discovery Fund, the
Balanced Fund, the High Income Equity Fund, the Bond Fund, the Limited
Maturity Bond Fund, the Intermediate Government Obligations Fund, the
U.S. Government Income Fund, the Municipal Bond Fund, and the Michigan
Municipal Bond Fund was filed with Registrant's Notice filed pursuant
to Rule 24f-2 on August 28, 1996.
(11) (a) Consent of Coopers & Lybrand, L.L.P.
(b) Consent of Howard & Howard Attorneys, P.C.
(12) Not applicable.
(13) Purchase Agreement dated July 2, 1987, between Registrant and The
Winsbury Corporation.
(14) (a) Specimen Agreement for the Parkstone Individual Retirement
Account.
(b) Specimen Agreement for the National Financial Services Corporation
Individual Retirement Account offered through First of America
Securities, Inc. for investment in the Parkstone Group of Funds.
(15) (a) Investor A Distribution and Shareholder Service Plan.
(i) Participating Organization Agreement between The Winsbury
Company and National Financial Services Corporation dated
October 1, 1993, relating to Investor A Share distribution
and shareholder services for the U.S. Government Obligations
Fund, the Tax-Free Fund, the Prime Obligations Fund, the
Treasury Fund, the Municipal Investor Fund, the Equity Fund,
the Small Capitalization Fund, the High Income Equity Fund,
the International Discovery Fund, the Balanced Fund, the Bond
Fund, the Limited Maturity Bond Fund, the Michigan Municipal
Bond Fund, the Municipal Bond Fund, the U.S. Government
Income Fund and the Intermediate Government Obligations Fund.
(a) Amendment dated November 8, 1995 to Schedule A
adding the Large Capitalization Fund.
(ii) Participating Organization Agreement between The Winsbury
Company and First of America Bank Corporation on behalf of
its wholly- owned subsidiary banks, dated October 1, 1993,
relating to Investor A Share distribution
OTHER INFORMATION
<PAGE> 340
and shareholder services for the U.S. Government Obligations
Fund, the Tax-Free Fund, the Prime Obligations Fund, the Treasury
Fund, the Municipal Investor Fund, the Equity Fund, the Small
Capitalization Fund, the High Income Equity Fund, the
International Discovery Fund, the Balanced Fund, the Bond Fund,
the Limited Maturity Bond Fund, the Michigan Municipal Bond Fund,
the Municipal Bond Fund, the U.S. Government Income Fund and the
Intermediate Government Obligations Fund.
(a) Amendment dated November 8, 1995 adding Exhibit C to reflect
12b-1 fees charged to each Fund.
(b) Amendment dated November 8, 1995 to Exhibit A adding the
Large Capitalization Fund.
(iii) Participating Organization Agreement between The Winsbury Company
and First of America Securities, Inc., as a party and on behalf
of its affiliate First of America Brokerage Services, dated
September 21, 1994, relating to Investor A Share distribution and
shareholder services for the U.S. Government Obligations Fund,
the Tax-Free Fund, the Prime Obligations Fund, the Treasury Fund,
the Municipal Investor Fund, the Equity Fund, the Small
Capitalization Fund, the High Income Equity Fund, the
International Discovery Fund, the Balance Fund, the Bond Fund,
the Limited Maturity Bond Fund, the Michigan Municipal Bond Fund,
the Municipal Bond Fund, the U.S. Government Income Fund and the
Intermediate Government Obligations Fund.
(a) Amendment dated November 8, 1995 to Exhibit A adding the
Large Capitalization Fund.
(b) Investor B Distribution and Shareholder Service Plan.
(i) Shareholder Services and Financing Agreement between The
Winsbury Company and Security Distributors, Inc. dated February
1, 1994 relating to Investor B Share financing assistance and
shareholder support services for the Equity Fund, the Small
Capitalization Fund, the International Discovery Fund, the High
Income Equity Fund, the Balanced Fund, the Bond Fund, the
Limited Maturity Bond Fund, the U.S. Government Income Fund, the
Intermediate Government Obligations Fund, the
OTHER INFORMATION
<PAGE> 341
Municipal Bond Fund and the Michigan Municipal Bond Fund.
(ii) Service and Commission Agreement between The Winsbury Company and
Security Distributors, Inc., Security Benefit Group, Inc. and
First of America Brokerage Services dated February 1, 1994,
relating to Investor B Share shareholder support services for the
Equity Fund, the Small Capitalization Fund, the International
Discovery Fund, the High Income Equity Fund, the Balanced Fund,
the Bond Fund, the Limited Maturity Bond Fund, the U.S.
Government Income Fund, the Intermediate Government Obligations
Fund, the Municipal Bond Fund and the Michigan Municipal Bond
Fund.
(iii) Dealer Agreement between The Winsbury Company and First of
America Brokerage Service, Inc. dated February 1, 1994 relating
to Investor B Share distribution services for the Equity Fund,
the Small Capitalization Fund, the International Discovery Fund,
the High Income Equity Fund, the Balanced Fund, the Bond Fund,
the Limited Maturity Bond Fund, the U.S. Government Income Fund,
the Intermediate Government Obligations Fund, the Municipal Bond
Fund and the Michigan Municipal Bond Fund.
(a) Amendment dated November 8, 1995 to Exhibit A adding the
Large Capitalization Fund.
(c) Investor C Distribution and Shareholder Service Plan.
OTHER INFORMATION
<PAGE> 342
(i) Participating Organization Agreement between The Winsbury Company
and First of America Securities, Inc. dated September 21, 1994,
relating to Investor C Share distribution and shareholder services
for the Equity Fund, the Small Capitalization Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the Michigan Municipal
Bond Fund, the Balanced Fund, the U.S. Government Income Fund and
the International Discovery Fund.
(a) Amendment dated November 8, 1995 to Exhibit A adding the Large
Capitalization Fund.
(b) Amendment dated November 8, 1995 to Exhibit C adding the Large
Capitalization Fund.
(16) (a) Computation of Total Returns for the Equity Fund, the Small
Capitalization Fund, the Large Capitalization Fund, the
International Discovery Fund, the Emerging Markets Fund, the
Balanced Fund, the High Income Equity Fund, the Bond Fund, the
Limited Maturity Bond Fund, the Intermediate Government Obligations
Fund, the U.S. Government Income Fund, the Municipal Bond Fund,
the Michigan Municipal Bond Fund, for the U.S. Government
Obligations Fund, the Prime Obligations Fund, the Tax-Free Fund,
the Treasury Fund and the Municipal Investor Fund.
(b) Computation of Yields for the Equity Fund, the Small Capitalization
Fund, the Large Capitalization Fund, the International Discovery
Fund, the Emerging Markets Fund, the Balanced Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government
Income Fund, the Municipal Bond Fund, the Michigan Municipal
Bond Fund, the U.S. Government Obligations Fund, the Prime
Obligations Fund, the Tax-Free Fund, the Treasury Fund and
the Municipal Investor Fund.
(c) Computation of Distribution Rates for the Equity Fund, the Small
Capitalization Fund, the Large Capitalization Fund, the
International Discovery Fund, the Emerging Markets Fund, the
Balanced Fund, the High Income Equity Fund, the Bond Fund, the
Limited Maturity Bond Fund, the Intermediate Government Obligations
Fund, the U.S. Government Income Fund, the Municipal Bond Fund, and
the Michigan Municipal Bond Fund.
OTHER INFORMATION
<PAGE> 343
(17) (a) Power of Attorney for George R. Landreth, Lawrence D. Bryan,
Robert M. Beam, and Adrian Charles Edwards.
(18) Multiple Class Plan adopted by the Board of Trustees on November 8,
1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Trustees, the members of which also
serve as members of the Board of Trustees of the Parkstone Advantage Fund.
As of June 30, 1996, First of America Bank Corporation, a bank holding
company ("FABC"), and the parent of First of America Bank - Michigan, N.A.,
may be deemed to control the Registrant because of its record ownership and
beneficial ownership through its wholly-owned subsidiaries of more than 25%
of the shares of each series of the Registrant outstanding on such date. In
addition to controlling the Registrant, FABC controls, and therefore the
Registrant is under common control with, First of America Investment
Corporation, a Michigan corporation and a wholly-owned subsidiary of First of
America Bank - Michigan, N.A.
Financial statements for First of America Investment Corporation and First of
America - Michigan, N.A. are included in FABC's consolidated financial
statements.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of August 31, 1996, the number of record holders of each series of shares
of the Registrant were as follows:
<TABLE>
<CAPTION>
Title of Series Investor A Investor B Investor C Institutional
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations 54 --- --- 3
Fund
Prime Obligations Fund 531 --- --- 94
Tax-Free Fund 34 --- --- 2
Treasury Fund 37 --- --- 1
Equity Fund 6,937 2,555 63 4
Small Capitalization Fund 12,633 4,233 194 30
Large Capitalization Fund 274 148 2 3
</TABLE>
OTHER INFORMATION
<PAGE> 344
<TABLE>
<S> <C> <C> <C> <C>
International Discovery Fund 6,186 2,090 47 5
High Income Equity Fund 7,502 1,776 15 4
Balanced Fund 1,742 494 31 2
Bond Fund 1,832 606 45 4
Limited Maturity Bond Fund 1,066 131 4 2
Intermediate Government
Obligations Fund 1,452 220 11 2
Government Income Fund 2,813 1,100 11 2
Municipal Bond Fund 249 29 --- 2
Michigan Municipal Bond Fund 1,112 137 --- 2
</TABLE>
ITEM 27. INDEMNIFICATION
Article IX Section 9.2 of the Registrant's Declaration of Trust, as amended,
provides for the indemnification of Registrant's Trustees and officers.
Indemnification of the Group's principal underwriter, custodian, investment
adviser, manager and administrator, transfer agent and fund accountant is
provided for, respectively, in Section 1.13 of the Distribution Agreement
filed or incorporated by reference as Exhibit 6(a) hereto, Section 10.1 of
the Custody Agreement filed or incorporated by reference as Exhibit 8(a)
hereto and in Section 16 of the Custodian Agreement filed as Exhibit 8(b)
hereto, Section 8 of the Investment Advisory and Sub-Investment Advisory
Agreements filed or incorporated by reference as Exhibits 5(a), (b), (c) and
(d) hereto, Section 6 of the Administration Agreement filed or incorporated
by reference as Exhibit 9(a) hereto, Section 9 of the Transfer Agency
Agreement, filed or incorporated by reference as Exhibit 9(b) hereto, and
Section 6 of the Fund Accounting Agreement filed or incorporated by reference
as Exhibit 9(c) hereto. As of the date of this Registration Statement, the
Group has obtained from a major insurance carrier a Trustees' and officers'
liability policy covering certain types of errors and omissions. In no event
will Registrant indemnify any of its Trustees, officers, employees or agents
against any liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of his reckless disregard of the
duties involved in the conduct of his office or under his agreement with
Registrant. Registrant will comply with Rule 484 under the Securities Act of
1933 and Release 11330 under the Investment Company Act of 1940 in connection
with any indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "Act"), may be permitted to trustees, officers, and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is
OTHER INFORMATION
<PAGE> 345
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
First of America Investment Corporation, Kalamazoo, Michigan ("FIC"), is the
Group's investment adviser. FIC is a Michigan-chartered, wholly-owned
subsidiary of First of America Bank - Michigan, N.A., Kalamazoo, Michigan
("FOA-Michigan"). Although FIC has not, except for the Group, previously
served as an investment adviser to a registered investment company, FIC
currently manages over $12 billion on behalf of both taxable and tax-exempt
clients, including pensions, endowments, corporations, individual portfolios
and the Group. FIC also acts as subadviser to the Trust Division of First of
America Bank Corporation with respect to $3.6 billion in discretionary
assets, providing equity, fixed income, balanced and money management
services.
To the knowledge of Registrant, none of the directors or officers of FIC is
or has been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain directors and officers of FIC also hold positions with FIC's
parent, FOA-Michigan, or First of America Bank Corporation (First of
America's parent) or other subsidiaries.
ITEM 29. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services Limited Partnership, formerly known as The Winsbury
Company Limited Partnership ("BISYS") acts as distributor and
administrator for Registrant. BISYS also distributes the securities of
The Victory Portfolios, The HighMark Group, The AmSouth Mutual Funds, The
Sessions Group, The Coventry Group, The BB&T Mutual Funds Group, The
American Performance Funds, The ARCH Fund, Inc., The MMA Praxis Mutual
Funds, The MarketWatch Funds, The Pacific Capital Funds, The Qualivest
Funds, The Riverfront Funds, Inc., The Summit Investment Trust, The
Pegasus Funds, The Fountain Square Funds, The Kent Group of Funds, The
HSBC Funds, First Choice Funds Trust, The Parkstone Advantage Fund, SBSF
Funds, Inc, Infinity Mutual Funds, Inc., The Republic Funds, and the Time
Horizon Funds, each of which is an investment management company.
OTHER INFORMATION
<PAGE> 346
(b) Directors, officers and partners of BISYS, as of June 30, 1996, were as
follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with BISYS Offices with
Business Address Fund Services, L.P. Registrant
- -------------------------------------------------------------------------------------------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder of BISYS
150 Clove Road Fund Services, Inc. and Sole
Little Falls, NJ 07424 Limited Partner None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219 Sole General Partner None
J. David Huber Senior Vice President,
3435 Stelzer Road Business Development
Columbus, Ohio 43219 Fund Services Division Vice President
Stephen G. Mintos Executive Vice President
3435 Stelzer Road General Manager
Columbus, Ohio 43219 Fund Services Division None
</TABLE>
(c) Compensation to BISYS during the fiscal year ended June 30, 1996 was as
follows:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemption and Brokerage Other
Commissions Repurchase Commissions Compensation
-------------------- ------------------- ----------------- --------------
<S> <C> <C> <C>
$280,986 $3,615 $0 $0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(a) First of America Investment Corporation, 303 North Rose Street,
Kalamazoo, Michigan 49007 (records relating to its functions as
investment adviser); Gulfstream Global Investors, Ltd., 100 Crescent
Court, Suite 550, Dallas, Texas 75201 (records relating to certain
functions of the subadviser for the International Discovery Fund and
Balanced Fund).
(b) BISYS Fund Services, L.P., 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as general manager, administrator and
distributor).
(c) Howard & Howard, 1400 North Woodward Avenue, Suite 101, Bloomfield
Hills, Michigan 48304-2856 (Declaration of Trust, Code of Regulations,
and Minute Books).
OTHER INFORMATION
<PAGE> 347
(d) Union Bank of California, N.A., 475 Sansome Street, San Francisco,
California 94111 (records relating to its functions as custodian).
(e) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as transfer agent and fund
accountant).
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual Report to
Shareholders upon request and without charge.
OTHER INFORMATION
<PAGE> 348
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Columbus and the State of Ohio on the 8th day of
October, 1996.
THE PARKSTONE GROUP OF FUNDS
By: /s/ GEORGE R. LANDRETH
----------------------------
George R. Landreth, President
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ GEORGE R. LANDRETH
- ----------------------
George R. Landreth Chairman and Trustee* October 8, 1996
Robert M. Beam* Trustee
Lawrence D. Bryan* Trustee
Adrian Charles Edwards* Trustee
*By: /s/ GEORGE R. LANDRETH
------------------------
George R. Landreth
Attorney-in-Fact October 8, 1996
</TABLE>
OTHER INFORMATION
<PAGE> 349
EXHIBIT INDEX
Exhibit No.
(1) (a) Declaration of Trust dated March 25, 1987.
(i) Amendment dated April 7, 1987 to Declaration of Trust.
(ii) Amendment dated July 1, 1987 to Declaration of Trust.
(2) (a) Code of Regulations as approved and adopted by Registrant's Board
of Trustees.
(i) Amendment dated May 11, 1989 to Code of Regulations.
(ii) Amendment dated August 26, 1993 to Code of Regulations.
(3) Not applicable.
(4) Not applicable.
(5) (a) Investment Advisory Agreement between Registrant and Securities
Counsel, Inc., dated July 9, 1987, relating to the U.S. Government
Obligations Fund, the Prime Obligations Fund and the Tax-Free Fund.
(i) Amendment dated August 26, 1993 to Schedule A adding to the
Treasury Fund and Municipal Investor Fund
(b) Investment Advisory Agreement between Registrant and Securities
Counsel, Inc. dated September 8, 1988, relating to the Bond Fund, the
Limited Maturity Bond Fund, the Intermediate Government Obligations
Fund, the Municipal Bond Fund, the Equity Fund, the Small
Capitalization Fund and the High Income Equity Fund.
(i) First Amendment dated March 1, 1995 authorizing the use of
subadvisers with respect to the Balanced Fund.
(ii) Amendment dated November 8, 1995 to Schedule A adding the Large
Capitalization Fund and incorporating previous amendments adding
the Michigan Municipal Bond Fund, the Balanced Fund and the U.S.
Government Income Fund.
(c) Investment Advisory Agreement between the Registrant and First of
America Investment Corporation dated December 22, 1992, relating to
the International Discovery Fund.
OTHER INFORMATION
<PAGE> 350
(i) Amendment dated February 10, 1995 to Schedule A adding the
Emerging Markets Fund.
(d) Sub-Investment Advisory Agreement between First of America
Investment Corporation and Gulfstream Global Investors, Ltd. dated
March 1, 1995, relating to the International Discovery Fund, the
Balanced Fund and the Emerging Markets Fund.
(6) (a) Distribution Agreement between Registrant and The Winsbury Company
Limited Partnership dated October 1, 1993, relating to the U.S.
Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free Fund, the Treasury Fund, the Municipal Investor Fund, the
Equity Fund, the Small Capitalization Fund, the International
Discovery Fund, the Balanced Fund, the High Income Equity Fund, the
Bond Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the U.S. Government Income Fund, the
Municipal Bond Fund and the Michigan Municipal Bond Fund.
(i) Amendment dated May 12, 1994 to the Distribution Agreement
adding Schedules H and I relating to Investor C Shares.
(ii) Amendment dated November 8, 1995 to Schedule A adding the
Large Capitalization Fund.
(iii) Amendment dated November 8, 1995 to Schedule B adding the
Large Capitalization Fund.
(iv) Amendment dated November 8, 1995 to Schedule D adding the
Large Capitalization Fund.
(v) Amendment dated November 8, 1995 to Schedule F adding the
Large Capitalization Fund.
(vi) Amendment dated November 8, 1995 to Schedule G adding the
Large Capitalization Fund.
(vii) Amendment dated November 8, 1995 to Schedule I adding the
Large Capitalization Fund.
(b) Specimen Dealer Agreement between BISYS Fund Services, L.P. and
dealers.
(c) Specimen Shareholder Service Agreement between BISYS Fund Services,
L.P. and organizations providing shareholder services.
(7) Not applicable.
OTHER INFORMATION
<PAGE> 351
(8) (a) Custody Agreement between Registrant and the Bank of California,
N.A., dated October 18, 1991, relating to the U.S. Government
Obligations Fund, the Prime Obligations Fund, the Tax-Free Fund,
the Bond Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the Municipal Bond Fund, the Equity
Fund, the Small Capitalization Fund, the High Income Equity Fund
and the Michigan Municipal Bond Fund.
(i) Amendment dated November 8, 1995 to Schedule A adding the
Large Capitalization Fund and incorporating amendments adding
the Balanced Fund, the U.S. Government Income Fund, the
International Discovery Fund, the Treasury Fund and the
Municipal Investor Fund.
(ii) Amendment dated November 20, 1992, to Schedule B of the Custody
Agreement.
(iii) Securities Lending and Reverse Repurchase Agreement Addendum
dated June 8, 1995.
(b) Custodian Agreement between Registrant and the Bank of California,
N.A., dated July 30, 1995, relating to the International Discovery
Fund, Emerging Markets Fund and portion of the Balanced Fund
invested in foreign securities.
(9) (a) Administration Agreement between Registrant and The Winsbury
Company Limited Partnership dated January 1, 1995, relating to the
U.S. Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free Fund, the Treasury Fund, the Municipal Investor Fund, the
Equity Fund, the Small Capitalization Fund, the International
Discovery Fund, the Balanced Fund, the High Income Equity Fund, the
Bond Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the U.S. Government Income Fund, the
Municipal Bond Fund and the Michigan Municipal Bond Fund.
(i) Amendment dated November 8, 1995 to Exhibit A adding the Large
Capitalization Fund.
(b) Transfer Agency Agreement between Registrant and The Winsbury
Service Corporation dated August 8, 1990.
(i) Amendment dated May 12, 1994 to Schedule B revising the fee
schedule.
(c) Fund Accounting Agreement between Registrant and The Winsbury
Service Corporation dated as of February 1, 1993, relating to the
U.S. Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free
OTHER INFORMATION
<PAGE> 352
Fund, the Equity Fund, the Small Capitalization Fund, the
International Discovery Fund, the Balanced Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government Income
Fund, the Municipal Bond Fund and the Michigan Municipal Bond Fund.
(i) Amendment dated November 8, 1995 to Schedule A adding the Large
Capitalization Fund and incorporating an amendment adding the
Treasury Fund and the Municipal Investor Fund.
(ii) Amendment dated April 1, 1993 to Schedule B revising the fee
schedule.
(d) Sub-Administration Agreement between First of America Investment
Corporation and The Winsbury Company Limited Partnership dated January
1, 1995, relating to the U.S. Government Obligations Fund, the Prime
Obligations Fund, the Tax-Free Fund, the Treasury Fund, the Municipal
Investor Fund, the Equity Fund, the Small Capitalization Fund, the
International Discovery Fund, the Balanced Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government Income
Fund, the Municipal Bond Fund and the Michigan Municipal Bond Fund.
(i) Amendment dated November 8, 1995 adding the Large Capitalization
Fund.
(e) Securities Lending Record Administration Agreement between The Bank of
California, N.A. and The Winsbury Company Limited Partnership dated
June 1, 1995.
(11) (a) Consent of Coopers & Lybrand, L.L.P.
(b) Consent of Howard & Howard Attorneys, P.C.
(12) Not applicable.
(13) Purchase Agreement dated July 2, 1987, between Registrant and The
Winsbury Corporation.
(14) (a) Specimen Agreement for Individual Retirement Account offered
through BISYS Fund Services, L.P. for investment in the Parkstone
Group of Funds.
(b) Specimen Agreement for Individual Retirement Account offered through
First of America Securities, Inc. for investment in the Parkstone
Group of Funds.
(15) (a) Investor A Distribution and Shareholder Service Plan.
OTHER INFORMATION
<PAGE> 353
(i) Participating Organization Agreement between The Winsbury Company and
National Financial Services Corporation dated October 1, 1993,
relating to Investor A Share distribution and shareholder services
for the U.S. Government Obligations Fund, the Tax-Free Fund, the
Prime Obligations Fund, the Treasury Fund, the Municipal Investor
Fund, the Equity Fund, the Small Capitalization Fund, the High Income
Equity Fund, the International Discovery Fund, the Balanced Fund, the
Bond Fund, the Limited Maturity Bond Fund, the Michigan Municipal
Bond Fund, the Municipal Bond Fund, the U.S. Government Income Fund
and the Intermediate Government Obligations Fund.
(a) Amendment dated November 8, 1995 to Schedule A adding the Large
Capitalization Fund.
(ii) Participating Organization Agreement between The Winsbury Company and
First of America Bank Corporation on behalf of its wholly-owned
subsidiary banks, dated October 1, 1993, relating to Investor A Share
distribution and shareholder services for the U.S. Government
Obligations Fund, the Tax-Free Fund, the Prime Obligations Fund, the
Treasury Fund, the Municipal Investor Fund, the Equity Fund, the
Small Capitalization Fund, the High Income Equity Fund, the
International Discovery Fund, the Balanced Fund, the Bond Fund, the
Limited Maturity Bond Fund, the Michigan Municipal Bond Fund, the
Municipal Bond Fund, the U.S. Government Income Fund and the
Intermediate Government Obligations Fund.
(a) Amendment dated November 8, 1995 adding the Large Capitalization
Fund and adding Exhibit C to reflect 12b-1 fees charged to each
Fund.
(b) Amendment dated November 8, 1995 to Schedule A adding the Large
Capitalization Fund.
(iii) Participating Organization Agreement between The Winsbury Company
and First of America Securities, Inc., as a party and on behalf of
its affiliate First of America Brokerage Services, dated September
21, 1994, relating to Investor A Share distribution and shareholder
services for the U.S. Government Obligations Fund, the Tax-Free
Fund, the Prime Obligations Fund, the Treasury Fund, the Municipal
Investor Fund, the Equity Fund, the Small Capitalization Fund, the
High Income Equity Fund, the International Discovery Fund, the
Balanced Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Michigan Municipal Bond Fund, the Municipal Bond Fund, the U.S.
Government Income Fund and the Intermediate Government Obligations
Fund.
OTHER INFORMATION
<PAGE> 354
(a) Amendment dated November 8, 1995 to Exhibit A adding the Large
Capitalization Fund.
(b) Investor B Distribution and Shareholder Service Plan.
(i) Shareholder Services and Financing Agreement between The Winsbury
Company and Security Distributors, Inc. dated February 1, 1994
relating to Investor B Share financing assistance and shareholder
support services for the Equity Fund, the Small Capitalization
Fund, the International Discovery Fund, the High Income Equity
Fund, the Balanced Fund, the Bond Fund, the Limited Maturity Bond
Fund, the U.S. Government Income Fund, the Intermediate Government
Obligations Fund, the Municipal Bond Fund and the Michigan
Municipal Bond Fund.
(ii) Service and Commission Agreement between The Winsbury Company and
Security Distributors, Inc., Security Benefit Group, Inc. and
First of America Brokerage Services dated February 1, 1994,
relating to Investor B Share shareholder support services for the
Equity Fund, the Small Capitalization Fund, the International
Discovery Fund, the High Income Equity Fund, the Balanced Fund,
the Bond Fund, the Limited Maturity Bond Fund, the U.S. Government
Income Fund, the Intermediate Government Obligations Fund, the
Municipal Bond Fund and the Michigan Municipal Bond Fund.
(iii) Dealer Agreement between The Winsbury Company and First of
America Brokerage Service, Inc. dated February 1, 1994 relating to
Investor B Share distribution services for the Equity Fund, the
Small Capitalization Fund, the International Discovery Fund, the
High Income Equity Fund, the Balanced Fund, the Bond Fund, the
Limited Maturity Bond Fund, the U.S. Government Income Fund, the
Intermediate Government Obligations Fund, the Municipal Bond Fund
and the Michigan Municipal Bond Fund.
(a) Amendment dated November 8, 1995 to Exhibit A adding the Large
Capitalization Fund and incorporating an amendment adding the
Emerging Markets Fund.
OTHER INFORMATION
<PAGE> 355
(c) Investor C Distribution and Shareholder Service Plan.
(i) Participating Organization Agreement between The Winsbury Company and
First of America Securities, Inc. dated September 21, 1994, relating
to Investor C Share distribution and shareholder services for the
Equity Fund, the Small Capitalization Fund, the High Income Equity
Fund, the Bond Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the Michigan Municipal Bond Fund, the
Balanced Fund, the U.S. Governmental Income Fund and the
International Discovery Fund.
(a) Amendment dated November 8, 1995 to Exhibit A adding the Large
Capitalization Fund.
(b) Amendment dated November 8, 1995 to Exhibit C adding the Large
Capitalization Fund.
(16) (a) Computation of Total Returns for the Equity Fund, the Small
Capitalization Fund, the Large Capitalization Fund, the
International Discovery Fund, the Emerging Markets Fund, the
Balanced Fund, the High Income Equity Fund, the Bond Fund, the
Limited Maturity Bond Fund, the Intermediate Government Obligations
Fund, the U.S. Government Income Fund, the Municipal Bond Fund,
the Michigan Municipal Bond Fund, the U.S. Government Obligations
Fund, the Prime Obligations Fund, the Tax-Free Fund, the Treasury
Fund and the Municipal Investor Fund.
(b) Computation of Yields for the Equity Fund, the Small Capitalization
Fund, the Large Capitalization Fund, the International Discovery
Fund, the Emerging Markets Fund, the Balanced Fund, the High Income
Equity Fund, the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government
Income Fund, the Municipal Bond Fund, the Michigan Municipal
Bond Fund, the U.S. Government Obligations Fund, the Prime
Obligations Fund, the Tax-Free Fund, the Treasury Fund and
the Municipal Investor Fund.
(c) Computation of Distribution Rates for the Equity Fund, the Small
Capitalization Fund, the Large Capitalization Fund, the
International Discovery Fund, the Emerging Markets Fund, the
Balanced Fund, the High Income Equity Fund, the Bond Fund, the
Limited Maturity Bond Fund, the Intermediate Government Obligations
Fund, the U.S. Government Income Fund, the Municipal Bond Fund, and
the Michigan Municipal Bond Fund.
(17) (a) Power of Attorney for George R. Landreth, Lawrence D. Bryan, Robert
M. Beam, and Adrian Charles Edwards.
(18) Multiple Class Plan adopted by the Board of Trustees.
OTHER INFORMATION
<PAGE> 1
Exhibit 1(a)
DECLARATION OF TRUST
THE MICHIGAN FUND
MARCH 25, 1987
DECLARATION OF TRUST, made as of March 25, 1987, by Martin E. Lybecker (the
"Trustee").
WHEREAS, the Trustee desires to establish a trust fund for the investment and
reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustee declares that all money and property contributed
to the trust fund hereunder shall be held in trust and managed under this
Declaration of Trust as herein set forth below.
I.
NAME
This trust shall be known as The Michigan Fund (hereinafter called the
"Trust").
II.
PURPOSE OF TRUST; AGENT FOR SERVICE
The Trust is a Massachusetts business trust as described in Chapter 182,
Section 1 of the General Laws of the Commonwealth of Massachusetts, and is
formed for the purpose of acting as a management investment company under the
Investment Company Act of 1940; provided, however, that the Trust may exercise
all powers which are ordinarily exercised by or permissible for Massachusetts
business trusts.
The Agent of the Trust for Service of Process within the Commonwealth of
Massachusetts shall be: CT Corporation System, Two Oliver Street, Boston,
Massachusetts 02109.
III.
DEFINITIONS
3.1 DEFINITION OF CERTAIN TERMS. As used in this Declaration of Trust, the
terms set forth below shall have the following meanings:
A. "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each series of the Trust may be divided
or redivided from time
<PAGE> 2
to time by the Trustees acting under this Declaration of Trust or, in the
absence of such action, such term means the equal proportionate transferable
units of interest into which the entire beneficial interest in the Trust shall
be divided from time to time, and includes fractions of Shares as well as whole
Shares.
B. The holder of each Share shall be entitled to one vote for each dollar
of value invested, and a proportionate fractional vote for any fraction of a
dollar invested, irrespective of series, then recorded in his name on the books
of the Trust. On any matter submitted to a vote of the Shareholders, all
Shares then issued and outstanding and entitled to vote, irrespective of the
series, shall be voted in the aggregate and not by series except: (1) as
otherwise required by the Act; or (2) when the matter, as conclusively
determined by the Trustees, affects only the interest of the Shareholders of a
particular series of the Trust (in which case only Shareholders of the affected
series shall be entitled to vote thereon).
C. "Person" shall mean a natural person, a corporation, a partnership, an
association, a joint-stock company, a trust, a fund, any federal, state, or
local governmental body, agency, instrumentality, or any political subdivision
thereof, or any organized group of persons whether or not incorporated.
D. "Trustees" refers to the individual trustees of the Trust, in their
capacity as trustees hereunder and not as individuals, and to their successor
or successors, while serving in office as a trustee of the Trust.
E. The "Act" refers to the Investment Company Act of 1940, as now or
hereafter amended, and to the rules and regulations adopted from time to time
thereunder.
F. The terms "assignment" and "interested person" shall have the respective
meanings set forth in the Act. The term "vote of a majority of the outstanding
Shares" shall mean, where required by the Act, the approval, at a meeting of
Shareholders duly called, of the lesser of (i) the holders of 67% or more of
the votes present at any such meeting, if the holders of more than 50% of the
outstanding votes are present or represented by proxy thereat; or (ii) the
holders of more than 50% of the outstanding votes; provided, however, that the
term "vote of a majority of the outstanding Shares" may be used herein with
respect to Shares of the Trust as a whole, or with respect to Shares of a
particular series of the Trust, as the context may require.
G. The "Regulations" shall refer to the Code of Regulations of the Trust as
adopted and amended from time to time.
H. The "Declaration of Trust" shall mean this Declaration of Trust as
amended or restated from time to time.
-2-
<PAGE> 3
IV.
OWNERSHIP OF ASSETS OF THE TRUST
4.1 The assets of the Trust shall be held separate capacity, other than as
Trustees hereunder, by the Trustees. Legal title to all the assets of the
Trust shall be vested in the Trustees as joint tenants except that the Trustees
shall have power to cause legal title to any assets of the Trust to be held by
or in the name of one or more of the Trustees, in the name of the Trust, in the
name of a particular series of the Trust, or in the name of any other Person as
nominee, on such terms as the Trustees may reasonably determine. The right,
title, and interest of the Trustees in the assets of the Trust shall vest
automatically in each person who may hereafter become a Trustee. Upon the
resignation, removal, or death of a Trustee, such Trustee shall automatically
cease to have any right, title, or interest in any of the assets of the Trust,
and the right, title, and interest of such Trustee in the assets of the Trust
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective regardless of whether conveyancing documents
(pursuant to Section 6.6 of this Declaration of Trust or otherwise) have been
executed and delivered. Except to the extent otherwise required by Article V
hereof, no Shareholder shall be deemed to have severable ownership in any
individual asset of the Trust or any right of partition or possession thereof;
nor shall any Shareholder be called upon to assume any losses of the Trust or
suffer an assessment of any kind by virtue of his ownership of Shares; but each
Shareholder shall have a proportionate undivided beneficial interest in the
series of the Trust in respect of which the Shares held by such Shareholder
shall have been issued.
V.
SHAREHOLDERS; SERIES; BENEFICIAL INTEREST IN
SERIES OF THE TRUST; PURCHASE AND REDEMPTION OF SHARES
5.1 SHARES IN THE SERIES OF THE TRUST.
A. The Trustees shall have full power and authority, in their sole
discretion, without obtaining the prior approval of the Shareholders (either
with respect to the Trust as a whole or with respect to any series of the
Trust) by vote or otherwise, to establish one or more series of Shares of the
Trust. The establishment of any such series shall be effective upon the
adoption by a majority of the Trustees then in office of a resolution
establishing such series and setting the voting rights, preferences,
designations, conversion or other rights, restrictions, limitations as to
distributions, conditions of redemption, qualifications, or other terms of the
Shares of such series. The beneficial interest in each series of the Trust
shall at all times be divided into full and fractional transferable Shares
without par value. There is no numerical limitation on the number of Shares of
a series that may be issued. The investment objective, policies, and
restrictions governing the management and operations of each series of the
Trust, including the management of assets belonging to any particular series,
may from time to time be changed or supplemented by the Trustees, subject to
the requirements of the Act. The
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Trustees may from time to time divide or combine the outstanding Shares of any
one or more series of the Trust into a greater or lesser number without thereby
changing their proportionate beneficial interests in the Trust assets allocated
or belonging to such series.
Subject to the respective voting rights, preferences, participating or other
special rights and qualifications, restrictions, and limitations expressly
provided for in this Declaration of Trust with respect to Shares of each series
of the Trust, the Trustees have the power to classify or reclassify Shares of
any series of the Trust into one or more classes by setting or changing in any
one or more respects, from time to time, the preferences, designations,
conversion or other rights, restrictions, limitations as to dividends,
conditions of redemption, qualifications, or other terms applicable to Shares
of such class. All references in this Declaration of Trust to Shares of any
series of the Trust shall include and refer to the Shares of any class thereof.
B. The holder of each Share shall be entitled to one vote for each dollar
of value invested, and a proportionate fractional vote for any fraction of a
dollar invested, irrespective of series, then recorded in his name on the books
of the Trust. On any matter submitted to a vote of the Shareholders, all
Shares then issued and outstanding and entitled to vote, irrespective of
series, shall be voted in the aggregate and not by series except: (1) as
otherwise required by the Act; or (2) when the matter, as conclusively
determined by the Trustees, affects only the interest of the Shareholders of a
particular series of the Trust (in which case only Shareholders of the affected
series shall be entitled to vote thereon).
C. Shares of each series of the Trust shall have the following preferences,
participating or other special rights, qualifications, restrictions and
limitations:
(1) ASSETS BELONGING TO A SERIES. All consideration received by the
Trust for the issue or sale of Shares of any series, together with all assets
in which such consideration is invested or reinvested, including any proceeds
derived from the sale, exchange, or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be referred to as "assets belonging to" that series. In
addition, any assets, income, earnings, profits or proceeds thereof, or funds
or payments which are not readily identifiable as belonging to a particular
series shall be allocated by the Trustees to one or more series (such
allocation to be conclusive and binding upon the Shareholders of all series for
all purposes) in such manner as they, in their sole discretion, deem fair and
equitable, and shall also be referred to as "assets belonging to" such series.
Such assets belonging to a particular series shall irrevocably belong for all
purposes to the Shares of the series, and shall be so handled upon the books of
account of the Trust. Such assets and the income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange, or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form, are herein referred to as "assets belonging to"
such a series. Shareholders of any series shall have no right, title or
interest in or to the assets belonging to any other series.
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(2) LIABILITIES BELONGING TO A SERIES. The assets belonging to any
series of the Trust shall be charged with the direct liabilities in respect of
such series and with all expenses, costs, charges, and reserves attributable to
such series, and shall also be charged with the share of such series of the
general liabilities, expenses, costs, charges, and reserves of the Trust which
are not readily identifiable as belonging to a particular series in proportion
to the relative net assets of the respective series, as determined at such time
or times as may be authorized by the Trustees. Any such determination by the
Trustees shall be conclusive and binding upon the Shareholders of all series
for all purposes; provided, however, that under no circumstances shall the
assets allocated or belonging to any series of the Trust be charged with
liabilities directly attributable to any other series. The liabilities so
charged to a series are herein referred to as "liabilities belonging to" such
series. All persons who may have extended credit to a particular series or who
have contracts or claims with respect to a particular series shall look only to
the assets of that particular series for payment of such contracts or claims.
(3) LIQUIDATING DISTRIBUTIONS. In the event of the termination of the
Trust or a particular series thereof and the winding up of its affairs, the
Shareholders of the Trust or such particular series shall be entitled to
receive out of the assets of the Trust or belonging to the particular series,
as the case may be, available for distribution to Shareholders, but other than
general assets not belonging to any particular series of the Trust, the assets
belonging to such series; and the assets so distributable to the Shareholders
of any series shall be distributed among such shareholders in proportion to the
number of Shares of such series held by them and recorded in their names on the
books of the Trust. In the event that there are any general assets not
belonging to any particular series of the Trust available for distribution,
such distribution shall be made to the Shareholders of all series subject to
such termination and winding up in proportion to the relative net assets of the
respective series determined as hereinafter provided and the number of Shares
of such series held by them and recorded in their names on the books of the
Trust.
(4) DIVIDENDS AND DISTRIBUTIONS. Shares of each series shall be entitled
to such dividends and distributions in Shares or in cash or both, as may be
declared from time to time by the Trustees, acting in their sole discretion,
with respect to such series, provided, however, that dividends and
distributions on Shares of a particular series shall be paid only out of the
lawfully available "assets belonging to" such series as such term is defined in
this Declaration of Trust.
5.2 PURCHASE OF SHARES. The Trustees may accept investments in each series
of the Trust from such Persons for such consideration and on such other terms
as they may from time to time authorize. The Trust may reject any order for,
or refuse to give effect on the books of the Trust to the transfer of, any
Shares as permitted under the Act. Each such investment shall be credited to
the Shareholder's account in the form of full and fractional Shares of the
appropriate series of the Trust, at the net asset value per Share next computed
after receipt of the investment.
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5.3 NET ASSET VALUE PER SHARE. The net asset value per Share of each series
of the Trust shall be computed at such time or times as the Trustees may
specify pursuant to the Act. Assets shall be valued and net asset value per
Share shall be determined by such Person or Persons as the Trustees may appoint
under the supervision of the Trustees in such manner not inconsistent with the
Act and any orders of the Securities and Exchange Commission received by the
Trust, as the Trustees may determine.
5.4 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
separately with respect to each series on the record books of the Trust.
Certificates for Shares shall be issued to holders of such Shares only upon the
authorization of the Trustees, in their discretion, to issue such certificates,
and shall be issued, if at all, subject to such rules and regulations as the
Trustees may determine. The Trustees may make such rules as they consider
appropriate for the transfer of Shares and similar matters. The record books
of the Trust shall be conclusive as to the identity of holders of Shares and as
to the number of Shares of each series held by each Shareholder.
5.5 PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or other
rights to subscribe to any additional Shares or other securities issued by the
Trust or by the Trustees.
5.6 REDEMPTION OF SHARES. To the extent of the assets of the Trust legally
available for such redemption, a Shareholder of any series of the Trust shall
have the right, subject to the provisions of Section 5.7 hereof, to require the
Trust to redeem his full and fractional Shares of any series out of assets
belonging to such series at a redemption price equal to the net asset value per
Share next determined after receipt of a request to redeem in proper form as
determined by the Trustees. The Trustees shall establish such rules and
procedures as they deem appropriate for redemption of Shares; provided,
however, that all redemptions shall be in accordance with the Act. Without
limiting the generality of the foregoing, the Trust shall, to the extent
permitted by applicable law, have the right at any time to redeem the Shares
owned by any holder thereof (i) if the value of such Shares in an account
maintained by the Trust or its transfer agent for any Shareholder with respect
to any series of the Trust is less than the amount specified by resolution of
the Trustees; provided, however, that any such Shareholder shall be notified
that the value of his account is less than such amount, and shall be allowed
such period of time as specified by resolution of the Trustees to make
additional purchases of Shares of the appropriate series so that the value of
his account may be increased before any such involuntary redemption is
processed by the Trust; or (ii) if the net income with respect to any
particular series of the Trust should be negative or it should otherwise be
appropriate to carry out the Trust's responsibilities under the Act, in each
case subject to such further terms and conditions as the Board of Trustees of
the Trust may from time to time adopt. The redemption price of Shares of any
series of the Trust shall, except as otherwise provided in this section, be the
net asset value thereof as determined by the Board of Trustees of the Trust
from time to time in accordance with the provisions of applicable law, less
such redemption fee or other charge, if any, as may be fixed by resolution of
the Board of Trustees of the Trust. When the net income with respect to any
particular series of the Trust is negative or whenever deemed appropriate by
the Board of Trustees of the Trust in order to carry out the Trust's
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responsibilities under the Act, any series of the Trust may, without payment of
compensation but in consideration of the interests of the Trust or a particular
series thereof and of the Shareholders of the Trust or of such series in
maintaining a constant net asset value per Share with respect to such series,
redeem pro rata from each holder of record on such day, such number of full and
fractional Shares of such series as may be necessary to reduce the aggregate
number of outstanding Shares of such series in order to permit the net asset
value thereof to remain constant. Payment of the redemption price, if any,
shall be made in cash by the appropriate series of the Trust at such time and
in such manner as may be determined from time to time by the Board of Trustees
of the Trust unless, in the opinion of the Board of Trustees, which shall be
conclusive and binding upon the Shareholders for all purposes, conditions exist
which make payment wholly in cash unwise or undesirable; in such event the
appropriate series of the Trust may make payment in the assets belonging or
allocable to such series, the value of which shall be determined as provided
herein.
5.7 SUSPENSION OF RIGHT OF REDEMPTION. The Trustees may suspend the right
of redemption by Shareholders or postpone the date of payment or the
recordation of transfer of Shares of any series, as permitted under the Act or
applicable law. Such suspension or postponement shall take effect at such time
as the Trustees shall specify but not later than the close of business of the
business day following the declaration of suspension or postponement, and
thereafter there shall be no right of redemption or payment or transfer until
the Trustees shall declare the suspension at an end. In case of suspension of
the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension.
5.8 CONVERSION RIGHTS. The Trustees shall have the authority to provide
from time to time that the holders of Shares of any series shall have the right
to convert or exchange said Shares for or into Shares of one or more other
series in accordance with such requirements and procedures as may be
established from time to time by the Trustees.
VI.
THE TRUSTEES
6.1 MANAGEMENT OF THE TRUST. Subject to any applicable requirements of law,
the business and affairs of the Trust shall be managed by the Trustees, who
shall have all powers necessary or desirable to carry out such responsibility,
including without limitation the appointment of and delegation of
responsibility to such officers, employees, agents, and contractors as they may
select.
6.2 NUMBER AND TERM OF OFFICE. The number of Trustees shall be determined
from time to time by the Trustees themselves, but shall not be less than three,
nor more than ten, subject to any applicable requirements of law provided,
however, that if there are less than three Shareholders, the number of Trustees
may be less than three but not less than the number of Shareholders and in no
event less than one. Each Trustee shall hold such position for such term
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as may be provided in the Regulations, and until his successor is elected and
qualifies. A Trustee shall qualify by accepting in writing his election or
appointment and agreeing to be bound by the provisions of this Declaration of
Trust. Except as otherwise provided herein in the case of vacancies, Trustees
(other than the Initial Trustee provided in Section 6.3) shall be elected by
the Shareholders, who shall vote in the aggregate and not by series and at such
time or times as the Trustees shall determine that such election is required
under Section 16(a) of the Act or as otherwise advisable. Notwithstanding the
foregoing, (a) any Trustee may resign as a Trustee by written instrument signed
by him and delivered to the other Trustees at the principal business office of
the Trust (without need for prior or subsequent accounting), which resignation
shall take effect upon such delivery or upon such later date as is specified
therein; (b) any Trustee may be removed at any time with or without cause by
written instrument, signed by at least two-thirds of the number of Trustees
prior to such removal, specifying the date when such removal shall become
effective; (c) any Trustee who requests to be retired or who has become
incapacitated by illness or injury may be retired by written instrument signed
by a majority of the other Trustees; and (d) the term of a Trustee shall
terminate at his death, resignation, bankruptcy, removal, or adjudicated
incompetency.
6.3 INITIAL TRUSTEE. The initial Trustee shall be Martin E. Lybecker, 1752
N Street, N.W., Suite 500, Washington, D.C. 20036, who, by his execution
hereof, has agreed to be bound by the provisions of this Declaration of Trust.
6.4 MEETINGS AND COMMITTEES. Meetings of the Trustees shall be held from
time to time within or without Massachusetts upon the call of such person or
persons as may be designated in the Regulations. The required quorum for any
such meeting shall be as set forth in the Regulations. Meetings of the
Trustees may be held by means of a conference telephone circuit or similar
communications equipment by means of which all persons participating may hear
each other at the same time. The Trustees may also act without a meeting,
unless provided otherwise in this Declaration of Trust, the Regulations or the
Act, by written consents of a majority of the Trustees.
The Trustees may appoint committees of Trustees and delegate powers to them
as provided in the Regulations. Any committee of the Trustees, including an
executive committee, if any, may act with or without a meeting. The requisite
quorum for all meetings of any committee shall be as set forth in the
Regulations. Unless provided otherwise in this Declaration of Trust, the
Regulations or the Act, any action of any such committee may be taken at a
meeting by vote of a majority of the members present a quorum being present),
or without a meeting by unanimous written consent of the members.
6.5 VACANCIES. In case a vacancy shall exist by reason of an increase in
the number of Trustees, or for any other reason, the remaining Trustees may
fill such vacancy by appointing such other person as they in their discretion
shall select, subject to the requirements of the Act. Such appointment shall
be evidenced by a written instrument signed by a majority of the then Trustees,
but the appointment shall not take effect until the individual so named shall
have qualified by accepting in writing the appointment and agreeing to be bound
by the terms of this
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Declaration of Trust. As may be required by law, the Trustees shall cause
notice thereof to be mailed to each of the Shareholders of record at the
address of such Shareholder on the books of the Trust. Whenever a vacancy in
the number of Trustees shall occur, until such vacancy is filled as provided in
this Section, the Trustees in office, regardless of their number, shall have
all the powers granted to the Trustees and shall discharge all the duties
imposed on the Trustees by this Declaration of Trust. In anticipation of a
vacancy to occur as a result of the resignation, retirement, or removal of a
Trustee or an increase in number of the Trustees, a majority of the Trustees
then in office may appoint such other person to fill such vacancy as they in
their discretion shall select, such appointment to be effective at such future
time as the Trustees may specify (subject to the acceptance in writing by such
other person of said appointment and his or her agreement to be bound by the
terms of this Declaration of Trust), with such notice as required to be mailed
as aforesaid to the Shareholders of record. A vacancy may also be filled by
the Shareholders in an election held at a meeting of Shareholders. As soon as
any Trustee so appointed or elected shall have qualified, the Trust estate
shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance.
6.6 EFFECT OF DEATH, RESIGNATION, ETC. OF TRUSTEE. The death, resignation,
bankruptcy, removal, retirement, or incapacity of the Trustees, or any one of
them, shall not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
asset of the Trust held in the name of the resigning or removed Trustee. Upon
the incapacity or death of any Trustee, his legal representative shall execute
and deliver on his behalf such documents as the remaining Trustees shall
require as provided in the preceding sentence. The failure to request or
deliver such documents shall not affect the operation of the provisions of
Article IV hereof.
6.7 POWERS. The Trustees in all instances shall act as principals and are
and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and execute
any and all contracts and instruments that they may consider necessary or
desirable in connection with the management of the Trust. The Trustees shall
not be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or the Regulations, and without limiting the
generality of the foregoing, the Trustees shall have power and authority:
A. To establish, in their sole discretion, without obtaining the prior
approval of the Shareholders, one or more series of the Trust, such
establishment to be effective upon the adoption by a majority of the Trustees
then in office of a resolution establishing such series and setting the voting
rights, preferences, designations, conversion or other rights, restrictions,
limitations as to distributions, conditions of redemption, qualifications, or
other terms of the Shares of such series, and to allocate among such series any
assets, income, earnings, profits
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or proceeds thereof, funds or payments, or expenses, costs, charges, or
reserves not readily identifiable as belonging to a particular series, such
allocation to be conclusive and binding upon all Shareholders for all purposes
in accordance with the provisions of Article V of this Declaration of Trust.
B. To buy and invest funds in their hands in such securities, debt
instruments, and other instruments and rights of a financial character as they
may from time to time determine; and to invest and reinvest cash and other
property or to hold cash and other property uninvested, in either instance
without being subject to any limitations imposed by law upon the nature of
investments made by fiduciaries.
C. To adopt a Code of Regulations not inconsistent with this Declaration of
Trust providing for the conduct of the affairs of the Trust, and to amend and
repeal this Declaration of Trust or such Regulations to the extent that this
Declaration of Trust or such Regulations do not reserve that right solely to
the Shareholders.
D. To elect and remove representatives and appoint and terminate the
appointment of agents.
E. To set record dates in the manner provided for hereinafter or in the
Regulations.
F. To issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in full and
fractional Shares with respect to each series of the Trust for such amount and
type of consideration, including, without limitation, cash or property, as the
Trustees may determine; and to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares, any funds or other assets of
the Trust, whether constituting capital or surplus or otherwise and to divide
or combine Shares of any series without thereby changing the proportionate
beneficial interests in any series of the Trust.
G. To vote or give assent, or exercise any rights of ownership, with
respect to securities or property; to solicit proxies from Shareholders and to
execute and deliver powers of attorney and proxies to such Person or Persons as
the Trustees shall deem proper, granting to such Person or Persons such power
and discretion with relation to securities or property as the Trustees shall
deem proper.
H. To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities.
I. To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered, or other negotiable form, in the name of the
Trust or a particular series thereof or in the name of the custodian or a
nominee or nominees, subject in either case to proper safeguards according with
applicable law or the usual practices of Massachusetts business trusts or
investment companies.
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J. To consent to or participate in any plan for the reorganization,
consolidation, or merger of any corporation or concern, any security of which
is held by any series of the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held by any series of
the Trust.
K. To collect all property due to the Trust; to pay all claims, including
taxes, against the assets belonging to the Trust; to prosecute, defend,
compromise, arbitrate, or otherwise adjust claims in favor of or against the
Trust or any matter in controversy, including, but not limited to, claims for
taxes; to foreclose any security interest securing any obligations by virtue of
which any property is owed to the Trust; and to enter into releases,
agreements, and other instruments.
L. To establish in their absolute discretion in accordance with the
provisions of applicable law the basis or method for determining the value of
the assets belonging to any series, the value of the liabilities belonging to
any series, the allocation of any assets or liabilities to any series, the net
asset value of any series, the times at which Shares of any series shall be
deemed to be outstanding or no longer outstanding and the net asset value of
each Share of any series for purposes of sales, redemptions, repurchases of
Shares or otherwise.
M. To determine in accordance with generally accepted accounting principles
and practices what constitutes net profits or net earnings, and to determine
what accounting periods shall be used by the Trust for any purpose, whether
annual or any other period, including daily; to set apart out of the assets
belonging to any series such reserves of funds for such purposes as it shall
determine and to abolish the same; to declare and pay any dividends and
distributions to any series in cash, securities or other property from any
assets legally available therefor, at such intervals (which may be as
frequently as daily) or on such other periodic basis, as it shall determine; to
declare such dividends or distributions by means of a formula or other method
of determination, at meetings held less frequently than the frequency of the
effectiveness of such declaration; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; and to provide for the payment
of declared dividends on a date earlier or later than the specified payment
date in the case of Shareholders redeeming their entire ownership of Shares of
any series.
N. To issue guarantees, to lend its assets, and to borrow money from banks,
and to pledge, assign, mortgage, encumber or hypothecate the assets of any
series of the Trust.
O. To issue, acquire, hold, resell, convey, and otherwise deal in
securities, debt instruments, and other instruments and rights of a financial
character, and to apply to any acquisition of securities any property of the
appropriate series of the Trust, whether from capital or surplus or otherwise.
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P. To enter into joint ventures, partnerships, and any other combinations
or associations.
Q. To purchase, and pay for out of the assets of the Trust, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents, or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action or admitted to be taken by
such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Persons against
such liability.
R. To the extent permitted by law, to indemnify any Person with whom the
Trust has dealings, to such extent as the Trustees shall determine consistent
with Article X hereof.
S. To engage in and to prosecute, defend, compromise, abandon, or adjust,
by arbitration or otherwise, any actions, suits, proceedings, disputes, claims,
and demands relating to the Trust or the assets of the Trust, and, out of the
assets of the Trust, to pay or to satisfy any debts, claims or expenses
incurred in connection therewith, including those of litigation, and such power
shall include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business
judgment, consenting to dismiss any action, suit, proceeding, dispute, claims,
or demand, derivative or otherwise, brought by any person, including a
Shareholder in such Shareholder's own name or in the name of the Trust, whether
or not the Trust or any of the Trustees may be named individually therein or
the subject matter arises by reason of business for or on behalf of the Trust.
T. To retain and employ Persons to serve on behalf of the Trust as
investment adviser, administrator, transfer agent, custodian, underwriter,
distributor, or in such other capacities as they consider desirable.
U. To the extent permitted by law, to delegate such power and authority as
they consider desirable to any representatives of the Trust and to any
investment adviser, administrator, transfer agent, custodian, underwriter,
distributor, or other Person.
V. To conduct, operate and carry on, either directly or through one or more
wholly-owned subsidiaries, the business of an investment company or any other
lawful business activity which the Trustees, in their sole discretion, consider
to be incidental to the business of the Trust or any series of the Trust as an
investment company, conducive to or expedient for the benefit or protection of
the Trust, any series of the Trust, or the Shareholders, or calculated in any
other manner to promote the interests of the Trust, any series of the Trust, or
the Shareholders.
W. To engage in any other lawful act or activity in which a Massachusetts
business trust may engage.
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No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
6.8 TRUSTEES AND REPRESENTATIVES AS SHAREHOLDERS. Any Trustee,
representative, or other agent of the Trust may acquire, own, vote, and dispose
of Shares of any series of the Trust to the same extent as if he were not a
Trustee, representative, or agent; and the Trust may issue and sell or cause to
be issued and sold Shares of any series of the Trust to, and may buy such
Shares from, any Persons with which such Trustee, representative, or agent is
affiliated, subject only to the general limitations herein contained as to the
sale and purchase of such Shares, and to any restrictions which may be
contained in the Regulations and in the Act.
6.9 TRUSTEE REIMBURSEMENT. The Trustees shall have the power to incur and
to pay (or shall be reimbursed) from the Trust estate all expenses and
disbursements of the Trust, including without limitation: interest expenses;
compensation payable to Trustees and representatives of the Trust; taxes; fees
and commissions of every kind incurred in connection with the affairs of the
Trust; expenses of the issue, repurchase, and redemption of Shares; expenses of
registering and qualifying the Trust and its Shares under federal and state
securities laws and regulations; charges of custodians, transfer agents,
investment advisers, administrators, and registrars; expenses of preparing and
printing and distributing prospectuses; auditing and legal expenses; expenses
of reports to Shareholders; expenses of meetings of Shareholders and proxy
solicitations therefor; insurance expenses; association membership dues; and
such non-recurring items as may arise, including costs and expenses of
litigation to which the Trust is a party. For all losses and liabilities by
them incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses, and liabilities, the Trustees shall have a lien on the
Trust estate prior to any rights or interests of the Shareholders thereto;
provided, however, that this section shall not prevent the Trust from directly
paying any of the aforementioned fees and expenses.
6.10 POWER TO CARRY OUT TRUSTS PURPOSES; PRESUMPTIONS. The Trustees shall
have power to carry out any all acts consistent with the Trust's purposes
through branches and offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, possessions, agencies, or instrumentalities of the united States
of America and of foreign governments, and to do all such other things and
execute all such instruments as they deem necessary, proper, or desirable in
order to promote the interests of the Trust, although such things may not be
herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive
and binding for all purposes. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees shall not be required to obtain any court order to deal
with the Trust property.
6.11 SERVICE IN OTHER CAPACITIES. Any Trustee, representative, employee, or
agent of the Trust, including any investment adviser, transfer agent,
administrator, distributor,
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custodian, or underwriter for the Trust, may serve in any other capacity on his
or its own behalf or on behalf of others, and may engage in other business
activities in addition to his or its services on behalf of the Trust; provided,
however, that such other activities do not materially interfere with the
performance of his or its duties for or on behalf of the Trust.
6.12 DETERMINATIONS BY TRUSTEES. Any determination made in good faith and,
so far as accounting matters are involved in accordance with generally accepted
accounting principles, by or pursuant to the direction of the Trustees as to
the amount and value of assets, obligations or liabilities of the Trust or any
series, as to the amount of net income of the Trust or any series from
dividends and interest for any period or amounts at any time legally available
for the payment of dividends, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose for creating
reserves or as to the use, alteration or cancellation of any reserves or
charges (whether or not any obligation or liability for which such reserves or
charges shall have been created shall have been paid or discharged or shall be
then or thereafter required to be paid or discharged), as to the value of any
security owned by the Trust or any series, as to the allocation of any assets
or liabilities to any series, as to the times at which Shares of any series
shall be deemed to be outstanding or no longer outstanding, or as to any other
matters relating to the issuance, sale or redemption or other acquisition or
disposition of securities or Shares, and any reasonable determination made in
good faith by the Trustees as to whether any transaction constitutes a purchase
of securities on "margin," a sale of securities "short," or any underwriting of
the sale of, or a participation in any underwriting or selling group in
connection with the public distribution of, any securities, shall be final and
conclusive, and shall be binding upon the Trust and all Shareholders, past,
present and future, and Shares are issued and sold on the condition and
understanding, evidenced by the purchase of Shares or acceptance of Share
certificates, that any and all such determinations shall be binding as
aforesaid.
VII.
AGREEMENTS WITH INVESTMENT ADVISER, PRINCIPAL
UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT, AND CUSTODIAN
7.1 INVESTMENT ADVISER. Subject to the vote of a majority of the
outstanding Shares of each series affected thereby, if then required by the
Act, and subject to all other applicable requirements of the Act, the Trustees
may, on such terms and conditions as they may in their discretion determine,
enter into a written investment advisory agreement or agreements with any
Person or Persons whereby such Person(s) shall undertake to furnish the
Trustees, on behalf of the Trust or one or more series of the Trust, such
portfolio management, investment advisory, statistical, research, and other
services upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser (subject to such general or
specific instructions as the Trustees may adopt) to effect purchases, sales, or
exchanges of portfolio securities of any series of the Trust on behalf of the
Trustees, or may authorize any representative, agent, or Trustee to effect such
purchases, sales, or exchanges pursuant to the recommendations of the
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investment adviser (and all without further action by the Trustees). Any such
purchases, sales, and exchanges so effected shall be deemed to have been
authorized by all of the Trustees.
7.2 ADMINISTRATOR. The Trustees may, on such terms and conditions as they
may in their discretion determine, enter into one or more agreements with any
Person or Persons providing for administrative services to the Trust, including
assistance in supervising the affairs of the Trust or one or more of its series
and the performance of administrative, clerical, and other services considered
desirable by the Trustees, and to determine the net asset value and net income
with respect to Shares of each series of the Trust.
7.3 PRINCIPAL UNDERWRITER. The Trustees may, on such terms and conditions
as they may in their discretion determine, enter into one or more distribution
agreements with any Person or Persons providing for the sale of Shares of any
series at a price at least equal to the net asset value per Share of such
series and further providing for sale of Shares of any series pursuant to
arrangements by which the Trust may either agree to sell the Shares to the
other party to the agreement or appoint such other party its sales agent for
such Shares. Such agreement may also provide for the repurchase of Shares of
any series of the Trust by such other party as principal or as agent of the
Trust, and may authorize the other party to enter into agreements with others
for the purpose of the distribution or repurchase of Shares of any series.
7.4 TRANSFER AGENT. The Trustees may, on such terms and conditions as they
may ln their discretion determine, enter into one or more agreements with any
Person or Persons providing for transfer agency and other services to
Shareholders of any series of the Trust.
7.5 CUSTODIAN. The Trustees shall at all times employ one or more banks or
trust companies, each organized under the laws of the United States or one of
the states thereof, and having capital, surplus, and undivided profits of at
least twenty million dollars ($20,000,000, as custodian(s) with authority as
the agent of the Trust, but subject to such restrictions, limitations, and
other requirements as may be established by the Trustees from time to time:
(1) to hold the cash and securities owned by the Trust and deliver the
same upon written order;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct; and
(3) to disburse such funds upon orders or vouchers.
The Trust may also employ such custodian(s) as its agent:
(1) to furnish transfer agency services;
(2) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
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(3) to compute, if authorized to do so by the Trustees, the net asset
value and net income of the Trust or any series thereof in accordance with the
provisions hereof; all upon such basis of compensation as may be agreed upon
between the Trustees and the custodian(s). If so directed by a vote of a
majority of the outstanding Shares of each affected series, any custodian shall
deliver and pay over all property of the series of the Trust held by it as
specified in such vote.
The Trustees may also authorize the custodian(s) to employ one or more
subcustodians from time to time to perform such of the acts and services of the
custodian(s) and upon such terms and conditions, as may be agreed upon between
the custodian(s) and such subcustodians. Any such subcustodian shall be a bank
or trust company organized under the laws of the United States or one of the
states thereof and having capital, surplus, and undivided profits of at least
twenty million dollars ($20,000,000), or such other Person as may be permitted
by the Securities and Exchange Commission, or otherwise in accordance with the
Act as from time to time amended.
7.6 CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations, and
orders as the Securities and Exchange Commission may adopt, the Trustees may
direct the custodian to deposit all or any part of the securities owned by any
series of the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, or such other person as may be permitted
by the Securities and Exchange Commission, or otherwise in accordance with the
Act as from time to time amended, pursuant to which system all securities of
any particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the Trust.
7.7 PARTIES TO THE AGREEMENT. The same Person or Persons may be employed in
multiple capacities under Sections 7.1 through 7.5 of this Article VII and may
receive compensation from the Trust in as many capacities in which such Person
or Persons shall serve the Trust. The Trustees may enter into any agreement of
the character described in this Article VII or any other agreement or
transaction with any Person, including any Person in which any Trustee,
representative, employee, or Shareholder of the Trust may be interested,
pecuniarily or otherwise, and no such agreement or transaction shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any Person holding such relationship be liable by
reason of such relationship for any loss or expense to the Trust under or by
reason of said agreement or transaction, or accountable for any profit realized
directly or indirectly therefrom; provided, however, that any such agreement or
transaction, when entered into, shall have been reasonable and fair and not
inconsistent with this Declaration of Trust, the Regulations, or the Act. The
same Person or Persons may be party to agreements or transactions entered into
pursuant to this Article VII and any such other agreement or transaction, and
any individuals may be financially interested in or otherwise affiliated with
Persons who are party to any or all of the agreements or transactions mentioned
in this Section 7.7.
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VIII.
SHAREHOLDERS' VOTING POWERS AND MEETINGS
8.1 VOTING POWERS. The Shareholders shall have power to vote (a) for the
election or removal of Trustees; (b) with respect to the amendment of this
Declaration of Trust as provided in Section 10.8 hereof; (c) with respect to
the approval of investment advisory and distribution agreements entered into on
behalf of the Trust or one or more series thereof, and with respect to such
other matters relating to the Trust as may be required by law, by this
Declaration of Trust, the Regulations, or the Act, by any requirements
applicable to or agreement of the Trust, and as the Trustees may consider
desirable; and (d) to the same extent as the shareholders of a Massachusetts
business corporation, when considering whether a court action, proceeding, or
claim should or should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders; provided, however, that no
Shareholder of a particular series sh.all be entitled to bring, or to vote in
respect of, any class of derivative action not on behalf of the series of the
Trust in respect of which the Shareholder owns Shares. Every Shareholder of
record shall have the right to one vote for each dollar of value invested in
his name as shown on the books of the Trust, and to have a proportionate
fractional vote for any fraction of one dollar invested, as to any matter on
which the Shareholder is entitled to vote. There shall be no cumulative
voting. Shares may be voted in person or by proxy. On any matter submitted to
a vote of the Shareholders, all Shares shall be voted in the aggregate and not
by individual series, except (i) where required by the Act, Shares shall be
voted by individual series, and (ii) if the Trustees shall have determined that
a matter affects the interests only of one or more series, then only the
Shareholders of such affected series shall be entitled to vote thereon. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required or permitted to be taken by Shareholders by law, this
Declaration of Trust, or the Regulations.
8.2 MEETINGS. Meetings of Shareholders may be called by the Trustees as
provided in the Regulations, and shall be called by the Trustees upon the
written request of Shareholders owning at least twenty percent of the
outstanding Shares entitled to vote.
8.3 QUORUM AND REQUIRED VOTE. At any meeting of the Shareholders, a quorum
for the transaction of business shall consist of a majority represented in
person or by proxy of all votes attributable to the outstanding Shares (without
regard to individual series) entitled to vote with respect to a matter;
provided, however, that at any meeting at which the only actions to be taken
are actions required by the Act to be taken by vote of the Shareholders of an
individual series, a quorum shall consist of a majority of all votes
attributable to the outstanding Shares of such individual series entitled to
vote thereon, and that at any meeting at which the only actions to be taken
shall have been determined by the Board of Trustees to affect the rights and
interests of one or more but not all series of the Trust, a quorum shall
consist of a majority of all votes attributable to the outstanding Shares of
the series so affected; and provided, further, that reasonable adjournments of
such meeting until a quorum is obtained may be made by a vote attributable to
the Shares present in person or by proxy. A majority of the votes shall decide
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any question and a plurality shall elect a Trustee, subject to any applicable
requirements of law or of this Declaration of Trust or the Regulations;
provided, however, that when any provision of law or of this Declaration of
Trust requires the holders of Shares of any particular series to vote by series
and not in the aggregate with respect to a matter, then a majority of all votes
attributable to the outstanding Shares of that series shall decide such matter
insofar as that particular series shall be concerned.
8.4 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by
Shareholders may be taken without a meeting if the holders of not less than
two-thirds of all votes attributable to the outstanding Shares entitled to be
voted with respect to the matter consent to the action in writing and the
written consents are filed with the records of the meetings of Shareholders.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
8.5 CODE OF REGULATIONS. The Regulations may include further provisions not
inconsistent with this Declaration of Trust for Shareholders' meetings, votes,
record dates, notices of meetings, and related matters.
IX.
LIMITATION OF LIABILITY AND INDEMNIFICATION
9.1 LIMITATION OF TRUSTEE LIABILITY. Every act or thing done or omitted,
and every power exercised or obligation incurred by the Trustees or any of them
in the administration of this Trust or in connection with any affairs,
property, or concerns of the Trust, whether ostensibly in their own names or in
their capacity as Trustees, shall be done, omitted, exercised, or incurred by
them as Trustees and not as individuals; and every Person contracting or
dealing with the Trustees or having any debt, claim, or judgment against them
or any of them shall look only to the funds and property of the Trust for
payment or satisfaction. No Trustee or Trustees of the Trust shall ever be
personally liable for or on account of any contract, debt, tort, claim, damage,
judgment, or decree arising out of or connected with the administration or
preservation of the Trust estate or the conduct of any of the affairs of the
Trust. Every note, bond, contract, order, or other undertaking issued by the
Trust or the Trustees relating to the Trust, and stationery used by the Trust,
shall include the notice set forth in section 9.4 of this Article IX (but the
omission thereof shall not be construed as a waiver of the foregoing provision,
and shall not render the Trustees personally liable).
It is the intention of this Section 9.1 that no Trustee shall be subject to
any personal liability whatsoever to any Person for any action or failure to
act, or any action or failure to act of any officer, agent, employee of the
Trust or of any investment adviser, administrator, distributor, custodian, or
transfer agent to the Trust or to any series thereof, or any officer, agent, or
employee of any of the foregoing (including, without limitation, the failure to
compel in any way any former or acting Trustee to redress any breach of trust),
except that nothing in this Declaration of Trust shall protect any Trustee from
any liability to the Trust or its
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Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties,
or by reason of reckless disregard of his obligations and duties as Trustee;
and that all persons shall look solely to the assets of the Trust for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
9.2 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES, AND EMPLOYEES. The Trust
shall indemnify, to the fullest extent permitted by law, every person who is or
has been a Trustee or officer of the Trust and any person rendering or having
rendered investment advisory, administrative, distribution, custodian, or
transfer agency services to the Trustees or to the Trust or any series thereof
pursuant to Article VII of this Declaration of Trust or otherwise, and every
officer, director, trustee, shareholder, employee, and agent of any such Person
(all such Persons hereinafter referred to as the "Covered Persons") against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit, or
other proceeding, whether civil or criminal, in which he may be involved or
with which he may be threatened, while as a Covered Person or thereafter, by
reason of his being or having been such a Covered Person except with respect to
any matter as to which he shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence, or reckless disregard of his
duties; provided, however, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from
independent legal counsel approved by the Trustees to the effect that, if
either the matter of willful misfeasance, gross negligence, or reckless
disregard of duty or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such person. The
rights accruing to any Covered Person under these provisions shall not exclude
any other right to which he may be lawfully entitled; provided, however, that
no Covered Person may satisfy any right of indemnity or reimbursement except
out of the property of the Trust. The Trustees may make advance payments in
connection with the indemnification under this Section 9.2; provided, however,
that the indemnified Covered Person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification. Rights of indemnification herein provided
may be insured against by policies maintained by the Trust. Such rights of
indemnification are severable, and shall inure to the benefit of the heirs,
executors, administrators, and other legal representatives of such Covered
Persons.
9.3 RELIANCE ON EXPERTS, ETC. Each Trustee and representative of the Trust
shall, in the performance of his duties, be fully and completely justified and
protected with regard to any act or any failure to act resulting from reliance
in good faith upon the books of account or other records of the Trust, upon an
opinion of counsel satisfactory to the Trust, or upon reports made to the Trust
by any of its representatives or employees or by the investment adviser, the
principal underwriter, selected dealers, accountants, appraisers, or other
experts or consultants selected with reasonable care by the Trustees or
representatives of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
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9.4 LIMITATION OF SHAREHOLDER LIABILITY. Shareholders shall not be subject
to any personal liability in connection with the assets of the Trust for the
acts or obligations of the Trust. The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for the payment of any
sum of money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription to any Share or
otherwise. Every obligation, contract, instrument, certificate, Share, other
security or undertaking of the Trust, and every other act whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacities as Trustees
under this Declaration of Trust or in their capacity as officers, employees, or
agents of the Trust, and not individually. Every note, bond, contract, order,
or other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust-or to any series of the Trust, and the stationery used by
the Trust, shall include a recitation limiting the obligation represented
thereby to the Trust and its assets (but the omission of such a recitation
shall not operate to bind any Shareholder), as follows:
"The names 'The Michigan Fund and Trustees of The Michigan Fund' refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under this Declaration of
Trust dated March 25, 1987 to which reference is hereby made and a copy of
which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of 'The Michigan Fund'
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, Shareholders or representatives
of the Trust personally, but bind only the assets of the Trust, and all persons
dealing with any series of Shares of the Trust must look solely to the assets
of the Trust belonging to such series for the enforcement of any claims against
the Trust."
The rights accruing to a Shareholder under this Section 9.4 shall not exclude
any other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided for herein, provided, however, that a Shareholder of any
series of the Trust shall be indemnified only from assets belonging to that
series.
9.5 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators, or other legal representatives, or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust shall,
upon request by the Shareholder, assume the defense of any claim made against
any Shareholder for any act or obligations of the Trust, and shall satisfy any
judgment thereon.
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9.6 LIABILITIES OF A SERIES. Liabilities belonging to any series of the
Trust, including, without limitation, expenses, fees, charges, taxes, and
liabilities incurred or arising in connection with a particular series, or in
connection with the management thereof, shall be paid only from the assets
belonging to that series.
X.
MISCELLANEOUS
10.1 TRUST NOT A PARTNERSHIP. It is hereby expressly declared that a
Massachusetts business trust and not a partnership, joint venture, corporation,
joint stock company, or any form of legal relationship other than a trust is
created hereby. Nothing herein shall be construed to make the Shareholders,
either by themselves or with the Trustees, partners or members of a joint stock
association. No Trustee hereunder shall have any power to bind personally
either the Trust's representatives or any Shareholders. All Persons extending
credit to, contracting with, or having any claim against any series of the
Trust or the Trustees shall look only to the assets of the appropriate series
of the Trust for payment under such credit, contract, or claim; and neither the
Shareholders, or the Trustees nor any of their agents, whether past, present,
or future, shall be personally liable therefor.
10.2 NO BOND OR SURETY. The Trustees shall not be required to give any bond
as such, nor any surety if a bond is required.
10.3 TERMINATION OF TRUST. This Trust shall continue without limitation of
time; provided, however, that:
A. The Trustees, with the vote of a majority of the outstanding Shares of
any series of the Trust, may sell and convey the assets belonging to such
series to another trust or corporation organized under the laws of any state of
the United States, which is a management investment company as defined in the
Act, for an adequate consideration which may include the assumption of all
outstanding obligations, taxes, and other liabilities, accrued or contingent,
of the series and which may include beneficial interests of such trust or stock
of such corporation. Upon making provision for the payment of all such
liabilities, by such assumption or otherwise, the Trustees shall distribute the
remaining proceeds ratably among the holders of the Shares of the series then
outstanding.
B. The Trustees, with the vote of a majority of the outstanding Shares of
any series of the Trust, may sell and convert into money all the assets
belonging to such series. Upon making provision for the payment of all
outstanding obligations, taxes, and other liabilities, accrued or contingent,
of the series, the Trustees shall distribute the remaining assets belonging to
such series ratably among the holders of the outstanding Shares of the series.
C. Without the vote of a majority of the outstanding Shares of any series
of the Trust (unless Shareholder approval is otherwise required by applicable
law), the Trustees
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may combine the assets belonging to any two or more series into a single series
if the Trustees reasonably determine that such combination will not have a
material adverse effect on the Shareholders of each series affected thereby.
D. After the effective date of the determination of the Trustees under
paragraph A or B above,
(1) The Trust shall carry on no business relating to the assets of such
series except for the purpose of winding up the affairs of such series.
(2) The Trustees shall proceed to wind up the affairs of such series and
all of the powers of the Trustees under this Declaration of Trust shall
continue until the affairs of such series shall have been wound up, including
the power to fulfill or discharge the contracts of the Trust relating to such
series, to collect assets of such series, to sell, convey, assign, exchange,
transfer, or otherwise dispose of all or any part of the remaining assets of
such class to one or more Persons at public or private sale for consideration
that may consist in whole or in part of cash, securities, or other property of
any kind, to discharge or pay its liabilities, and to do all other acts
appropriate to liquidate the business of such series.
Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in paragraphs A and B of this section, the
Trustees may authorize the termination of that series of the Trust. Such
termination shall be effective upon filing with the State Secretary of the
Commonwealth of Massachusetts of an instrument setting forth such termination,
at which time the Trustees shall be discharged of any and all further
liabilities and duties hereunder relating to such series and the right, title
and interest of all parties shall be cancelled and discharged with respect to
such series. Such instrument shall constitute an amendment to this Declaration
of Trust when filed with the State Secretary of the Commonwealth of
Massachusetts as provided in this Title X.
10.4 INCORPORATION. with the vote of a majority of the outstanding Shares
without regard to individual series, the Trustees may cause to be organized, or
assist in organizing, a corporation or corporations under the laws of any
jurisdiction, to carry on any affairs in which the Trust Property shall
directly or indirectly have any interest, and to transfer the Trust Property to
any Person in exchange for any Shares or securities thereof or otherwise, and
to lend money to, subscribe for the Shares or securities of, and enter into any
contract with any such Person in which the Trust holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any Person if and
to the extent permitted by law. Nothing contained herein shall be construed as
requiring approval of Shareholders in order for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations, or other organizations and selling, conveying, or transferring a
portion of the Trust property to any Person(s).
10.5 FILING OF COPIES, REFERENCES, HEADINGS. The original instrument of this
Declaration of Trust and each amendment hereto shall be filed with the State
Secretary of the
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Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of the Commonwealth of Massachusetts, and copies
thereof shall be kept at the office of the Trust where they may be inspected by
any Shareholder. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein and, unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, integrating into a single
instrument all of the provisions of the Declaration that are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
shall, upon filing with the State Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the initial Declaration and the
various amendments thereto. Anyone dealing with the Trust may rely on a
certificate by a representative of the Trust as to whether or not any such
amendment hereto shall have been made and as to any matters in connection with
the Trust hereunder, and with the same effect as if it were the original, may
rely on a copy certified by a representative of the Trust to be a copy of this
instrument or of any amendment thereto. Headings are placed herein for
convenience of reference only and in the case of any conflict, the text of this
instrument, rather than the headings, shall control. This instrument may be
executed in any number of counterparts, each of which shall be deemed an
original. All signatures to this instrument need not appear on the same page.
10.6 APPLICABLE LAW. The Trust set forth in this instrument is a trust made
in the Commonwealth of Massachusetts and is to be governed by and construed and
administered according to the laws of said Commonwealth.
10.7 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
A. The provisions of this Declaration of Trust are severable and, if the
Trustees shall determine with the advice of counsel that any of such provisions
shall be in conflict with the Act, the regulated investment company provisions
of the Internal Revenue Code, Chapter 182 of the General Laws of the
Commonwealth of Massachusetts, or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration of Trust; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration of Trust or render
invalid or improper any action taken or omitted prior to such determination.
B. If any provision of this Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
C. Notwithstanding the foregoing, nothing contained in this Declaration of
Trust shall permit any amendment of this Declaration of Trust which would
impair the
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exemption from personal liability of the Trustees and Shareholders or to permit
assessments upon Shareholders.
10.8 AMENDMENT PROCEDURE.
A. This Declaration of Trust may be amended by the affirmative vote of the
holders of not less than a majority of all votes attributable to the
outstanding Shares without regard to individual series (unless otherwise
required by Section 8.1 herein) or by any larger vote as may be required by any
provisions of applicable law.
B. Notwithstanding any other provisions hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration of Trust may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees.
C. The Trustees may also amend this Declaration without the vote of
Shareholders to cure any error or ambiguity or to change the name of the Trust
or, if they deem it necessary, to conform this Declaration of Trust to the
requirements of applicable state or federal laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, but the Trustees shall not be liable for failing to do
so.
IN WITNESS WHEREOF, the undersigned has executed this Declaration of Trust as
Trustee and not individually, as of the 25th day of March, 1987.
/s/ MARTIN E. LYBECKER
--------------------------
MARTIN E. LYBECKER
-24-
<PAGE> 25
CITY OF BOSTON :
:
COMMONWEALTH OF MASSACHUSETTS :
On this 25th day of March, 1987, Martin E. Lybecker, known to me and known to
be the individual described in and who executed the foregoing instrument,
personally appeared before me and he acknowledged the foregoing instrument to
be his free act and deed.
/s/ NANCY FONDA
------------------------
Notary Public
My Commission Expires:
December 9, 1988
- ----------------------------
(Seal)
-25-
<PAGE> 1
Exhibit 1(a)(i)
AMENDMENT TO THE DECLARATION OF TRUST
THE ROSE STREET GROUP (FORMERLY THE MICHIGAN FUND)
APRIL 7, 1986
The undersigned being the sole trustee of The Michigan Fund (the "Trust"), a
Massachusetts business trust established by Declaration of Trust dated as of
March 25, 1987, do hereby certify that pursuant to paragraph B of Section 10.8
thereof and for the purpose of changing the name of the Trust, the undersigned
hereby amend said Declaration of Trust as follows:
AMENDMENT TO DECLARATION OF TRUST, made as of April 7, 1987, by Stephen G.
Mintos (the "Trustee").
WHEREAS, the Trustee desires to change the name of the Trust to The Rose
Street Group:
NOW, THEREFORE, the Trustee declares that Declaration of Trust shall be
amended as set forth below.
Section I is amended in its entirety by substituting the following in its
place:
This trust shall be known as The Rose Street Group (hereinafter called the
"Trust").
IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Declaration of Trust as trustee and not individually, as of the 7th day of
April, 1987.
/s/ STEPHEN G. MINTOS
---------------------------
STEPHEN G. MINTOS
STATE OF OHIO:
COUNTY OF FRANKLIN:
On this 7th day of April, 1987, Stephen G. Mintos, known to me and known to
be the individual described in and who executed the foregoing instrument,
personally appeared before me and acknowledged the foregoing instrument to be
his act and deed.
/s/ BETH A. HOOVER
----------------------------
Notary Public
My Commission Expires:
September 25, 1989
- ---------------------------
(SEAL)
<PAGE> 1
Exhibit 1(a)(ii)
AMENDMENT TO THE DECLARATION OF TRUST
THE PARKSTONE GROUP OF FUNDS
(FORMERLY THE ROSE STREET GROUP)
JUNE 11, 1987
The undersigned being the sole trustee of The Rose Street Group (the
"Trust"), a Massachusetts business trust established by Declaration of Trust
dated as of March 25, 1987, do hereby certify that pursuant to paragraph B of
Section 10.8 thereof and for the purpose of changing the name of the Trust, the
undersigned hereby amend said Declaration of Trust as follows:
AMENDMENT TO DECLARATION OF TRUST, made as of June 11, 1987, by Stephen G.
Mintos (the "Trustee").
WHEREAS, the Trustee desires to change the name of the Trust to The Parkstone
Group of Funds:
NOW, THEREFORE, the Trustee declares that Declaration of Trust shall be
amended as set forth below.
Section I is amended in its entirety by substituting the following in its
place:
This trust shall be known as The Parkstone Group of Funds (hereinafter called
the "Trust").
IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Declaration of Trust as trustee not individually, as of the 11th day of June,
1987.
/s/ STEPHEN G. MINTOS
-----------------------------
STEPHEN G. MINTOS
STATE OF OHIO
COUNTY OF FRANKLIN
On this 11th day of June, 1987, Stephen G. Mintos, known to me and known to
be the individual described in and who executed the foregoing instrument,
personally appeared before me and acknowledged the foregoing instrument to be
his act and deed.
/s/ BETH A. HOOVER
-----------------------------
Notary Public
My Commission Expires:
September 25, 1989
- ----------------------------
(SEAL)
<PAGE> 1
Exhibit 2(a)
CODE OF REGULATIONS
THE PARKSTONE GROUP OF FUNDS
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 MEETINGS. Meetings of Shareholders of The Parkstone Group of Funds (the
"Trust") may be called by the Trustees, and shall be called by the Trustees
whenever required by law or upon the written request of holders of at least
twenty percent of all votes attributable to the outstanding units of beneficial
interest in the Trust (the "Shares") entitled to vote.
1.2 NOTICE. Written notice, stating the place, day, and hour of each
meeting of Shareholders and the general nature of the business to be
transacted, shall be given by, or at the direction of, the person calling the
meeting to each Shareholder of record entitled to vote at the meeting at least
ten days prior to the day named for the meeting, unless in a particular case a
longer period of notice is required by law.
1.3 SHAREHOLDERS' LIST. The officer or agent having charge of the transfer
books for Shares of the Trust shall make, at least five days before each
meeting of Shareholders, a complete list of the Shareholders entitled to vote
at the meeting, arranged in alphabetical order with the address of and the
number of Shares held by each such Shareholder. The list shall be kept on file
at the office of the Trust and shall be subject to inspection by any
Shareholders at any time during usual business hours, and shall also be
produced and kept open at the time and place of each meeting of Shareholders
and shall be subject to the inspection of any Shareholder during each meeting
of Shareholders.
1.4 RECORD DATE. The Trustees may fix a time (during which they may close
the Share transfer books of the Trust) not more than fifty (50) days prior to
the date of any meeting of Shareholders, or the date fixed for the payment of
any dividend, or the date of the allotment of rights or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, or to
vote at, any such meeting, or entitled to receive payment of any such dividend,
or to receive any such allotment of rights, or to exercise such rights, as the
case may be. In such case, only such Shareholders as shall be Shareholders of
record at the close of business n the date so fixed shall be entitled to notice
of, or to vote at, such meeting or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any Shares on the books of the Trust after
any record date fixed, as aforesaid.
<PAGE> 2
ARTICLE II
TRUSTEES
2.1 NUMBER AND TERM OF OFFICE. The number of Trustees shall be fixed from
time to time by the Trustees, but shall not be less than three (3) nor more
than ten (10), provided, however, that if there are less than three (3)
Shareholders, the number of Trustees may be less than three (3), but not less
than the number of Shareholders and in no event less than one (1). Each
Trustee shall hold office until the next meeting of Shareholders following his
election or appointment as Trustee at which Trustees are elected and until his
successor shall have been elected and qualified.
2.2 QUORUM. At all meetings of the Trustees, a majority of the Trustees
shall constitute a quorum for the transaction of business and the action of a
majority of the Trustees present at any meeting at which a quorum is present
shall be the action of the Trustees unless the concurrence of a greater portion
is required for action by law, by the Declaration of Trust, or by these
Regulations. If a quorum shall not be present at any meeting of the Trustees,
the Trustees present thereat may by a majority vote adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present. A quorum for all meetings of any committee of the
Trustees shall be a majority of the members thereof.
2.3 PLACE OF MEETING; TELEPHONE MEETINGS. Meetings of the Trustees, regular
or special, shall be held at the principal office of the Trust or at such other
place as the Trustees may from time to time determine. Except as may otherwise
be required by law or by the Declaration of Trust, the Trustees or any
committee thereof may participate in a meeting of the Trustees or of such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the conference may
hear each other at the same time, and participation by such means shall
constitute presence in person at the meeting. The Trustees may also act
without a meeting, unless provided otherwise in the Declaration of Trust, this
Code of Regulations or required by law, by written consents of a majority of
the Trustees.
2.4 REGULAR MEETINGS. Regular meetings of the Trustees may be called by the
President or the Secretary and must be called by the President at the request
of any two Trustees. Regular meetings of the Trustees may be held without
notice at such time and at the principal office of the Trust or at such other
place as the Trustees may from time to time determine.
2.5 SPECIAL MEETINGS. Special Meetings of the Trustees may be called by the
President on one day's notice to each Trustee; Special Meetings shall be called
by the President or Secretary in like manner and on like notice on the written
request of a majority of the Trustees then in office.
-2-
<PAGE> 3
2.6 COMMITTEES. The Trustees may by resolution passed by a majority of the
Trustees appoint from among the Trustees an executive committee and other
committees composed of two or more Trustees, and may delegate to such
committees, in the intervals between meetings of the Trustees, any or all of
the powers of the Trustees in the management of the business and affairs of the
Trust, except the power to issue Shares in the Trust or to recommend to
Shareholders any action requiring Shareholders' approval.
2.7 CHAIRMAN OF THE BOARD. The Trustees may at any time appoint one of
their number as Chairman of the Board, who shall serve at the pleasure of the
Trustees and who shall perform and execute such duties as the Trustees may from
time to time provide but who shall not by reason of performing or executing
these duties be deemed an officer or employee of the Trust.
2.8 COMPENSATION. Any Trustee, whether or not a salaried officer, employee,
or agent of the Trust, may be compensated for his services as Trustee or as a
member of a committee, or as Chairman of the Board of Trustees or Chairman of a
committee, by fixed periodic payment or by fees for attendance at meetings or
by both and, in addition, may be reimbursed for transportation and other
expenses, all in such manner and amounts as the Trustees may from time to time
determine.
ARTICLE III
NOTICES
3.1 FORM. Notices to Shareholders shall be in writing and delivered
personally or mailed to the Shareholders at their addresses appearing on the
books of the Trust. Notices to Trustees shall be oral or by telephone or
telegram or in writing delivered personally or mailed to the Trustees at their
addresses appearing on the books of the Trust. Oral notice shall be deemed to
be given when given directly to the person required to be notified and notice
by mail shall be deemed to be given when deposited in the United States mail or
with a telegraph office or courier service for transmission. Notices to
Trustees need not state the purpose of a Regular or Special Meeting.
3.2 WAIVER. Whenever any notice of the time, place, or purpose of any
meeting of Shareholders, Trustees, or committee is required to be given under
the provisions of Massachusetts law or under the provisions of the Declaration
of Trust or these Regulations, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of Shareholders in person or by proxy, or at the meeting of
Trustees or committee in person, shall be deemed equivalent to the giving of
such notice to such persons.
-3-
<PAGE> 4
ARTICLE IV
OFFICERS
4.1 NUMBER. The officers of the Trust shall be chosen by the Trustees and
shall include a President, who shall be a Trustee, a Secretary, and a
Treasurer. The Board of Trustees may, from time to time, elect or appoint one
or more Vice Presidents, Assistant Secretaries, and Assistant Treasurers.
4.2 OTHER OFFICERS. The Trustees may from time to time appoint such other
officers and agents as they shall deem advisable, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Trustees. The Trustees may delegate to
one or more officers or agents the power to appoint any such subordinate
officers or agents and to prescribe their respective rights, terms of office,
authorities, and duties.
4.3 ELECTION AND TENURE. The officers of the Trust shall be chosen annually
by the Trustees. Two or more offices may be held by the same person but no
officer shall execute, acknowledge, or verify any instrument in more than one
capacity, if such instrument is required by law, the Declaration of Trust, or
these Regulations to be executed, acknowledged, or verified by two or more
officers. Any officer or agent may be removed by the Trustees. i An officer of
the Trust may resign by filing a written resignation with the President, with
the Trustees, or with the Secretary. Any vacancy occurring in any officer of
the Trust by death, resignation, removal, or otherwise shall be filled by the
Trustees.
4.4 COMPENSATION. The salaries or other compensation of all officers and
agents of the Trust shall be fixed by the Trustees, except that the Trustees
may delegate to any committee the power to fix the salary or other compensation
of any officer of the Trust.
4.5 PRESIDENT. The President shall be the chief executive officer of the
Trust; he shall preside at all meetings of the Shareholders and the Trustees
unless a Chairman has been designated, shall be a member ex officio of all
standing committees, and shall see that all orders and resolutions of the
Trustees are carried into effect. He, or such person as he may designate,
shall sign, execute, and acknowledge, in the name of the Trust, deeds,
mortgages, bonds, contracts, and other instruments authorized by the Trustees,
except in the case where the signing and execution thereof shall be delegated
by the Trustees to some other officer or agent of the Trust. The President
shall also be the chief administrative officer of the Trust and shall perform
such other duties and have such other powers as the Trustees may from time to
time prescribe.
4.6 VICE PRESIDENTS. The Vice Presidents, if any, in the order of their
seniority, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties as the Trustees may from time to time prescribe.
-4-
<PAGE> 5
4.7 SECRETARY. The Secretary shall attend meetings of the Trustees and
meetings of the Shareholders and record all the proceedings thereof and shall
perform like duties for any committee when required. He shall give, or cause
to be given, notice of meetings of the Shareholders and of the Trustees, and
shall perform such other duties as may be prescribed by the Trustees or the
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the Trust and, when authorized by the Trustees, affix and attest
the same to any instrument requiring it; provided, however, that in lieu of
affixing the seal of the Trust to any document, it shall be sufficient to meet
the requirements of any law, rule, or regulation relating to a seal to affix
the word "(SEAL)" adjacent to the signature of the authorized officer of the
Trust. The Trustees may give general authority to any other officer to affix
the seal of the Trust and to attest the affixing by his signature.
4.8 ASSISTANT SECRETARIES. The Assistant Secretaries, if any, when so
directed by the Secretary, or in the absence or disability of the Secretary, in
order of their seniority, shall perform the duties and exercise the powers of
the Secretary and shall perform such other duties as the Trustees shall
prescribe.
4.9 TREASURER. The Treasurer shall be the chief financial officer of the
Trust. He shall be responsible for the maintenance of its accounting records
and shall render to the Trustees when the Trustees so require an account of all
the Trust's financial transactions and a report of the financial condition of
the Trust.
4.10 ASSISTANT TREASURERS. The Assistant Treasurers, if any, when so
directed by the Treasurer, or in the absence or disability of the Treasurer, in
the order of their seniority, shall perform the duties and exercise the powers
of the Treasurer and shall perform such other duties as the Trustees may from
time to time prescribe.
ARTICLE V
INVESTMENT RESTRICTIONS
The Trustees may from time to time adopt such restrictions upon the
investment of the assets of the Trust, or amendments thereto, as they may
consider necessary or desirable; provided, however, that any such restriction
or amendment shall be approved by a majority of the outstanding shares of the
Trust entitled to vote thereon if required by the Investment Company Act of
1940, as amended.
ARTICLE VI
GENERAL PROVISIONS
6.1 INSPECTION OF BOOKS. The Trustees shall from time to time determine
whether and to what extent, and at what times and places and under what
conditions and regulations, the accounts and books of the Trust or any of them
shall be open to the inspection of the
-5-
<PAGE> 6
Shareholders; and no Shareholder shall have any right to inspect any account or
book or documents of the Trust except as conferred by law or by these
regulations or authorized by the Trustees or by resolution of the Shareholders.
6.2 REPORTS. The Trust shall transmit to the Shareholders and file with
federal and state regulatory agencies such reports of its operations as the
Trustees shall consider necessary or desirable or as may be required by law.
6.3 BONDING OF OFFICERS AND EMPLOYEES. All officers and employees of the
Trust shall be bonded to such extent, and in such manner, as may be required by
law.
6.4 TRANSFER OF SHARES. Transfers of Shares shall be made on the books of
the Trust at the direction of the person named on the Trust's books or named in
any certificates for such Shares (if issued), or by his attorney lawfully
constituted in writing, and upon surrender of any certificate or certificates
for such Shares (if issued) properly endorsed, together with a proper request
for redemption, to the Trust's transfer agent, with such evidence of the
authenticity of such transfer, authorization, and other matters as the Trust or
its agents may reasonably require, and subject to such other reasonable
conditions and requirements as may be required by the Trust or its agents; or,
if the Trustees shall by resolution so provide, transfer of Shares may be made
in any other manner provided by law.
ARTICLE VII
AMENDMENTS
This Code of Regulations may be altered or repealed by the Trustees at any
Regular or Special Meeting of the Trustees.
-6-
<PAGE> 1
Exhibit 2(a)(i)
THE PARKSTONE GROUP OF FUNDS
AMENDMENT TO CODE OF REGULATIONS
Amended: May 11, 1989 as follows:
ARTICLE I, Section 1.4 is amended by deleting such Section 1.4 in its
entirety and by substituting in place thereof the following new Section 1.4:
"1. RECORD DATE. The Trustees may fix a time during which they may close
the Share transfer books of the Trust) not more than ninety (90) day prior to
the date of any meeting of Shareholders, or the date fixed for the payment of
any dividend, or the date of the allotment of rights or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, or to
vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any such allotment of rights, or to exercise such
right, as the case my be. In such case, only such Shareholders as shall be
Shareholders of record at the close of business on the date so fixed shall be
entitled to notice of, or to vote at such meeting or to receive payment of
such dividend, or to receive such allotment of rights, or to exercise such
rights; as the case may be, notwithstanding any transfer of any Shares on the
books of the Trust after any record date fixed, as aforesaid."
<PAGE> 1
Exhibit 2(a)(ii)
THE PARKSTONE GROUP OF FUNDS
AMENDMENT TO CODE OF REGULATIONS
Amended: August 26, 1993 as follows:
ARTICLE II, Section 2.1 is amended by deleting such Section 2.1 in its
entirety and by substituting in place thereof the following new Section 2.1:
"2.1 NUMBER AND TERM OF OFFICE.
(a) The number of Trustees shall be fixed from time to time by the
Trustees, but shall not be less than three (3) nor more than ten (10),
provided, however, that if there are less than three (3) Shareholders, the
number of Trustees may be less than three (3), but not less than the number
of Shareholders and in no event less than one (1). Each Trustee shall hold
office until the next meeting of Shareholders following his election or
appointment as Trustee at which Trustees are elected and until his successor
shall have been elected and qualified.
(b) To be eligible for election or appointment as a Trustee, a person must
be less than 65 years of age. At the end of the month in which any Trustee
attains age 65, such Trustee's qualification to serve shall cease, his or her
trusteeship shall be deemed vacated and such person shall thereafter not be
eligible for election or appointment to the Board; provided, however, that
the foregoing shall not disqualify or render ineligible for service persons
serving as Trustees and who are 65 years of age or older as of August 26,
1993, and provided further, that such persons shall remain eligible for
service through August 31, 1995, immediately after which date such persons'
eligibility to serve shall cease."
<PAGE> 1
Exhibit 5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of July 9, 1987 between THE PARKSTONE GROUP OF FUNDS, a
Massachusetts business trust (herein called the "Group"), and SECURITIES
COUNSEL INCORPORATED, a wholly-owned, Michigan-chartered subsidiary of First of
America Bank - Michigan, N.A. (herein called the "Investment Adviser").
WHEREAS, the Group is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Group desires to retain the Investment Adviser to furnish
investment advisory and administrative services to certain investment
portfolios of the Group (the "Funds") and the Investment Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Group hereby appoints the Investment Adviser to act as
investment adviser to the Funds identified on Schedule A hereto for the period
and on the terms set forth in this Agreement. The Investment Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Group has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Group's Declaration of Trust, as executed on March 25, 1987 and as
filed with the Secretary of State of the Commonwealth of Massachusetts on March
27, 1987, and all amendments thereto or restatements thereof (such Declaration,
as presently in effect and as it shall from time to time be amended or
restated, is herein called the "Declaration of Trust");
(b) the Group's Code of Regulations and amendments thereto;
(c) resolutions of the Group's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Group's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission on April 8, 1987 and
211 amendments thereto.
(e) the Group's Registration Statement on Form-1A under the Securities Act
of 1933, as amended ("1933 Act"), (File No. 33-13283) and under the 1940 Act as
filed with the Securities and Exchange Commission and all amendments thereto;
and
<PAGE> 2
(f) the Funds' most recent prospectuses and Statement of Additional
Information (such prospectuses and Statement of Additional Information, as
presently in effect, and all amendments and supplements thereto are herein
collectively called the "Prospectus").
The Group will furnish the Investment Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Group's Board of Trustees,
the Investment Adviser will provide a continuous investment program for each
Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Group with respect to the Funds.
The Investment Adviser will provide the services under this Agreement in
accordance with each Fund's investment objective, policies, and restrictions as
stated in the Prospectus and resolutions of the Group's Board of Trustees. The
Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its activities
under this Agreement in accordance with any applicable regulations of any
governmental authority pertaining to the investment advisory activities of the
Investment Adviser;
(c) will not make loans to any person to purchase or carry units of
beneficial interest in the Group or make loans to the Group;
(d) will place orders pursuant to its investment determinations for the
Group either directly with the issuer or with any broker or dealer. In placing
orders with brokers and dealers, the Investment Adviser will attempt to obtain
prompt execution of orders in an effective manner at the most favorable price.
Consistent with this obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Investment Adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Investment Adviser with research advice and other
services. In no instance will portfolio securities be purchased from or sold to
The Winsbury Com?any, Securities Counsel Incorporated, or any affiliated person
of either the Group, The Winsbury Company, or Securities Counsel Incorporated;
(e) will maintain all books and records with respect to the Group's
securities transactions and will furnish the Group's Board of Trustees such
periodic and special reports as the Board may request;
-2-
<PAGE> 3
(f) will treat confidentially and as proprietary information of the Group
all records and other information relative to the Group and prior, present, or
potential interestholders, and will not use such records and information for
any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Group, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Group;
and
(g) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the Group,
the Investment Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for the Group's
account are customers of the Investment Adviser or of its parent or its
subsidiaries or affiliates. In dealing with such customers, the Investment
Adviser and its parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of those customers are held by the Group.
4. SERVICES NOT EXCLUSIVE. The investment management services furnished by
the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Group are the property of the Group and further agrees to
surrender promptly to the Group any of such records upon the Group's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. EXPENSES. During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions,
if any) purchased for the Group.
7. COMPENSATION. For the services provided and the expenses assumed pursuant
to this Agreement, each of the Funds will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee computed
daily and paid monthly at the applicable annual rate set forth on Schedule A
hereto. Each Fund's obligation to pay the above-described fee to the
Investment Adviser will begin as of the date of the initial public sale of
shares in that Fund.
If in any fiscal year the aggregate expenses of any of the Funds (as defined
under the securities regulations of any state having jurisdiction over the
Group) exceed the expense limitations of any such state, the Investment Adviser
will reimburse the Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by the
-3-
<PAGE> 4
Fund to the Investment Advise hereunder to the aggregate fees otherwise payable
by the Fund to the Investment Adviser hereunder and to The Winsbury Company
under the Administration Agreement between The Winsbury Company and the Group.
The obligation of the Investment Adviser to reimburse the Funds hereunder is
limited in any fiscal year to the amount of its fee hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Funds for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over
the Group so require. Such expense reimbursement, if any, will be estimated
daily and reconciled and paid on a monthly basis.
8. LIMITATION OF LIABILITY. The Investment Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds
in connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under
this Agreement.
9. DURATION AND TERMINATION. This Agreement will become effective as to a
particular Fund as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of
such Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until December
31, 1988.
Thereafter, if not terminated, this Agreement shall continue in effect as to
a particular Fund for successive periods of twelve months each ending on
December 31 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Group's
Board of Trustees who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Group's Board of Trustees or by the vote of a majority of all votes
attributable to the outstanding Shares of such Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to a particular Fund at any time
on sixty days' written notice, without the payment of any penalty, by the Group
(by vote of the Group's Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund) or by the Investment Adviser. This
Agreement will immediately terminate in the event of its assignment. (As used
in this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning of such terms
in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
-4-
<PAGE> 5
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the Commonwealth of Massachusetts.
The names "The Parkstone Group of Funds" and "Trustees of The Parkstone Group
of Funds" refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under a
Declaration of Trust dated as of March 25, 1987 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of "The
Parkstone Group of Funds" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, interestholders
or representatives of the Trust personally, but bind only the assets of the
Trust, and all persons dealing with any Fund of the Trust must look solely to
the assets of the Trust belonging to such Fund for the enforcement of any
claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE PARKSTONE GROUP OF FUNDS
Seal By: /s/ G. RONALD HENDERSON
-----------------------------
Title: President
--------------------------
SECURITIES COUNSEL INCORPORATED
Seal By: /s/ RUSSELL LEONARD
-----------------------------
Title: President
--------------------------
-5-
<PAGE> 6
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
SECURITIES COUNSEL INCORPORATED
DATED JULY 9, 1987
Name of Fund Compensation*
The Parkstone U.S. Government Annual rate of forty
Obligations Fund one-hundredths of one percent
(.40%) of the U.S. Government
Obligations Fund's average
daily net assets.
The Parkstone Prime Annual rate of forty
Obligations Fund one-hundredths of one percent
(.40%) of the Prime
Obligations Fund's average
daily net assets.
The Parkstone Tax-Free Fund Annual rate of forty
one-hundredths of ore percent
(.40%) of the Tax-Free Fund's
average daily net assets.
THE PARKSTONE GROUP OF FUNDS
By: /s/ G. RONALD HENDERSON
-----------------------------
Title: President
--------------------------
Date: July 9, 1987
----------------------------
SECURITIES COUNSEL INCORPORATED
By: /s/ RUSSELL LEONARD
-----------------------------
Title: President
--------------------------
Date: July 9, 1987
----------------------------
_______
* All fees are computed daily and paid monthly.
-6-
<PAGE> 1
EXHIBIT 5(a)(i)
SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
SECURITIES COUNSEL INCORPORATED
DATED JULY 9, 1987
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
------------ ------------ ----
<S> <C> <C>
Parkstone U.S. Government Annual rate of forty onehundreths September 8, 1988
Obligations Fund of one percent (.40%) of the
Parkstone Prime Obligations average daily net assets of each
Fund Fund
Parkstone Tax-Free Fund
Parkstone Treasury Fund Annual rate of forty onehundreths August 26, 1993
Parkstone Municipal Investor of one percent (.40%) of the
Fund average daily net assets of each
Fund
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ G. RONALD HENDERSON
--------------------------------
G. Ronald Henderson
Title: President
-----------------------------
Date: 9/2/93
------------------------------
FIRST OF AMERICA INVESTMENT
CORPORATION (formerly SECURITIES COUNSEL
INCORPORATED)
By: /s/ RICHARD A. WOLF
--------------------------------
Title: President
-----------------------------
Date: 9/10/93
------------------------------
- ------------
* All fees are computed daily and paid monthly.
<PAGE> 1
Exhibit 5(b)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of September 8, 1988 between THE PARKSTONE GROUP OF FUNDS,
a Massachusetts business trust (herein called the "Group"), and SECURITIES
COUNSEL, INC., a wholly owned, Michigan-chartered subsidiary of First of
America Bank - Michigan, N.A. (herein called the "Investment Adviser").
WHEREAS, the Group is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Group desires to retain the Investment Adviser to furnish
investment advisory and administrative services to certain investment
portfolios of the Group (the "Funds") and the Investment Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Group hereby appoints the Investment Adviser to act as
investment adviser to the Funds identified on Schedule A hereto for the period
and on the terms set forth in this Agreement. The Investment Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided. Additional investment portfolios may from time
to time be added to those covered by this Agreement by the parties executing a
new Schedule A which shall become effective upon its execution and shall
supersede any Schedule A having an earlier date.
2. DELIVERY OF DOCUMENTS. The Group has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Group's Declaration of Trust, as executed on March 25, 1987 and as
filed with the Secretary of State of the Commonwealth of Massachusetts on March
27, 1987, and all amendments thereto or restatements thereof (such Declaration,
as presently in effect and as it shall from time to time be amended or
restated, is herein called the "Declaration of Trust");
(b) the Group's Code of Regulations and amendments thereto;
(c) resolutions of the Group's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Group's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission on April 8, 1987 and
all amendments thereto;
(e) the Group's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended ("1933 Act") (File No. 33-13283), and under the 1940
Act as filed with the Securities and Exchange Commission and all amendments
thereto; and
<PAGE> 2
(f) the Funds' most recent prospectuses and Statement of Additional
Information (such prospectuses and Statement of Additional Information, as
presently in effect, and all amendments and supplements thereto are herein
collectively called the "Prospectus").
The Group will furnish the Investment Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Group's Board of Trustees,
the Investment Adviser will provide a continuous investment program for each
Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Group with respect to the Funds.
The Investment Adviser will provide the services under this Agreement in
accordance with each Fund's investment objective, policies, and restrictions as
stated in the Prospectus and resolutions of the Group's Board of Trustees. The
Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its activities
under this Agreement in accordance with any applicable regulations of any
governmental authority pertaining to the investment advisory activities of the
Investment Adviser;
(c) will not make loans to any person to purchase or carry units of
beneficial interest in the Group or make loans to the Group;
(d) will place orders pursuant to its investment determinations for the
Group either directly with the issuer or with any broker or dealer. In placing
orders with brokers and dealers, the Investment Adviser will attempt to obtain
prompt execution of orders in an effective manner at the most favorable price.
Consistent with this obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Investment Adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Investment Adviser with research advice and other
services. In no instance will portfolio securities be purchased from or sold
to The Winsbury Company, Securities Counsel, Inc., or any affiliated person of
either the Group, The Winsbury Company, or Securities Counsel, Inc.;
(e) will maintain all books and records with respect to the Group's
securities transactions and will furnish the Group's Board of Trustees such
periodic and special reports as the Board may request;
-2-
<PAGE> 3
(f) will treat confidentially and as proprietary information of the Group
all records and other information relative to the Group and prior, present, or
potential interestholders, and will not use such records and information for
any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Group, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Group;
and
(g) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the Group,
the Investment Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for the Group's
account are customers of the Investment Adviser or of its parent or its
subsidiaries or affiliates. In dealing with such customers, the Investment
Adviser and its parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of those customers are held by the Group.
4. SERVICES NOT EXCLUSIVE. The investment management services furnished by
the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Group are the property of the Group and further agrees to
surrender promptly to the Group any of such records upon the Group's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. EXPENSES. During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions,
if any) purchased for the Group.
7. COMPENSATION. For the services provided and the expenses assumed pursuant
to this Agreement, each of the Funds will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee set forth on
Schedule A hereto. Each Fund's obligation to pay the above-described fee to
the Investment Adviser will begin as of the date of the initial public sale of
shares in that Fund.
If in any fiscal year the aggregate expenses of any of the Funds (as defined
under the securities regulations of any state having jurisdiction over the
Group) exceed the expense limitations of any such state, the Investment Adviser
will reimburse the Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the
Fund
-3-
<PAGE> 4
to the Investment Adviser hereunder and to The Winsbury Company under the
Administration Agreement between The Winsbury Company and the Group. The
obligation of the Investment Adviser to reimburse the Funds hereunder is
limited in any fiscal year to the amount of its fee hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Funds for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over
the Group so require. Such expense reimbursement, if any, will be estimated
daily and reconciled and paid on a monthly basis.
8. LIMITATION OF LIABILITY. The Investment Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds
in connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under
this Agreement.
9. DURATION AND TERMINATION. This Agreement will become effective as to a
particular Fund as of the date first written above (or, if a particular Fund is
not in existence on that date, on the date a registration statement relating to
that Fund becomes effective with the Securities and Exchange Commission),
provided that it shall have been approved by vote of a majority of the
outstanding voting securities of such Fund, in accordance with the requirements
under the 1940 Act, and, unless sooner terminated as provided herein, shall
continue in effect until December 31, 1988.
Thereafter, if not terminated, this Agreement shall continue in effect as to
a particular Fund for successive periods of twelve months each ending on
December 31 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Group's
Board of Trustees who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Group's Board of Trustees or by the vote of a majority of all votes
attributable to the outstanding Shares of such Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to a particular Fund at any time
on sixty days' written notice, without the payment of any penalty, by the Group
(by vote of the Group's Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund) or by the Investment Adviser. This
Agreement will immediately terminate in the event of its assignment. (As used
in this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning of such terms
in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
-4-
<PAGE> 5
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the Commonwealth of Massachusetts.
The names "The Parkstone Group of Funds" and "Trustees of The Parkstone Group
of Funds" refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the
Declaration of Trust to which reference is hereby made and a copy of which is
on file at the office of the Secretary of the Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Parkstone Group of Funds" entered
into in the name or on behalf thereof by any of the Trustees, representatives
or agents are made not individually, but in such capacities, and are not
binding upon any of the Trustees, interestholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons
dealing with any Fund of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE PARKSTONE GROUP OF FUNDS
Seal
By: /s/ G. RONALD HENDERSON
-----------------------------
Title: President
--------------------------
SECURITIES COUNSEL, INC.
Seal
By: /s/ MARK R. KUMMERER
-----------------------------
Title: Vice President
--------------------------
-5-
<PAGE> 6
Dated: September 8, 1988
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
SECURITIES COUNSEL, INC.
DATED SEPTEMBER 8, 1988
<TABLE>
<CAPTION>
Name of Fund Compensation*
- ------------ ------------
<S> <C>
Parkstone Bond Fund Annual rate of seventy four one-hundredths of one
Parkstone Limited Maturity percent (.74%) of the average daily net assets of
Bond Fund each Fund
Parkstone Intermediate
Government Obligations
Fund
Parkstone Municipal Bond Fund
Parkstone Limited Maturity
Municipal Bond Fund
--------------------
Parkstone Equity Fund Annual rate of one percent (1%) of the average
Parkstone Small Capitalization daily net assets of each Fund
Value Fund
Parkstone High Income Equity
Fund
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ G. RONALD HENDERSON
-----------------------------
Title: President
--------------------------
SECURITIES COUNSEL, INC.
By: /s/ MARK R. KUMMERER
-----------------------------
Title: Vice President
--------------------------
_____
*All fees are computed daily and paid monthly.
<PAGE> 1
Exhibit 5(b)(i)
THE PARKSTONE GROUP OF FUNDS
FIRST AMENDMENT TO INVESTMENT ADVISORY AGREEMENT
THIS FIRST AMENDMENT TO INVESTMENT ADVISORY AGREEMENT (this "First
Amendment") dated as of March 1, 1995, by and between THE PARKSTONE GROUP OF
FUNDS, a Massachusetts business trust, located in Columbus, Ohio (the "Group")
and FIRST OF AMERICA INVESTMENT CORPORATION, a Michigan corporation, located in
Kalamazoo, Michigan (the "Investment Adviser").
W I T N E S S E T H:
WHEREAS, the parties hereto entered into that certain Investment Advisory
Agreement as of the 8th day of September, 1988, and amended as of the 21st day
of January, 1992, with respect to the Balanced Fund (the "Investment Advisory
Agreement"), and
WHEREAS, the parties hereto wish to amend the Investment Advisory Agreement
as it relates to the Balanced Fund.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
Unless otherwise defined herein, all capitalized terms used in this First
Amendment shall have their respective defined meanings ascribed to them in the
Investment Advisory Agreement.
2. AMENDMENTS.
a. Subject to the provisions of the Investment Advisory Agreement, the
Declaration of Trust and the 1940 Act, the Investment Adviser directly and
indirectly may select and enter into contracts with one or more qualified
Investment Advisers ("Sub-Advisers") to provide to the Trust some or all of the
services required by the Investment Advisory Agreement with respect to the
Balanced Fund. With respect to any such appointment by the Investment Adviser
of any of the Sub-Advisers, the Investment Adviser will, as appropriate:
(i) Advise the Sub-Advisers with respect to United States ("U.S.")
economic conditions and trends;
(ii) Assist Sub-Advisers with the placement of orders for the purchase and
sale of securities of U.S. issuers;
(iii) Assist and consult with the Sub-Advisers regarding the management
of the Balanced Fund's short-term cash balance
<PAGE> 2
positions denominated in U.S. dollars to preserve liquidity in the Balanced
Fund's assets, including the placement of orders for U.S. money market
instruments;
(iv) Assist and consult with the Sub-Advisers in connection with the
Balanced Fund's continuous investment program; and
(v) Periodically review, evaluate and report to the Group's Board of
Trustees with respect to the performance of the Sub-Advisers.
b. The Investment Advisor, in selecting and entering into contracts with
Sub-Advisers, shall require that each of the Sub-Advisers comply with the
provisions of the Investment Advisory Agreement set forth in Sections 3, 5 and
6 thereof.
c. The compensation of any Sub-Advisers directly appointed by the
Investment Adviser shall be the sole responsibility of the Investment Adviser
and shall be an expense of the Investment Adviser to be paid by it in
accordance with Section 6 of the Investment Advisory Agreement.
3. MISCELLANEOUS.
Except the extent expressly amended by this First Amendment, the Investment
Advisory Agreement shall remain unchanged and in full force and effect.
References therein to "this Agreement," "hereby," "herein," and the like shall
be deemed to refer to the Investment Advisory Agreement as amended hereby with
respect to the Balanced Fund. This First Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE PARKSTONE GROUP OF FUNDS
By: /s/ STEPHEN G. MINTOS
----------------------------
Stephen G. Mintos
Its: Chairman
----------------------------
FIRST OF AMERICA INVESTMENT
CORPORATION
By: /s/ RICHARD A. WOLF
---------------------------
Richard A. Wolf
Its: President
---------------------------
-3-
<PAGE> 1
Exhibit 5(b)(ii)
DATED: NOVEMBER 8, 1995
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
FIRST OF AMERICA INVESTMENT CORPORATION
(FORMERLY SECURITIES COUNSEL, INC.)
DATED SEPTEMBER 8, 1988
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION* DATE
------------ ------------ ----
<S> <C> <C>
Parkstone Bond Fund Annual rate of seventy four one- September 8, 1988
Parkstone Limited Maturity Bond Fund hundredths of one percent (.74%) of
Parkstone Intermediate the average daily net assets of each
Government Obligations Fund Fund
Parkstone Municipal Bond Fund
Parkstone Equity Fund Annual rate of one percent (1%) of the September 8, 1988
Parkstone Small Capitalization average daily net assets of each Fund
Value Fund
Parkstone High Income Equity Fund
Parkstone Michigan Annual rate of seventy four one- June 29, 1990
Municipal Bond Fund hundredths of one percent (.74%) of
the average daily net assets of such
Fund
Parkstone Balanced Fund Annual rate of one percent (1.00%) of January 21, 1992
the average daily net assets of such
Fund
Parkstone U.S. Government Annual rate of seventy-four one- October 27, 1992
Income Fund hundredths of one percent (.74%) of
the average daily net assets of such
Fund
Parkstone Large Capitalization Fund Annual rate of eighty one-hundredths November 8, 1995
of one percent (.80%) of the average
daily net assets of such Fund
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ GEORGE R. LANDRETH
---------------------------
George R. Landreth
President
FIRST OF AMERICA INVESTMENT CORPORATION
(formerly known as Securities Counsel, Inc.)
By: /s/ RICHARD A. WOLF
---------------------------
Richard A. Wolf
President
__________________________________
* All fees are computed daily and paid monthly.
<PAGE> 1
Exhibit 5(c)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 22nd day of December, 1992 between THE PARKSTONE
GROUP OF FUNDS, a Massachusetts business trust (the "Trust"), and FIRST OF
AMERICA INVESTMENT CORPORATION, a wholly-owned Michigan-chartered subsidiary of
First of America Bank Michigan, N.A. (the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to provide, or
arrange for the provision of, investment advisory services to one or more
investment portfolios of the Trust (the "Funds") and the Investment Adviser
represents that it is willing and possesses legal authority to so furnish such
services; and
WHEREAS, the Investment Adviser is registered under the Investment Advisers
Act of 1940, as amended, and is engaged in the business of rendering investment
advisory services to the Trust and to others and desires to provide the
services described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Investment Adviser to act as
investment adviser to the Funds identified on Schedule A hereto for the period
and on the terms set forth in this Agreement. The Investment Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided. Additional investment portfolios may from time
to time be added to those covered by this Agreement by the parties executing a
new Schedule A which shall become effective upon its execution and shall
supersede any Schedule A having an earlier date.
2. DELIVERY OF DOCUMENTS. The Trust has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Trust's Declaration of Trust, as executed on March 25, 1987 and as
filed with the Secretary of State of the Commonwealth of Massachusetts on March
27, 1987, and all amendments thereto or restatements thereof (such Declaration,
as presently in effect and as it shall from time to time be amended or
restated, is herein called the "Declaration of Trust");
(b) the Trust's Code of Regulations and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission on April 8, 1987 and
all amendments thereto;
<PAGE> 2
(e) Post-Effective Amendment No. 17 to the Trust's Registration Statement
on Form N-1A under the Securities Act of 1933, as amended ("1933 Act") (File
No. 33-13283), and under the 1940 Act, as filed with the Securities and
Exchange Commission; and
(f) each Fund's most recent Prospectus and Statement of Additional
Information (such Prospectus and Statement of Additional Information, as
presently in effect, and all amendments and supplements thereto are herein
collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject to the supervision of the Trust's Board of Trustees,
the Investment Adviser will provide, or arrange for the provision of, a
continuous investment program for each of the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in said Funds. The Investment Adviser will determine, or arrange
for others to determine, from time to time what securities and other
investments will be purchased, retained or sold by the Trust with respect to
the Funds and will implement, or arrange for others to implement, such
determinations through the placement, in the name of the Funds, of orders for
the execution of portfolio transactions with or through such brokers or dealers
as it may select. The Investment Adviser will provide, or arrange for the
provision of, the services under this Agreement in accordance with each of the
Funds' investment objectives, policies and restrictions as stated in the
Prospectus and resolutions of the Trust's Board of Trustees.
Subject to the provisions of this Agreement, the Declaration of Trust and the
1940 Act, the Investment Adviser directly and indirectly may select and enter
into contracts with one or more qualified investment advisers ("Sub-Advisers")
to provide to the Trust some or all of the services required by this Agreement.
With respect to any such appointment by the Investment Adviser of any of the
Sub-Advisers, the Investment Adviser will, as appropriate:
(a) advise the Sub-Advisers with respect to United States ("U.S.")
economic conditions and trends;
(b) assist Sub-Advisers with the placement of orders for the purchase and
sale of securities of U.S. issuers;
(c) assist and consult with the Sub-Advisers regarding the management of
the Funds' short-term cash balance positions denominated in U.S. dollars to
preserve liquidity in the Funds' assets, including the placement of orders for
U.S. money market instruments;
(d) assist and consult with the Sub-Advisers in connection with the Funds'
continuous investment programs; and
-2-
<PAGE> 3
(e) periodically review, evaluate and report to the Trust's Board of
Trustees with respect to the performance of the Sub-Advisers.
In fulfilling its responsibilities hereunder, the Investment Adviser agrees
that it will, or, with respect to services provided to the Trust by any of the
Sub-Advisers appointed by the Investment Adviser, that it will require that
each of the Sub-Advisers:
a. use the same skill and care in providing such services as it uses in
providing services to fiduciary accounts for which it has investment
responsibilities;
b. conform with all applicable Rules and Regulations of the Securities and
Exchange Commission and in addition will conduct its activities under this
Agreement (or any applicable sub-investment advisory agreement) in accordance
with any applicable regulations of any governmental authority pertaining to the
investment advisory activities of the Investment Adviser or Sub-Advisers;
c. not make loans to any person to purchase or carry units of beneficial
interest in the Trust or make loans to the Trust;
d. place orders pursuant to investment determinations for the Trust either
directly with the issuer or with an underwriter, market maker or broker or
dealer. In placing orders with brokers and dealers, the Investment Adviser
will use its reasonable best efforts to obtain, or require that each of the
Sub-Advisers obtain, prompt execution of orders in an effective manner at the
most favorable price. Consistent with this obligation, the Investment Adviser
and any of the Sub-Advisers may, to the extent permitted by law, purchase and
sell portfolio securities to and from brokers and dealers who provide brokerage
and research services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934) to or for the benefit of the Funds and/or other accounts
over which the Investment Adviser or any of the Sub-Advisers or any of their
respective affiliates exercises investment discretion. Subject to the review
of the Trust's Board of Trustees from time to time with respect to the extent
and continuation of the policy, the Investment Adviser and any of the
Sub-Advisers are authorized to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a securities
transaction for any of the Funds which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
the Investment Adviser or Sub-Advisers determine in good faith that such
commission was reasonable in relation-to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Investment
Adviser or Sub-Advisers with respect to the accounts as to which it exercises
investment discretion. In no instance will portfolio securities be purchased
from or sold to The Winsbury Company, Investment Adviser or any Sub-Adviser, or
any affiliated person of the Trust, except as may be permitted by the 1940 Act;
-3-
<PAGE> 4
e. maintain all books and records with respect to the Trust's securities
transactions and will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
f. treat confidentially and as proprietary information of the Trust all
records and other information relative to the Trust and prior, present, or
potential interest-holders, and will not use such records and information for
any purpose other than performance of its responsibilities and duties
hereunder, except that, subject to prompt notification of the Trust, the
Investment Adviser and any of the Sub-Advisers may divulge such information to
duly constituted authorities, or when so requested by the Trust, provided,
however, that nothing contained herein shall prohibit the Investment Adviser or
any of the Sub-Advisers from advertising or soliciting the public generally
with respect to other products or services regardless of whether such
advertisement or solicitation may include prior, present or potential
shareholders of the Funds; and
g. maintain its policy and practice of conducting its fiduciary functions
independently. In making investment recommendations for the Trust, the
Investment Adviser's or Sub-Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or sale
for the Trust's account are customers of the Investment Adviser or Sub-Adviser
or of their respective parents, subsidiaries or affiliates. In dealing with
such customers, the Investment Adviser or Sub-Adviser and their respective
parents, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the Trust.
4. SERVICES NOT EXCLUSIVE. The services furnished by the Investment Adviser
and any Sub-Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser and any Sub-Adviser shall be free to furnish similar
services to others so long as its services under this Agreement or any
sub-advisory agreement are not impaired thereby. It is understood that the
action taken by the Investment Adviser under this Agreement may differ from the
advice given or the timing or nature of action taken with respect to other
clients of the Investment Adviser, and that a transaction in a specific
security may not be accomplished for all clients of the Investment Adviser at
the same time or at the same price.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records, if
any, which it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly, and to require each of the Sub-Advisers to
surrender promptly, to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve, and to require each of the
Sub-Advisers to preserve, for the periods prescribed by Rule 31a-2 under the
1940 Act, the records required to be maintained by Rule 31a-1 under the 1940
Act.
6. EXPENSES. During the term of this Agreement, the Investment Adviser will
pay all expenses, including, as applicable, the compensation of any
Sub-Advisers directly appointed
-4-
<PAGE> 5
by it, incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Trust.
7. COMPENSATION. For the services provided and the expenses assumed pursuant
to this Agreement, each of the Funds will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee set forth on
Schedule A hereto. Each of the Funds' obligations to pay the above-described
fee to the Investment Adviser will begin as of the date of the initial public
sale of shares in that Fund. Except as permitted by applicable law, the
Investment Adviser shall not be compensated on the basis of a share of capital
gains upon or capital appreciation of any of the Funds or any portion thereof.
If in any fiscal year the aggregate expenses of any of the Funds (as defined
under the securities regulations of any state having jurisdiction over the
Trust) exceed the expense limitations of any such state, the Investment Adviser
will reimburse the Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the
Fund to the Investment Adviser hereunder and to The Winsbury Company under the
Management and Administration Agreement between The Winsbury Company and the
Trust. The obligation of the Investment Adviser to reimburse the Funds
hereunder is limited in any fiscal year to the amount of its fee hereunder for
such fiscal year, provided, however, that notwithstanding the foregoing, the
Investment Adviser shall reimburse the Funds for such proportion of such excess
expenses regardless of the amount of fees paid to it during such fiscal year to
the extent that the securities regulations of any state having jurisdiction
over the Trust so require. Such expense reimbursement, if any, will be
estimated daily and reconciled and paid on a monthly basis.
8. LIMITATION OF LIABILITY. The Investment Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds
in connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under
this Agreement.
9. DURATION AND TERMINATION. This Agreement will become effective as to a
particular Fund as of the date first written above (or, if a particular Fund is
not in existence on that date, on the date a registration statement relative to
that Fund becomes effective with the Securities and Exchange Commission),
provided that it shall have been approved by a vote of a majority of the
outstanding voting securities of such Fund, in accordance with the requirements
under the 1940 Act, and, unless sooner terminated as provided herein, shall
continue in effect until December 22, 1994.
Thereafter, if not terminated, this Agreement shall continue in effect as to
a particular Fund for successive periods of approximately twelve months each
ending on December 31 of each year, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of
the Trust's Board of Trustees who are not parties to this
-5-
<PAGE> 6
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
vote of a majority of the Trust's Board of Trustees or by the vote of a
majority of all votes attributable to the outstanding Shares of such Fund.
Notwithstanding the foregoing, this Agreement may be terminated as to a
particular Fund at any time on sixty days' written notice, without the payment
of any penalty, by the Trust (by vote of the Trust's Board of Trustees or by
vote of a majority of the outstanding voting securities of such Fund) or by the
Investment Adviser. This Agreement will immediately terminate in the event of
its assignment. No assignment of this Agreement shall be made by the
Investment Adviser without the consent of the Board of Trustees of the Trust.
(As used in this Agreement, the terms "majority of the outstanding voting
securities, "interested persons" and "assignment" shall have the same meaning
of such terms in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the State of Ohio.
The names "The Parkstone Group of Funds" and "Trustees of The Parkstone Group
of Funds" refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under the
Declaration of Trust and to which reference is hereby made and a copy of which
is on file at the office of the Secretary of the Commonwealth of Massachusetts
and elsewhere as required by law, and to any and all amendments thereto as
filed or hereafter filed. The obligations of "The Parkstone Group of Funds"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, interest-holders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any Fund of the Trust must look solely to the
assets of the Trust belonging to such Fund for the enforcement of any claims
against the Trust.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE PARKSTONE GROUP OF FUNDS
(Seal) By: /s/ G. RONALD HENDERSON
------------------------------
Title: President
---------------------------
FIRST OF AMERICA INVESTMENT
CORPORATION
By: /s/ RICHARD A. WOLF
------------------------------
Title: President
---------------------------
-7-
<PAGE> 8
Dated: December 22, 1992
SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
FIRST OF AMERICA INVESTMENT CORPORATION
<TABLE>
<CAPTION>
Name of Fund Compensation Date
------------ ------------ ----
<S> <C> <C>
Parkstone International Discovery Annual Rate of 1.25% of the first $50 Million of the 12/22/92
Fund average daily net assets of such Fund, 1.20% of the
average daily net assets between $50 Million and $100
Million, 1.15% of the average daily net assets between
$100 Million and $400 Million, and 1.05% of the
average daily net assets over $400 Million.
</TABLE>
THE PARKSTONE GROUP OF FUNDS
(Seal) By: /s/ G. RONALD HENDERSON
----------------------------
Title: President
-------------------------
FIRST OF AMERICA INVESTMENT
CORPORATION
By: /s/ RICHARD A. WOLF
----------------------------
Title: President
--------------------------
_____
All fees are computed daily and paid monthly.
-8-
<PAGE> 1
Exhibit 5(c)(i)
Dated: February 15, 1995
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED AS OF DECEMBER 22, 1992 BETWEEN
THE PARKSTONE GROUP OF FUNDS
AND
FIRST OF AMERICA INVESTMENT CORPORATION
<TABLE>
<CAPTION>
Name of Fund Compensation Date
- ------------ ------------ ----
<S> <C> <C>
Parkstone International Annual Rate of 1.25% of the first December 22, 1992
Discovery Fund $50 Million of the average daily net
assets of such Fund, 1.20% of the average
daily net assets between $50 Million and
$100 Million, 1.15% of the average daily
net assets between $100 Million and $400
Million, and 1.05% of the average daily
net assets over $400 Million.
Parkstone Emerging Markets Annual Rate of 1.25% of the average daily February 15, 1995
Fund net assets of such Fund
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ STEPHEN G. MINTOS
------------------------
Stephen G. Mintos
Chairman
FIRST OF AMERICA INVESTMENT
CORPORATION
By: /s/ RICHARD A. WOLF
------------------------
Richard A. Wolf
President
_____
All fees are computed daily and paid monthly.
<PAGE> 1
Exhibit 5(d)
SUB-INVESTMENT ADVISORY AGREEMENT
SUB-INVESTMENT ADVISORY AGREEMENT made as of the 1st day of March, 1995, by
and between First of America Investment Corporation, a Michigan corporation
(the "Adviser"), and Gulfstream Global Investors, Ltd., a Texas limited
partnership (the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of The Parkstone Group of
Funds, a Massachusetts business trust and an open-end management investment
company (the "Group"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Group is comprised of several separate investment portfolios; and
WHEREAS, the Adviser desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser experienced in the
management of a portfolio of international securities to assist the Adviser in
performing services for the portfolios indicated on Schedule A to this
Agreement (the "Funds"); and
WHEREAS, the Sub-Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory and sub-advisory services to investment companies and desires to
provide such services to the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objective, policies
and restrictions of the Funds and has reviewed the Investment Advisory
Agreement dated as of December 22, 1992 between the Adviser and the Group (the
"Group/Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for the Funds, subject
to such instructions and supervision as the Adviser may from time to time
furnish and further subject to the control and direction of the Group's Board
of Trustees, for the period and on the terms hereinafter set forth. The
Sub-Adviser hereby accepts such appointment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser will provide the services under
this Agreement in accordance with the Funds' investment objective, policies and
restrictions as stated in each Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Group's Board of Trustees. Adviser agrees
to furnish the Sub-Adviser from time to time copies of all amendments of or
supplements to such Prospectus and Statement of Additional Information. The
Sub-Adviser shall for all purpose herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether
herein or otherwise), have no authority to act for or represent the Adviser,
the Funds or the Group in any way.
2. Sub-Advisory Services. Subject to such instructions and supervision as the
Adviser may from time to time furnish, the continuous investment program of the
Funds provided by the Sub-Adviser shall include, among other things, investment
research and management with respect
<PAGE> 2
to all securities, investments and cash equivalents in the Funds. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund, the appropriate
portion of the Fund's assets to be invested in particular countries or
geographic regions, the use of foreign exchange contracts and other foreign
currency matters, and the manner in which voting rights, rights to consent to
corporate action and other rights pertaining to the Funds' investments should
be exercised. The Sub-Adviser will implement such determinations through the
placement, in the name of a Fund, of orders for the execution of portfolio
transactions with or through such brokers or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees that it
will:
(a) use the same skill and care in providing such services as it uses in
providing services to other fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the United States
Securities and Exchange Commission ("SEC") and in addition will conduct
its activities under this Agreement in accordance with any applicable
regulations of any government authority pertaining to the investment
advisory activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as the Adviser
reasonably may from time to time request;
(c) not make loans to any person to purchase or carry units of beneficial
interest in the Group or make loans to the Group;
(d) place orders pursuant to investment determinations for the Funds either
directly with the issuer or with an underwriter, market maker or broker
or dealer. In placing orders with brokers and dealers, the Sub-Adviser
will use its reasonable best efforts to obtain prompt execution of orders
in an effective manner at the most favorable price. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by law, purchase
and sell portfolio securities to, from and through brokers and dealers
who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the
benefit of the Funds and/or other accounts over which the Sub-Adviser
exercises investment discretion. Subject to the review of the Group's
Board of Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to pay a broker
or dealer who provides such brokerage and research services a commission
for effecting a securities transaction for a Fund which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Adviser determines in good faith
that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the accounts as to
which it exercises investment
2
<PAGE> 3
discretion. In no instance will portfolio securities be purchased from or sold
to the Group, The Winsbury Company, Adviser or Sub-Adviser or any affiliate of
the foregoing except as may be permitted by the 1940 Act;
(e) maintain all necessary or appropriate books and records with respect to
each Fund's securities transactions in accordance with all applicable
laws, rules and regulations, including but not limited to Section 31(a)
of the 1940 Act and will furnish the Group's Board of Trustees such
periodic and special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of the Adviser and
the Group all records and other information relative to the Adviser and
the Group and prior, present, or potential interest-holders, and will not
use such records and information for any purpose other than performance
of its responsibilities and duties hereunder, except that subject to
prompt notification to the Group and Adviser, Sub-Adviser may divulge
such information to duly constituted authorities, or when so requested by
the Adviser and the Group, provided, however, that nothing contained
herein shall prohibit the Sub-Adviser from advertising or soliciting the
public generally with respect to other products or services, regardless
of whether such advertisement or solicitation may be directed to persons
including prior, present or potential shareholders of the Funds;
(g) maintain its policy and practice of conducting its fiduciary functions
independently. In making investment recommendations for the Group, the
Sub-Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for the
Group's account are customers of the Adviser, Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing with such
customers, the Sub-Adviser and its affiliates will not inquire or take
into consideration whether securities of those customers are held by the
Group; and
(h) render, upon request of the Adviser or the Group's Board of Trustees,
written reports concerning the investment activities of the Funds.
3. Expenses. During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Funds.
4. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Adviser hereby agrees that all records, if any, which it
maintains for the Funds are the property of such Funds and further agrees to
surrender promptly, to the Adviser or the Group any such records upon the
Adviser's or the Group's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 31a-2 under the 1940 Act, the
records required to be maintained by Rule 31a-1 under the 1940 Act.
3
<PAGE> 4
5. Compensation of the Sub-Adviser. In consideration of services rendered
pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee at the
annual rate of the value of each Fund's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Sub-Adviser shall serve for
less than the whole of any month, the foregoing compensation shall be prorated.
For the purpose of determining fees payable to the Sub-Adviser, the value of
each Fund's net assets shall be computed at the times and in the manner
specified in the Group's Registration Statement. If the Adviser is required to
reduce its fee or to reimburse the Group because the expenses of a Fund exceed
applicable limits under state securities regulations or are in excess of any
voluntary expense limitations set forth in the Group's current Registration
Statement, the Sub-Adviser's fee hereunder shall be reduced by an amount equal
to such excess expense multiplied by the ratio that the Sub-Adviser's fee
hereunder bears to the sum of the fees paid to the Adviser and to The Winsbury
Company (under the Management and Administration Agreement with The Winsbury
Company) by the Group with respect to the Fund. Notwithstanding anything
contained herein to the contrary, the Sub-Adviser shall not be compensated on
the basis of a share of capital gains or upon capital appreciation of a Funds
or any portion thereof except as may be authorized by applicable law.
6. Services Not Exclusive. The services of the Sub-Adviser hereunder are not
to be deemed exclusive, and the Sub-Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired. It is understood that the action taken by
the Sub-Adviser under this Agreement may differ from the advice given or the
timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
7. Use of Names. The Sub-Adviser shall not use the name of the Group or the
Adviser in any material relating to the Sub-Adviser in any manner not approved
prior thereto by the Adviser; provided, however, that the Adviser shall approve
all uses of its or the Group's name which merely refer in accurate terms to the
appointment of the Sub-Adviser hereunder or which are required by the SEC or a
state securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
8. Liability. Sub-Adviser, in rendering its services hereunder, agrees to
use its best judgment and efforts, and Adviser agrees that Sub-Adviser shall
not be liable hereunder for any mistake in judgment or any event whatsoever
except for lack of good faith on the part of Sub-Adviser. Notwithstanding the
foregoing, nothing herein shall be deemed to protect or purport to protect
Sub-Adviser against any liability to Adviser, the Group, or the holders of
securities of the Group to which Sub-Adviser would otherwise be subject by
reason of an act or practice constituting willful misfeasance, bad faith, gross
negligence, reckless disregard of duty or a breach of fiduciary duty involving
personal misconduct, or loss resulting from breach of fiduciary duty with
respect to the receipt of compensation for services (all within the meaning of
1940 Act) in respect of Adviser or the Group in the performance of duties
hereunder.
9. Limitation of Group's Liability. The Sub-Adviser acknowledges that it has
received notice of and accepts the limitations upon the Group's liability set
forth in its Declaration of Group. The Sub-Adviser agrees that any of the
Group's obligations shall be limited to the assets
4
<PAGE> 5
of the Funds and that the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders of the Group nor from any Trustee, Group
employee or agent of the Group.
10. Duration, Renewal, Termination and Amendment. This Agreement shall become
effective as of the date first written above and, unless sooner terminated as
provided herein, shall continue until December 31, 1996.
After December 31, 1996, if not terminated, this Agreement shall continue in
effect with respect to Funds for successive periods of approximately twelve
months each ending on December 31 of each year, provided such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Group's Board of Trustees who are not parties to this Agreement
or interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Group's Board of Trustees or by the vote of a majority of
all votes attributable to the outstanding Shares of a Fund. This Agreement may
be terminated as to a Fund at any time, without payment of any penalty, by the
Group's Board of Trustees, by the Adviser, or by a vote of the majority of the
outstanding voting securities of the Fund, upon 60 days' prior written notice
to the Sub-Adviser, or by the Sub-Adviser upon 150 days' prior written notice
to the Adviser and the Group's Board of Trustees, or upon such shorter notice
as may be mutually agreed upon. This Agreement shall terminate automatically
and immediately upon termination of the Group/Adviser Agreement.
This Agreement shall terminate automatically and immediately in the event of
its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Group. The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Sub-Adviser,
subject to approval by the Group's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Fund's
outstanding voting securities.
11. Confidential Relationship. Any information and advice furnished by either
party to this Agreement to the other shall be treated as confidential and shall
not be disclosed to third parties except as required by law.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Michigan and the applicable provisions
of the 1940 Act. To the extent applicable law of the State of Michigan, or any
of the provisions herein, conflict with applicable provisions of the 1940 Act,
the latter shall control.
14. Names. The names "The Parkstone Group of Funds" and "Trustees of the
Parkstone Group of Funds" refer respectively to the Trust created and the
Trustees, as trustees but no individually or personally, acting from time to
time under an Agreement and Declaration of Trust dated March 25, 1987 which is
hereby referred to and a copy of which is on file at the office of
5
<PAGE> 6
the State Secretary of the Commonwealth of Massachusetts and the principal
office of the Trust. The obligations of "The Parkstone Group of Funds" entered
into in the name or on behalf thereof by any of the Trustees, representatives
or agents are made not individually, but in such capacities, and are not
binding upon any of the Trustees, shareholders, or representatives of the Trust
personally, but bind only the property of the Trust, and all persons dealing
with any class of shares of the Trust must look solely to the property of the
Trust belonging to such class for the enforcement of any claims against the
Trust.
15. Miscellaneous. This Agreement constitutes the full and complete agreement
of the parties hereto with respect to the subject matter hereof. Each party
agrees to perform such further actions and execute such further documents as
are necessary to effectuate the purposes hereof. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on all parties.
IN WITNESS HEREOF, the parties have duly executed this Agreement as of the
date first written above.
FIRST OF AMERICA INVESTMENT CORPORATION
By: /s/ RICHARD A. WOLF
----------------------
Richard A. Wolf
Its: President
GULFSTREAM GLOBAL INVESTORS, LTD.
By: Tull, Doud, Marsh & Triltsch, Inc., General Partner
By: /s/ C. THOMAS TULL
----------------------
C. Thomas Tull
Its: President
6
<PAGE> 7
The Parkstone Group of Funds and First of America Investment Corporation each
acknowledge receipt of Gulfstream Global Investors, Ltd. Disclosure Statement
as required by Rule 204-3 under the Investment Advisers Act of 1940 not less
than 48 hours prior to the execution date of this Agreement.
THE PARKSTONE GROUP OF FUNDS
By: /s/ GEORGE R. LANDRETH
-------------------------
George R. Landreth
Its: President
FIRST OF AMERICA INVESTMENT
CORPORATION
By: /s/ RICHARD A. WOLF
-------------------------
Richard A. Wolf
Its: President
7
<PAGE> 8
Dated: March 1, 1995
SCHEDULE A
To the Sub-Investment Advisory Agreement
between First of America Investment Corporation and
Gulfstream Global Investors, Ltd.
<TABLE>
<CAPTION>
NAME OF FUND DATE COMPENSATION
- ------------ ---- ------------
<S> <C> <C>
Parkstone International March 1, 1995 Annual Rate of .50% of the first $50 Million
Discovery Fund of the average daily net assets under
management pursuant to agreements with First
of America Investment Corporation, .45% of
the average daily net assets between $50
Parkstone Balanced Fund March 1, 1995 Million and $100 Million, .40% of the
average daily net assets between $100
Million and $400 Million, and .30% of the
average daily net assets above $400 Million,
provided, the minimum annual fee shall be
$75,000.
Parkstone Emerging Markets March 1, 1995 Annual Rate of .50% of the average daily net
Fund assets under management pursuant to
agreements with First of America Investment
Corporation
</TABLE>
FIRST OF AMERICA INVESTMENT CORPORATION
By: /s/ RICHARD A. WOLF
--------------------------------
Richard A. Wolf
Its: President
GULFSTREAM GLOBAL INVESTORS, LTD.
By: Tull, Doud, Marsh & Triltsch, Inc.
General Partner
By: /s/ C. THOMAS TULL
--------------------------------
C. Thomas Tull
Its: President
8
<PAGE> 1
Exhibit 6(a)
DISTRIBUTION AGREEMENT
OCTOBER 1, 1993
The Winsbury Company Limited Partnership
1900 East Dublin-Granville Road
Columbus, Ohio 43229
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, The Parkstone Group of Funds, a Massachusetts
business trust (the "Trust"), has agreed that The Winsbury Company Limited
Partnership, an Ohio limited partnership ("Distributor"), shall be, for the
period of this Distribution Agreement (the "Agreement"), the distributor of the
shares of beneficial interest of each class of the currently constituted
investment portfolios and any additional investment portfolios of the Trust, as
each are or will be identified on Schedule A hereto (such current investment
portfolios and any additional investment portfolios together called the
"Funds"). Such shares of beneficial interest are hereinafter called "Shares."
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares covered
by the registration statement and prospectus of the Trust then in effect under
the Securities Act of 1933, as amended (the "1933 Act").
1.2 Distributor agrees to use appropriate efforts to solicit orders for the
sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust
understands that Distributor is now and, in the future, may be the distributor
of the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the Funds
of the Trust. The Trust further understands that investors and potential
investors in the Trust may invest in shares of such other Companies. The Trust
agrees that Distributor's duties to such Companies shall not be deemed in
conflict with its duties to the Trust under this paragraph 1.2.
Except as provided in Section 2 herein, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 All activities by Distributor and its partners, agents, and employees as
distributor of the Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940 ("1940 Act") by the
Securities and Exchange Commission (the "Commission") or any securities
association registered under the Securities Exchange Act of 1934.
<PAGE> 2
1.4 Distributor will provide one or more persons, during normal business
hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of the
Shares until such time as those officers deem it advisable to accept such
orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it chooses
to enter into selling agreements with selected dealers or others.
1.8 Distributor shall adopt and maintain compliance standards as to when
each class of Shares may be sold to particular investors in accordance with the
Order of Exemption granted by the Commission in connection with the Trust's
offering of multiple classes of Shares. Distributor further agrees to conform
to such standards and shall require all other persons selling Shares of the
Trust to conform to such standards.
1.9 The Trust agrees at its own expense to execute any and all documents and
to furnish any and all information and otherwise to take all actions that may
be reasonably necessary in connection with the qualification of the Shares for
sale in such states as Distributor may designate.
1.10 The Trust shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent
what they purport to show or represent. The Trust shall also furnish
Distributor upon request with: (a) unaudited semi- annual statements of the
Funds' books and accounts prepared by the Trust, (b) quarterly earnings
statements prepared by the Trust, (c) a monthly itemized list of the securities
in the Funds, (d) monthly balance sheets as on as practicable after the end of
each month, and (e) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.11 The Trust represents to Distributor that all registration statements and
prospectuses filed by the Trust with the Commission under the 1933 Act with
respect to the Shares have been carefully prepared in conformity with the
requirements of the 1933 Act and rules and regulations of the Commission
thereunder. As used in this Agreement the terms "registration statement" and
"prospectus" shall mean any registration statement and any prospectus and
Statement of Additional Information relating to the Funds filed with the
Commission and any amendments and supplements thereto which at any time shall
have been filed with the Commission. The Trust represents and warrants to
Distributor that any registration statement and prospectus, when such
registration statement becomes effective, will contain all statements required
to be stated therein
2
<PAGE> 3
in conformity with the 1993 Act and the rules and regulations of the
Commission; that all statements of fact contained in any such registration
statement and prospectus will be true and correct when such registration
statement becomes effective; and that neither any registration statement nor
any prospectus when such registration statement becomes effective will include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of the Shares. The Trust may but shall not be
obligated to propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus as,
in the light of future developments, may, in the opinion of the Trust's
counsel, be necessary or advisable. If the Trust shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Trust of a written request from Distributor to do so,
Distributor may, at its option, terminate this agreement. The Trust shall not
file any amendment to any registration statement or supplement to any
prospectus without giving Distributor reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall in any way
limit the Trust's right to file at any time such amendments to any registration
statement and/or supplements to any prospectus, of whatever character, as the
Trust may deem advisable, such right being in all respects absolute and
unconditional.
1.12 The Trust authorizes Distributor and dealers to use any prospectus in
the form furnished from time to time in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its several
partners and employees, and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its partners and
employees, or any such controlling person, may incur under the 1933 Act or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated
in either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the
Trust's agreement to indemnify Distributor, its partners or employees, and any
such controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations as are
contained in any prospectus and in such financial and other statements as are
furnished in writing to the Trust by Distributor and used in the answers to the
registration statement or in the corresponding statements made in the
prospectus, or arising out of or based upon any omission or alleged omission to
state a material fact in connection with the giving of such information
required to be stated in such answers or necessary to make the answers not
misleading; and further provided that the Trust's agreement to indemnify
Distributor and the Trust's representations and warranties hereinbefore set
forth in paragraph 1.11 shall not be deemed to cover any liability to the Trust
or its Shareholders to which Distributor would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of Distributor's reckless disregard of its obligations and
duties under this agreement. The Trust's agreement to indemnify Distributor,
its partners and employees, and any such controlling person, as aforesaid, is
expressly conditioned
3
<PAGE> 4
upon the Trust's being notified of any action brought against Distributor, its
partners or employees, or any such controlling person, such notification to be
given by letter or by telegram addressed to the Trust at its principal office
in Columbus, Ohio and sent to the Trust by the person against whom such action
is brought, within 10 days after the summons or other first legal process shall
have been served. The failure to so notify the Trust of any such action shall
not relieve the Trust from any liability which the Trust may have to the person
against whom such action is brought by reason of any such untrue, or allegedly
untrue, statement or omission, or alleged omission, otherwise than on account
of the Trust's indemnity agreement contained in this paragraph 1.12. The Trust
will be entitled to assume the defense of any suit brought to enforce any such
claim, demand or liability, but, in such case, such defense shall be conducted
by counsel of good standing chosen by the Trust and approved by Distributor,
which approval shall not be unreasonably withheld. In the event the Trust
elects to assume the defense of any such suit and retain counsel of good
standing approved by Distributor, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any of
them; but in case the Trust does not elect to assume the defense of any such
suit, or in case Distributor reasonably does not approve of counsel chosen by
the Trust, the Trust will reimburse Distributor, its partners and employees, or
the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by Distributor or them.
The Trust's indemnification agreement contained in this paragraph 1.12 and the
Trust's representations and warranties in this agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares. This agreement of indemnity will
inure exclusively to Distributor's benefit, to the benefit of its several
partners and employees, and their respective estates, and to the benefit of the
controlling persons and their successors. The Trust agrees promptly to notify
Distributor of the commencement of any litigation or proceedings against the
Trust or any of its officers or Trustees in connection with the issue and sale
of any Shares.
1.13 Distributor agrees to indemnify, defend and hold the Trust, its several
officers and Trustees and any person who controls the Trust within the meaning
of Section 15 of the 1933 Act free and harmless from and against any and all
claims, demands, liabilities and expenses (including the costs of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Trust, its officers or Trustees or any such
controlling person, may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by
the Trust, its officers or Trustees or such controlling person resulting from
such claims or demands, shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by Distributor to the Trust and used in the answers to any of the
items of the registration statement or in the corresponding statements made in
the prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Trust required to be stated in such
answers or necessary to make such information not misleading. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor's
being notified of any action brought against the Trust,
4
<PAGE> 5
its officers or Trustees, or any such controlling person, such notification to
be given by letter or telegram addressed to Distributor at its principal office
in Columbus, Ohio, and sent to Distributor by the person against whom such
action is brought, within 10 days after the summons or other first legal
process shall have been served. Distributor shall have the right of first
control of the defense of such action, with counsel of its own choosing,
satisfactory to the Trust, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the
Trust, its officers or Trustees or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the Trust,
its officers or Trustees, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission, otherwise
than on account of Distributor's indemnity agreement contained in this
paragraph 1.13.
1.14 No Shares shall be offered by either Distributor or the Trust under any
of the provisions of this Agreement and no orders for the purchase or sale of
Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10(a) of
the 1933 Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.14 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's Prospectus,
Declaration of Trust or Code of Regulations.
1.15 The Trust agrees to advise Distributor as soon as reasonably practical
by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the registration
statement or prospectus then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or prospectus then
in effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus then in effect
or which requires the making of a change in such registration statement or
prospectus in order to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to any
registration statement or prospectus which may from time to time be filed
with the Commission.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.
5
<PAGE> 6
1.16 Distributor agrees on behalf of itself and its partners and employees to
treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and its prior, present or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where Distributor
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
1.17 This Agreement shall be governed by the laws of the State of Ohio.
2. Fee.
The Distributor shall receive from the Funds identified on Schedule B hereto
with respect to such Funds' Investor A Shares a distribution fee and/or service
fee at the rate and upon the terms and conditions set forth in the Investor A
Distribution and Shareholder Service Plan attached as Schedule C hereto, and as
amended from time to time. The Distributor shall receive from the Funds
identified on Schedule D hereto with respect to such Funds' Investor B Shares a
distribution fee and a service fee at the rate and upon the terms and
conditions set forth in the Investor B Distribution and Shareholder Service
Plan attached as Schedule E hereto, and as amended from time to time. The
distribution fees described above shall be accrued daily and shall be paid on
the first business day of each month, or at such time(s) as the Distributor
shall reasonably request.
3. Sale and Payment.
Under this Agreement, the following provisions shall apply with respect to
the sale of and payment of Shares of any class sold at an offering price which
includes a sales load (collectively, "Load Shares") as described in the
prospectuses of any Funds identified on Schedule F hereto (collectively, the
"Load Funds" and individually, a "Load Fund"):
(a) The Distributor shall have the right, as principal, to purchase Load
Shares from the Load Funds at their net asset value and to sell such Load
Shares to the public against orders therefor at the applicable public
offering price, as defined in Section 4 hereof. Distributor shall also have
the right, as principal, to sell Load Shares to dealers against orders
therefor at the public offering price less a concession determined by the
Distributor, which concession shall not exceed the amount of the sales charge
or underwriting discount, if any, referred to in Section 4 below.
(b) Prior to the time of delivery of any Load Shares by a Load Fund to, or
on the order of, the Distributor, the Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in federal funds equal to the
applicable net asset value of such Load Shares. Distributor may retain so
much of any sales charge or underwriting discount as is not allowed by
Distributor as a concession to dealers.
6
<PAGE> 7
4. Public Offering Price.
The public offering price shall be the net asset value of Load Shares, plus
any applicable sales charge, all as set forth in the current prospectus of the
Load Fund. The net asset value of Load Shares shall be determined in
accordance with the provisions of the Declaration of Trust and Code of
Regulations of the Trust and the then current prospectus of the Load Fund.
5. Issuance of Shares.
The Load Funds reserve the right to issue, transfer or sell Load Shares at
net asset value (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding Shares of any other investment company; (b) in connection with a
pro rata distribution directly to the holders of Load Shares in the nature of a
stock dividend or split; (c) upon the exercise of subscription rights granted
to the holders of Load Shares on a pro rata basis; (d) in connection with the
issuance of Load Shares pursuant to any exchange and reinvestment privileges
described in any then current prospectus of the Load Fund; and (e) otherwise in
accordance with any then current prospectus of the Load Fund.
6. Redemption and Payment.
Under this Agreement, the following provisions shall apply with respect to
the redemption of and payment for Shares of any class redeemed at net asset
value less a contingent deferred sales charge (collectively "CDSC Shares") as
described in the prospectuses of any Funds identified on Schedule G hereto
(collectively, the "CDSC Funds" and individually a "CDSC Fund"):
(a) Distributor shall have the right to redeem CDSC Shares from the public
on behalf of the CDSC Funds at net asset value less the applicable contingent
deferred sales charge.
(b) Distributor may retain so much of any contingent deferred sales charge
as is allowed by Distributor back to dealers as a concession.
7. Term and Matters Relating to the Trust as a Massachusetts Business Trust.
This Agreement shall become effective on October 1, 1993, and, unless
sooner terminated as provided herein, shall continue until March 31, 1995, and
thereafter shall continue automatically for successive annual periods ending on
March 31st of each year with respect to each of the Funds, provided such
continuance is specifically approved at least annually by (i) the Trust's Board
of Trustees or (ii) by "vote of a majority of the outstanding voting
securities" (as defined below) of the Trust, provided, however, that in either
event the continuance is also approved by the majority of the Trust's Trustees
who are not parties to the agreement or interested persons (as defined in the
1940 Act) of any party to this agreement, by vote cast in
7
<PAGE> 8
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable without penalty, on not less than sixty days' notice,
by the Trust's Board of Trustees, by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Trust or by Distributor.
This Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act).
The names "The Parkstone Group of Funds" and "Trustees of The Parkstone Group
of Funds" refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under a
Declaration of Trust dated as of March 25, 1987 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of "The
Parkstone Group of Funds" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
Please confirm that the foregoing is in accordance with your understanding by
indicating your acceptance hereof at the place below indicated, whereupon it
shall become a binding agreement between us.
Yours very truly,
THE PARKSTONE GROUP OF FUNDS
By /s/ G. RONALD HENDERSON
------------------------------
Name G. Ronald Henderson
----------------------------
Title President
---------------------------
Accepted:
THE WINSBURY COMPANY LIMITED PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By /s/ KENNETH B. QUINTENZ
-----------------------------
Name Kenneth B. Quintenz
---------------------------
Title Senior Vice President
--------------------------
8
<PAGE> 9
Dated: October 1, 1993
Schedule A
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
<TABLE>
<CAPTION>
Name of Fund Date
- ------------ ----
<S> <C>
Parkstone U.S. Government Obligations Fund August 8, 1990
Parkstone Prime Obligations Fund
Parkstone Tax-Free Fund
Parkstone Equity Fund
Parkstone Small Capitalization Fund
Parkstone High Income Equity Fund
Parkstone Bond Fund
Parkstone Limited Maturity Bond Fund
Parkstone Intermediate Government
Obligations Fund
Parkstone Municipal Bond Fund
Parkstone Michigan Municipal Bond Fund
Parkstone Balanced Fund January 21, 1992
Parkstone U.S. Government Income Fund October 27, 1992
Parkstone International Discovery Fund December 22, 1992
Parkstone Treasury Fund August 26, 1993
Parkstone Municipal Investor Fund
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By /s/ G. RONALD HENDERSON
-----------------------------
G. Ronald Henderson
President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By The Winsbury Corporation,
General Partner
By /s/ KENNETH B. QUINTENZ
-----------------------------
Kenneth B. Quintenz
Vice President
A-1
<PAGE> 10
Dated: October 1, 1993
Schedule B
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
<TABLE>
<CAPTION>
Name of Investor A Plan Fund Date
- ---------------------------- ----
<S> <C>
Parkstone U.S. Government Obligations
Fund - Investor A Shares March 31, 1993
Parkstone Prime Obligations Fund
Investor A Shares
Parkstone Tax-Free Fund - Investor A
Shares
Parkstone Equity Fund - Investor A Shares
Parkstone Small Capitalization Fund
Investor A Shares
Parkstone High Income Equity Fund
Investor A Shares
Parkstone Bond Fund - Investor A Shares
Parkstone Limited Maturity Bond Fund
Investor A Shares
Parkstone Intermediate Government
Obligations Fund - Investor A Shares
Parkstone Municipal Bond Fund -
Investor A Shares
Parkstone Michigan Municipal Bond Fund
Investor A Shares
Parkstone Balanced Fund - Investor A Shares
Parkstone U.S. Government Income Fund
Investor A Shares
Parkstone International Discovery Fund
Investor A Shares
Parkstone Treasury Fund - Investor A Shares August 26, 1993
Parkstone Municipal Investor Fund -
Investor A Shares
</TABLE>
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
--------------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
---------------------------
Kenneth B. Quintenz
Vice President
A-1
<PAGE> 11
Dated: October 1, 1993
Schedule C
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
Investor A Distribution and Shareholder Service Plan
This Plan (the "Investor A Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
(the "Trust"), adopted pursuant Rule 12b-1 under the Investment Company Act of
1940, as amended, (the "1940 Act"). The Investor A Plan relates to the
Investor A Shares of those investment portfolios identified on Schedule B to
the Trust's Distribution Agreement and as amended form time to time (the
"Investor A Plan Funds").
Section 1. Each Investor A Plan Fund shall pay to The Winsbury Company
Limited Partnership, an Ohio limited partnership and the distributor (the
"Distributor") of the Trust's shares of beneficial interest of its Investor A
class (the "Investor A Shares"), a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of the Investor A Shares of
such Fund (the "Investor A Plan Fee") for: (a) payments the Distributor makes
to banks and other institutions and broker/dealers (a "Participating
Organization") for distribution assistance and/or Shareholder service pursuant
to an agreement with the Participating Organization or for distribution
assistance and/or Shareholder service provided by the Distributor pursuant to
an agreement between the Distributor and the Trust; or (b) reimbursement of
expenses incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance and/or Shareholder service including,
but not limited to, the reimbursement of expenses relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor A
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders used in connection with the sale of Investor A Shares,
and personnel and communication equipment used in servicing Shareholder
accounts and prospective shareholder inquiries. For purposes of the Investor A
Plan, a Participating Organization may include the Distributor or any of its
affiliates or subsidiaries.
Section 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Funds to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Investor A Plan shall not take effect with respect to an
Investor A Plan Fund until it has been approved by a vote of at least a
majority of the outstanding Investor A Shares of such Fund.
Section 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
C-1
<PAGE> 12
Section 5. The Investor A Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor A Plan Funds pursuant to the Investor A Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor A Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor A Shares of an Investor A Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor A Plan shall be in writing, and any agreement related to the Investor
A Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan Fund,
on not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor A Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material
amendments to the Investor A Plan shall be approved in the manner provided for
approval of the Investor A Plan in Section 4.
Section 10. As used in the Investor A Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor A Plan or any agreements related to it, and (b) the
terms "assignment", "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
------------------------------ General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
----------------------------
Kenneth B. Quintenz
Vice President
C-2
<PAGE> 13
Dated: October 1, 1993
Schedule D
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
<TABLE>
<CAPTION>
Name of Investor B Plan Fund Date
- ---------------------------- ----
<S> <C>
Parkstone Equity Fund - Investor B Shares March 31, 1993
Parkstone Small Capitalization Fund
Investor B Shares
Parkstone High Income Equity Fund
Investor B Shares
Parkstone Bond Fund - Investor B Shares
Parkstone Limited Maturity Bond Fund
Investor B Shares
Parkstone Intermediate Government
Obligations Fund - Investor B Shares
Parkstone Municipal Bond Fund - Investor
B Shares
Parkstone Michigan Municipal Bond Fund
Investor B Shares
Parkstone Balanced Fund - Investor B Shares
Parkstone U.S. Government Income Fund
Investor B Shares
Parkstone International Discovery Fund
Investor B Shares
</TABLE>
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
--------------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
----------------------------
Kenneth B. Quintenz
Vice President
D-1
<PAGE> 14
Dated: October 1, 1993
Schedule E
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
Investor B Distribution and Shareholder Service Plan
This Plan (the "Investor B Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
("the Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor B Plan relates to the
Investor B Shares of those investment portfolios identified on Schedule D to
the Trust's Distribution Agreement and as amended from time to time (the
"Investor B Plan Funds").
Section 1. Each Investor B Plan Fund is authorized to pay to The Winsbury
Company Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Trust's shares of beneficial interest of its
Investor B class (the "Investor B Shares");
(a) a distribution fee in an amount not to exceed on an annual basis .75%
of the average daily net asset value of the Investor B shares of such Fund
(the "Distribution Fee") for: (i) payments the Distributor makes to banks
and other institutions and broker/dealers (a "Participating Organization")
for distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (ii)
reimbursement of expenses incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including, but
not limited to, the reimbursement of expense relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor
B Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders for use in connection with the sales of Investor B
Shares, processing purchase, exchange and redemption requests from customers
and placing orders with the Distributor or the Trust's transfer agent, and
personnel and communication equipment used in servicing Shareholder accounts
and prospective shareholder inquiries; and
(b) a service fee in an amount not to exceed on an annual basis .25% of the
average daily net asset value of the Investor B Shares of such Fund (the
"Service Fee") for (i) payments the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust;
or (ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with
E-1
<PAGE> 15
Shareholder service including, but not limited to, personal, continuing
services to investors in the Investor B Shares of a Fund, providing
sub-accounting with respect to Investor B Shares beneficially owned by
customers or the information necessary for sub-accounting, arranging for bank
wires, and providing office space, equipment, telephone facilities and
various personnel including clerical, supervisory and computer, as is
necessary or beneficial in connection therewith.
For purposes of the Investor B Plan, a Participating Organization may include
the Distributor or any of its affiliates or subsidiaries.
Section 2. The Distribution Fee and the Service Fee shall be paid by the
Investor B Plan Funds to the Distributor only to compensate or to reimburse the
Distributor for payments or expenses incurred pursuant to Section 1.
Section 3. The Investor B Plan shall not take effect with respect to the
Investor B Shares of any Investor B Plan Fund until it has been approved by a
vote of the initial Shareholder of the Investor B Shares of such Fund.
Section 4. The Investor B Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor B Plan or
such agreement.
Section 5. The Investor B Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor B Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor B Plan Funds pursuant to the Investor B Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor B Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor B Shares of an Investor B Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor B Plan shall be in writing, and any agreements related to the Investor
B Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor B Shares of the Investor B Plan Fund,
on not more than 60 days' written notice to any other party to the
agreement; and
E-2
<PAGE> 16
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor B Plan may not be amended to increase materially the
amount of the Distribution Fee and Service Fee permitted pursuant to Section 1
hereof until any such amendment has been approved by a vote of at least a
majority of the outstanding Investor B Shares of such Fund, and all material
amendments to the Investor B Plan shall be approved in the manner provided for
approval of the Investor B Plan in Section 4.
Section 10. As used in the Investor B Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor B Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
----------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
-----------------------
Kenneth B. Quintenz
Vice President
E-3
<PAGE> 17
Dated: October 1, 1993
Schedule F
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
<TABLE>
<CAPTION>
Name of Load Fund Date
- ----------------- ----
<S> <C>
Parkstone Equity Fund - Investor A Shares March 31, 1993
Parkstone Small Capitalization Fund
Investor A Shares
Parkstone High Income Equity Fund
Investor A Shares
Parkstone Bond Fund - Investor A Shares
Parkstone Limited Maturity Bond Fund
Investor A Shares
Parkstone Intermediate Government
Obligations Fund - Investor A Shares
Parkstone Municipal Bond Fund -
Investor A Shares
Parkstone Michigan Municipal Bond Fund
Investor A Shares
Parkstone Balanced Fund - Investor A Shares
Parkstone U.S. Government Income Fund
Investor A Shares
Parkstone International Discovery Fund
Investor A Shares
</TABLE>
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
----------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
-------------------------
Kenneth B. Quintenz
Vice President
F-1
<PAGE> 18
Dated: October 1, 1993
Schedule G
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
October 1, 1993
<TABLE>
<CAPTION>
Name of CDSC Fund Date
- ----------------- ----
<S> <C>
Parkstone Equity Fund - Investor B Shares March 31, 1993
Parkstone Small Capitalization Fund
Investor B Shares
Parkstone High Income Equity Fund
Investor B Shares
Parkstone Bond Fund - Investor B Shares
Parkstone Limited Maturity Bond Fund
Investor B Shares
Parkstone Intermediate Government
Obligations Fund - Investor B Shares
Parkstone Municipal Bond Fund -
Investor B Shares
Parkstone Michigan Municipal Bond Fund
Investor B Shares
Parkstone Balanced Fund - Investor B Shares
Parkstone U.S. Government Income Fund
Investor B Shares
Parkstone International Discovery Fund
Investor B Shares
</TABLE>
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
----------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
-----------------------
Kenneth B. Quintenz
Vice President
G-1
<PAGE> 1
Exhibit 6(a)(i)
Dated: May 12, 1994
Schedule H
to the
Distribution Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
dated
October 1, 1993
Investor C Distribution and Shareholder Service Plan
This Plan (the "Investor C Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
("the Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor C Plan relates to the
Investor C Shares of those investment portfolios identified on Schedule I to
the Trust's Distribution Agreement and as amended from time to time (the
"Investor C Plan Funds").
Section 1. Each Investor C Plan Fund is authorized to pay to The Winsbury
Company Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Trust's shares of beneficial interest of its
Investor C class (the "Investor C Shares");
(a) a distribution fee in an amount not to exceed on an annual basis .75%
of the average daily net asset value of the Investor C shares of such Fund
(the "Distribution Fee") for: (i) payments the Distributor makes to banks
and other institutions and broker/dealers (a "Participating Organization")
for distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (ii)
reimbursement of expenses incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including, but
not limited to, the reimbursement of expense relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor
C Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders for use in connection with the sales of Investor C
Shares, processing purchase, exchange and redemption requests from customers
and placing orders with the Distributor or the Trust's transfer agent, and
personnel and communication equipment used in servicing Shareholder accounts
and prospective shareholder inquiries; and
(b) a service fee in an amount not to exceed on an annual basis .25% of the
average daily net asset value of the Investor C Shares of such Fund (the
"Service Fee") for (i) payments the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust;
or (ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with
<PAGE> 2
Shareholder service including, but not limited to, personal, continuing
services to investors in the Investor C Shares of a Fund, providing
sub-accounting with respect to Investor C Shares beneficially owned by
customers or the information necessary for sub-accounting, arranging for bank
wires, and providing office space, equipment, telephone facilities and
various personnel including clerical, supervisory and computer, as is
necessary or beneficial in connection therewith.
For purposes of the Investor C Plan, a Participating Organization may include
the Distributor or any of its affiliates or subsidiaries.
Section 2. The Distribution Fee and the Service Fee shall be paid by the
Investor C Plan Funds to the Distributor only to compensate or to reimburse the
Distributor for payments or expenses incurred pursuant to Section 1.
Section 3. The Investor C Plan shall not take effect with respect to the
Investor C Shares of any Investor C Plan Fund until it has been approved by a
vote of the initial Shareholder of the Investor C Shares of such Fund.
Section 4. The Investor C Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor C Plan or
such agreement.
Section 5. The Investor C Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor C Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor C Plan Funds pursuant to the Investor C Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor C Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor C Shares of an Investor C Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor C Plan shall be in writing, and any agreements related to the Investor
C Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a
H-2
<PAGE> 3
majority of the outstanding Investor C Shares of the Investor C Plan Fund, on
not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor C Plan may not be amended to increase materially the
amount of the Distribution Fee and Service Fee permitted pursuant to Section 1
hereof until any such amendment has been approved by a vote of at least a
majority of the outstanding Investor C Shares of such Fund, and all material
amendments to the Investor C Plan shall be approved in the manner provided for
approval of the Investor C Plan in Section 4.
Section 10. As used in the Investor C Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor C Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
THE PARKSTONE GROUP OF FUNDS THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
----------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
-----------------------
Kenneth B. Quintenz
Senior Vice President
H-3
<PAGE> 4
Dated: May 12, 1994
Schedule I
to the
Distribution Agreement
between The Parkstone Group of Funds
and The Winsbury Company Limited Partnership
dated
October 1, 1993
Name of Investor C Fund Date
- ----------------------- ----
Parkstone Equity Fund - Investor C Shares May 12 ,1994
Parkstone Small Capitalization Fund - Investor C Shares
Parkstone High Income Equity Fund - Investor C Shares
Parkstone Bond Fund - Investor C Shares
Parkstone Limited Maturity Bond Fund - Investor C Shares
Parkstone Intermediate Government Obligations Fund -
Investor C Shares
Parkstone Municipal Bond Fund - Investor C Shares
Parkstone Michigan Municipal Bond Fund - Investor C Shares
Parkstone Balanced Fund - Investor C Shares
Parkstone U.S. Government Income Fund - Investor C Shares
Parkstone International Discovery Fund - Investor C Shares
THE PARKSTONE GROUP OF FUNDS BY THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By /s/ G. RONALD HENDERSON By The Winsbury Corporation,
----------------------- General Partner
G. Ronald Henderson
President
By /s/ KENNETH B. QUINTENZ
-----------------------
Kenneth B. Quintenz
Senior Vice President
I-1
<PAGE> 1
Exhibit 6(a)(ii)
Dated: November 8, 1995
Schedule A
to the
Distribution Agreement
between The Parkstone Group of Funds and
BISYS Fund Services Limited Partnership (formerly
The Winsbury Company Limited Partnership)
Dated October 1, 1993
Name of Fund Date
- ------------ ----
Parkstone U.S. Government Obligations Fund October 1, 1993
Parkstone Prime Obligations Fund
Parkstone Tax-Free Fund
Parkstone Equity Fund
Parkstone Small Capitalization Fund
Parkstone High Income Equity Fund
Parkstone Bond Fund
Parkstone Limited Maturity Bond Fund
Parkstone Intermediate Government Obligations Fund
Parkstone Municipal Bond Fund
Parkstone Michigan Bond Fund
Parkstone Balanced Fund
Parkstone U.S. Government Income Fund
Parkstone International Discovery Fund
Parkstone Treasury Fund
Parkstone Municipal Investor Fund
Parkstone Large Capitalization Fund November 8, 1995
THE PARKSTONE GROUP OF FUNDS
By: /s/ GEORGE R. LANDRETH
-------------------------
George R. Landreth
President
BISYS FUND SERVICES LIMITED PARTNERSHIP
(formerly The Winsbury Company
Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ STEPHEN G. MINTOS
--------------------------
Stephen G. Mintos
Executive Vice President
A-1
<PAGE> 1
Exhibit 6(a)(iii)
Dated: November 8, 1995
Schedule B
to the
Distribution Agreement
between The Parkstone Group of Funds and
BISYS Fund Services Limited Partnership (formerly
The Winsbury Company Limited Partnership)
Dated October 1, 1993
Name of Fund Date
- ------------ ----
Parkstone U.S. Government Obligations
Fund - Investor A Shares October 1, 1993
Parkstone Prime Obligations Fund - Investor A Shares
Parkstone Tax-Free Fund - Investor A Shares
Parkstone Equity Fund - Investor A Shares
Parkstone Small Capitalization Fund - Investor A Shares
Parkstone High Income Equity Fund - Investor A Shares
Parkstone Bond Fund - Investor A Shares
Parkstone Limited Maturity Bond Fund - Investor A Shares
Parkstone Intermediate Government Obligations
Fund - Investor A Shares
Parkstone Municipal Bond Fund - Investor A Shares
Parkstone Michigan Municipal Bond Fund - Investor A Shares
Parkstone Balanced Fund - Investor A Shares
Parkstone U.S. Government Income Fund - Investor A Shares
Parkstone International Discovery Fund - Investor A Shares
Parkstone Treasury Fund - Investor A Shares
Parkstone Municipal Investor Fund - Investor A Shares
Parkstone Large Capitalization Fund - Investor A Shares November 8, 1995
THE PARKSTONE GROUP OF FUNDS BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ GEORGE R. LANDRETH By: /s/ STEPHEN G. MINTOS
-------------------------- -------------------------
George R. Landreth Stephen G. Mintos
President Executive Vice President
B-1
<PAGE> 1
Exhibit 6(a)(iv)
Dated November 8, 1995
Schedule D
to the
Distribution Agreement
between The Parkstone Group of Funds and
BISYS Fund Services Limited Partnership (formerly
The Winsbury Company Limited Partnership)
Dated October 1, 1993
Name of Fund Date
- ------------ ----
Parkstone Equity Fund - Investor B Shares October 1, 1993
Parkstone Small Capitalization Fund - Investor B Shares
Parkstone High Income Equity Fund - Investor B Shares
Parkstone Bond Fund - Investor B Shares
Parkstone Limited Maturity Bond Fund - Investor B Shares
Parkstone Intermediate Government Obligations
Fund - Investor B Shares
Parkstone Municipal Bond Fund - Investor B Shares
Parkstone Michigan Municipal Bond Fund - Investor B Shares
Parkstone Balanced Fund - Investor B Shares
Parkstone U.S. Government Income Fund - Investor B Shares
Parkstone International Discovery Fund - Investor B Shares
Parkstone Large Capitalization Fund - Investor B Shares November 8, 1995
THE PARKSTONE GROUP OF FUNDS BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ GEORGE R. LANDRETH By: /s/ STEPHEN G. MINTOS
-------------------------- -------------------------
George R. Landreth Stephen G. Mintos
President Executive Vice President
D-1
<PAGE> 1
Exhibit 6(a)(v)
Dated: November 8, 1995
Schedule F
to the
Distribution Agreement
between The Parkstone Group of Funds and
BISYS Fund Services Limited Partnership (formerly
The Winsbury Company Limited Partnership)
Dated October 1, 1993
Name of Load Fund Date
- ----------------- ----
Parkstone Equity Fund - Investor A Shares October 1, 1993
Parkstone Small Capitalization Fund - Investor A Shares
Parkstone High Income Equity Fund - Investor A Shares
Parkstone Bond Fund - Investor A Shares
Parkstone Limited Maturity Bond Fund - Investor A Shares
Parkstone Intermediate Government Obligations
Fund - Investor A Shares
Parkstone Municipal Bond Fund - Investor A Shares
Parkstone Michigan Municipal Bond Fund - Investor A Shares
Parkstone Balanced Fund - Investor A Shares
Parkstone U.S. Government Income Fund - Investor A Shares
Parkstone International Discovery Fund - Investor A Shares
Parkstone Large Capitalization Fund - Investor A Shares November 8, 1995
THE PARKSTONE GROUP OF FUNDS BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ GEORGE R. LANDRETH By: /s/ STEPHEN G. MINTOS
-------------------------- -------------------------
George R. Landreth Stephen G. Mintos
President Executive Vice President
F-1
<PAGE> 1
Exhibit 6(a)(vi)
Dated: November 8, 1995
Schedule G
to the
Distribution Agreement
between The Parkstone Group of Funds and
BISYS Fund Services Limited Partnership (formerly
The Winsbury Company Limited Partnership)
Dated October 1, 1993
Name of CDSC Fund Date
- ----------------- ----
Parkstone Equity Fund - Investor B Shares October 1, 1993
Parkstone Small Capitalization Fund - Investor B Shares
Parkstone High Income Equity Fund - Investor B Shares
Parkstone Bond Fund - Investor B Shares
Parkstone Limited Maturity Bond Fund - Investor B Shares
Parkstone Intermediate Government Obligations
Fund - Investor B Shares
Parkstone Municipal Bond Fund - Investor B Shares
Parkstone Michigan Municipal Bond Fund - Investor B Shares
Parkstone Balanced Fund - Investor B Shares
Parkstone U.S. Government Income Fund - Investor B Shares
Parkstone International Discovery Fund - Investor B Shares
Parkstone Large Capitalization Fund - Investor B Shares November 8, 1995
THE PARKSTONE GROUP OF FUNDS BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ GEORGE R. LANDRETH By: /s/ STEPHEN G. MINTOS
--------------------------- ------------------------
George R. Landreth Stephen G. Mintos
President Executive Vice President
G-1
<PAGE> 1
Exhibit 6(a)(vii)
Dated: November 8, 1995
Schedule I
to the
Distribution Agreement
between The Parkstone Group of Funds and
BISYS Fund Services Limited Partnership (formerly
The Winsbury Company Limited Partnership)
Dated October 1, 1993
Name of Investor C Fund Date
- ----------------------- ----
Parkstone Equity Fund - Investor C Shares May 12, 1994
Parkstone Small Capitalization Fund - Investor C Shares
Parkstone High Income Equity Fund - Investor C Shares
Parkstone Bond Fund - Investor C Shares
Parkstone Limited Maturity Bond Fund - Investor C Shares
Parkstone Intermediate Government Obligations
Fund - Investment C Shares
Parkstone Municipal Bond Fund - Investor C Shares
Parkstone Michigan Municipal Bond Fund - Investor C Shares
Parkstone U.S. Government Income Fund - Investor C Shares
Parkstone International Discovery Fund - Investor C Shares
Parkstone Large Capitalization Fund - Investor C Shares November 8, 1995
THE PARKSTONE GROUP OF FUNDS BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ GEORGE R. LANDRETH By: /s/ STEPHEN G. MINTOS
------------------------- -------------------------
George R. Landreth Stephen G. Mintos
President Executive Vice President
I-1
<PAGE> 1
Exhibit 6(b)
BISYS FUND SERVICES LIMITED PARTNERSHIP, DISTRIBUTOR
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
DEALER AGREEMENT
Ladies and Gentlemen:
As the principal underwriter of the shares ("Shares") of each investment
company portfolio ("Fund") listed in Exhibit A attached hereto, which may be
amended from time to time, BISYS Fund Services Limited Partnership ("BISYS")
hereby agrees with you as follows:
1. You hereby represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and that you are a
broker-dealer properly registered and qualified under all applicable
federal, state and local laws to engage in the business and transactions
described in this Agreement. You also represent that you are a member in
good standing of the Securities Investor Protection Corporation ("SIPC").
We both agree to abide by the Rules of Fair Practice of the NASD and all
applicable laws, rules and regulations, including applicable federal and
state securities laws, rules and regulations that are now or may become
applicable to transactions hereunder. You agree that it is your
responsibility to determine the suitability of any Fund Shares as
investments for your customers, and that BISYS has no responsibility for
such determination. You further agree to maintain all records required by
applicable law or otherwise reasonably requested by BISYS relating to Fund
transactions that you have executed. In addition, you agree to notify us
immediately in the event your status as a SIPC member changes.
2. We have furnished you with a list of the states or other jurisdictions in
which Fund Shares have been registered for sale or are otherwise qualified
for sale. Such list appears in Exhibit B attached hereto. Shares of the
Funds may from time to time be registered or otherwise qualified for sale
in states or jurisdictions other than those listed in Exhibit B. Those
states or jurisdictions are incorporated into Exhibit B by reference. You
agree to indemnify us and/or the Funds for any claim, liability, expense or
loss in any way arising out of a sale of Shares in any state or
jurisdiction in which such Shares are not so registered or qualified for
sale.
3. In all sales of Fund Shares, you shall act as agent for your customers or
as principal for your own bona fide investment. In no transaction shall
you act as our agent or as agent for any Fund or the Funds' Transfer Agent.
As agent for your customers, you are hereby authorized to: (i) place
orders directly with the investment company (the "Company") for the
purchase of Shares and (ii) tender Shares to the Company for redemption, in
each case subject to the terms and conditions set forth in the applicable
prospectus ("Prospectus") and the operating procedures and policies
established by us. The minimum dollar purchase of Shares shall be the
applicable minimum amount set forth in the applicable Prospectus, and no
order for less than such amount shall be accepted by you. The procedures
relating to the handling of orders shall be subject to instructions which
we shall forward to you from time to time. All orders are subject to
acceptance or rejection by BISYS in its sole discretion. No person is
authorized to make any representations concerning Shares of any Fund except
such representations contained in the relevant then-current Prospectus and
statement of additional information ("Statement of Additional Information")
and in such supplemental information that may be supplied to you by us for
a Fund. If you should make such an unauthorized representation, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation. You are specifically authorized to
distribute the Prospectus and Statement of Additional Information and sales
material received from us. No person is authorized to distribute any other
sales material relating to a Fund without our prior written approval. You
further agree to deliver, upon our request, copies of any relevant amended
Prospectus and Statement of Additional Information to shareholders of the
Fund to whom you have sold Shares. As agent for your customers, you shall
not withhold placing customers' orders for any Shares so as to profit
yourself as a result of such withholding and shall not purchase any Shares
from us except for the purpose of covering purchase orders already
received.
<PAGE> 2
If any Shares purchased by you are repurchased by a Fund or by us for the
account of a Fund, or are tendered for redemption within seven business days
after confirmation by us of the original purchase order for such Shares, (i)
you agree forthwith to refund to us the full concession allowed to you on
the original sale and (ii) we shall forthwith pay to such Fund that part of
the discount retained by us on the original sale. Notice will be given to
you of any such repurchase or redemption within ten days of the date on
which the tender of Shares for redemption is delivered to us or to the Fund.
Neither party to this Agreement shall purchase any Shares from a record
holder at a price lower than the net asset value next computed by or for the
issuer thereof. Nothing in this subparagraph shall prevent you from selling
Shares for the account of a record holder to us or the issuer and charging
the investor a fair commission for handling the transaction. Any order
placed by you for the repurchase of Shares of a Fund is subject to the
timely receipt by the Company of all required documents in good order. If
such documents are not received within a reasonable time after the order is
placed, the order is subject to cancellation, in which case you agree to be
responsible for any loss resulting to the Fund or to us from such
cancellation.
4. We will furnish you, upon request, with offering prices for the Shares in
accordance with the then-current Prospectuses for the Funds, and you agree
to quote such prices subject to confirmation by us on any Shares offered to
you for sale. The public offering price shall equal the net asset value
per Share of a Fund plus a front-end sales load, if applicable. For Funds
with a front-end sales load, you will receive a discount from the public
offering price as outlined in the current Prospectus. For Funds with a
contingent deferred sales load, you will receive from us, or a paying agent
appointed by us, a commission in the amount shown in Exhibit C. We reserve
the right to waive sales charges. Each price is always subject to
confirmation, and will be based upon the net asset value next computed
after receipt by us of an order that is in good form. You acknowledge that
it is your responsibility to date and time stamp all orders received by you
and to transmit such orders promptly to us. You further acknowledge that
any failure to promptly transmit such orders to us that causes a purchaser
of Shares to be disadvantaged, based upon the pricing requirements of Rule
22c-1 under the 1940 Act, shall be your sole responsibility. We reserve
the right to cancel this Agreement at any time without notice if any Shares
shall be offered for sale by you at less than the then-current offering
price determined by or for the applicable Fund.
5. Your customer will be entitled to a front-end sales load reduction with
respect to purchases made under a letter of intent ("Letter of Intent") or
right of accumulation ("Right of Accumulation") described in the
Prospectuses. In such case, your dealer's concession will be based upon
such reduced sales load; however, in the case of a Letter of Intent signed
by your customer, an adjustment to a higher dealer's concession will
thereafter be made to reflect actual purchases by your customer if he or
she should fail to fulfill the Letter of Intent. Your customer will be
entitled to an additional front-end sales load reduction in those instances
in which the customer makes purchases that exceed the dollar amount
indicated in the Letter of Intent and qualifies for an additional front-end
sales load reduction pursuant to the appropriate Prospectus. In such case,
your dealer's concession will be reduced to reflect such additional sales
load reduction. When placing wire trades, you agree to advise us of any
Letter of Intent signed by your customer or of any Right of Accumulation
available to such customer of which he or she has made you aware. If you
fail to so advise us, you will be liable for the return of any commissions
plus interest thereon.
6. With respect to orders that are placed for the purchase of Fund Shares,
unless otherwise agreed, settlement shall be made with the Company within
three (3) business days after our acceptance of the order. If payment is
not so received or made, we reserve the right to cancel the sale, or, at
our option, to sell the Shares to the Funds at the then prevailing net
asset value. In this event or in the event that you cancel the trade for
any reason, you agree to be responsible for any loss resulting to the Funds
or to us from your failure to make payments as aforesaid. You shall not be
entitled to any gains generated thereby.
7. You shall be responsible for the accuracy, timeliness and completeness of
any orders transmitted by you on behalf of your customers by wire or
telephone for purchases, exchanges or redemptions, and shall indemnify us
against any claims by your customers as a result of your failure to
properly transmit their
-2-
<PAGE> 3
instructions. In addition, you agree to guarantee the signatures of your
customers when such guarantee is required by the Prospectus of a Fund. In
that connection, you agree to indemnify and hold harmless all persons,
including us and the Funds' Transfer Agent, against any and all loss, cost,
damage or expense suffered or incurred in reliance upon such signature
guarantee.
8. No advertisement or sales literature with respect to a Fund (as such terms
are defined in the NASD's Rules of Fair Practice) shall be used by you
without first having obtained our approval.
9. Neither of us shall be liable to the other except for (1) acts or failures
to act which constitute a lack of good faith or negligence and (2)
obligations expressly assumed under this Agreement. In addition, you agree
to indemnify us and hold us harmless from any claims or assertions relating
to the lawfulness of your participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with your organization which are performed
in connection with the discharge of your responsibilities under this
Agreement. If such claims are asserted, we shall have the right to manage
our own defense, including the selection and engagement of legal counsel,
and all costs of such defense shall be borne by you.
10. This Agreement will automatically terminate in the event of its assignment.
This Agreement may be terminated by either of us, without penalty, upon ten
days' prior written notice to the other party. This Agreement may also be
terminated at any time without penalty by the vote of a majority of the
members of a Fund's Board of Trustees who are not "interested persons" (as
such term is defined in the 1940 Act), or (with respect to a Fund) by a
vote of a majority of the outstanding voting securities of that Fund on ten
days' written notice.
11. All communications to us shall be sent to the address set forth on page 1
hereof or at such other address as we may designate in writing. Any notice
to you shall be duly given if mailed or telecopied to you at the address
set forth below or at such other address as you may provide in writing.
----------------------
----------------------
----------------------
12. You hereby represent that all requisite corporate proceedings have been
undertaken to authorize you to enter into this Agreement, and to perform
the services contemplated herein. You further represent that the
individual that has signed this Agreement below is a duly elected officer
that has been empowered to act for and on behalf of your organization with
respect to the execution of this Agreement.
13. This Agreement supersedes any other agreement between us with respect to
the offer and sale of Shares and relating to any other matters discussed
herein. All covenants, agreements, representations and warranties made
herein shall be deemed to have been material and relied on by each party.
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision
thereof. This Agreement may be executed in any number of counterparts,
which together shall constitute one instrument, and shall be governed by
and construed in accordance with the laws (other than the conflict of laws
rules) of the State of Ohio and shall bind and insure to the benefit of the
parties hereto and their respective successors and assigns.
-3-
<PAGE> 4
If the foregoing corresponds with your understanding of our agreement, please
sign this document and the accompanying copies thereof in the appropriate space
below and return the same to us, whereupon this Agreement shall be binding upon
each of us, effective as of the date of execution.
BISYS FUND SERVICES LIMITED PARTNERSHIP The foregoing Agreement is hereby
By: BISYS FUND SERVICES. INC., accepted:
GENERAL PARTNER
---------------------------
Company Name
By: By:
-------------------------------- -----------------------
Stephen G. Mintos Date Date
Executive Vice President
Title:
--------------------
-4-
<PAGE> 5
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
EXHIBIT A
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
<TABLE>
<CAPTION>
FUND NAME TYPE CUSIP QUOTRON
- --------- ---- ----- -------
<S> <C> <C> <C>
The Parkstone Group of Funds
The Parkstone U.S. Government Obligations Fund (Class A) Money Market 701475782 PGAXX
The Parkstone U.S. Government Obligations Fund (Inst) Money Market 701475865 PKGXX
The Parkstone Prime Obligations Fund (Class A) Money Market 701475816 POAXX
The Parkstone Prime Obligations Fund (Inst) Money Market 701475873 PKPXX
The Parkstone Tax-Free Fund (Class A) Money Market 701475790 PFAXX
The Parkstone Tax-Free Fund (Inst) Money Market 701475873 PKTXX
The Parkstone Equity Fund (Class A) Stock 701475766 PKEAX
The Parkstone Equity Fund (Class B) Stock 701475642 PKEBX
The Parkstone Equity Fund (Class C) Stock 701475436
The Parkstone Equity Fund (Inst) Stock 701475402 PKEQX
The Parkstone Small Capitalization Fund (Class A) Stock 701475741 PKSAX
The Parkstone Small Capitalization Fund (Class B) Stock 701475626 PKSBX
The Parkstone Small Capitalization Fund (Class C) Stock 701475428
The Parkstone Small Capitalization Fund (Inst) Stock 701475709 PKSCX
The Parkstone High Income Equity Fund (Class A) Stock 701475758 PKHAX
The Parkstone High Income Equity Fund (Class B) Stock 701475634 PKHBX
The Parkstone High Income Equity Fund (Class C) Stock 701475401
The Parkstone High Income Equity Fund (Inst) Stock 701475204 PKHEX
The Parkstone Balanced Fund (Class A) Stock and Bond 701475733 PKBFX
The Parkstone Balanced Fund (Class B) Stock and Bond 701475618 N/A
The Parkstone Balanced Fund (Class C) Stock and Bond 701475394
The Parkstone Balanced Fund (Inst) Stock and Bond 701475840 PLBAX
The Parkstone Municipal Bond Fund (Class A) Municipal Bond 701475683 PKMAX
The Parkstone Municipal Bond Fund (Class B) Municipal Bond 701475568 N/A
The Parkstone Municipal Bond Fund (Inst) Municipal Bond 701475303 PKMBX
</TABLE>
<PAGE> 6
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
EXHIBIT A
INVESTMENT PORTFOLIOS OF
THE PARKSTONE GROUP OF FUNDS
<TABLE>
<CAPTION>
FUND NAME TYPE CUSIP QUOTRON
- --------- ---- ----- -------
<S> <C> <C> <C>
The Parkstone Michigan Municipal Bond Fund (Ohio and Michigan only) (Class A) Municipal Bond 701475675 PKMAX
The Parkstone Michigan Municipal Bond Fund (Ohio and Michigan only) (Class B) Municipal Bond 701475550 N/A
The Parkstone Michigan Municipal Bond Fund (Ohio and Michigan only) (Inst) Municipal Bond 701475881 PKMIX
The Parkstone Bond Fund (Class A) Bond 701475725 PBOAX
The Parkstone Bond Fund (Class B) Bond 701475592 N/A
The Parkstone Bond Fund (Class C) Bond 701475493 N/A
The Parkstone Bond Fund (Inst) Bond 701475105 PKBDX
The Parkstone Government Income Fund (Class A) Bond 701475667 PKGAX
The Parkstone Government Income Fund (Class B) Bond 701475543 N/A
The Parkstone Government Income Fund (Class C) Bond 701475451 N/A
The Parkstone Government Income Fund (Inst) Bond 701475832 PKGIX
The Parkstone Limited Maturity Fund (Class A) Bond 70147691 PLMAX
The Parkstone Limited Maturity Fund (Class B) Bond 70147576 N/A
The Parkstone Limited Maturity Fund (Class C) Bond 701475485 N/A
The Parkstone Limited Maturity Fund (Inst) Bond 701475600 PKLMX
The Parkstone Intermediate Government Obligations Fund (Class A) Bond 701475717 PKIAX
The Parkstone Intermediate Government Obligations Fund (Class B) Bond 701475584 N/A
The Parkstone Intermediate Government Obligations Fund (Class C) Bond 701475477 N/A
The Parkstone Intermediate Government Obligations Fund (Inst) Bond 701475808 PKIEX
The Parkstone International Discovery Fund (Class A) Equity 701475774 PIDAX
The Parkstone International Discovery Fund (Class B) Equity 701475659 PIDBX
The Parkstone International Discovery Fund (Class C) Equity 701475386 N/A
The Parkstone International Discovery Fund (Inst) Equity 701475824 PKIDX
The Parkstone Treasury Fund (Class A) Money Market 701475535 PTUXX
The Parkstone Treasury Fund (Inst) Money Market 701475527 PCSXX
The Parkstone Large Capitalization Fund (Class A) Equity 701475337 N/A
The Parkstone Large Capitalization Fund (Class B) Equity 701475311 N/A
The Parkstone Large Capitalization Fund (Class C) Equity 701475295 N/A
The Parkstone Large Capitalization Fund (Inst) Equity 701575329 PLCIX
</TABLE>
<PAGE> 7
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
EXHIBIT B
THE PARKSTONE GROUP OF FUNDS
BLUE SKY INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FUND NAME STATES/JURISDICTIONS REGISTERED IN
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
The Parkstone Group of Funds Parkstone Class A: (All Portfolios)
The Parkstone U.S. Government Obligations Fund Alabama, Alaska, Arizona, Arkansas, California, Colorado,
The Parkstone Prime Obligations Fund Connecticut, Delaware, District of Columbia, Florida,
The Parkstone Tax-Free Fund Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
The Parkstone Equity Fund Kentucky, Louisiana, Maine, Maryland, Massachusetts,
The Parkstone Small Capitalization Fund Michigan, Minnesota, Mississippi, Missouri, Montana,
The Parkstone High Income Equity Fund Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,
The Parkstone Municipal Bond Fund New York, North Carolina, North Dakota, Ohio, Oklahoma,
The Parkstone Bond Fund Oregon, Pennsylvania, Rhode Island, South Carolina, South
The Parkstone U.S. Government Income Fund Dakota, Tennessee, Texas, Utah, Vermont, Virginia,
The Parkstone Limited Maturity Bond Fund Washington, West Virginia, Wisconsin, Wyoming
The Parkstone International Discovery Fund
The Parkstone Balanced Fund PARKSTONE CLASS B: (ALL PORTFOLIOS EXCEPT MONEY MARKETS
The Parkstone Intermediate Government Obligations Fund Alabama, Alaska, Arizona, Arkansas, California, Colorado,
The Parkstone Treasury Fund Connecticut, Delaware, District of Columbia, Florida,
The Parkstone Large Capitalization Fund Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Montana,
The Parkstone Michigan Municipal Bond Fund Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,
(OHIO, DISTRICT OF COLUMBIA, AND MICHIGAN, HAWAII, New York, North Carolina, North Dakota, Ohio, Oklahoma,
FLORIDA, VIRGINIA, COLORADO, GEORGIA, INDIANA, NEW JERSEY, Oregon, Pennsylvania, Rhode Island, South Carolina, South
AND MISSISSIPPI (A & B ONLY) Dakota, Tennessee, Texas, Utah, Vermont, Virginia,
Washington, West Virginia, Wisconsin, Wyoming
PARKSTONE CLASS C: (All portfolios except Money Markets)
Registration Pending
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
EXHIBIT C
THE PARKSTONE GROUP OF FUNDS
COMMISSION AMOUNT PAYABLE FOR FUNDS
CHARGING A CONTINGENT DEFERRED SALES LOAD
_______ 1. ________ percent of the public offering price
_______ 2. Not Applicable
(Place a check next to the appropriate category.)
<PAGE> 1
Exhibit 6(c)
BISYS FUND SERVICES LIMITED PARTNERSHIP, DISTRIBUTOR
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
SHAREHOLDER SERVICES AGREEMENT
Ladies and Gentlemen:
As the principal underwriter of the shares ("Shares") of each investment
company portfolio ("Fund") of Parkstone Mutual Funds (the "Trust"), BISYS Fund
Services Limited Partnership ("BISYS") hereby agrees that you, the undersigned
broker-dealer, shall provide the shareholder services that are more fully
described below.
1. We represent and warrant to you that the shareholder services described
herein have been authorized pursuant to a Distribution and Shareholder
Services Plan (the "Plan") adopted by the shareholders ("Shareholders") of
each Fund. The Plan has been adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). It is intended that you
shall provide such shareholder services to your customers ("Customers") who
may, from time to time, beneficially own a Fund's Shares.
2. You represent and warrant to us that (i) you are and will be at all times
relevant to this Agreement a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), and (ii) you are and
will be at all times relevant to this Agreement a broker-dealer properly
registered and qualified under all applicable federal, state and local laws
to engage in the business and transactions described in this Agreement.
You agree to comply with all applicable laws, including federal and state
securities laws, the Rules and Regulations of the Securities and Exchange
Commission and the Rules of Fair Practice of the NASD. We have furnished
you with a list of the states or other jurisdictions in which Shares of the
Funds have been registered for sale under, or are otherwise qualified for
sale pursuant to, the respective securities laws of such states and
jurisdictions. You agree that you will not offer a Fund's Shares to
persons in any jurisdiction in which such Shares are not registered or
otherwise qualified for sale. You further agree that you will maintain all
records required by applicable law or otherwise reasonably requested by us
relating to Fund transactions that you have executed.
3. You agree to provide various types of distribution assistance and
Shareholder support services with respect to a Fund's Shares. Such
distribution assistance and Shareholder support services may include those
items that are enumerated in Schedule A attached hereto and such other
similar services that we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
4. For all purposes of this Agreement, you shall be deemed to be an
independent contractor, and shall have no authority to act as agent for us
or for the Trust in any matter or in any respect. No person is authorized
to make any representations concerning us, the Trust, or a Fund's Shares
except those representations contained in the Fund's then-current
Prospectus and the Trust's Statement of Additional Information and in such
printed information as we or the Trust may subsequently prepare. You are
specifically authorized to distribute to Customers a Fund's Prospectus
(including any supplements to such Prospectus), the Trust's Statement of
Additional Information and sales material received from us. No person is
authorized to distribute any other sales material relating to the Trust
without our prior written approval. You further agree to deliver to
Customers, upon our request, copies of amended Prospectuses and Statements
of Additional Information.
5. You and your employees will, upon request, be available during normal
business hours to consult with us concerning the performance of your
responsibilities under this Agreement. You will provide to us and the
Trust's Board of Trustees a written report of all expenditures under this
Agreement, including a discussion of the purposes for which such
expenditures were made. In addition, you will furnish to us or to the
Trust such information as we or the Trust may reasonably request
(including, without limitation, periodic certifications confirming the
rendering of distribution assistance and support services with respect to
Shares described herein), and will otherwise cooperate with us and the
Trust in the preparation of reports to the Trust's Board of Trustees
concerning this Agreement and the monies paid or payable by us under this
Agreement, as well as any other reports or filings that may be required by
law.
<PAGE> 2
6. The minimum dollar purchase of a Fund's Shares (including Shares being
acquired by Customers pursuant to the exchange privileges described in the
Fund's Prospectus) shall be the applicable minimum amount set forth in the
Prospectus of such Fund, and no order for less than such amount shall be
accepted by you. The procedures relating to the handling of orders shall
be subject to instructions which we shall forward to you from time to time.
All orders for a Fund's Shares are subject to acceptance or rejection by
the Trust in its sole discretion, and the Trust may, in its discretion and
without notice, suspend or withdraw the sale of a Fund's Shares, including
the sale of such Shares to you for the account of any Customer or
Customers. You acknowledge that it is your responsibility to date and time
stamp all orders received by you and to transmit such orders promptly to
us. You further acknowledge that any failure to promptly transmit such
orders to us that causes a purchaser of Shares to be disadvantaged, based
upon the pricing requirements of Rule 22c-1 under the 1940 Act, shall be
your sole responsibility. We reserve the right to cancel this Agreement at
any time without notice if any Shares shall be offered for sale by you at
less than the then-current offering price determined by or for the
applicable Fund.
7. For the services provided under this Agreement, you shall receive a fee
calculated at the applicable annual rate set forth on Schedule B hereto
with respect to the average daily net asset value of each Fund's Shares
which are owned of record by you as nominee for Customers or which are
owned by Customers whose records, as maintained by such Fund or its agent,
designate you as the Customer's dealer of record, which fee will be
computed daily and paid monthly. The fee will not be paid with respect to
(i) Shares of a Fund sold by you and redeemed or repurchased by the Trust
or by us within seven business days of receipt of confirmation of such
sale, or (ii) a Customer if the amount of such fee on an annual basis with
respect to such Customer shall be less than $1.00. The fee rate stated on
Schedule B hereto may be prospectively increased or decreased by us in our
sole discretion, at any time upon notice to you. Such fee shall be subject
to the limitations on the payment of asset-based sales charges that are set
forth in Article III. Section 26 of the NASD's Rules of Fair Practice.
8. Neither of us shall be liable to the other except for (1) acts or failures
to act which constitute a lack of good faith or negligence and (2)
obligations expressly assumed under this Agreement. In addition, you agree
to indemnify us and hold us harmless from any claims or assertions relating
to the lawfulness of your participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with your organization which are performed
in connection with the discharge of your responsibilities under this
Agreement. If such claims are asserted, you shall have the right to manage
your own defense, including the selection and engagement of legal counsel,
and all costs of such defense shall be borne by you.
9. This Agreement will automatically terminate in the event of its assignment.
This Agreement may be terminated by either of us, without penalty, upon ten
days' prior written notice to the other party. This Agreement may also be
terminated at any time without penalty by the vote of a majority of the
Disinterested Trustees of a Fund or by a vote of a majority of the
outstanding voting securities of a Fund on ten days' written notice.
10. All communications to us shall be sent to the address set forth on page 1
hereof or at such other address as we may designate in writing. Any notice
to you shall be duly given if mailed or telecopied to you at the address
set forth below or at such other address as you may provide in writing.
11. You represent and warrant that all requisite corporate proceedings have
been undertaken to authorize you to enter into this Agreement and to
perform the services contemplated herein. You further represent and
warrant that the individual that has signed this Agreement below is a duly
elected officer that has been empowered to act for and on behalf of your
organization with respect to the execution of this Agreement.
12. This Agreement supersedes any other agreement between us with respect to
the offer and sale of Shares and relating to any other matters discussed
herein. All covenants, agreements, representations and
-2-
<PAGE> 3
warranties made herein shall be deemed to have been material and relied on
by each party. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term or
provision thereof. This Agreement may be executed in any number of
counterparts, which together shall constitute one instrument, and shall be
governed by and construed in accordance with the laws (other than the
conflict of laws rules) of the State of Ohio and shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
If the foregoing corresponds with your understanding of our agreement, please
sign this document and the accompanying copies thereof in the appropriate space
below and return the same to us, whereupon this Agreement shall be binding upon
each of us, effective as of the date of execution.
BISYS FUND SERVICES LIMITED PARTNERSHIP The foregoing Agreement is hereby
By: BISYS FUND SERVICES, INC., accepted:
General Partner
By:
------------------------------- --------------------------
Stephen G. Mintos Date
Executive Vice President Company Name
By:
-----------------------------
Date
-3-
<PAGE> 4
Dated: As of ____________________________
Schedule A
to the
Shareholder Services Agreement
Shareholder Services
--------------------
In accordance with Section 3 of the Shareholder Services Agreement, you agree
to provide various types of distribution assistance and shareholder support
services that we may reasonably request with respect to Fund Shares that are
beneficially owned by your Customers. Such distribution assistance and
shareholder support services may include the following.
Distribution Assistance
- -----------------------
(i) placing orders with the Trust for the purchase or exchange of a Fund's
Shares and tendering a Fund's Shares to the Trust for redemption; (ii)
promoting the purchase of Shares by Customers; (iii) responding to inquiries
from Customers concerning their investments in Fund Shares; (iv) engaging in
advertising with respect to a Fund's Shares; and (v) distributing Fund
prospectuses, reports and sales literature.
Shareholder Support Services
- ----------------------------
(i) providing Customers with a service that invests the assets of their
accounts in a Fund's Shares pursuant to specific or pre-authorized
instructions; (ii) processing dividend payments from the Trust on behalf of
Customers; (iii) providing information periodically to Customers showing their
positions in a Fund's Shares; (iv) arranging for bank wire transfers of funds
to or from a Customer's account; (v) responding to inquiries from Customers
relating to the services performed by the Participating Organization under this
Agreement; (vi) providing subaccounting, in the case of omnibus accounts, with
respect to a Fund's Shares beneficially owned by Customers or the information
to the Trust necessary for subaccounting; (vii) if required by law, forwarding
Shareholder communications from the Trust (such as proxies, Shareholder
reports, annual and semi-annual financial statements, and dividend,
distribution, and tax notices) to Customers; (viii) forwarding to Customers
proxy statements and proxies containing any proposals regarding this Agreement
or a Fund's Plan; and (ix) rendering ongoing advice respecting the suitability
of particular investment opportunities offered by the Trust in light of the
Customer's need.
A-1
<PAGE> 5
Dated: As of __________________
Schedule B
to the
Shareholder Services Agreement
Compensation
------------
Annual rate of up to 25 one-hundredths of one percent (.25%) of the average
daily net asset value of each Fund's Shares held of record by you from time to
time on behalf of Customers.
- -----------
* All fees are computed daily and paid monthly.
B-1
<PAGE> 1
Exhibit 8(a)
CUSTODY AGREEMENT
THIS AGREEMENT is entered into as of October 18, 1991, between THE PARKSTONE
GROUP OF FUNDS (the "Trust"), a Massachusetts business trust, having its
principal office and place of business at 1900 East Dublin-Granville Road,
Columbus, Ohio 43229 and THE BANK OF CALIFORNIA, N.A. (the "Bank"), a
national banking association organized under the laws of the United States with
its principal place of business at 400 California Street, San Francisco,
California 94104.
In consideration of the mutual promises set forth below, the Trust and the
Bank agree as follows:
1. DEFINITIONS. Whenever used in this Agreement or in any Schedules to this
Agreement, the words and phrases set forth below shall have the following
meanings, unless the context otherwise requires:
1.1 "AUTHORIZED PERSON" shall be deemed to include the President, and any
Vice President, the Secretary, the Assistant Secretary, the Treasurer and any
Assistant Treasurer of the Trust, or any other person, including persons
employed by the Trust's investment adviser, whether or not any such person is
an officer of the Trust, duly authorized by the Board of Trustees of the Trust
to give oral instructions and Written Instructions on behalf of the Trust and
listed in the certification annexed hereto as Schedule C or such other
certification as may be amended or supplemented by the Trust and received by
the Bank from time to time.
1.2 "BOOK-ENTRY SYSTEM" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
1.3 "DECLARATION OF TRUST" shall mean the Declaration of Trust of the
Trust as now in effect and as the same may be amended from time to time.
1.4 "DEPOSITORY" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Bank is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in Written Instructions
authorized to act as a depository under the 1940 Act, its successor or
successors and its nominee or nominees.
1.5 "MONEY MARKET SECURITY" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities
thereof, and repurchase and reverse repurchase agreements with respect to any
of the foregoing types of securities, commercial paper, bank certificates of
deposit, bankers' acceptances and short-term corporate obligations, where the
<PAGE> 2
purchase or sale of such securities normally requires settlement in federal
funds on the same day as such purchase or sale.
1.6 "PROSPECTUS" shall mean the Series' current prospectuses and
statements of additional information relating to the registration of the
Series' Shares under the Securities Act of 1933, as amended.
1.7 "SECURITY" or "SECURITIES" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by each Series, and shall
include each Money Market Security.
1.8 "SHARES" refers to the shares of beneficial interest of a Series of
the Trust.
1.9 "SERIES" refers to the funds of the Trust shown on Schedule A,
attached hereto and made a part hereof by this reference, and any such other
Series as may from time to time be created and designated in accordance with
the provisions of the Declaration of Trust.
1.10 "TRANSFER AGENT" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Trust.
1.11 "WRITTEN INSTRUCTIONS" shall mean a written or electronic
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telex or
any other such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.
1.12 The "1940 ACT" refers to the Investment Company Act of 1940, and the
rules and regulations thereunder, all as amended from time to time.
2. APPOINTMENT OF CUSTODIAN.
2.1 The Trust hereby constitutes and appoints the Bank as custodian of all
the Securities and moneys owned by or in the possession of the Trust during the
period of this Agreement.
2.2 The Bank hereby accepts appointment as custodian for the Trust and
agrees to perform the duties thereof as hereinafter set forth.
3. COMPENSATION.
3.1 The Trust will compensate the Bank for its services rendered under
this Agreement in accordance with the fees set forth in the Fee Schedule
attached as Schedule B and made a part of this Agreement by this reference.
3.2 The parties to this Agreement will agree upon the compensation for
acting as Custodian for any Series hereafter established and designated, and at
the time that the Bank
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commences serving as such for said Series, such agreement shall be reflected in
a Fee Schedule for the Series, which shall be attached to Schedule B of this
Agreement.
3.3 Any compensation agreed to hereunder may be adjusted from time to time
by agreement of the parties and such adjustment shall be reflected in an
amendment to Schedule B, provided that any party requesting an adjustment shall
provide not less than 90 days advance written notice of such request.
3.4 The Bank will bill the Trust as soon as practicable after the end of
the month, and said billings will be detailed in accordance with the Fee
Schedule. The Trust will promptly pay to the Bank the amount of such billing.
In the event such bill is not promptly paid, the Bank may charge against any
money specifically allocated to the Trust such compensation and any expenses
incurred by the Bank in the performance of its duties pursuant to a mutual
agreement between the Bank and the Trust. Subject to mutual agreement the Bank
shall also be entitled to charge against any money held by it and specifically
allocated to the Trust the amount of any loss, damage, liability or expense
incurred with respect to such Trust, including counsel fees, for which it shall
be entitled to reimbursement under the provision of this Agreement.
4. CUSTODY OF CASH AND SECURITIES.
4.1 RECEIPT AND HOLDING OF ASSETS. The Trust will deliver or cause to be
delivered to the Bank all Securities and moneys owned by it, including cash
received from the issuance of its Shares, at any time during the period of this
Agreement and shall specify the Series to which the Securities and moneys are
to be specifically allocated. The Bank shall physically segregate and keep
apart on its books, the assets of each Series, including separate
identification of Securities held in the Book-Entry System. The Bank will not
be responsible for such Securities and moneys until actually received by it.
The Trust shall instruct the Bank from time to time in its sole discretion, by
means of Written Instructions as to the manner in which and in what amounts
Securities and moneys of a Series are to be deposited on behalf of such Series
in the Book-Entry System or the Depository and specifically allocated on the
books of the Bank to such Series. Securities and moneys of the Trust deposited
in the Book-Entry System or the Depository will be represented in accounts
which include only assets held by the Bank for customers, including but not
limited to accounts in which the Bank acts in a fiduciary or representative
capacity.
4.2 ACCOUNTS AND DISBURSEMENTS. The Bank shall establish and maintain a
separate account for each Series and shall credit to the separate account of
each Series all moneys received by it for the account of such Series and shall
disburse the same only:
4.2.1 In payment for Securities purchased for such Series, as provided in
Section 5 hereof;
4.2.2 In payment of dividends or distributions with respect to the Shares
of such Series;
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4.2.3 In payment of original issue or other taxes with respect to the
Shares of such Series;
4.2.4 In payment for Shares which have been redeemed by such Series; and
4.2.5 Pursuant to Written Instructions, setting forth the name of such
Series, the name and address of the person to whom the payment is to be made,
the amount to be paid and the purpose for which payment is to be made.
4.3 CONFIRMATIONS AND STATEMENTS. Promptly after the close of business
each day, the Bank shall make available to the Trust information with respect
to all transfers to and from the account of a Series during that day. The Bank
need not send written confirmation or a summary of all such transfers to or
from the account of each Series. Provided, however that upon the written
request of the Trust, Bank shall provide within 5 business days of such written
request a copy of any confirmations which include transactions of the Trust.
Where securities purchased by a Series are in a fungible bulk of Securities
registered in the name of the Bank (or its nominee) or shown on the Bank's
account on the books of the Depository or the Book-Entry System, the Bank shall
by book entry or otherwise identify the quantity of those securities belonging
to such Series. At least monthly, the Bank shall furnish the Trust with a
detailed statement of the Securities and moneys held for each Series under this
Agreement. The Bank shall, at the Trust's request, supply the Trust with a
tabulation of securities owned by each Series and held by the Bank and shall,
when requested to do so by the Trust and for such compensation as shall be
agreed upon between the Trust and the Bank, include certificate numbers in such
tabulations.
4.4 REGISTRATION OF SECURITIES AND PHYSICAL SEPARATION. All Securities
held for a Series which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System shall be held by the Bank in
that form; all other Securities held for a Series may be registered, in the
name of any duly appointed registered nominee of the Bank as the Bank may from
time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees.
When a reference is made in this Agreement to an action to be taken by Bank it
is understood by the parties that the action may be taken directly or in the
case of book-entry securities, through the appropriate Depository. The Trust
agrees to furnish to the Bank appropriate instruments to enable the Bank to
hold or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository,
any Securities which it may hold for the account of a Series. The Bank (or its
authorized sub-custodians) shall hold all such Securities specifically
allocated to a Series which are not held in the Book-Entry System or the
Depository in a separate account for such Series in the name of such Series
physically segregated at all times from those of any other person or persons.
4.5 COLLECTION OF INCOME AND OTHER MATTERS AFFECTING SECURITIES. Unless
otherwise instructed to the contrary by Written Instructions, the Bank shall
with respect to all Securities held for a Series in accordance with this
Agreement:
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4.5.1 Collect all income due or payable and credit such income promptly
on contractual settlement date, whether or not actually received, to the
account of the appropriate Series, except for income from foreign issues.
Income which has not been collected after reasonable effort, within a time
agreed upon between the parties, shall be repaid to the Bank pending final
collection at such date as may be mutually agreed upon by the Trust and the
Bank;
4.5.2 Present for payment and collect in a timely manner the amount
payable upon all Securities which may mature or be called, redeemed or retired,
or otherwise become payable. bank shall make a good faith effort to inform
Trust of any call, redemption or retirement date with respect to Securities
which are owned by a Series and held by the Bank or its nominee.
Notwithstanding the foregoing, the Bank shall have no responsibility to the
Trust or a series for monitoring or ascertaining of any call, redemption or
retirement date with respect to Securities which are owned by a Series and held
by Bank or its nominee. Nor with respect to any put bond shall the Bank have
any responsibility or liability to the Trust or to a Series for any loss by a
Series for any missed payment or other default resulting therefrom unless the
Bank received timely general notification, which shall not be less than 5
business days, from the Trust or the Series specifying the time, place and
manner for the presentment of any put bond owned by a Series and held by the
Bank or its nominee. The Bank shall not be responsible and assumes no
liability to the Trust or a Series for the accuracy or completeness of any
notification the Bank shall provide to the Trust or a Series with respect to
put securities;
4.5.3 Execute any necessary declarations or certificates of ownership
under the Federal income tax laws or the laws or regulations of any other
taxing authority now or hereafter in effect;
4.5.4 Hold for the account of each Series all rights and Securities
issued with respect to any Securities held by the Bank hereunder for such
Series; and
4.5.5 With respect to all Securities (except foreign securities) the Bank
will pay to the Trust for the benefit of the Series, all interest and dividend
income which is due and payable but unpaid on the contractual settlement or
payment dates, subject to reimbursement from the Trust in each case at such a
later date as may be agreed upon by the Trust and the Bank.
4.6 DELIVERY OF SECURITIES AND EVIDENCE OF AUTHORITY. Upon receipt of
Written Instructions, the Bank shall:
4.6.1 Execute and deliver or cause to be executed and delivered to such
persons as may be designated in such Written Instructions, proxies, consents,
authorization, and any other instruments whereby the authority of the Trust as
owner of any Securities may be exercised;
4.6.2 Deliver or cause to be delivered any Securities held for a Series
in exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
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<PAGE> 6
4.6.3 Deliver or cause to be delivered any Securities held for a Series
to any protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate (bookkeeping) account for
each Series such certificates of deposit, interim receipts or other instruments
or documents as may be issued so as to evidence such delivery;
4.6.4 Make or cause to be made such transfers or exchanges of the assets
and take such steps as shall be stated in said Written Instructions to be for
the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Trust;
4.6.5 Deliver Securities owned by any Series upon sale of such Securities
for the account of such Series pursuant to Section 5;
4.6.6 Deliver Securities owned by any Series upon the receipt of payment
in connection with any repurchase agreement related to such Securities entered
into by the Trust for the benefit of such Series;
4.6.7 Deliver Securities owned by any Series to the issuer thereof or its
agent when such Securities are called, redeemed, retired or otherwise become
payable; provided, however, that in any such case the cash or other
consideration is to be delivered to the Bank;
4.6.8 Deliver Securities owned by any Series in connection with any loans
of Securities made by such Series but only against receipt of adequate
collateral as agreed upon from time to time by the Bank and the Trust which may
be in any form permitted under the 1940 Act or any interpretations thereof
issued by the Securities and Exchange Commission or its staff;
4.6.9 Deliver Securities owned by any Series for delivery as security in
connection with any borrowings by such Series requiring a pledge of Series
assets, but only against receipt of amount borrowed;
4.6.10 Deliver Securities owned by any Series upon receipt of
instructions from such Series for delivery to the Transfer Agent or to the
holders of Shares of such Series in connection with distributions in kind, as
may be described from time to time in the Series' Prospectus, in satisfaction
of requests by holders of Shares for repurchase or redemption; and
4.6.11 Deliver Securities owned by any Series for any other proper
business purpose, but only upon receipt of, in addition to Written
Instructions, a certified copy of a resolution of the Board of Trustees signed
by an Authorized Person and certified by the Secretary or Assistant Secretary
of the Trust, specifying the Securities to be delivered, setting forth the
purpose of which such delivery is to be made, declaring such purpose to be a
proper business purpose, and naming the person or persons to whom delivery of
such Securities shall be made.
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4.7 ENDORSEMENT AND COLLECTION OF CHECKS, ETC. The Bank is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of a Series.
5. PURCHASE AND SALE OF INVESTMENTS OF THE SERIES.
5.1 Promptly after each purchase of Securities for a Series, the Trust
shall deliver to the Bank Written Instructions specifying with respect to each
purchase: (1) the name of the Series to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or the principal amount purchased and
accrued interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such purchase; (7)
the name of the person from whom or the broker through whom the purchase was
made, if any; (8) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and (9) whether the Securities purchased
are to be deposited in the Book-Entry System or the Depository. The Bank shall
receive all Securities purchased by or for a Series and upon receipt of such
Securities shall pay out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Written Instructions.
5.2 Promptly after each sale of Securities of a Series, the Trust shall
deliver to the Bank Written Instructions specifying with respect to such sale:
(1) the name of the Series to which the Securities were sold were specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or principal amount sold, and accrued interest, if any; (4)
the date of sale; (5) the sale price per unit; (6) the total amount payable to
the Series upon such sale; (7) the name of the broker through whom or the
person to whom the sale was made; and (8) whether or not such sale is to be
settled through the Book-Entry System or the Depository. The Bank shall
deliver or cause to be delivered the Securities to the broker or other person
designated by the Trust upon receipt of the total amount payable to such Series
upon such sale, provided that the same conforms to the total amount payable to
such Series as set forth in such Written Instructions. Subject to the
foregoing, the Bank may accept payment in such form as shall be satisfactory to
it, and may deliver Securities and arrange for payment in accordance with the
customs prevailing among dealers in Securities.
6. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS.
6.1 The Trust shall furnish to the Bank the resolution of the Board of
Trustees of the Trust certified by the Secretary or Assistant Secretary (i)
authorizing the declaration of dividends or distribution with respect to a
Series on a specified periodic basis and authorizing the Bank to rely on
Written Instructions specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of such
shareholders entitled to payment shall be determined, the amount payable per
Share to the shareholders of record as of the record date and the total amount
payable per Share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Series, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be
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determined, the amount payable per Share to the shareholders of record as of
the record date and the total amount payable to the Transfer Agent on the
payment date.
6.2 Upon the payment date specified in such resolution or Written
Instructions the Bank shall pay out the moneys specifically allocated to and
held for the account of the appropriate Series the total amount payable to the
Transfer Agent of the Trust.
7. SALE AND REDEMPTION OF SHARES OF A SERIES.
7.1 Whenever the Fund shall sell or redeem any Shares of a Series, the
Fund shall deliver or cause to be delivered to the Bank Written Instructions
duly specifying:
7.1.1 The name of the Series whose Shares were sold or redeemed;
7.1.2 The number of Shares sold or redeemed, trade date, and price; and
7.1.3 The amount of money to be received or paid by the Bank for the sale
or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the Bank shall
credit such money to the separate account of the Series.
7.3 Upon issuance of any Shares of a Series in accordance with the
foregoing provisions of this Section 7, the Bank shall pay, out of the moneys
specifically allocated and held for the account of such Series, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of Written Instructions specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting forth the
number of Shares of a Series received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the Bank shall make
payment to the Transfer Agent out of the moneys specifically allocated to and
held for the account of the Series.
8. INDEBTEDNESS.
8.1 The Trust will cause to be delivered to the Bank by any bank
(excluding the Bank) from which the Trust borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Trust against
delivery of a stated amount of collateral. The Trust shall promptly deliver to
the Bank Written Instructions stating with respect to each such borrowing: (1)
the name of the Series for which the borrowing is to be made; (2) the name of
the bank; (3) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Trust, or other loan agreement; (4) the time and date, if known, on which the
loan is to be entered into (the "borrowing date"); (5) the date on which the
loan becomes due and payable; (6) the total amount payable to the Trust for the
separate account of the Series on the borrowing date; (7) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares
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or the principal amount of any particular Securities; (8) whether the Bank is
to deliver such collateral through the Book-Entry System or the Depository; and
(9) a statement that such loan is in conformance with the 1940 Act and the
Series' Prospectus.
8.2 Upon receipt of the Written Instructions referred to above, the Bank
shall deliver on the borrowing date the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Written Instructions. The Bank may, at the option
of the lending bank keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note, loan agreement or security agreement. The Bank shall deliver
as additional collateral in the manner directed by the Trust from time to time
such Securities specifically allocated to such Series as may be specified in
Written Instructions to collateralize further any transaction described in this
Section 8. The Trust shall cause all Securities released from collateral
status to be returned directly to the Bank, and the Bank shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Trust fails to specify in Written Instructions all of the information
required by this Section 8, the Bank shall not be under any obligation to
deliver any Securities. Collateral returned to the Bank shall be held
hereunder as it was prior to being used as collateral.
9. PERSONS HAVING ACCESS TO ASSETS OF THE SERIES.
9.1 No Trustee, officer, employee or agent of the Trust, and no officer,
director, employee or agent of the Trust's investment adviser, shall have
physical access to the assets of the Trust held by the Bank or be authorized or
permitted personally to withdraw any investments of the Trust, nor shall the
Bank deliver any assets of the Trust to any such person. No officer, director,
employee or agent of the Bank who holds any similar position with the Trust or
the Trust's investment adviser shall have access to the assets of the Trust.
9.2 The individual employees of the Bank initially duly authorized by the
Board of Directors of the Bank to have access to the assets of the Trust are
listed on Schedule C which is attached and made a part of this Agreement by
this reference. The Bank shall advise the Trust of any change in the
individuals authorized to have access to the assets of the Trust by written
notice to the Trust.
9.3 Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Trust, or any officer, director, employee or agent of the Trust's
investment adviser, from giving Written Instructions to the Bank so long as it
does not result in delivery of or access to assets of the Trust prohibited by
this Section 9.
10. CONCERNING THE BANK.
10.1 STANDARD OF CONDUCT. The Bank shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Agreement and reasonably believed by
it to be valid or genuine and shall be held harmless in acting upon proper
instructions, resolutions, any notice, request, consent, certificate or other
instrument reasonably believed it to be genuine and to be signed by the
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proper party or parties and shall be entitled to receive as conclusive proof of
any fact or matter required to be ascertained by it hereunder, a certificate
signed by the President, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of the Trust. The Bank may receive and accept a resolution
as conclusive evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any action by the Board of
Trustees pursuant to the Declaration of Trust as described in such vote, and
such vote may be considered as in full force and effect until receipt by the
Bank of written notice from the Secretary or an Assistant Secretary to the
contrary.
The Bank shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Provided, however, that if such reliance involves a potential material loss to
the Trust, the Bank shall advise the Trust of any such actions to be taken in
accordance with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement but shall be liable only for its own negligent
or bad faith acts or willful misconduct or failures to act by the Bank and its
agents or Employees. Bank shall have no responsibility for reviewing or
questioning the acts or records of any prior custodian. The Trust shall
indemnify the Bank and hold it harmless from and against all losses,
liabilities, demands, claims, actions, expenses, attorneys' fees, and taxes
with respect to each Series which the Bank may suffer or incur on account of
being custodian hereunder except to the extent that such losses, liabilities,
demands, claims, actions, expenses, attorneys fees or taxes arise from the
Bank's own negligence or bad faith. In addition to the foregoing the Bank
shall be liable to the Trust for any loss or damage resulting from the use of
the Book-Entry System or the Depository arising by reason of any negligence,
misfeasance or misconduct on the part of the Bank or any of its employees or
agents.
If a Series requires the Bank to take any action with respect to Securities,
which action involves the payment of money or which action may, in the opinion
of the Bank, result in the Bank or its nominee assigned to such Series being
liable for the payment of money or incurring liability of some other form, such
Series, as a prerequisite to requiring the Bank to take such action, shall,
prior to the Bank taking such action, provide indemnity in writing to the Bank
in an amount and form satisfactory to it.
10.2 LIMIT OF DUTIES. Without limiting the generality of the foregoing,
the Bank shall be under no duty or obligation to inquire into and shall not be
liable for:
10.2.1 The validity of the issue of any Securities purchased by any
Series, the legality of the purchase thereof, the permissibility of the
purchase thereof under the Trust's governing documents, or the propriety of the
amount paid therefor:
10.2.2 The legality of the sale of any Securities by any Series, the
permissibility of such sale under the Trust's governing documents, or the
propriety of the amount for which the same are sold:
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10.2.3 The legality of the issue or the sale of any Shares, or the
sufficiency of the amount to be received therefor;
10.2.4 The legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor;
10.2.5 The legality of the declaration or payment of any dividend or
other distribution of any Series; and
10.2.6 The legality of any borrowing for temporary or emergency
administrative purposes.
10.3 NO LIABILITY UNTIL RECEIPT. Except as set forth in section 4.5.1 and
4.5.5 hereof the Bank shall not be liable for, or considered to be the
custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of any
Series until the Bank actually receives and collects such money directly or by
the final crediting of the account representing the Trust's interest in the
Book-Entry System or the Depository.
10.4 COLLECTION WHERE PAYMENT REFUSED. The Bank 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 (a) it shall be
directed to take such action by Written Instructions and (b) it shall be
assured to its satisfaction of reimbursement of its costs and expenses in
connection with any such action. Notwithstanding the foregoing, the Bank will
use reasonable efforts to collect at the Bank's expense all income and
dividends from all Securities.
10.5 APPOINTMENT OF AGENTS AND SUB-CUSTODIANS. The Bank may upon proper
authorization from the Trust appoint one or more banking institutions,
including but not limited to banking institutions located in foreign countries,
to act as Depository or Depositories or as Sub-Custodian or as Sub-Custodians
of Securities and moneys at any time owned by any Series, upon terms and
conditions specified in Written Instructions. The Bank shall use reasonable
care in selecting a Depository and/or Sub-Custodian located in a country other
than the United States ("Foreign Sub-Custodian"), and shall oversee the
maintenance of any Securities or moneys of the Trust by any Foreign
Sub-Custodians.
10.6 NO DUTY TO ASCERTAIN; AUTHORITY. The Bank shall not be under any duty
or obligation to ascertain whether any Securities at any time delivered to or
held by it for the Trust and specifically allocated to a Series are such as may
properly be held by the Series and specifically allocated to such Series under
the provisions of the Declaration of Trust and the Series' Prospectus.
10.7 RELIANCE ON CERTIFICATES AND INSTRUCTIONS. The Bank shall be entitled
to rely upon any Written Instructions or oral instructions actually received by
the Bank pursuant to the applicable Sections of this Agreement and reasonably
believed by the Bank to be genuine and to be given by an Authorized Person.
The Trust agrees to forward to the Bank Written Instructions from an Authorized
Person confirming such oral instructions in such manner so that
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such Written Instructions are received by the Bank, whether by hand delivery,
telex, or otherwise, by the close of business on the same day that such oral
instructions are given to the Bank. The Trust agrees that the fact that such
confirming instructions are not received by the Bank shall in no way affect the
validity for the transactions or enforceability of the transactions hereby
authorized by the Trust. The Trust agrees that the Bank shall incur no
liability to the Trust in acting upon oral instructions given to the Bank
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from a duly Authorized Person.
10.8 INSPECTION OF BOOKS AND RECORDS. The books and records of the Bank
regarding the Trust shall be open to inspection and audit at reasonable times
by officers and auditors employed by the Trust and by employees of the
Securities and Exchange Commission. The Bank shall provide the Trust, upon
request, with any report obtained by the Bank on the system of internal
accounting control of the Book-Entry System or the Depository and with such
reports on its own systems of internal accounting control as the Trust may
reasonably request from time to time. Provided, however, that in the event
that the Trust shall require a report of internal accounting control produced
by the auditors of the Series rather than of the Bank, then such report shall
be prepared at the expense of the Series, and the Series agrees to pay for the
time expended by Bank on such audit and report at the hourly rate set forth on
the Fee agreement.
10.9 RECORDS. The Bank shall with respect to each Series create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Trust under the
Investment Company Act of 1940, with particular attention to Section 31 thereof
and Rules 31a-1 and 31a-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules or procedures which may be applicable to
the Trust. All such records shall be the property of the Trust.
10.10 OPINION OF TRUST'S INDEPENDENT ACCOUNTANT. The Bank shall take all
reasonable actions, as the Trust on behalf of each applicable Series may from
time to time request, to obtain from year to year favorable opinions from the
Trust's independent accountants with respect to its activities hereunder in
connection with the preparation of the Trust's Form N-SAR or other periodic
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
11. TERM AND TERMINATION.
11.1 This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
11.2 Either of the parties hereto may terminate this Agreement with respect
to any or all Series by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice is given by
the Trust, it shall designate a successor custodian or custodians, which shall
be a person qualified to so act under the 1940 Act. In the event such notice
is given by the Bank, the Trust shall, on or before the termination date,
deliver to the Bank, Written Instructions designating a successor Custodian or
Custodians. In the absence of such designation
-12-
<PAGE> 13
by the Trust, the Bank may designate a successor Custodian, which shall be a
person qualified to so act under the 1940 Act. If the Trust fails to designate
a successor Custodian for any Series, the Trust shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Bank of all Securities (other than Securities held in the Book-Entry Systems
which cannot be delivered to the Trust) and moneys then owned by such Series,
be deemed to be its own Custodian and the Bank 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 Trust.
11.3 Upon the date set forth in such notice under paragraph 11.2 of this
Section, this Agreement shall terminate tot he extend specified in such notice,
and the Bank shall upon receipt of a notice of acceptance by the successor
Custodian on that date deliver directly to the successor Custodian all
Securities and moneys then held by the Bank and specifically allocated to the
Series or Series specified, after deducting all fees, expenses and other
amounts mutually agreed to prior to termination by the Bank and the Trust for
the payment or reimbursement of which it shall then be entitled with respect to
such Series or Series.
12. ADDITIONAL SERVICES BY BANK.
12.1 If allowed by the Prospectus, the Trust's investment adviser may
direct that the assets of any Series be invested in deposits in Bank or its
affiliates bearing a reasonable rate of interest.
12.2 OTHER BANK SERVICES. Any Authorized Person may direct Bank to utilize
other services or facilities provided by BanCal Tri-State Corp. ("BanCal"),
its subsidiaries or affiliates including Bank. Such services shall include,
but not be limited to (1) the placing of orders for the purchase, sale
exchange, investment or reinvestment of securities through any brokerage
service conducted by, or (2) the purchase of units of any investment company
managed or advised by Bank, BanCal, or their subsidiaries or affiliates and/or
for which Bank, BanCal, or their subsidiaries or affiliates act as custodian or
provide investment advice or other services for a fee, including, without
limitation, The HighMark Group of Funds. Trust hereby acknowledges that Bank,
BanCal or their subsidiaries or affiliates will receive fees for such services
in addition to the fees payable under this Agreement. Fee Schedules for such
additional directed services shall be delivered to the Authorized Person before
provision of such services.
13. MISCELLANEOUS.
13.1 Annexed hereto as Schedule C is a certification signed by an
authorized officer of the Trust setting forth the names and the signatures of
the present Authorized Persons. The Trust agrees to furnish to the Bank a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon oral instructions or Written
Instructions of the Authorized Persons as set forth in the last delivered
certification.
-13-
<PAGE> 14
13.2 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Bank, shall be sufficiently given if
addressed to the Bank and mailed or delivered to it at its offices at:
The Bank of California, N.A.
Mutual Fund Services Dept., Trust Group
475 Sansome Street, 11th Floor
San Francisco, California 94111
or such other place as the Bank may from time to time designate in writing.
13.3 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Trust, shall be sufficiently given if
addressed to the Trust and mailed or delivered to it at its offices at The
Parkstone Group of Funds, c/o The Winsbury Company, 1900 East Dublin-Granville
Road, Columbus, Ohio 43229 or at such other place as the Trust may from time
to time designate in writing.
13.4 This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and as may be permitted or required by the 1940 Act.
13.5 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 Trust without the written consent
of the Bank, or by the Bank without the written consent of the Trust authorized
or approved by a resolution of the Board of Trustees of the Trust, and any
attempted assignment without such written consent shall be null and void.
13.6 This Agreement shall be construed in accordance with the laws of the
State of California.
13.7 The names The Parkstone Group of Funds and Trustees of The Parkstone
Group of Funds refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated march 25, 1987, to which reference is hereby made
and a copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust, and to
any and all amendments thereto so filed or hereafter filed. The obligations of
The Parkstone Group of Funds entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but
in such capacities, and are not binding upon any of the Trustees, shareholders,
or representatives of the Trust personally, but bind only the assets of the
Trust, and all persons dealing with any Series of the Trust must look solely to
the assets of the Trust belonging to such Series for the enforcement of any
claims against the Trust.
13.8 The captions of the Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
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<PAGE> 15
13.9 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 thereunder duly authorized as of the day
and year first above written.
THE PARKSTONE GROUP OF FUNDS
By: /s/ WILLIAM J. TOMKO
-----------------------------------
Date: 10/7/91
---------------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ MARY FOWLER
-----------------------------------
Mary Fowler, Vice President
Date: 9/30/91
---------------------------------
-15-
<PAGE> 16
SCHEDULE A - FUNDS
o Parkstone Prime Obligations Fund
o Parkstone U.S. Government Obligations Fund
o Parkstone Tax Free Fund
o Parkstone Equity Fund
o Parkstone High Income Equity Fund
o Parkstone Small Capitalization Fund
o Parkstone Bond Fund
o Parkstone Municipal Bond Fund
o Parkstone Limited Maturity Bond Fund
o Parkstone Intermediate Government Obligations Fund
o Parkstone Michigan Municipal Bond Fund
THE PARKSTONE GROUP OF FUNDS
By: /s/ WILLIAM J. TOMKO
-------------------------------------
William J. Tomko
Date: 10/7/91
-----------------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ MARY FOWLER
-------------------------------------
Mary Fowler, Vice President
Date: 10/1/91
-----------------------------------
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<PAGE> 17
SCHEDULE B
MUTUAL FUND SERVICES
SCHEDULE OF FEES
CUSTODY
A. With respect to the Prime Obligations, U.S. Government Obligations,
Tax-Free, Equity, High Income Equity, Small Capitalization, Bond, Municipal
Bond, Limited maturity Bond, Intermediate Government Obligations and
Municipal Bond funds, The Bank of California agrees to perform all its
obligations under the attached Custody Agreement for a flat fee of $325,000
for the first year.
B. With respect to the Balanced Fund and the U.S. Government Income Fund, The
Bank of California agrees to perform all its obligations under the attached
Custody Agreement for the first year for an annual administration fee of
$1,000, plus itemized fees for each of the following transactions, subject
to a $2,500 minimum:
ITEMIZED FEES
Transaction Fee(1) $18 Depository Eligible
$40 Depository Ineligible
Annual Holding Fee $25 Depository Eligible
$40 Depository Ineligible
Disbursements $ 3 Scheduled Disbursements in excess of 3
per quarter
$10 Non-Scheduled (Personal)
$15 Non-Scheduled (EBT & IRA)
$15 All Domestic Wires
Termination Fees $200
C. Any changes in its annual fees after the first year shall be based upon the
mutual agreement of the parties hereto, in accordance with an amendment to
this Schedule B.
THE BANK OF CALIFORNIA, N.A. THE PARKSTONE GROUP OF FUNDS
By: /s/ MARY FOWLER By: /s/ WILLIAM J. TOMKO
------------------------------- --------------------------------
Mary Fowler, Vice President William J. Tomko
Date: October 27, 1992
____________________
(1) A transaction is defined as any activity affecting assets, such as
purchase, sale, tender offer, stock dividend, free deliveries, maturity,
exchange, redemption, etc. Fees for foreign securities, foreign exchange
transactions, international wires and nonstandard service are quoted separately.
<PAGE> 18
SCHEDULE C
AUTHORIZED PERSONS
Part I - Access Persons of Bank
Karen Kawatomari Edward Brands
Vida Liaukus Mary Fowler
Part II - Authorized Persons of the Trust
In addition to the Trust's President and Treasurer, only any one of the
following individuals is authorized to give oral instructions and Written
Instructions, provided that instructions given in connection with the issuance
of checks and other drafts in payment of the Trust's operating expenses must
not be given except upon prior Written Instructions of at least two officers of
the Trust and provided further that no person shall be authorized or permitted
to withdraw Trust investments or assets upon his or their mere receipt:
G. Ronald Henderson Roy E. Rogers
Kenneth B. Quintens Cynthia L. Lindsey
J. David Huber Charles Booth
Stephen G. Mintos Scott A. Englehart
William J. Tomko Melanie L. Nicholson
Lora L. Oberlander Janna Bugliosi
Notwithstanding the foregoing, in addition to the Trust's President and
Treasurer, only any one of the following employees of the Trust's investment
adviser is authorized to give oral instructions and Written Instructions in
connection with the purchase and sale of portfolio securities with respect to
the Trust; provided that no one or more persons shall be authorized or
permitted to withdraw Trust investments or assets upon his or their mere
receipt:
Victor J. Melone Roger H. Stemper
Mark E. Kummerer Todd C. Bell
Laura A. Wiley Steve Wisneski
Maureen T. Meert Nancy Lacko
Greg Frost Kathleen A. Bramlage
Richard Wolfe Richard L. Sutterfiled
Bruce Bartlett
THE PARKSTONE GROUP OF FUNDS
By: /s/ WILLIAM J. TOMKO
------------------------------------
William J. Tomko
Date: 10/7/91
----------------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ MARY FOWLER
------------------------------------
Mary Fowler, Vice President
Date: 10/1/91
---------------------------------
<PAGE> 1
Exhibit 8(a)(i)
DATED: NOVEMBER 8, 1995
SCHEDULE A TO CUSTODY AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
THE BANK OF CALIFORNIA, N.A.
DATED OCTOBER 18, 1991
- - Parkstone Prime Obligations Fund
- - Parkstone U.S. Government Obligations Fund
- - Parkstone Tax-Free Fund
- - Parkstone Equity Fund
- - Parkstone High Income Equity Fund
- - Parkstone Small Capitalization Fund
- - Parkstone Bond Fund
- - Parkstone Municipal Bond Fund
- - Parkstone Limited Maturity Bond Fund
- - Parkstone Intermediate Government Obligations Fund
- - Parkstone Michigan Municipal Bond Fund
- - Parkstone Balanced Fund
- - Parkstone U.S. Government Income Fund
- - Parkstone International Discovery Fund
- - Parkstone Treasury Fund
- - Parkstone Municipal Investor Fund
- - Parkstone Large Capitalization Fund
THE PARKSTONE GROUP OF FUNDS
By: /s/ GEORGE LANDRETH
-------------------------
George R. Landreth
President
THE BANK OF CALIFORNIA, N.A.
By: /s/ MARY FOWLER
-------------------------
Title: Vice President
----------------------
<PAGE> 1
Exhibit 8(a)(ii)
November 20, 1992
AMENDMENT TO
SCHEDULE B
MUTUAL FUND SERVICES
SCHEDULE OF FEES
Custody Agreement
The Bank of California agrees to perform all its obligations under the attached
Custody Agreement for an annual fee of $472,500. The fee is payable in equal
monthly installments or as agreed to in writing between the parties.
Any changes in its annual fee shall be based upon the mutual agreement of the
parties, hereto, in accordance with an amendment to this Schedule B.
THE PARKSTONE GROUP OF FUNDS
By: /s/ G. RONALD HENDERSON
-----------------------
Date:
----------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ MARY FOWLER
---------------
Mary Fowler, Vice President
Date: January 19, 1993
<PAGE> 1
Exhibit (8)(a)(iii)
SECURITIES LENDING AND REVERSE REPURCHASE AGREEMENT SERVICES
CLIENT ADDENDUM
(CUSTODIAN AGREEMENT: OCTOBER 18, 1991)
THIS AGREEMENT for securities lending and/or reverse repurchase agreement
services is made, effective as of June 8, 1995, by and between THE
PARKSTONE GROUP OF FUNDS ("Principal") and THE BANK OF CALIFORNIA, NATIONAL
ASSOCIATION ("Bank"). This Agreement is an addendum to the Custody Agreement
by and between Principal and Bank dated as of October 18, 1991 ("Custodian
Agreement"). This Addendum supersedes the Addendum to the Custodian Agreement
dated by the parties on October 7, 1991 and September 30, 1991 addressing
securities lending activities.
Principal and Bank agree as follows:
I. APPOINTMENT OF BANK; ELIGIBLE COUNTERPARTIES
1. APPOINTMENT OF BANK AS AGENT. Principal hereby authorizes Bank to act as
agent for Principal in securities lending and reverse repurchase agreement
transactions with respect to securities deposited with or held by Bank
pursuant to the Custodian Agreement. Bank's duties and responsibilities
shall be only those set forth in this Agreement and the Custodian Agreement,
or as otherwise agreed to by Bank in writing. Further, Principal authorizes
Bank to delegate Bank's duties as agent hereunder to a sub-agent(s).
2. ELIGIBLE BORROWERS/BUYERS. Bank may lend securities only to such securities
brokers and dealers or other person or entities as are listed in the
attached Exhibit A, as amended from time to time ("Borrowers"), unless and
until otherwise instructed in writing by Principal. Bank may engage in
reverse repurchase agreement transactions on Principal's behalf with only
those brokers and dealers or other person or entities as are listed on the
attached Exhibit A, as amended from time to time ("Buyers"), unless and
until otherwise instructed in writing by Principal. All securities lending
transactions and reverse repurchase agreement transactions entered into by
Bank hereunder shall be entered into pursuant to related agreements between
the Borrowers or Buyers, as the case may be, and Bank on behalf of
Principal. Principal's execution of Exhibits A, B, and C or any amendment
to Exhibits A, B, or C shall constitute Principal's representation and
agreement that it has received, read, and understood the terms of each such
agreement in respect of each Borrower or Buyer, as the case may be, listed
thereon. Principal hereby (i) represents and warrants to Bank (which
representations shall be deemed repeated at and as of all times when this
Addendum is in effect) that Principal has the power and authority, and has
taken all necessary action, to enter into this Addendum and each such
agreement, and to perform the obligations of a lender or seller, as the case
may be, under such transactions, and to authorize Bank to execute and
deliver each such agreement on Principal's behalf and to enter into such
transactions and to perform the obligations of a lender or seller, as the
case may be, under such transactions on behalf of Principal, and (ii)
authorizes Bank to execute and deliver each such agreement on Principal's
behalf and to enter into any transaction of a nature contemplated by any
such agreement on behalf of Principal and to perform the obligations of a
lender or seller, as the case may be, under such transactions on behalf of
Principal and (iii) has furnished
<PAGE> 2
or will furnish Bank with evidence satisfactory to Bank that Principal has
all necessary authority to enter into this Addendum and each of the
transactions contemplated hereby.
Bank shall have full unlimited power and authority to perform and each and
every act or thing it may in its discretion deem necessary or appropriate in
respect of any Securities Lending Agreement or Reverse Repurchase Agreement
or any securities loan or any reverse repurchase agreement transaction. Bank
shall be fully protected in engaging in repurchase agreement and securities
lending transactions on behalf of Principal, with respect to any or all
securities deposited with or held by Bank with any one or more of such
brokers or dealers or other person or entities until otherwise instructed in
writing by Principal.
II. SECURITIES LENDING TRANSACTIONS
1. LOANS: SECURITIES LOAN AGREEMENT. Principal hereby authorizes Bank, as
agent for Principal, to lend, from time to time in its discretion,
securities of Principal at any time on deposit with or held by Bank.
Principal acknowledges and agrees that any securities lending agreement
(each, a "Securities Lending Agreement") may take the form of a master
agreement covering a series of securities loan transactions between a
borrower and Bank as lender on behalf of Principal and other accounts
administered through Bank's Trust Department. There can be no assurance
that the activities of any such other account pursuant to any such
agreement, or by Bank in respect of any such other account, will not have
an adverse effect on Principal or on the rights of Principal in respect of
any securities loan.
Bank shall not in any event be liable to Principal or anyone else in
respect of any delay or failure of any other person (including Borrower or
any other lender) to comply with the provisions of the Securities Lending
Agreement unless such failure is the result of circumstances reasonably
likely to result in such failure and which were known to Bank at the time
at which the loan was made.
2. MARKING TO MARKET. Banks responsibilities in this regard shall be to
monitor the need for additional Collateral, and to use all reasonable
efforts to demand additional Collateral (as defined in the Securities
Lending Agreement) in accordance with the terms of the Securities Lending
Agreement in the event additional Collateral is required under the terms
of such Securities Lending Agreement, and to notify Principal in the event
a Borrower has refused to provide such additional Collateral in accordance
with the Securities Lending Agreement.
3. COLLATERAL. Collateral received by Bank in connection with a loan of
securities hereunder shall be held separate and apart from Bank's own
funds and securities. The amount of Collateral (as such term is defined
in the Securities Lending Agreements) transferred to Bank by any Borrower
at any time may be an amount calculated to meet the obligations of such
Borrower in respect of any or all loans to Borrower by Principal and any
one or more other clients of Bank, whether entered into pursuant to the
same loan or Securities Lending agreement or more
-2-
<PAGE> 3
than one such loan or agreement, and may be an amount calculated net of
amounts of Collateral required at the time to be delivered by Principal and
any one or more such other client to such Borrower pursuant to any such
Securities Lending Agreements. In addition, the amount of Collateral
transferred by Bank to any Borrower at any time may be an amount calculated
to meet the obligations of Principal and any one or more other clients of
Bank to such Borrower in respect of any or all loans to Borrower, whether
entered into pursuant to the same Securities Lending Agreement or more than
one such agreement, and may be an amount calculated net of amounts of
Collateral required at the time to be delivered by such Borrower to
Principal or one or more such other clients pursuant to any such Securities
Lending Agreements. Bank shall in good faith allocate or reallocate
(including without limitation in respect of any return of Collateral to any
Borrower) any Collateral held by it or received by it from any Borrower
among Principal and Bank's clients and in respect of any or all of such
loans in such manner and on such base as Bank in its discretion and from
time to time determine, and shall be fully protected in doing so. As a
result of the foregoing, the nature or amount of Collateral credited to the
account of Principal in respect of any Borrower or any securities loan or
loans will vary and may be different from or less than the nature or amount
of Collateral which might have been held by it or credited to its account
if it had entered into such loan or loans directly with such Borrower or if
Bank had entered into such loan or loans with such Borrower as agent solely
for Principal, provided that in no event shall any allocation be permitted
to give rise to the Market Value (as defined in the Securities Lending
Agreement) of the Collateral being less than 100% of the Market Value of
the loaned securities on any particular loan.
Bank may, in its discretion, invest and reinvest any Cash Collateral for
the benefit and at the risk of Principal in investments specified in
Exhibit D as it may be amended from time to time, including, without
limitation, The HighMark Group of Funds or which Bank provides investment
advice, custody and other administrative services. Principal acknowledge
that Bank shall receive fees from The HighMark Group of Funds ln addition
to the fees earned under this Agreement. Bank may invest any or all of
such Cash Collateral in any one or more of such investments, including any
such HighMark Funds, on any basis Bank determines appropriate. Bank shall
be entitled to pay or retain from any amounts held by Bank on Principal's
account from time to time in respect of any securities loan (i) all Cash
Collateral Fees and other sums required to be paid in accordance with the
Securities Lending Agreement, and (ii) Bank's compensation or other amounts
incurred by it or owed to it in respect of its services in lending
securities hereunder.
4. DISTRIBUTION ON LOANED SECURITIES. Bank shall pay to or for the account of
Principal, in accordance with Principal's instructions, any amounts it
receives from a Borrower which represent interest, dividends, and other
distributions made with respect to any Loaned Securities (as defined in the
Securities Lending Agreement) and which are credited by Bank to Principal's
account.
-3-
<PAGE> 4
5. TERM OF LOANS; TERMINATION OF LOANS; DEFAULT. Bank shall have full
discretion to determine the term of any securities lending transaction
entered into by Bank on Principal's behalf hereunder subject to any
guidelines provided to it in writing by the Principal, and shall in no
event incur any liability for entering into any such transaction on behalf
of Principal for a term equal to the maximum available (or permitted
pursuant to such guidelines), regardless of any change in market
conditions or in the financial condition of the Borrower or any other
person. Bank may in its discretion terminate any loan of securities
pursuant to the provisions of the Securities Lending Agreement based on
such factors as it in its discretion deems relevant, but shall in no event
have any liability for its failure to take steps to terminate any
transaction on any date or at any time unless instructed by Principal.
Bank shall in no event have any responsibility for taking steps to
terminate any securities lending transaction before its maturity (unless
instructed to do so by Principal), regardless of any change in market
conditions or in the financial condition of the Borrower or any other
person. In the event Bank receives actual notice of an Event of Default
by a Borrower under the Securities Lending Agreement, it shall notify
Principal thereof as soon as reasonably practicable and may in its
discretion (but shall in no event be obligated to) exercise any rights or
remedies given the Lender under the Securities Lending Agreement until
instructed by Principal otherwise, provided that Bank shall in no event
incur any liability for its exercise or its failure to exercise any such
rights or remedies under any circumstances.
6. TERMINATION OF LENDING AUTHORITY. Principal may terminate Bank's
authority to lend securities by fifteen (15) days' written notice to Bank
and may direct Bank to terminate any outstanding securities loans, which
Bank shall do in accordance with provisions of the Securities Lending
Agreement. In the event Principal terminates Bank's authority to lend
securities hereunder, the provisions of this Agreement relating to
securities loans, including provisions relating to Bank's compensation,
shall remain in effect with respect to all securities loans outstanding on
the effective date of termination, until termination thereof in accordance
with the Securities Lending Agreement.
III. REVERSE REPURCHASE AGREEMENT TRANSACTIONS
1. REVERSE REPURCHASE AGREEMENT TRANSACTIONS; REVERSE REPURCHASE AGREEMENTS.
Principal hereby authorizes Bank, as agent for Principal, to engage from
time to time, in its discretion, in reverse repurchase agreement
transactions with Buyers with respect to securities of Principal at
anytime on deposit with or held by Bank. Principal acknowledges and
agrees that any reverse repurchase agreement (each a "Master Repurchase
Agreement") may take the form of a master agreement covering a series of
reverse repurchase agreement transactions between a Buyer and Bank as
seller on behalf of Principal and other accounts administered through
Bank's Trust Department. There can be no assurance that the activities of
any other such account pursuant to any such agreement, or by Bank in
respect of any such other account, will not have an adverse effect on
-4-
<PAGE> 5
Principal or on the rights of Principal with respect to any such reverse
repurchase agreement transaction.
Bank shall not in any event be liable to Principal or anyone else in
respect of any delay or failure of any other person (including any Buyer or
any other seller) to comply with the provisions of the Master Repurchase
Agreement unless such failure is the result of circumstances reasonably
likely to result in such failure and which were known to Bank at the time
at which the repurchase agreement transaction was entered into.
2. MARKING TO MARKET. Bank's responsibilities in this regard shall be to
monitor the need for margin maintenance under the Master Repurchase
Agreement, and to use all reasonable efforts to require margin maintenance
in accordance with the terms of the Master Repurchase Agreement in the
event such margin maintenance is required under the terms of the Master
Repurchase Agreement, and to notify Principal in the event a Buyer has
refused to provide such margin maintenance in accordance with the Master
Repurchase Agreement.
3. INVESTMENT OF CASH. Cash received by Bank in connection with reverse
repurchase agreement transactions shall be held separate and apart from
Bank's own funds and securities.
The amount of the Purchase Price or any amount with respect to a Margin
Excess (as such terms are defined in the Master Repurchase Agreements)
transferred to Bank by any Buyer at any time may be an amount calculated to
meet the obligations of such Buyer in respect of any or all sales to Buyer
by Principal and any one or more other clients of Bank, whether entered
into pursuant to the same reverse repurchase agreement transaction or
Master Repurchase agreement, and may be an amount calculated net of amounts
of the Repurchase Price (as such term is defined in the Master Repurchase
Agreements) required at the time to be delivered by Principal and any one
or more such other clients to such Buyer pursuant to any such Master
Repurchase Agreements. In addition, the amount of the Repurchase Price or
any amount with respect to a Margin Deficit (as such term is defined in the
Master Repurchase Agreement) transferred by Bank to any Buyer at any time
may be an amount calculated to meet the obligations of Principal and any
one or more other clients of Bank to such Buyer in respect of any or all
sales to such Buyer, whether entered into pursuant to the same Master
Repurchase Agreement or more than one such agreement, and may be an amount
calculated net of amounts of the Purchase Price required at the time to be
delivered by such Buyer to Principal or one or more such other clients
pursuant to any such Master Repurchase Agreements. Bank shall in good
faith allocate or reallocate (including without limitation in respect of
any payment of any Repurchase Price to any Buyer) any Purchase Price and
any amount with respect to a Margin Excess held by it or received by it
from any Buyer among Principal and Bank's clients and in respect of any or
all of such reverse repurchase agreement transactions in such manner and on
such bases as Bank in its discretion may from time to time determine, and
shall be fully protected in doing so. As
-5-
<PAGE> 6
a result of the foregoing, the nature or amount of the Purchase Price and
any amount with respect to a Margin Excess credited to the account of
Principal in respect of any Buyer or any reverse repurchase agreement
transaction or transactions will vary and may be different from or less
than the nature or amount of the Purchase Price and any amount with respect
to a Margin Excess which might have been held by it or credited to its
account if it had entered into such reverse repurchase transaction or
transactions directly with such Buyer or if Bank had entered into such loan
or loans with Buyer as agent solely for Principal in no event, however,
shall any allocation and reallocation be permitted to give rise to the
Margin Amount (as defined in the Master Repurchase Agreement) being less
than 100% of the Market Value of the Purchased Securities (as defined in
the Master Repurchase Agreement) on any particular Repurchase Agreement
transaction.
Bank may in its discretion invest and reinvest cash received by Bank on
behalf of Principal in connection with reverse repurchase agreement
transactions in investments specified in Exhibit D, as it may be amended
from time to time, including without limitation in any way, The HighMark
Group of Funds for which Bank provides investment advice, custody and other
administrative services. Principal acknowledges that Bank shall receive
fees from The HighMark Group of Funds in addition to the fees earned under
this Agreement. Bank may invest any or all of such cash in any one or more
of such investments, including such HighMark Funds, on any basis Bank
determines appropriate. Bank shall be entitled to pay or retain from any
amounts held by Bank for Principal's account from time to time in respect
of any reverse repurchase agreement transaction (i) the Repurchase Price,
any amount necessary to correct a Margin Deficit, and other sums required
to be paid in accordance with the Master Repurchase Agreement, and (ii)
Bank's compensation and other amounts incurred by it or owed to it in
respect of services with respect to reverse repurchase agreement
transactions hereunder.
4. DISTRIBUTIONS ON SECURITIES SUBJECT TO REVERSE REPURCHASE AGREEMENTS.
Bank shall pay to or for the account of Principal, in accordance with
Principal's instructions, any amounts received from a Buyer or its agent
which represent interest, dividends or other distributions on Purchased
Securities (as such term is defined in the Master Repurchase Agreement)
and which are credited by Bank to Principal's account.
5. TERM OF REVERSE REPURCHASE AGREEMENT TRANSACTIONS; TERMINATION OF REVERSE
REPURCHASE AGREEMENT TRANSACTIONS: DEFAULT. Bank shall have full
discretion to determine the term of any reverse repurchase agreement
transaction entered into by Bank on Principal's behalf hereunder subject
to any guidelines provided to it in writing by Principal, and shall in no
event incur any liability for entering into any such reverse repurchase
agreement transaction on behalf of Principal for a term equal to the
maximum available (or permitted pursuant to such guidelines), regardless
of any change in market conditions or in the financial condition of the
Buyer or any other person. Bank may in its discretion terminate
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<PAGE> 7
any reverse repurchase agreement transaction pursuant to the provisions of
the Master Repurchase Agreement based on such factors as it in its
discretion deems relevant, but shall in no event have any liability for its
failure to terminate any transaction on any date or at any time unless
instructed by Principal. Bank shall in no event have any responsibility
for taking steps to terminate any reverse repurchase agreement transaction
before its maturity (unless instructed to do so by Principal), regardless
of any change in market conditions or in the financial condition of the
Buyer or any other person. In the event Bank receives actual notice of an
vent of Default by a Buyer under the Master Repurchase Agreement, it shall
notify Principal thereof as soon as reasonably practicable and may in its
discretion (but shall in no event be obligated to) exercise any rights or
remedies given the Seller under the Master Repurchase Agreement until
instructed by Principal otherwise, provided that Bank shall in no event
incur any liability for its failure to exercise any such rights or remedies
under any circumstances.
6. TERMINATION OF AUTHORITY TO ENTER INTO REVERSE REPURCHASE AGREEMENTS.
Principal may terminate Bank's authority to enter into reverse repurchase
agreement transactions by fifteen (15) days' written notice to Bank and
may direct Bank to terminate any outstanding reverse repurchase agreement
transaction, which Bank shall do in accordance with provisions of the
Master Repurchase Agreement. In the event Principal terminates Bank's
authority to enter into reverse repurchase agreement transactions
hereunder, the provisions of this Agreement relating to reverse repurchase
agreements, including, provisions relating to Bank's compensation, shall
remain in effect with respect to all reverse repurchase agreement
transactions outstanding on the effective date of termination, until
termination thereof in accordance with the Master Repurchase Agreement.
IV. GENERAL
1. PRINCIPAL'S REPRESENTATIONS AND WARRANTIES. In addition to any other
representation and warranty of Principal hereunder, Principal represents
and warrants (which representations shall be deemed repeated at and as of
all times when this Addendum is in effect) that:
(a) Lending Principal's securities and/or entering into reverse
repurchase agreement transactions as provided in this Agreement, and
the appointment of Bank as Principal's agent as contemplated hereby,
will not violate any law, regulation, charter, by-law, or other
restriction applicable to Principal.
(b) Principal will not sell any securities subject to this Agreement
unless and until Principal shall have first obtained confirmation from
Bank that the securities Principal intends to sell are not subject to
an outstanding loan or reverse repurchase agreement transaction.
Principal will notify Bank in writing, or cause written notice to be
given to Bank, that Principal intends to sell securities which are
subject to this Agreement, such notice
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<PAGE> 8
to be provided on or before the second Business Day immediately prior
to the trade date on which Principal intends to sell such securities.
(c) Principal acknowledges and agrees that there can be no assurance,
during the term of any securities loan or reverse repurchase agreement
transaction, that (notwithstanding any provision of any Securities
Lending Agreement or Master Repurchase Agreement) Principal will be
able to participate in, or the full benefit of, any corporate action,
dividend or principal payment, or any other right or privilege
accruing in respect of any securities subject to any such Agreement.
Without limiting the generality of the foregoing, Principal hereby
waives the right to vote or to provide any consent or to take any
similar action with respect to any securities loaned or which are
subject to any reverse repurchase agreement transaction during the
term of such loan, and/or reverse repurchase agreement transaction.
By its signature hereunder, Principal acknowledges that it has been apprised
of the fact that:
NOTWITHSTANDING ANY OTHER PROVISION TO THE CONTRARY, IN THE EVENT OF
THE DEFAULT OF A BORROWER AND/OR BUYER, THE PROVISIONS OF THE
SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT PRINCIPAL'S
ACCOUNT WITH RESPECT TO SECURITIES LOAN OR REVERSE REPURCHASE AGREEMENT
TRANSACTIONS AND IN SUCH EVENT, THE COLLATERAL DELIVERED TO LENDER IN
CONNECTION WITH SUCH LOANS AND REVERSE REPURCHASE AGREEMENTS MAY BE THE
ONLY SOURCE OF SATISFACTION OF THE BORROWER'S OR BUYER'S OBLIGATIONS IN
THE EVENT THE BORROWER/BUYER FAILS TO RETURN THE LOANED SECURITIES AND
OR SECURITIES SUBJECT TO REVERSE REPURCHASE AGREEMENTS.
2. INSTRUCTIONS OF PRINCIPAL. All instructions of Principal to Bank shall be
provided as set forth in the Custodian Agreement.
Bank shall be entitled to accept and rely on any written instruction Bank
reasonably believes to have been authorized by Principal. Bank shall have
no obligation to act in the absence of instructions. If at anytime the
circumstances require immediate action and Bank endeavors to obtain
instructions from Principal, but is unable to so obtain them, Bank may act
and is fully protected in acting in such manner as it considers appropriate
hereunder.
3. REPORTS. Bank shall provide Principal with periodic reports at such
intervals as Principal and Bank should agree, reflecting a schedule of
property, statement of transactions recording principal and income receipts
and disbursements,
-8-
<PAGE> 9
outstanding loans and reverse repurchase agreements transactions, income,
and schedule of property detailing investments made hereunder.
4. DUTIES OF BANK. Bank's duties and responsibilities shall be only those
expressly set forth in this Agreement, or as otherwise agreed by Bank in
writing. Bank shall not be liable for acting or failing to act in
accordance with the instructions of Principal under this Agreement or
otherwise in accordance with this Agreement or within the scope of its
actual or apparent authority. Bank shall not be required to appear in or
defend any legal proceedings with respect to the property subject to this
Agreement unless Bank has been indemnified to its satisfaction against
loss and expense (including reasonable attorneys' fees). Bank may consult
with counsel acceptable to it concerning its duties and responsibilities
under this Agreement, and shall not be liable for any action taken or not
taken on the advice of such counsel.
Principal acknowledges that Bank and its agents, if any, act as agent for
other repurchase agreement and securities lending clients and accordingly,
that other clients' securities may be used prior to Principal's. Principal
agrees that each of Bank and any such agent has full discretion to allocate
the use of Principal's securities as it deems appropriate, and that Bank
may make available securities lending and/or reverse repurchase agreement
opportunities to clients other than Principal for any reason, and that Bank
will have no obligation to make any securities lending and/or reverse
repurchase agreement opportunities available to Principal.
5. EXPENSES: COMPENSATION OF BANK. Principal shall be responsible for
payment of all expenses and charges incurred in connection with the
administration of this Agreement, including Bank's compensation for its
services hereunder as determined in accordance with the attached Exhibit
E, and Bank may in its discretion charge the assets subject to this
Agreement therefor.
6. INDEMNIFICATION. Principal shall indemnify, keep indemnified, defend and
hold harmless the Bank and any of its directors, officers, employees or
agents against any cost, expense, damage, loss or liability whatsoever
(including without limitation attorneys' fees and expenses) which may be
suffered or incurred by any of them directly or indirectly as a result of,
or in connection with, or arising out of, this Agreement or any loan of
securities or reverse repurchase agreement transaction involving
Principal's securities provided, however, that Principal shall not
indemnify the Bank for any cost, expense, damage, loss or liability
whatsoever which is attributable to the negligence or intentional
misconduct of the Bank or any of its directors, officers, employees or
agents. This provision shall survive any termination of this Agreement
and shall be binding on Principal's successors and assigns.
7. TAX CONSEQUENCES. Bank makes no representations regarding tax treatment
by federal, state, or local authorities of the lending or placing in
reverse repurchase agreements of securities under this Agreement, the
receipt of any income or profit
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<PAGE> 10
inuring to Principal as the result of receipt of any loan premium,
dividends, interest, distributions or other amounts on securities loaned
and/or the subject of reverse repurchase agreements hereunder, or the
investment by Bank of any Collateral received in connection with such
loans or cash received in connection with such reverse repurchase
agreements (including without limitation the characterization for tax
purposes of any such amount as taxable income.
8. FINANCIAL CONDITION. Upon reasonable request by Bank, and at least
annually, Principal shall provide Bank with its most recent available
audited statement of its financial condition, and its most recent
unaudited statement of its financial condition if more recent than the
audited statement. Principal represents and warrants that to the best of
its knowledge and belief such statement(s) fairly represent its financial
condition and net capital as of the dates of such statements and have been
prepared in accordance with generally accepted accounting principles of
the jurisdiction in which Principal is organized or located, as the case
may be. Principal acknowledges and agrees that Bank may provide Borrowers
and Buyers with copies of such financial statements and that Principal
will cooperate with Bank in providing such other financial information to
Borrowers and Buyers as such Borrowers and Buyers may reasonably request.
9. OTHER BORROWER RELATIONSHIPS. Principal acknowledges and agrees that Bank
may, through its commercial, trust or other departments, be a creditor for
its own account or represent in a fiduciary capacity other
Borrowers/Buyers (or its or their affiliates, creditors or customers) to
which securities are loaned or sold under this Agreement, even though any
of such relationships may potentially be in conflict with those of
Principal.
10. TERMINATION. This Agreement may be terminated at any time by either
party upon fifteen (15) days' written notice to the other. In the event
of termination, Bank shall deliver to Principal all funds, securities,
and other property held by it under this Agreement for the account of
Principal or to such other person or persons as Principal shall
designate in writing on Exhibit F or shall continue to hold such
property pursuant to the Custodian Agreement; provided however, that
this Agreement shall remain in effect with respect to all securities
loan transactions or reverse repurchase agreement transactions
outstanding on the effective date of termination, until consummation or
completion thereof.
11. AMENDMENTS. This Agreement may be amended only in writing executed by
both parties. Amendments to any Exhibit or Attachment hereto shall be
effective only if executed by all the parties required to execute the
initial Attachment/Exhibit, and then, only after received by Bank and
Principal by the party to whom notices are to be sent hereunder.
12. NOTICES. All notices hereunder shall be given and deemed received as
set forth in the Custodian Agreement.
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<PAGE> 11
13. GOVERNING LAW. The validity, construction, and administration of this
Agreement shall be governed by the laws of the State of California from
time to time in force and effect.
Dated: June 8, 1995
-----------------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ STEPHEN G. MINTOS
--------------------------------------
By: /s/ GEORGE R. LANDRETH
--------------------------------------
Dated: June 8, 1995
-----------------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
--------------------------------------
By: /s/ GREG C. KING
--------------------------------------
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<PAGE> 12
EXHIBIT "A"
BORROWERS/BUYERS
FOR
SECURITIES LENDING/REVERSE REPURCHASE AGREEMENT TRANSACTIONS
Bank of America NT & SA
Barclays De Zoete Wedd Securities, Inc.
Bear Stearns & Co. Inc.
BT Securities Corporation
HSBC Securities
Chase Securities, Inc.
Chemical Securities Inc.
Citicorp Securities
Daiwa Securities America, Inc.
Dean Witter Reynolds, Inc.
Deutche Bank Securities Corporation
Dillon Read & Company, Inc.
Donaldson Lufkin & Jenrette Securities Corp.
Eastbridge Capital Inc.
First Boston Corporation
First Chicago Capital Markets
Fuji Securities, Inc.
Goldman Sachs & Company
Greenwich Capital Markets, Inc.
Harris Nesbitt Thomson Securities, Inc.
Lehman GSI
Merrill Lynch GSI
Morgan (J.P.) Securities, Inc.
Morgan Stanley & Company, Inc.
NationsBanc Capital Markets, Inc.
The Nikko Securities International, Inc.
Nomura-BGK Securities, L.P.
Paine Webber, Inc.
Prudential Securities, Inc.
Salomon Brothers
SBC Government Securities
SG Warburg & Co., Inc.
Smith Barney Shearson Inc.
Union Bank of Switzerland
Yamaichi International (America), Inc.
Dated: June 8, 1995
-----------------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
-----------------------------------
By: /s/ STEPHEN G. MINTOS
-----------------------------------
Dated: June 8, 1995
-----------------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
-----------------------------------
By: /s/ GREG C. KING
-----------------------------------
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<PAGE> 13
EXHIBIT B
SECURITIES LENDING AGREEMENT
Following under separate cover.
All executed borrower agreements to date.
Please sign when received.
Dated: June 8, 1995
---------------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ STEPHEN G. MINTOS
-----------------------------------
By: /s/ GEORGE R. LANDRETH
-----------------------------------
Dated: June 8, 1995
---------------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
-----------------------------------
By: /s/ GREG C. KING
-----------------------------------
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<PAGE> 14
EXHIBIT C
PUBLIC SECURITIES ASSOCIATION PROTOTYPE
MASTER REPURCHASE AGREEMENT
Attached.
Dated: June 8, 1995
-----------------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
--------------------------------------
By: /s/ STEPHEN G. MINTOS
--------------------------------------
Dated: June 8, 1995
-----------------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
--------------------------------------
By: /s/ GREG C. KING
--------------------------------------
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<PAGE> 15
Public Securities Association [LOGO]
40 Broad Street
New York, NY 10004-2373
Telephone (212) 809-7000
EXHIBIT C
MASTER REPURCHASE AGREEMENT
Dated as of ________________________
Between:
_____________________________________
and
_____________________________________
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in which one
party ("Seller") agrees to transfer to the other ("Buyer") securities or
financial instruments ("Securities") against the transfer of funds by Buyer,
with a simultaneous agreement by Buyer to transfer to Seller such Securities at
a date certain or on demand, against the transfer of funds by Seller of each
such transaction shall be referred to herein as a Transaction and shall be
governed by this Agreement, including any supplemental terms or conditions
contained in Annex I hereto, unless otherwise agreed in writing.
2. DEFINITIONS
(a) "Act of Insolvency" with respect to any party, (i) the commencement by
such party as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar law, or such
party seeking the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property, or (ii) the
commencement of any such case or proceeding against such party, or another
seeking such an appointment, or the filing against a party of an application
for a protective decree under the provisions of the Securities Investor
Protection Act of 1970, which (A) is consented to or not timely contested by
such party, (B) results in the entry of an order for relief, such an
appointment, the issuance of such a protective decree or the entry of an order
having a similar effect, or (C) is not dismissed within 15 days, (iii) the
making by a party of a general assignment for the benefit of Creditors, or (iv)
the admission in writing by a party of such party's inability to pay such
party's debts as they become due;
(b) Additional Purchased Securities' Securities provided by Seller to Buyer
pursuant to Paragraph 4(a) hereof;
<PAGE> 16
(c) "Buyer's Margin Amount," with respect to any Transaction as of any date,
the amount obtained by application of a percentage (which may be equal to the
percentage that is agreed to as the Seller's Margin Amount under subparagraph
(q) of this Paragraph), agreed to by Buyer and Seller prior to entering into
the Transaction, to the Repurchase Price for such Transaction as of such date;
(d) "Confirmation" the meaning specified in Paragraph 3(b) hereof;
(e) "Income" with respect to any Security at any time, any principal thereof
then payable and all interest, dividends or other distributions thereon;
(f) "Margin Deficit- the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess' the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value" with respect to any Securities as of any date, the price
for such Securities on such date obtained from a generally recognized source
agreed to by the parties or the most recent closing bid quotation from such a
source, plus accrued Income to the extent not included therein (other than any
Income credited or transferred to, or applied to the obligations of, Seller
pursuant to Paragraph 5 hereof) as of such date (unless contrary to market
practice for such Securities);
(i) "Price Differential," with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing
Rate for such Transaction to the Purchase Price for such Transaction on a 360
day per year basis for the actual number of days during the period commencing
on (and including) the Purchase Date for such Transaction and ending on (but
excluding) the date of determination (reduced by any amount of such Price
Differential previously paid by Seller to Buyer with respect to such
Transaction);
(j) "Pricing Rate," the per annum percentage rate for determination of the
Price Differential;
(k) "Prime Rate," the prime rate of U.S. money center commercial banks as
published in The Wall Street Journal;
(l) "Purchase Date," the date on which Purchased Securities are transferred
by Seller to Buyer;
(m) "Purchase Price," (i) on the Purchase Date, the price at which Purchased
Securities are transferred by Seller to Buyer, and (ii) thereafter, such price
increased by the amount of any cash transferred by Buyer to Seller pursuant to
Paragraph 4(b) hereof and decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's
obligations under clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities," the Securities transferred by Seller to Buyer in
a Transaction hereunder, and any Securities substituted therefor in accordance
with Paragraph 9 hereof. The term "Purchased Securities" with respect to any
Transaction at any time also shall
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<PAGE> 17
include Additional Purchased Securities delivered pursuant to Paragraph 4(a)
and shall exclude Securities returned pursuant to Paragraph 4(b);
(o) "Repurchase Date," the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by application
of the provisions of Paragraphs 3(c) or 11 hereof;
(p) "Repurchase Price," the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount," with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Buyer's Margin Amount under
subparagraph (c) of this Paragraph), agreed to by Buyer and Seller prior to
entering into the Transaction, to the Repurchase Price for such Transaction as
of such date.
3. INITIATION; CONFIRMATION; TERMINATION
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller On the Purchase Date for
the Transaction, the Purchased Securities shall be transferred to Buyer or its
agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or
both), as shall be agreed, shall promptly deliver to the other party a written
confirmation of each Transaction (a "Confirmation"). The Confirmation shall
describe the Purchased Securities (including CUSIP number, if any), identify
Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price,
(iii) the Repurchase Date, unless the Transaction is to be terminable on
demand, (iv) the Pricing Rate or Repurchase Price applicable to the
Transaction, and (v) any additional terms or conditions of the Transaction not
inconsistent with this Agreement. The Confirmation, together with this
Agreement, shall constitute conclusive evidence of the terms agreed between
Buyer and Seller with respect to the Transaction to which the Confirmation
relates, unless with respect to the Confirmation specific objection is made
promptly after receipt thereof. In the event of any conflict between the terms
of such Confirmation and this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall be
made by Buyer or Seller, no later than such time as is customary in accordance
with market practice, by telephone or otherwise on or prior to the business day
on which such termination will be effective. On the date specified in such
demand, or on the date fixed for termination in the case of Transactions having
a fixed term, termination of the Transaction will be effected by transfer to
Seller or its agent of the Purchased Securities and any Income in rest thereof
received by Buyer (and not previously credited or transferred to, or applied to
the obligations of, Seller
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<PAGE> 18
pursuant to Paragraph 5 hereof) against the transfer of the Repurchase Price to
an account of Buyer.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Buyer is less than the aggregate Buyer's Margin amount for all such
Transactions (a "Margin Deficit"), then Buyer may by notice to Seller require
Seller in such Transactions, at Seller's option, to transfer to Buyer cash or
additional Securities reasonably acceptable to Buyer ("Additional Purchased
Securities"), so that the cash and aggregate Market Value of the Purchased
Securities, including any such Additional Purchased Securities, will thereupon
equal or exceed such aggregate Buyer's Margin Amount (decreased by the amount
of any Margin Deficit as of such date arising from any Transactions in which
such Buyer is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Seller exceeds the aggregate Seller's Margin Amount for all such Transactions
at such time (a "Margin Excess"), then Seller may by notice to Buyer require
Buyer in such Transactions at Buyer's option, to transfer cash or Purchased
Securities to Seller, so that the aggregate Market Value of the Purchased
Securities, after deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's Margin Amount
(increased by the amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to
such Transactions as shall be agreed upon by Buyer and Seller.
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both) under
subparagraphs (a) and (b) of this Paragraph may be exercised only where a
Margin Deficit or Margin Excess exceeds a specified dollar amount or a
specified percentage of the Repurchase Prices for such Transactions (which
amount or percentage shall be agreed to by Buyer and Seller prior to entering
into any such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under subparagraphs
(a) and (b) of this Paragraph to require the elimination of a Margin Deficit or
a Margin Excess, as the case may be, may be exercised whenever such a Margin
Deficit or Margin Excess exists with respect to any single Transaction
hereunder (calculated without regard to any other Transaction outstanding under
this Agreement).
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<PAGE> 19
5. INCOME PAYMENTS
Where a particular Transaction's term extends over an Income payment date on
the Securities subject to that Transaction, Buyer shall, as the parties may
agree with respect to such Transaction (or, in the absence of any agreement, as
Buyer shall reasonably determine in its discretion), on the date such Income is
payable either (i) transfer to or credit to the account of Seller an amount
equal to such Income payment or payments with respect to any Purchased
Securities subject to such Transaction or (ii) apply the Income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon
termination of the Transaction. Buyer shall not be obligated to take any
action pursuant to the preceding sentence to the extent that such action would
result in the creation of a Margin Deficit, unless prior thereto or
simultaneously therewith Seller transfers to Buyer cash or Additional Purchased
Securities sufficient to eliminate such Margin Deficit.
6. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and ail proceeds thereof.
7. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder shall be
in immediately available funds. All Securities transferred by one party hereto
to the other party (i) shall be in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
such other documentation as the party receiving possession may reasonably
request, (ii) shall be transferred on the book-entry system of a Federal
Reserve ink, or (iii) shall be transferred by any other method mutually
acceptable to Seller and Buyer. As used herein with respect to Securities,
"transfer" is intended to have the same meaning as when used in Section 8-313
of the New York Uniform Commercial Code or, where applicable, in any federal
regulation governing transfers of the Securities.
8. SEGREGATION OF PURCHASED SECURITIES
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its
possession and shall be identified as subject to this Agreement Segregation may
be accomplished by appropriate identification on the books and records of the
holder, including a financial intermediary or a clearing corporation. Title to
all Purchased Securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Securities to Seller
pursuant to Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or
pay Income to, or apply Income to the obligations of, Seller pursuant to
Paragraph 5 hereof.
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<PAGE> 20
REQUIRED DISCLOSURE FOR TRANSACTIONS IN WHICH THE SELLER RETAINS CUSTODY OF THE
PURCHASED SECURITIES
Seller is not permitted to substitute other securities for those subJect
to this Agreement and therefore must keep Buyer's securities segregated at all
times, unless in this Agreement Buyer grants Seller the right to substitute
other securities. If Buyer grants the right to substitute, this means that
Buyer's securities will likely be commingled with Seller's own securities
during the trading day Buyer is advised that, during any trading day that
Buyer's securities are commingled with Seller's securities, they [will]*
[may]** be subject to liens granted by Seller to [its clearing bank]* [third
parties]** and may be used by Seller for deliveries on other securities
transactions. Whenever the securities are commingled, Seller's ability to
resegregate substitute securities for Buyer will be subject to Seller's ability
to satisfy [the clearing]* [any]** lien or to obtain substitute securities.
9. SUBSTITUTION
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such substitution
shall be made by transfer to Buyer of such other Securities and transfer to
Seller of such Purchased Securities. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed, for
purposes of subparagraph (a) of this Paragraph, to have agreed to and accepted
in this Agreement substitution by Seller of other Securities for Purchased
Securities; provided, however, that such other Securities shall have a Market
Value at least equal to the Market Value of the Purchased Securities for which
they are substituted.
10. REPRESENTATIONS
Each of Buyer and Seller represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder
and has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on
its behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal), (iv) it has obtained all authorizations of any
governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(v) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound
__________________________________
*Language to be used under 17 C.F.R. Section 403.4(e) if Seller is a
government securities broker or dealer other than a financial institution.
**Language to be used under 17 C.F.R. Section 403.5(d) if Seller is a
financial institution.
-6-
<PAGE> 21
or by which any of its assets are affected. On the Purchase Date for any
Transaction Buyer and Seller shall each be deemed to repeat all the foregoing
representations made by it.
11. EVENTS OF DEFAULT
In the event that (i) Seller fails to repurchase or Buyer fails to transfer
Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer
fails, after one business day's notice, to comply with Paragraph 4 hereof,
(iii) Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency
occurs with respect to Seller or Buyer, (v) any representation made by Seller
or Buyer shall have been incorrect or untrue in any material respect when made
or repeated or deemed to have been made or repeated, or (vi) Seller or Buyer
shall admit to the other its inability to, or its intention not to, perform any
of its obligations hereunder (each an "Event of Default"):
(a) At the option of the nondefaulting party, exercised by written notice to
the defaulting party (which option shall be deemed to have been exercised, even
if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shalt be deemed
immediately to occur.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's
obligations hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable, (ii) to the
extent permitted by applicable law, the Repurchase Price with resect to each
such Transaction shall be increased by the aggregate amount obtained by daily
application of (x) the greater of the Pricing Rate for such Transaction or the
Prime Rate to (y) the Repurchase Price for such Transaction as of the
Repurchase Date as determined pursuant to subparagraph (a) of this Paragraph
(decreased as of any day by (A) any amounts retained by the nondefaulting party
with respect to such Repurchase Price pursuant to clause (iii) of this
subparagraph, (B) any proceeds from the sale of Purchased Securities pursuant
to subparagraph (d)(i) of this Paragraph, and (C) any amounts credited to the
account of the defaulting pursuant to subparagraph (e) of this Paragraph) on a
360 day per year basis for the actual number of days during the period from and
including the date of the Event of Default giving rise to such option to but
excluding the date of payment of the Repurchase Price as so increased, (iii)
all Income paid after such exercise or deemed exercise shall be retained by the
nondefaulting party and applied to the aggregate unpaid Repurchase Prices owed
by the defaulting party, and (iv) the defaulting party shall immediately
deliver to the nondefaulting party any Purchased Securities subject to such
Transactions then in the defaulting party's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate Repurchase
Prices for all such Transactions, the defaulting party's right, title and
interest in all Purchased Securities subject to such Transactions shall be
deemed transferred to the nondefaulting party, and the defaulting party shall
deliver all such Purchased Securities to the nondefaulting party.
(d) After one business days notice to the defaulting party (which notice
need not be given if an Act of Insolvency shall have occurred, and which may be
the notice given under
-7-
<PAGE> 22
subparagraph (a) of this Paragraph or the notice referred to in clause (ii) of
the first sentence of this Paragraph), the nondefaulting party may:
(i) as to Transactions in which the defaulting party is acting as Seller,
(A) immediately sell, in a recognized market at such price or prices as the
nondefaulting party may reasonably deem satisfactory, any or all Purchased
Securities subject to such Transactions and apply the proceeds thereof to the
aggregate unpaid Repurchase Prices and any other amounts owing by the
defaulting party hereunder or (B) in its sole discretion elect, in lieu of
selling all or a portion of such Purchased Securities, to give the defaulting
party credit for such Purchased Securities in an amount equal to the price
therefor on such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the aggregate
unpaid Repurchase Prices and any other amounts owing by the defaulting party
hereunder; and
(ii) as to Transactions in which the defaulting party is acting as Buyer,
(A) purchase securities ("Replacement Securities") of the same class and
amount as any Purchased Securities that are not delivered by the defaulting
party to the nondefaulting party as required hereunder or (B) in its sole
discretion elect, in lieu of purchasing Replacement Securities, to be deemed
to have purchased Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent closing bid
quotation from such a source
(e) As to Transactions in which the defaulting party is acting as Buyer, the
defaulting party shall be liable to the nondefaulting party (i) with respect to
Purchased Securities (other than Additional Purchased Securities), for any
excess of the price paid or deemed paid) by the nondefaulting party for
Replacement Securities therefor over the Repurchase Price for such Purchased
Securities and (ii) with respect to Additional Purchased Securities, for the
price paid (or deemed paid) by the nondefaulting party for the Replacement
Securities therefor. In addition, the defaulting party shall be liable to the
nondefaulting party for interest on such remaining liability with respect to
each such purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such
interest shall be at a rate equal to the greater of the Pricing Rate or such
Transaction or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is acting as
Buyer shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by the
nondefaulting party of its option under subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for the
amount of all reasonable legal or other expenses incurred by the nondefaulting
party in connection with or as a consequence of an Event of Default, together
with interest thereon at a rate equal to the greater of the Pricing Rate for
the relevant Transaction or the Prime Rate.
(h) The nondefaulting party shall have, in addition to its rights hereunder,
any rights otherwise available to it under any other agreement or applicable
law.
-8-
<PAGE> 23
12. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon the
fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers made by
either of them in respect of any Transaction shall be deemed to have been made
in consideration of payments, deliveries and other transfers in respect of any
other Transactions hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other and netted.
13. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party to
whom any notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in Annex I attached hereto.
14. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.
15. NON-ASSIGNABILITY; TERMINATION
The rights and obligations of the parties under this Agreement and under any
Transaction shall not be assigned by either party without the prior written
consent of the other party Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns. This Agreement may be
cancelled by either party upon giving written notice to the other, except that
this Agreement shall, notwithstanding such notice, remain applicable to any
Transactions then outstanding.
-9-
<PAGE> 24
16. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New York without
giving effect to the conflict of law principles thereof.
17. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be
effective unless and until such shall be in writing and duly executed by both
of the parties hereto Without limitation on any of the foregoing, the failure
to give a notice pursuant to subparagraphs 4(a) or 4(b) hereof will not
constitute a waiver of any right to do so at a later date.
18. USE OF EMPLOYEE PLAN ASSETS
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by either party hereto (the "Plan Party") in a Transaction, the Plan Party
shall so notify the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction does not
constitute a prohibited transaction under ERISA or is otherwise exempt
therefrom, and the other party may proceed in reliance thereon but shall not be
required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph, any
such Transaction shall proceed only it Seller furnishes or has furnished to
Buyer its most recent available audited statement of its financial condition
and its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller shall
be deemed (i) to represent to Buyer that since the date of Sellers latest such
financial statements, there has been no material adverse change in Seller's
financial condition which Seller has not disclosed to Buyer, and (ii) to agree
to provide Buyer with future audited and unaudited statements of its financial
condition as they are issued, so long as it is a Seller in any outstanding
Transaction involving a Plan Party.
19. INTENT
(a) The parties recognize that each Transaction is a "repurchase agreement"
as that term is defined in Section 101 of Title 11 of the United States Code.
as amended (except insofar as the type of Securities subject to such
Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
-10-
<PAGE> 25
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Paragraph 11 hereof, is a contractual right to
liquidate such Transaction as described in Sections 55 and 559 of Title 11 of
the United States Code, as amended.
20. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or
dealer registered with the Securities and Exchange Commission ("SEC") under
Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the Securities
Investor Protection Corporation has taken the position that the provisions of
the Securities Investor Protection Act of 1970 ("SIPA") do not protect the
other party with respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a government
securities broker or a government securities dealer registered with the SEC
under Section 15C of the 1934 Act, SIPA will not provide protection to the
other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a Transaction
hereunder are not a deposit and therefore are not insured by the Federal
Deposit Insurance Corporation, the Federal Savings and Loan Insurance
Corporation or the National Credit Union Share Insurance Fund, as applicable.
[Name of Party]
By: By:
------------------------- ----------------------
Title: Title:
---------------------- -------------------
Date: Date:
----------------------- --------------------
-11-
<PAGE> 26
ANNEX 1
Names and Addresses for Communications Between Parties
Name of Party
-------------------------------------------------------------------
Contact
-------------------------------------------------------------------------
Street Address
------------------------------------------------------------------
City, State, Zip Code
-----------------------------------------------------------
Telephone No.
-------------------------------------------------------------------
-12-
<PAGE> 27
EXHIBIT D
THE PARKSTONE GROUP OF FUNDS
BOND FUND
PROPOSED PERMITTED INVESTMENTS FOR SECURITIES LENDING
All investment of cash collateral for the securities lending program will be
subject to the following criteria and additional limits specified by the
client:
NO MORE THAN 5% OF THE TOTAL PORTFOLIO OR EACH CLIENT ACCOUNT MAY BE INVESTED
IN ANY SINGLE ISSUER. NO MORE THAN 25% OF THE TOTAL PORTFOLIO MAY BE
INVESTED IN SECURITIES OF ONE OR MORE ISSUERS CONDUCTING THEIR PRINCIPAL
BUSINESS ACTIVITIES IN THE SAME INDUSTRY WITH THE EXCEPTION OF U.S.
GOVERNMENT SECURITIES Section 1 BELOW, U.S. AGENCIES, Section 2 BELOW OR
REVERSE REPO. Section 9 BELOW. IF MATURITIES ARE LONGER THAN ONE BUSINESS
DAY, NO MORE THAN 5% OF THE TOTAL PORTFOLIO OR EACH CLIENT ACCOUNT MAY BE
INVESTED WITH ANY SINGLE ISSUER.
Bank is authorized to invest cash collateral on behalf of Customer in
investments, which at the time of purchase, may consist of the following:
1. Securities issued by any agencies, instrumentalities, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass-through certificates and collateralized mortgage obligations. Maximum
maturity seven days (except when used as collateral in a reverse repurchase
transaction). Maximum exposure to any issuer 25% of portfolio at time of
purchase.
2. Deposits in, notes of, or bankers acceptances issued by banks with minimum
assets of one billion U.S. dollars (or U.S. dollar equivalent thereof),
which are rated "high quality" by at least one nationally recognized rating
agency. This category includes both "Yankee" and "Euro" paper. Maximum
maturity seven days.
3. Commercial paper and variable rate master notes rated at least A1 or P1 or
equivalent by at least one nationally recognized rating agency. Maximum
maturity seven days (or to the next reset date). This may include letter of
credit backed paper. This may include Section 4(2) or unregistered
commercial paper. Total portfolio exposure to Section 4(2) paper shall not
exceed 50% at time of purchase.
4. Reverse repurchase agreements for investment of funds from financial
institutions such as member banks of the Federal Deposit Insurance
Corporation or registered broker-dealers which First of America deems
creditworthy. Collateral must be delivered to either The Bank of
California, Mitsubishi Global, or a third party custodian acceptable to The
Bank of California. Collateral is limited to the securities and/or
instruments that are defined in Exhibit A. Collateral level must be at
least 100% and marked to market on a daily basis. Maximum exposure per
counterparty: the greater of $10 million or 25% at time of purchase. (See
Attachment 1).
<PAGE> 28
5. Shares of Registered Investment Companies or STIFs including those for which
Bank or any of its Affiliates acts as an investment adviser, administrator,
custodian and/or in any other capacity for which it may be compensated. No
more than 5% of any one money market fund with no more than 10% total in
money market mutual funds.
6. Average weighted maturity mismatch of the portfolio shall not exceed 7 days.
7. All credit restrictions and rating requirements pertain to time of purchase.
8. Creditworthiness of issuers of potential collateral investments other than
U.S. government securities, when authorized by policy, will be analyzed by
Merus and approved by Merus' Investment Policy Board (IPB). Merus' IPB will
promptly notify Bank of California's Credit Administration and Credit Policy
of any changes to be above Permitted Investment Policy for Securities
Lending.
Mismatches of maturities between securities lent and securities accepted (or
invested in) as collateral should be minimized. The Trust Department will
manage the mismatch within guidelines established from time to time by Merus'
IPB.
9. Cash collateral may not be invested with broker-dealers who are borrowers of
The Bank of California. The Bank of California's Credit Department will
notify the Securities Lending Department of any lending activity of any
broker/dealer.
Nationally recognized rating agencies:
<TABLE>
<CAPTION>
At least one of:
Supranationals Asset
At least one of: At least one of: Backed Mortgage
Minimum Short Ten Minimum Long Term Backed Sovereigns
Ratings Ratings
<S> <C> <C> <C>
Standard & Poors A1 A- AA-
Moodys P1 A3 Aa3
Fitch F1 A- AA-
Duff & Phelps D1 A- AA-
IBCA A1 A- AA-
</TABLE>
If any rating falls below the required rating criteria appropriate action will
be taken according to the client's instruction.
-ii-
<PAGE> 29
Dated: June 8, 1995
------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
----------------------------
By: /s/ STEPHEN G. MINTOS
----------------------------
Dated: June 8, 1995
------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
----------------------------
By: /s/ GREG C. KING
----------------------------
-iii-
<PAGE> 30
ATTACHMENT 1
COLLATERAL TO BE USED IN REVERSE REPURCHASE TRANSACTIONS (#4)
- - Securities issued by or fully guaranteed as to the payment of principal and
interest by the United States Government.
- - Securities issued by any agencies, instrumentality's, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass-through certificates and collateralized mortgage obligations.
- - Deposits in, notes of, or bankers acceptances issued by banks with minimum
assets of one billion U.S. dollars (or U.S. dollar equivalent thereof),
which are rated "high quality" by at least one nationally recognized rating
agency. This category includes both "Yankee" and "Euro" paper.
- - Commercial paper and variable rate master notes rated at least A1 or P1 or
equivalent by at least one nationally recognized rating agency. Maximum
maturity 270 days (or to the next reset date). This may include letter of
credit backed paper. This may include Section 4(2) or unregistered
commercial paper.
- - Asset-backed securities rated at least AA- or equivalent by at least one
nationally recognized rating agency. Maximum duration, overnight only.
- - Mortgage backed securities rated at least AA- or equivalent by at least one
nationally recognized rating agency.
- - Corporate obligations (exclusive of commercial paper), both with and without
credit enhancement. Those with a maturity of less than or equal to one year
may be judged upon the corporation's short term ratings, which must be rated
at least A1 or P1 or equivalent by at least one nationally recognized rating
agency. Those with a maturity of greater than one year must be rated at
least A- or equivalent by at least one nationally recognized rating agency.
This may include 144a (private placement) corporate obligations. Maximum
duration, overnight only.
-iv-
<PAGE> 31
EXHIBIT E
SCHEDULE OF FEES AND CHARGES
The gross revenue generated from securities lending and reverse repurchase
agreement activity shall be split as follows:
The Parkstone Group of Funds ("PRINCIPAL") 60%
The Bank of California, National Association ("BANK") 40%
Dated: June 8, 1995
-------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
----------------------------
By: /s/ STEPHEN G. MINTOS
----------------------------
Dated: June 8, 1995
-------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
----------------------------
By: /s/ GREG C. KING
----------------------------
-i-
<PAGE> 32
EXHIBIT D
THE PARKSTONE GROUP OF FUNDS
LIMITED MATURITY
PROPOSED PERMITTED INVESTMENTS FOR SECURITIES LENDING
All investment of cash collateral for the securities lending program will be
subject to the following criteria and additional limits specified by the
client:
NO MORE THAN 5% OF THE TOTAL PORTFOLIO OR EACH CLIENT ACCOUNT MAY BE INVESTED
IN ANY SINGLE ISSUER. NO MORE THAN 25% OF THE TOTAL PORTFOLIO MAY BE
INVESTED IN SECURITIES OF ONE OR MORE ISSUERS CONDUCTING THEIR PRINCIPAL
BUSINESS ACTIVITIES IN THE SAME INDUSTRY WITH THE EXCEPTION OF U.S.
GOVERNMENT SECURITIES Section 1 BELOW, U.S. AGENCIES, Section 2 BELOW OR
REVERSE REPO. Section 9 BELOW. IF MATURITIES ARE LONGER THAN ONE BUSINESS
DAY, NO MORE THAN 5% OF THE TOTAL PORTFOLIO OR EACH CLIENT ACCOUNT MAY BE
INVESTED WITH ANY SINGLE ISSUER.
Bank is authorized to invest cash collateral on behalf of Customer in
investments, which at the time of purchase, may consist of the following:
1. Securities issued by any agencies, instrumentalities, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass-through certificates and collateralized mortgage obligations. Maximum
maturity seven days (except when used as collateral in a reverse repurchase
transaction). Maximum exposure to any issuer 25% of portfolio at time of
purchase.
2. Deposits in, notes of, or bankers acceptances issued by banks with minimum
assets of one billion U.S. dollars (or U.S. dollar equivalent thereof),
which are rated "high quality" by at least one nationally recognized rating
agency. This category includes both "Yankee" and "Euro" paper. Maximum
maturity seven days.
3. Commercial paper and variable rate master notes rated at least A1 or P1 or
equivalent by at least one nationally recognized rating agency. Maximum
maturity seven days (or to the next reset date). This may include letter of
credit backed paper. This may include Section 4(2) or unregistered
commercial paper. Total portfolio exposure to Section 4(2) paper shall not
exceed 50% at time of purchase.
4. Reverse repurchase agreements for investment of funds from financial
institutions such as member banks of the Federal Deposit Insurance
Corporation or registered broker-dealers which First of America deems
creditworthy. Collateral must be delivered to either The Bank of
California, Mitsubishi Global, or a third party custodian acceptable to The
Bank of California. Collateral is limited to the securities and/or
instruments that are defined in Exhibit A. Collateral level must be at
least 100% and marked to market on a daily basis. Maximum exposure per
counterparty: the greater of $10 million or 25% at time of purchase. (See
Attachment 1).
<PAGE> 33
5. Shares of Registered Investment Companies or STIFs including those for which
Bank or any of its Affiliates acts as an investment adviser, administrator,
custodian and/or in any other capacity for which it may be compensated. No
more than 5% of any one money market fund with no more than 10% total in
money market mutual funds.
6. Average weighted maturity mismatch of the portfolio shall not exceed 7 days.
7. All credit restrictions and rating requirements pertain to time of purchase.
8. Creditworthiness of issuers of potential collateral investments other than
U.S. government securities, when authorized by policy, will be analyzed by
Merus and approved by Merus' Investment Policy Board (IPB). Merus' IPB will
promptly notify Bank of California's Credit Administration and Credit Policy
of any changes to be above Permitted Investment Policy for Securities
Lending.
Mismatches of maturities between securities lent and securities accepted (or
invested in) as collateral should be minimized. The Trust Department will
manage the mismatch within guidelines established from time to time by Merus'
IPB.
9. Cash collateral may not be invested with broker-dealers who are borrowers of
The Bank of California. The Bank of California's Credit Department will
notify the Securities Lending Department of any lending activity of any
broker/dealer.
Nationally recognized rating agencies:
<TABLE>
<CAPTION>
At least one of:
Supranationals Asset
At least one of: At least one of: Backed Mortgage
Minimum Short Ten Minimum Long Term Backed Sovereigns
Ratings Ratings
<S> <C> <C> <C>
Standard & Poors A1 A- AA-
Moodys P1 A3 Aa3
Fitch F1 A- AA-
Duff & Phelps D1 A- AA-
IBCA A1 A- AA-
</TABLE>
lf any rating falls below the required rating criteria appropriate action will
be taken according to the client's instruction.
-ii-
<PAGE> 34
Dated: 6-28-95
-------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
----------------------------
By: /s/ STEPHEN G. MINTOS
----------------------------
Dated: June 28, 1995
-------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
----------------------------
By: /s/ GREG C. KING
----------------------------
-iii-
<PAGE> 35
LIMITED MATURITY FUND
ATTACHMENT 1
COLLATERAL TO BE USED IN REVERSE REPURCHASE TRANSACTIONS (#4)
- - Securities issued by or fully guaranteed as to the payment of principal and
interest by the United States Government.
- - Securities issued by any agencies, instrumentality's, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass-through certificates and collateralized mortgage obligations.
- - Deposits in, notes of, or bankers acceptances issued by banks with minimum
assets of one billion U.S. dollars (or U.S. dollar equivalent thereof),
which are rated "high quality" by at least one nationally recognized rating
agency. This category includes both "Yankee" and "Euro" paper.
- - Commercial paper and variable rate master notes rated at least A1 or P1 or
equivalent by at least one nationally recognized rating agency. Maximum
maturity 270 days (or to the next reset date). This may include letter of
credit backed paper. This may include Section 4(2) or unregistered
commercial paper.
- - Asset-backed securities rated at least AA- or equivalent by at least one
nationally recognized rating agency. Maximum duration, overnight only.
- - Mortgage backed securities rated at least AA- or equivalent by at least one
nationally recognized rating agency.
- - Corporate obligations (exclusive of commercial paper), both with and without
credit enhancement. Those with a maturity of less than or equal to one year
may be judged upon the corporation's short term ratings, which must be rated
at least A1 or P1 or equivalent by at least one nationally recognized rating
agency. Those with a maturity of greater than one year must be rated at
least A- or equivalent by at least one nationally recognized rating agency.
This may include 144a (private placement) corporate obligations. Maximum
duration, overnight only.
-iv-
<PAGE> 36
EXHIBIT D
THE PARKSTONE GROUP OF FUNDS
BALANCED FUND
PROPOSED PERMITTED INVESTMENTS FOR SECURITIES LENDING
All investment of cash collateral for the securities lending program will be
subject to the following criteria and additional limits specified by the
client:
NO MORE THAN 5% OF THE TOTAL PORTFOLIO OR EACH CLIENT ACCOUNT MAY BE INVESTED
IN ANY SINGLE ISSUER. NO MORE THAN 25% OF THE TOTAL PORTFOLIO MAY BE
INVESTED IN SECURITIES OF ONE OR MORE ISSUERS CONDUCTING THEIR PRINCIPAL
BUSINESS ACTIVITIES IN THE SAME INDUSTRY WITH THE EXCEPTION OF U.S.
GOVERNMENT SECURITIES Sectio 1 BELOW, U.S. AGENCIES, Section 2 BELOW OR
REVERSE REPO. Section 9 BELOW. IF MATURITIES ARE LONGER THAN ONE BUSINESS
DAY, NO MORE THAN 5% OF THE TOTAL PORTFOLIO OR EACH CLIENT ACCOUNT MAY BE
INVESTED WITH ANY SINGLE ISSUER.
Bank is authorized to invest cash collateral on behalf of Customer in
investments, which at the time of purchase, may consist of the following:
1. Securities issued by any agencies, instrumentalities, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass-through certificates and collateralized mortgage obligations. Maximum
maturity seven days (except when used as collateral in a reverse repurchase
transaction). Maximum exposure to any issuer 25% of portfolio at time of
purchase.
2. Deposits in, notes of, or bankers acceptances issued by banks with minimum
assets of one billion U.S. dollars (or U.S. dollar equivalent thereof),
which are rated "high quality" by at least one nationally recognized rating
agency. This category includes both "Yankee" and "Euro" paper. Maximum
maturity seven days.
3. Commercial paper and variable rate master notes rated at least A1 or P1 or
equivalent by at least one nationally recognized rating agency. Maximum
maturity seven days (or to the next reset date). This may include letter of
credit backed paper. This may include Section 4(2) or unregistered
commercial paper. Total portfolio exposure to Section 4(2) paper shall not
exceed 50% at time of purchase.
4. Reverse repurchase agreements for investment of funds from financial
institutions such as member banks of the Federal Deposit Insurance
Corporation or registered broker-dealers which First of America deems
creditworthy. Collateral must be delivered to either The Bank of
California, Mitsubishi Global, or a third party custodian acceptable to The
Bank of California. Collateral is limited to the securities and/or
instruments that are defined in Exhibit A. Collateral level must be at
least 100% and marked to market on a daily basis. Maximum exposure per
counterparty: the greater of $10 million or 25% at time of purchase. (See
Attachment 1).
<PAGE> 37
5. Shares of Registered Investment Companies or STIFs including those for which
Bank or any of its Affiliates acts as an investment adviser, administrator,
custodian and/or in any other capacity for which it may be compensated. No
more than 5% of any one money market fund with no more than 10% total in
money market mutual funds.
6. Average weighted maturity mismatch of the portfolio shall not exceed 7 days.
7. All credit restrictions and rating requirements pertain to time of purchase.
8. Creditworthiness of issuers of potential collateral investments other than
U.S. government securities, when authorized by policy, will be analyzed by
Merus and approved by Merus' Investment Policy Board (IPB). Merus' IPB will
promptly notify Bank of California's Credit Administration and Credit Policy
of any changes to be above Permitted Investment Policy for Securities
Lending.
Mismatches of maturities between securities lent and securities accepted (or
invested in) as collateral should be minimized. The Trust Department will
manage the mismatch within guidelines established from time to time by Merus'
IPB.
9. Cash collateral may not be invested with broker-dealers who are borrowers of
The Bank of California. The Bank of California's Credit Department will
notify the Securities Lending Department of any lending activity of any
broker/dealer.
Nationally recognized rating agencies:
<TABLE>
<CAPTION>
At least one of:
Supranationals
At least one of: At least one of: Asset Backed
Minimum Short Minimum Long Mortgage Backed
Ten Ratings Term Ratings Sovereigns
<S> <C> <C> <C>
Standard & Poors A1 A- AA-
Moodys P1 A3 Aa3
Fitch F1 A- AA-
Duff & Phelps D1 A- AA-
IBCA A1 A- AA-
</TABLE>
If any rating falls below the required rating criteria appropriate action will
be taken according to the client's instruction.
-ii-
<PAGE> 38
Dated: 6-28-95
-------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
----------------------------
By: /s/ STEPHEN G. MINTOS
----------------------------
Dated: June 28, 1995
-------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
----------------------------
By: /s/ GREG C. KING
----------------------------
-iii-
<PAGE> 39
BALANCED FUND
ATTACHMENT 1
COLLATERAL TO BE USED IN REVERSE REPURCHASE TRANSACTIONS (#4)
- - Securities issued by or fully guaranteed as to the payment of principal and
interest by the United States Government.
- - Securities issued by any agencies, instrumentality's, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass-through certificates and collateralized mortgage obligations.
- - Deposits in, notes of, or bankers acceptances issued by banks with minimum
assets of one billion U.S. dollars (or U.S. dollar equivalent thereof),
which are rated "high quality" by at least one nationally recognized rating
agency. This category includes both "Yankee" and "Euro" paper.
- - Commercial paper and variable rate master notes rated at least A1 or P1 or
equivalent by at least one nationally recognized rating agency. Maximum
maturity 270 days (or to the next reset date). This may include letter of
credit backed paper. This may include Section 4(2) or unregistered
commercial paper.
- - Asset-backed securities rated at least AA- or equivalent by at least one
nationally recognized rating agency. Maximum duration, overnight only.
- - Mortgage backed securities rated at least AA- or equivalent by at least one
nationally recognized rating agency.
- - Corporate obligations (exclusive of commercial paper), both with and without
credit enhancement. Those with a maturity of less than or equal to one year
may be judged upon the corporation's short term ratings, which must be rated
at least A1 or P1 or equivalent by at least one nationally recognized rating
agency. Those with a maturity of greater than one year must be rated at
least A- or equivalent by at least one nationally recognized rating agency.
This may include 144a (private placement) corporate obligations. Maximum
duration, overnight only.
-iv-
<PAGE> 40
EXHIBIT F
PRINCIPAL'S DESIGNATED AGENT
FOR RECEIPT OF FUNDS, SECURITIES AND OTHER
PROPERTY IN THE EVENT OF TERMINATION OF THIS AGREEMENT
N/A /s/ GEORGE R. LANDRETH
Dated: June 8, 1995
------------------------
The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ GEORGE R. LANDRETH
----------------------------
By: /s/ STEPHEN G. MINTOS
----------------------------
Dated: June 8, 1995
------------------------
The Bank of California, National Association ("BANK")
By: /s/ ELLEN R. KAUNER
----------------------------
By: /s/ GREG C. KING
----------------------------
<PAGE> 41
SCHEDULE I
The Parkstone Group of Funds designated below shall be eligible for securities
lending and reverse repurchase agreement transactions pursuant to the
Securities Lending and Reverse Repurchase Agreement Client Services Client
Addendum dated as of June 8, 1995:
Parkstone Bond Fund (effective June 8, 1995)
Parkstone Balanced Fund (effective June 28, 1995)
Parkstone Limited Maturity Fund (effective June 28, 1995)
THE PARKSTONE GROUP OF FUNDS THE BANK OF CALIFORNIA, N.A.
By: /s/ George R. Landreth By: /s/ Ellen R. Kauner
--------------------------- -----------------------------
Title: President Title: Vice President/Manager
------------------------ --------------------------
Date: 6-28-95 Date: June 28, 1995
------------------------- ---------------------------
<PAGE> 42
AMENDMENT TO
SECURITIES LENDING AND REVERSE REPURCHASE AGREEMENT
SERVICES CLIENT ADDENDUM
This Amendment modifies the Addendum to the Securities Lending and Repurchase
Agreement Services Client Addendum between The Bank of California, National
Association ("Bank") and The Parkstone Group of Funds, ("Principal") effective
as of June 8, 1995 (the "Agreement"). Capitalized terms not otherwise defined
herein shall have the same meanings as in the Agreement.
1. The Agreement shall be modified by striking the introductory paragraph
thereto in its entirety and substituting it with the following:
THIS AGREEMENT for securities lending and/or reverse repurchase agreement
services is made, effective as of June 8, 1995, by and between THE PARKSTONE
GROUP OF FUNDS on behalf of each Fund listed in Schedule I hereto as may be
amended from time to time ("Principal"), and THE BANK OF CALIFORNIA, NATIONAL
ASSOCIATION ("Bank"). This Agreement is an addendum to the Custody Agreement by
and between The Parkstone Group of Funds and Bank dated as of October 18, 1991,
(Custodian Agreement"). This Addendum supersedes the Addendum to the Custodian
Agreement dated by Bank on September 30, 1991 and The Parkstone Group of Funds
on October 7, 1991 with respect to securities lending activities.
2. Paragraph 1 of the Agreement shall be modified by adding the following
immediately before the last sentence therein:
Bank shall perform its duties and responsibilities hereunder with respect to
each Fund individually.
THE PARKSTONE GROUP OF FUNDS THE BANK OF CALIFORNIA, N.A.
By: /s/ GEORGE R. LANDRETH By: /s/ ELLEN R. KAUNER
--------------------------- -----------------------------
Title: President Title: Vice President/Manager
------------------------ --------------------------
Date: 6-28-95 Date: June 28, 1995
------------------------- ---------------------------
<PAGE> 1
Exhibit 8(b)
MITSUBISHI GLOBAL CUSTODY
CUSTODIAN AGREEMENT
(FOREIGN AND DOMESTIC SECURITIES)
This Custodian Agreement is made by and between The Parkstone Group
("Principal") and THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Custodian").
Principal desires that Custodian hold and administer on behalf of Principal
certain Securities (as herein defined). Custodian is willing to do so on the
terms and conditions set forth in this Agreement. Accordingly, Principal and
Custodian agree as follows:
1. DEFINITIONS. Certain terms used in this Agreement are defined as
follows:
(a) "Account" means, collectively, each custodianship account maintained
by Custodian pursuant to Paragraph 3 of this Agreement.
(b) "Eligible Foreign Securities Depository" ("Depository") shall mean a
securities depository or clearing agency incorporated or organized under the
laws of a country other than the United States which operates (i) the central
system for handling securities or equivalent book-entries in that country, or
(ii) a transnational system for the central handling of securities or
equivalent book-entries.
(c) "Investment Manager" means an investment advisor or manager identified
by Principal in a written notice to Custodian as having the authority to direct
Custodian regarding the management, acquisition, or disposition of Securities.
(d) "Securities" means domestic or foreign securities or both within the
meaning of Section 2(a)(36) of the Investment Company Act of 1940 (" 1940 Act")
and regulations issued by the U.S. Securities and Exchange Commission ("SEC")
under Section 17(f) of the 1940 Act, 17 C.F.R. 270.17f-5(c)(1), as amended,
which are held by Custodian in the Account, and shall include cash of any
currency or other property of Principal and all income and proceeds of sale of
such securities or other property of Principal.
(e) "Eligible Foreign Custodian" ("Sub-Custodian") shall mean (i) a
banking institution or trust company incorporated or organized under the laws
of a country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders'
equity in excess of $100 million in U.S. currency (or a foreign currency
equivalent thereof), (iii) a banking institution or trust company incorporated
or organized under the laws of a country other than the United States or a
majority owned direct or indirect subsidiary of a qualified U.S. bank as
defined in Rule 17f-5 or bank holding company that is incorporated or organized
under the laws of a country other than the
<PAGE> 2
United States which has such other qualifications as shall be specified in
Instructions and approved by the Bank; or (iv) any other entity that shall have
been so qualified by exemptive order, rule or other appropriate action of the
SEC. Custodian shall evaluate and determine at least annually the continued
eligibility of each Sub-Custodian as described in Paragraph 5.(d) of this
Agreement.
2. REPRESENTATIONS.
(a) Principal represents that with respect to any Account established by
Principal to hold Securities, Principal is authorized to enter into this
Agreement and to retain Custodian on the terms and conditions and for the
purposes described herein.
(b) Custodian represents that (i) it is organized under the laws of the
United States and has its principal place of business in the United States,
(ii) it is a bank within the meaning of Section 202(a)(2) of the Investment
Advisers Act of 1940 and Section 2(a)(5) of the Investment Company Act of 1940,
as amended, and (iii) it has equity capital in excess of $1 million.
3. ESTABLISHMENT OF ACCOUNTS. Principal hereby establishes with Custodian,
and may in the future establish, one or more Accounts in Principal's name. The
Account shall consist of Securities delivered to and receipted for by Custodian
or by any Sub-Custodian. Custodian, in its sole discretion, may reasonably
refuse to accept any property now or hereafter delivered to it for inclusion in
the Account. Principal shall be notified promptly of such refusal and any such
property shall be immediately returned to Principal.
4. CUSTODY. Subject to the terms of this Agreement, Custodian shall be
responsible for the safekeeping and custody of the Securities. Custodian may
(i) retain possession of all or any portion of the Securities in a foreign
branch or other office of Custodian, or (ii) retain, in accordance with
Paragraph 5 of this Agreement, one or more Sub-Custodians to hold all or any
portion of the Securities. Custodian and any Sub-Custodian may, in accordance
with Paragraph 5 of this Agreement, deposit definitive or book-entry Securities
with one or more Depositories.
(a) If Custodian retains possession of Securities, Custodian shall ensure
the Securities are at all times properly identified as being held for the
appropriate Account. Custodian shall segregate physically the Securities from
other securities or property held by Custodian. Custodian shall not be
required to segregate physically the Securities from other securities or
property held by Custodian for third parties as Custodian, but Custodian shall
maintain adequate records showing the true ownership of the Securities.
(b) If Custodian deposits Securities with a Sub-Custodian, Custodian shall
maintain adequate records showing the identity and location of the
Sub-Custodian, the Securities held by the Sub-Custodian, and each Account to
which such Securities belong.
-2-
<PAGE> 3
(c) If Custodian or any Sub-Custodian deposits Securities with a
Depository, Custodian shall maintain, or shall cause the Sub-Custodian to
maintain, adequate records showing the identity and location of the Depository,
the Securities held by the Depository, and each Account to which such
Securities belong.
(d) If Principal directs Custodian to deliver certificates or other
physical evidence of ownership of Securities to any broker or other party,
other than a Sub-Custodian or Depository employed by Custodian for purposes of
maintaining the Account, Custodian's sole responsibility shall be to exercise
care and diligence in effecting the delivery as instructed by Principal. Upon
completion of the delivery, Custodian shall be discharged completely of any
further liability or responsibility with respect to the safekeeping and custody
of Securities so delivered.
(e) Custodian shall ensure that (i) the Securities will not be subject to
any right, charge, security interest, lien, or claim of any kind in favor of
Custodian or any Sub-Custodian or Depositor, except for Custodian's expenses
relating to the Securities' safe custody or administration, and (ii) the
beneficial ownership of the Securities will be freely transferable without the
payment of money or value other than for safe custody or administration.
(f) Principal or its authorized representatives shall have reasonable
access to inspect books and records maintained by Custodian or any
Sub-Custodian or Depository holding Securities hereunder to verify the accuracy
of such books and records. Custodian shall notify Principal promptly of any
applicable law or regulation in any country where Securities are held that
would restrict such access or inspection.
5. SUB-CUSTODIANS AND DEPOSITORIES. With Principal's advance written
approval, as provided in Paragraph 5.(c) of this Agreement, Custodian may from
time to time retain one or more Sub-Custodians and Depositories to hold
Securities hereunder.
(a) Custodian shall exercise reasonable care in the selection of
Sub-Custodians and Depositories. In making its selection, Custodian shall
consider (i) the Sub-Custodian's or Depository's financial strength, general
reputation and standing in the country in which it is located, its ability to
provide efficiently the custodial services required, and the relative cost of
such services, (ii) whether the Sub-Custodian or Depository would provide a
level of safeguards for safekeeping and custody of Securities not materially
different from those prevailing in the U.S., (iii) whether the Sub-Custodian or
Depository has branch offices in the U.S. in order to facilitate jurisdiction
over and enforcement of judgments against it, and (iv) in the case of a
Depository, the number of its participants and its operating history.
(b) Custodian shall give written notice to Principal of its intention to
deposit Securities with a Sub-Custodian or (directly or through a
Sub-Custodian) with a Depository. The notice shall identify the proposed
Sub-Custodian or Depository and shall include reasonably available information
relied on by Custodian in making the selection.
-3-
<PAGE> 4
(c) Within 30 days of its receipt of a notice from Custodian pursuant to
Paragraph 5.(b) of this Agreement regarding Custodian's proposed selection of
one or more Sub-Custodians or Depositories, Principal shall give written notice
to Custodian of Principal's approval or disapproval of the proposed selection.
If Principal has not responded within 30 days of receipt of Custodian's request
for approval of a Sub-Custody, Principal will be deemed to have approved such
Sub-Custody. Principal hereby approves Custodian's retention of those
Sub-Custodians and Depositories, if any, which are identified in Appendix A of
this Agreement.
(d) Custodian shall evaluate and determine at least annually the continued
eligibility of each Sub-Custodian and Depository approved by Principal to act
as such hereunder. In discharging this responsibility, Custodian shall (i)
monitor continuously the day to day services and reports provided by each
Sub-Custodian or Depository, (ii) at least annually, obtain and review the
annual financial report published by such Sub-Custodian or Depository and any
reports on such Sub-Custodian or Depository prepared by a reputable independent
analyst, (iii) at least triennially, physically inspect the operations of such
Sub-Custodian or Depository and (iv) Custodian shall provide Principal with a
report of its annual review of each Sub-Custodian and Depository.
(e) If Custodian determines that any Sub-Custodian or Depository no longer
satisfies the applicable requirements described in Paragraph 1.(b) (in the case
of a Depository) or Paragraph 1.(e) (in the case of a Sub-Custodian) of this
Agreement or is otherwise no longer capable or qualified to perform the
functions contemplated herein, Custodian shall promptly give written notice
thereof to Principal. The notice shall, in addition, either (i) indicate
Custodian's intention to transfer Securities held by the removed Sub-Custodian
or Depository to another Sub-Custodian or Depository previously approved by
Principal, or (ii) include a notice pursuant to Paragraph 5.(b) of this
Agreement of Custodian's intention to deposit Securities with a new
Sub-Custodian or Depository.
6. REGISTRATION. Subject to any specific instructions from Principal,
Custodian shall hold or cause to be held all Securities in the name of
Custodian, or any Sub-Custodian or Depository approved by Principal pursuant to
Paragraph 5 of this Agreement, or in the name of a nominee of any of them, as
Custodian shall determine to be appropriate under the circumstances.
7. TRANSACTIONS. Principal or any Investment Manager from time to time may
instruct Custodian (which in turn shall be responsible for giving appropriate
instructions to any Sub-Custodian or Depository) regarding the purchase or sale
of Securities in accordance with this Paragraph 7:
(a) Custodian shall effect and account for each Securities and currency
sale on the date such transaction actually settles; provided, however, that
Principal may in its sole discretion direct Custodian, in such manner as shall
be acceptable to Custodian, to account for Securities and currency purchases
and sales on contractual settlement date, regardless of whether settlement of
such transactions actually occurs on contractual settlement date. Principal
may,
-4-
<PAGE> 5
from time to time, direct Custodian to change the accounting method employed by
Custodian in a written notice delivered to Custodian at least thirty (30) days
prior to the date a change in accounting method shall become effective.
(b) Custodian shall effect purchases by charging the Account with the
amount necessary to make the purchase and effecting payment to the seller or
broker for the securities or other property purchased. Custodian shall have no
liability of any kind to any person, including Principal, except in the case of
negligent or intentional tortious acts, or willful misconduct, if the Custodian
effects payment on behalf of Principal, and the seller or broker fails to
deliver the securities or other property purchased. Custodian shall exercise
such ordinary care and diligence as would be employed by a reasonably prudent
custodian and due diligence in examining and verifying the certificates or
other indicia of ownership of the property purchased before accepting them.
(c) Custodian shall effect sales by delivering certificates or other
indicia of ownership of the Property, and, as instructed, shall receive cash
for such sales. Custodian shall have no liability of any kind to any person,
including Principal, if Custodian exercises due diligence and delivers such
certificates or indicia of ownership and the purchaser or broker fails to
effect payment. If a purchase or sale is effected through a Depository,
Custodian shall exercise such ordinary care and diligence as would be employed
by a reasonably prudent custodian and due diligence in verifying proper
consummation of the transaction by the Depository.
(d) Principal or, where applicable, the Investment Manager, is responsible
for ensuring Custodian receives timely instructions and/or funds to enable
Custodian to effect settlement of any purchase or sale of Securities or
Currency Transactions. If Custodian does not receive such timely instructions
or funds, Custodian shall have no liability of any kind to any person,
including Principal, for failing to effect settlement. However, Custodian
shall use reasonable efforts to effect settlement as soon as possible after
receipt of appropriate instructions. Principal shall be liable for interest
compensation and/or principal amounts to Custodian and/or its counterparty for
failure to deliver instructions or funds in a timely manner to effect
settlements of foreign exchange funds movement.
(e) At the direction of Principal or the Investment Manager, as the case
may be, Custodian shall convert currency in the Account to other currencies
through customary channels including, without limitation, Custodian or any of
its affiliates, as shall be necessary to effect any transaction directed by
Principal or the Investment Manager. Principal or the Investment Manager, as
the case may be, acknowledges that 1) the foreign currency exchange department
is a part of the Custodian or one of its affiliates or subsidiaries, 2) the
Account is not obligated to effect foreign currency exchange with Custodian, 3)
the Custodian will receive benefits for such foreign currency transactions
which are in addition to the compensation which the Custodian receives for
administering the Account, and 4) the Custodian will make available the
relevant data so that Principal or the Investment Manager, as the case may be,
can determine
-5-
<PAGE> 6
that the foreign currency exchange transactions are as favorable to the Account
as terms generally available in arm's length transactions between unrelated
parties.
(f) Custodian shall have no responsibility to manage or recommend
investments of the Account or to initiate any purchase, sale, or other
investment transaction in the absence of instructions from Principal or, where
applicable, an Investment Manager.
8. CAPITAL CHANGES; INCOME.
(a) Custodian may, without further instructions from Principal or any
Investment Manager, exchange temporary certificates and may surrender and
exchange Securities for other securities in connection with any reorganization,
recapitalization, or similar transaction in which the owner of the Securities
is not given an option. Custodian has no responsibility to effect any such
exchange unless it has received actual notice of the event permitting or
requiring such exchange at its office designated in Paragraph 14 of this
Agreement or at the office of its designated agents.
(b) Custodian, or its designated agents, are authorized, as Principal's
agent, to surrender against payment maturing obligations and obligations called
for redemption, and to collect and receive payments of interest and principal,
dividends, warrants, and other things of value in connection with Securities.
Except as otherwise provided in Paragraph 15.(d) of this Agreement, Custodian
or its designated agents shall not be obligated to enforce collection of any
item by legal process or other means.
(c) Custodian or its designated agents are authorized to sign for
Principal all declarations, affidavits, certificates, or other documents that
may be required to collect or receive payments or distributions with respect to
Securities. Custodian or its designated agents are authorized to disclose,
without further consent of Principal, Principal's identity to issuers of
Securities, or the agents of such issuers, who may request such disclosure.
9. NOTICES RE ACCOUNT SECURITIES. Custodian shall notify Principal or,
where applicable, the Investment Manager, of any reorganization,
recapitalization, or similar transaction not covered by Paragraph 8, and any
subscription rights, proxies, and other shareholder information pertaining to
the Securities actual notice of which is received by Custodian at its office
designated in Paragraph 14 of this Agreement or at the offices of its
designated agents. Custodian's sole responsibility in this regard shall be to
give such notices to Principal or the Investment Manager, as the case may be,
within a reasonable time after Custodian receives them, and Custodian shall not
otherwise be responsible for the timeliness of such notices. Custodian has no
responsibility to respond or otherwise act with respect to any such notice
unless and until Custodian has received appropriate instructions from Principal
or the Investment Manager.
10. TAXES. Custodian shall pay or cause to be paid from the Account all
taxes and levies in the nature of taxes imposed on the Account or the
Securities thereof by any country.
-6-
<PAGE> 7
Custodian will use its best efforts to give the Investment Manager advance
written notice of the imposition of such taxes. However, Custodian shall use
reasonable efforts to obtain refunds of taxes withheld on Securities or the
income thereof that are available under applicable tax laws, treaties, and
regulations.
11. CASH. The Principal may from time to time, direct Custodian to hold
Account cash in The HighMark Group of mutual funds or in any investment company
for which Custodian or its affiliates or subsidiaries, acts as investment
advisor, custodies the assets, or provides other services. Principal shall
designate the particular HighMark fund or such other above-mentioned fund that
Principal deems appropriate for the Account. Principal or an Investment
Manager, where applicable, acknowledges that Custodian will receive fees for
such services which will be in addition to those fees charged by Custodian as
agent for the Account.
12. REPORTS. Custodian shall give written reports to Principal showing
(i) each transaction involving Securities effected by or reported to Custodian,
(ii) the identity and location of Securities held by Custodian as of the date
of the report, (iii) any transfer of location of Securities not otherwise
reported, and (iv) such other information as shall be agreed upon by Principal
and Custodian. Unless otherwise agreed upon by Principal and Custodian,
Custodian shall provide the reports described in this Paragraph 12 on a monthly
basis.
13. INSTRUCTIONS FROM PRINCIPAL.
(a) Principal shall certify or cause to be certified to Custodian in
writing the names and specimen signatures of all persons authorized to give
instructions, notices, or other communications on behalf of Principal or any
Investment Manager. Such certification shall remain effective until Custodian
receives notice to the contrary.
(b) Principal or authorized Investment Manager, as the case may be, may
give instruction, notice, or other communication called for by this Agreement
to Custodian in writing, or by telecopy, telex, telegram, or other form of
electronic communication acceptable to Custodian. Unless otherwise expressly
provided, all Instructions shall continue in full force and effect until
canceled or superseded. Principal or Investment Manager may give and Custodian
may accept oral instructions on an exception basis; provided, however, that
Principal or Investment Manager shall promptly confirm any oral communications
in writing or by telecopy or other means permitted hereunder. Principal will
hold Custodian harmless for the failure of Principal or Investment Manager to
send confirmation in writing, the failure of such confirmation to conform to
the telephone instructions received or the Custodians's failure to produce such
confirmation at any subsequent time. The Custodian may electronically record
any instruction given by telephone, and any other telephone discussions with
respect to the Custody Account.
(c) All such communications shall be deemed effective upon receipt by
Custodian at its address specified in Paragraph 14 of this Agreement, as
amended from time to
-7-
<PAGE> 8
time. Custodian without liability may rely upon and act in accordance with any
instruction that Custodian using ordinary care believes has been given by
Principal or an Investment Manager.
(d) Custodian may at any time request instructions from Principal and may
await such instructions without incurring liability. Custodian has no
obligation to act in the absence of such requested instructions, but may,
however, without liability take such action as it deems appropriate to carry
out the purposes of this Agreement.
14. ADDRESSES. Until further notice from either party, all communications
called for under this Agreement shall be addressed as follows:
If to Principal:
Name:
---------------------------------------------
Street Address:
-----------------------------------
City, State, Zip:
---------------------------------
Attn:
---------------------------------------------
Telephone:
----------------------------------------
Telecopier:
---------------------------------------
Telex (Answerback):
-------------------------------
If to Custodian:
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
Mitsubishi Global Custody
Attn: Ms. Janet E. Potter, Vice President
475 Sansome Street, 15th Floor
San Francisco, California 94111
Telephone: (415) 291-7685
Telecopier: (415) 291-7697
Telex (Answerback): 21574
15. CUSTODIAN'S RESPONSIBILITIES AND LIABILITIES:
(a) Custodian's duties and responsibilities shall be limited to those
expressly set forth in this Agreement, or as otherwise agreed by Custodian in
writing. In carrying out its
-8-
<PAGE> 9
responsibilities, Custodian shall exercise no less than the same degree of care
and diligence it usually exercises with respect to similar property of its own.
(b) Custodian (i) shall not be required to maintain any special insurance
for the benefit of Principal, and (ii) shall not be liable or responsible for
any loss of or damage to Securities resulting from any causes beyond
Custodian's reasonable control including, without limitations, acts of God,
war, government action, civil commotion, fire, earthquake, or other casualty or
disaster. However, Custodian shall use reasonable efforts to replace
Securities lost or damaged due to such causes with securities of the same class
and issue with all rights and privileges pertaining thereto. The Custodian
shall be liable to the Principal for any loss which shall occur as the result
of the failure of a Sub-Custodian to exercise reasonable care with respect to
the safekeeping of assets to the same extent that the Custodian would be liable
to the Principal if the Custodian were holding such securities and cash in
their own premises. The Custodian shall be liable to the Principal only to the
extent of the Principal's direct damages, to be determined based on the market
value of the property which is subject to loss and without reference to any
special conditions or circumstances.
(c) The parties intend that Custodian shall not be considered a fiduciary
of the Account. Accordingly, Custodian shall have no power to make decisions
regarding any policy, interpretation, practice, or procedure with respect to
the Account, but shall perform the ministerial and administrative functions
described in this Agreement as provided herein and within the framework of
policies, interpretations, rules, practices, and procedures made by Principal
or an investment manager, where applicable, as the same shall be reflected in
instructions to Custodian from Principal or any Investment Manager.
(d) Custodian shall not be required to appear in or defend any legal
proceedings with respect to the Account or the Securities unless Custodian has
been indemnified to its reasonable satisfaction against loss and expense
(including reasonable attorneys' fees).
(e) With respect to legal proceedings referred to in paragraph 15.(d) of
this agreement, Custodian may consult with counsel acceptable to it after
written notification to Principal concerning its duties and responsibilities
under this Agreement, and shall not be liable for any action taken or not taken
in good faith on the advice of such counsel.
16. INDEMNITIES.
(a) Principal hereby agrees to indemnify Custodian against all liability,
claims, demands, damages, losses, and costs, including reasonable attorneys'
fees and expenses of legal proceedings, resulting from Custodian's compliance
with instructions from Principal or any Investment Manager and the terms of
this Agreement, except where Custodian has acted with negligence or willful
misconduct.
(b) Custodian's right to indemnity under Paragraph 16.(a) of this
Agreement shall survive the termination of this Agreement.
-9-
<PAGE> 10
17. COMPENSATION; EXPENSES. Principal shall reimburse Custodian for all
reasonable out-of-pocket expenses and processing costs incurred by Custodian in
the administration of the Account including, without limitation, reasonable
counsel fees incurred by Custodian pursuant to Paragraph 15.(e) of this
Agreement. Principal also shall pay Custodian reasonable compensation for its
services hereunder as specified in Appendix B. Custodian shall be entitled to
withdraw such expenses or compensation from the Account if Principal fails to
pay the same to Custodian within 45 days after Custodian has sent an
appropriate billing to Principal; provided, however, that Custodian will give
Principal ten (10) days prior written notice before withdrawing such funds.
18. AMENDMENT; TERMINATION. This Agreement may be amended at any time by a
written instrument signed by the parties. Either party may terminate this
Agreement and the Account upon 90 days' written notice to the other unless the
parties agree on a different time period. Upon such termination, Custodian
shall deliver or cause to be delivered the Securities, less any amounts due and
owing to Custodian under this Agreement, to a successor custodian designated by
Principal or, if a successor custodian has not accepted an appointment by the
effective date of termination of the Account, to Principal. Upon completion of
such delivery Custodian shall be discharged of any further liability or
responsibility with respect to the Securities so delivered.
19. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors in interest. Without
consent of the parties, this agreement cannot be assigned to any third party.
20. GOVERNING LAW. The validity, construction, and administration of this
Agreement shall be governed by the applicable laws of the United States from
time to time in force and effect and, to the extent not preempted by such laws
of the United States, by the laws of the State of California from time to time
in force and effect.
21. EFFECTIVE DATE. This Agreement shall be effective as of the date
appearing below, and shall supersede any prior or existing agreements between
the parties pertaining to the subject matter hereof.
Date: July 30, 1995
------------------------
By: /s/ ROY E. ROGERS
--------------------------
Authorized Signature
"Principal"
-10-
<PAGE> 11
The Bank of California, National Association
By: /s/ KEVIN GALVIN
---------------------------
Title: Vice President
------------------------
By: /s/ JANET POTTER
---------------------------
Title: Vice President
------------------------
"Custodian"
-11-
<PAGE> 12
APPENDIX A
<TABLE>
<CAPTION>
MITSUBISHI GLOBAL CUSTODY SUB-CUSTODIAN NETWORK SUMMARY
- --------------------------------------------------------------------------------------------------
LAST REPORTED CREDIT RATINGS
------------- ---------------------------
MARKET SUB-CUSTODIAN EQUITY IBCA MOODY'S S&P
- ------ ------------- ------ ---- ------- ---
<S> <C> <C> <C> <C> <C>
Argentina Citibank $11,067 AA- A1 A+
Australia National Australia Bank $ 5,830 AA Aa3 AA
Austria Creditansalt-Bankverein $ 1,791 A+ Aa3 A-1
Belgium Kredietbank $ 2,381 AA Aa2 A+
(1)Brazil Citibank $11,067 AA- A1 A+
Canada Royal Bank of Canada $ 6,066 AA- A1 A+
Chile Citibank $11,067 AA- Aa2 AA-
(1)China/Shenzen Standard Chartered Bank $ 1,982 A A2 -NR-
Denmark Den Danske Bank $ 2,960 AA- Aa3 A
Euro-CDs First National Bank of Chicago $ 4,264 A+ A1 A+
Finland Union Bank of Finland $ 1,354 A- A3 BBB
France Banque Indosuez $ 2,655 AA- A1 A+
Germany Dresdner Bank $ 7,077 AA+ Aaa A-1+
Hong Kong Hong King & Shanghai Bank $ 7,827 AA- A3 A-1
1India Standard Chartered Bank $ 1,982 A A2 -NR-
Indonesia Standard Chartered Bank $ 1,982 A A2 -NR-
Ireland Allied Irish Banks $ 1,784 A+ A1 A
Italy Banca Commerciale Italiana $ 3,631 AA- A1 A
Japan Mitsubishi Bank Limited $15,398 AA Aa3 AA-
(1)Korea (Rep. of) Standard Chartered Bank $ 1,982 A A2 -NR-
Malaysia Malayan Banking Berhad $ 1,330 A(2) -NR- -NR-
Mexico Citibank $11,067 AA- A1 A+
</TABLE>
____________________
(1) Market restrictions require investor registration prior to trading.
Please see your Relationship Manager for further details.
(2)Rated by Thomson Bank Watch-Asia
<PAGE> 13
APPENDIX A
<TABLE>
<CAPTION>
MITSUBISHI GLOBAL CUSTODY SUB-CUSTODIAN NETWORK SUMMARY
- --------------------------------------------------------------------------------------------------
LAST REPORTED CREDIT RATINGS
------------- ---------------------------
MARKET SUB-CUSTODIAN EQUITY IBCA MOODY'S S&P
- ------ ------------- ------ ---- ------- ---
<S> <C> <C> <C> <C> <C>
Netherlands MeesPierson N.V. $ 1,019 A1 -NR- -NR-
New Zealand National Australia Bank $ 5,830 AA Aa3 AA
Norway Christiania Bank $ 715 A A3 A-3
Philippines Standard Chartered Bank $ 1,982 A A2 -NR-
Portugal Banco Totta & Acores $ 790 A A3 A-
Singapore DBS Bank $ 2,860 AA2 -NR- -NR-
Spain Banco Bilbao Vizcaya $ 5,211 AA Aa2 AA-
Sweden Svenska Handelsbanken $ 2,528 AA- A1 A
Switzerland Union Bank of Switzerland $14,076 AAA Aaa AAA
(1)Taiwan Standard Chartered Bank $ 1,982 A A2 -NR-
Thailand Hong Kong & Shanghai Bank $ 7,827 AA- A3 A-1
U.K. Midland Bank $ 4,214 AA- Aa3 A
(1)Venezuela Citibank $11,067 AA- A1 A+
</TABLE>
<PAGE> 1
Exhibit 9(a)
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT made as of the 1st day of January, 1995, by and
between THE PARKSTONE GROUP OF FUNDS, a Massachussetts business trust (the
"Group"), and The Winsbury Company Limited Partnership, d/b/a The Winsbury
Company, an Ohio limited partnership (the "Administrator" ).
WHEREAS, the Group is an open-end management investment company which has
filed a registration statement (the "Registration Statement" ) under the
Investment Company Act of 1940, as amended (the "1940 Act") and the Securities
Act of 1933.
WHEREAS, the Group is comprised of several separate investment portfolios;
and
WHEREAS, the Group desires to avail itself of the services, information,
advice, assistance and facilities of the Administrator in performing services
for the portfolios indicated on Schedule A to this Agreement (the "Funds"); and
NOW, THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. Appointment of the Administrator. The Group hereby appoints the
Administrator to assist in supervising all aspects of the operations of the
Funds except those performed by the investment adviser for the Group under its
Investment Advisory Agreements, the custodians for the Group under its
custodian agreements, the transfer agent for the Group under its Transfer
Agency Agreement and the fund accountant for the Group under its Fund
Accounting Agreement, subject to the control and direction of the Group's Board
of Trustees, for the period and on the terms hereinafter set forth. The
Administrator hereby accepts such appointment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation herein provided.
2. Services as Administrator. Administrator will maintain office facilities
(which may be in the offices of Administrator or an affiliate but shall be in
such location as the Group shall reasonably determine); furnish statistical and
research data, clerical and certain bookkeeping services and stationery and
office supplies; prepare the periodic reports to the Securities and Exchange
Commission (the "Commission") on Form N-SAR or any replacement forms therefor;
compile data for, prepare for execution by the funds and file all the Funds'
federal and state tax returns and required tax filings other than those
required to be made by the Funds' custodian and transfer agent; prepare
compliance filings pursuant to state securities laws with the advice of the
Group's counsel; assist to the extent requested by the Group with the Group's
preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statements (on Form N-1A or any replacement therefor); compile
data for, prepare and file timely Notices to the Commission required pursuant
to Rule 24f-2 under the 1940 Act; keep and maintain the financial accounts and
records of the Funds, including calculation of daily expense accruals; in the
case of the money market funds, determine the actual variance from $1.00 of the
Fund's net asset value per share; and generally assist in all aspects of the
operations of the Funds. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Administrator hereby agrees that all records which it
maintains for the Group are the property of the Group and further agrees to
surrender
<PAGE> 2
promptly to the Group any of such records upon the Group's request.
Administrator further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act. The Administrator may delegate some or all of its
responsibilities under this Agreement to one or more sub-administrators.
3. Fees and Expenses. In consideration of services rendered pursuant to this
Agreement, each of the Funds will pay to the Administrator on the first
business day of each month, or at such time(s) as Administrator shall request
and the parties hereto shall agree, a fee computed daily and paid as specified
below equal to the lesser of (a) the fee calculated at the applicable annual
rate of the value of each Fund's average daily net assets set forth in Schedule
A hereto or (b) such other fee as may from time to time be agreed upon in
writing by the Group and the Administrator. If the Administrator shall serve
for less than the whole of any month, the foregoing compensation shall be
prorated. For the purpose of determining fees payable to the Administrator, the
value of each Fund's net assets shall be computed at the times and in the
manner specified in the Group's Registration Statement.
Administrator will from time to time employ or associate with itself such
person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both the Administrator or
the Group. The compensation of such person or persons shall be paid by
Administrator and no obligation may be incurred on behalf of the Funds in such
respect. Other expenses to be incurred in the operation of the Funds including
taxes, interest, brokerage fees and commissions, if any, fees of Trustees who
are not partners, officers, directors, shareholders or employees of
Administrator or investment adviser or distributor of the Funds, Commission
fees and state Blue Sky qualification and renewal fees and expenses, investment
advisory fees, custodian fees, transfer and dividend disbursing agents' fees,
fund accounting fees including pricing of portfolio securities, certain
insurance premiums, outside auditing and legal expenses, costs of maintenance
of corporate existence, typesetting and printing prospectuses for regulatory
purposes and for distribution to current Shareholders of the Funds, costs of
Shareholders' and Trustees' reports and meetings and any extraordinary expenses
will be borne by the Funds.
4. Expense Reimbursement. If in any fiscal year the aggregate expenses of a
particular Fund (as defined under the securities regulations of any state
having jurisdiction over the Group) exceed applicable limits under state
securities regulations or are in excess of any voluntary expense limitations
set forth in the Group's current Registration Statement, the Administrator
shall reimburse such Fund for a portion of such excess expenses equal to such
excess expense multiplied by the ratio of the fees respecting such Fund
otherwise payable to the Administrator hereunder and to the First of America
Investment Corporation under the Investment Advisory Agreement for such Fund.
The expense reimbursement obligation of the Administrator is limited to the
amount of its fees hereunder for such fiscal year, provided, however, that
notwithstanding the foregoing, Administrator shall reimburse a particular Fund
for such proportion of such excess expenses regardless of the amount of fees
paid to it during such fiscal year to the extent the securities regulations of
any state having jurisdiction of the Group so require. Such expense
reimbursement, if any, will be estimated daily and reconciled and paid on a
monthly basis.
2
<PAGE> 3
5. Proprietary and Confidential Information. Administrator agrees on behalf
of itself and its partners and employees to treat confidentially and as
proprietary information of the Group all records and other information relative
to the Group and prior, present, or potential Shareholders, and not to use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where Administrator may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Group.
6. Liability. Administrator, in rendering its services hereunder, agrees to
use its best judgment and efforts, and the Group agrees that Administrator
shall not be liable hereunder for any error of judgment or mistake of law or
for any loss suffered by the Funds in connection with the matters to which this
Agreement relates, except for a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of Administrator in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. Any person, even though also a partner, employee, or agent of
Administrator, who may be or become an officer, Trustee, employee, or agent of
the Group or the Funds shall be deemed, when rendering services to the Group or
the Funds, or acting on any business of that party, to be rendering such
services to or acting solely for that party and not as a partner, employee, or
agent or one under the control or direction of Administrator even though paid
by it.
7. Limitation of Group's Liability. The Administrator acknowledges that it
has received notice of and accepts the limitations upon the Group's liability
set forth in its Declaration of Trust. The Administrator agrees that any of the
Group's obligations shall be limited to the assets of the Funds and that the
Administrator shall not seek satisfaction of any such obligation from the
shareholders of the Group nor from any Trustee, Group employee or agent of the
Group.
8. Duration, Renewal and Termination. This Agreement shall become effective
as of the date first written above and, unless sooner terminated as provided
herein, shall continue until December 31, 1999 and thereafter shall be renewed
for successive five-year terms, unless written notice not to renew is given by
the non-renewing party to the other party at least 60 days prior to the
expiration of the then-current term. This Agreement is terminable with respect
to a particular Fund only upon mutual agreement of the parties hereto or for
"cause" (as defined below) by the party alleging "cause," in either case on not
less than 60 days' notice by the Group's Board of Trustees or by Administrator.
For purposes of this Agreement, "cause" shall mean (a) willful misfeasance,
bad faith, gross negligence, or reckless disregard on the part of either party
with respect to its obligations and duties set forth herein; (b) a final,
unappealable judicial, regulatory or administrative ruling or order in which
either party has been found guilty of criminal or unethical behavior in the
conduct of its business; (c) the dissolution or liquidation of either party or
other cessation of business other than a reorganization or recapitalization of
such party as an ongoing business; financial difficulties on the part of either
party which is evidenced by the authorization or commencement of, or
involvement by way of pleading, aswer, consent, or acquiescence in, a
3
<PAGE> 4
voluntary or involuntary case under Title 11 of the United States code, as from
time to time is in effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization of debtors or to
the modification or alteration of the rights of creditors; or (e) any
circumstance which substantially impairs the performance of either party's
obligations and duties as contemplated herein.
9. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent applicable law of the State of Ohio, or any of the
provisions herein, conflict with applicable provisions of the 1940 Act, the
latter shall control.
10. Names. The names "The Parkstone Group of Funds" and "Trustees of the
Parkstone Group of Funds" refer respectively to the Trust created and the
Trustees, as trustees but no individually or personally, acting from time to
time under an Agreement and Declaration of Trust dated March 25, 1987 which is
hereby referred to and a copy of which is on file at the office of the State
Secretary of the Commonwealth of Massachusetts and the principal office of the
Trust. The obligations of "The Parkstone Group of Funds" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities, and are not binding upon any of
the Trustees, shareholders, or representatives of the Trust personally, but
bind only the property of the Trust, and all persons dealing with any class of
shares of the Trust must look solely to the property of the Trust belonging to
such class for the enforcement of any claims against the Trust.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on all parties.
4
<PAGE> 5
IN WITNESS HEREOF, the parties have duly executed this Agreement as of the
date first written above.
THE PARKSTONE GROUP OF FUNDS
By: /s/ George R. Landreth
---------------------------
George R. Landreth
Its: President
THE WINSBURY COMPANY LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Stephen G. Mintos
--------------------------
Stephen G. Mintos
Its: Executive Vice President
5
<PAGE> 6
Dated: January 1, 1995
SCHEDULE A
To the Administration Agreement
between The Parkstone Group of Funds and
The Winsbury Company Limited Partnership
<TABLE>
<CAPTION>
NAME OF FUND DATE COMPENSATION
- ------------ ---- ------------
<S> <C> <C>
Parkstone Prime Obligations, January 1, 1995 Annual Rate of twenty one-
U.S. Government Obligations, hundredths of one percent
Tax-Free, Treasury, Municipal (0.20%) of each such Fund's
Investor, Equity, Small average daily net assets
Capitalization, High Income
Equity, International
Discovery, Bond, Limited
Maturity Bond, Intermediate
Government Obligations,
Municipal Bond, U.S.
Government Income, Michigan
Municipal Bond and Balanced
Funds
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ George R. Landreth
--------------------------
George R. Landreth
Its: President
THE WINSBURY COMPANY LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Stephen G. Mintos
--------------------------
Stephen G. Mintos
Its: Executive Vice President
<PAGE> 1
Exhibit 9(a)(i)
DATED: November 8, 1995
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP)
DATED JANUARY 1, 1995
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION* DATE
------------ ------------ ----
<S> <C> <C>
U.S. Government Obligations Fund, Prime Annual rate of twenty one-hundredths of one January 1, 1995
Obligations Fund, Tax-Free Fund, Equity Fund, percent (.20%) of each such Fund's average
Small Capitalization Fund, High Income Equity daily net assets
Fund, Bond Fund, Limited Maturity Bond Fund,
Intermediate Government Obligations Fund,
Municipal Bond Fund, Michigan Municipal Bond
Fund, Balanced Fund, Government Income Fund,
International Discovery Fund, Municipal
Investor Fund and Treasury Fund
Parkstone Large Capitalization Fund Annual rate of twenty one-hundredths of one November 8, 1995
percent (.20%) of such Fund's average daily
net assets
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ George R. Landreth
--------------------------
George R. Landreth
President
BISYS FUND SERVICES LIMITED PARTNERSHIP
(formerly The Winsbury Company
Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
Executive Vice President
___________________________
* All fees are computed daily and paid periodically.
<PAGE> 1
Exhibit 9(b)
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of the 8th day of August, 1990, between THE PARKSTONE GROUP
OF FUNDS (the "Trust"), a Massachusetts business trust having its principal
place of business at 1900 East Dublin-Granville Road, Columbus, Ohio 43229, and
THE WINSBURY SERVICE CORPORATION ("Winsbury"), an Ohio corporation having its
principal place of business at 1900 East Dublin-Granville Road, Columbus, Ohio
43229.
WHEREAS, the Trust desires that Winsbury perform certain services for the
Trust, and for each of its series denominated as funds and whose shares of
beneficial interest comprise from time to time the shares of the Trust
(individually referred to herein as a "Fund" and collectively as the "Funds");
WHEREAS, Winsbury has previously performed such services for the Trust
pursuant to a Transfer Agency and Service Agreement dated May 8, 1990, which
Agreement the Trust and Winsbury now desire to amend and restate in its
entirety; and
WHEREAS, Winsbury is willing to perform such services on the terms and
conditions as now set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants herein
set forth, the parties agree as follows:
1. SERVICES. Winsbury shall perform for the Trust the services set forth in
Schedule A hereto, including services as Transfer Agent.
Winsbury also agrees to perform for the Trust such special services
incidental to the performance of the services enumerated herein as agreed to by
the parties from time to time. Winsbury shall perform such additional services
as are provided on an amendment to Schedule A hereof, in consideration of such
fees as the parties hereto may agree.
2. FEES. The Trust shall pay Winsbury for the services to be provided by
Winsbury under this Agreement in accordance with, and in the manner set forth
in, Schedule B hereto. Fees for any additional services to be provided by
Winsbury pursuant to an amendment to Schedule A hereto shall be subject to
mutual agreement at the time such amendment to Schedule A is proposed.
3. REIMBURSEMENT OF EXPENSES. In addition to paying Winsbury the fees
described in Section 2 hereof, the Trust agrees to reimburse Winsbury for
Winsbury's out-of-pocket expenses in providing services hereunder, including
without limitation the following:
A. All freight and other delivery and bonding charges incurred by Winsbury
in delivering materials to and from the Trust and in delivering all materials
to shareholders;
<PAGE> 2
B. All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Winsbury in communication with the
Trust, the Trust's investment adviser or custodian, dealers, shareholders or
others as required for Winsbury to perform the services to be provided
hereunder;
C. Costs of postage, couriers, stock computer paper, statements, labels,
envelopes, checks, reports, letters, tax forms, proxies, notices or other form
of printed material which shall be required by Winsbury for the performance of
the services to be provided hereunder;
D. The cost of microfilm or microfiche of records or other materials; and
E. Any expenses Winsbury shall incur at the written direction of an officer
of the Trust thereunto duly authorized.
4. EFFECTIVE DATE. This Agreement shall become effective as of the date
first written above (the "Effective Date").
5. TERM. This Agreement shall continue in effect, unless earlier terminated
by either party hereto as provided hereunder, for an initial term of one year
from the Effective Date (the "Initial Term"). Thereafter, this Agreement shall
continue in effect unless either party hereto terminates this Agreement by
giving 90 days' written notice to the other party, whereupon this Agreement
shall terminate automatically upon the expiration of said 90 days; provided,
however, that after such termination, for so long as Winsbury, with the written
consent of the Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees
and out-of-pocket expenses incurred by Winsbury but unpaid by the Trust upon
such termination shall be immediately due and payable upon and notwithstanding
such termination. Winsbury shall be entitled to collect from the Trust, in
addition to the fees and disbursements provided by Sections 2 and 3 hereof, the
amount of all of Winsbury's cash disbursements and a reasonable fee (which fee
shall be not less than the sum of the actual costs incurred by Winsbury in
performing such service and 2 percent of such costs) for services in connection
with Winsbury's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its distributors or investment
advisers and/or other parties, of the Trust's property, records, instruments
and documents, or any copies thereof. Subsequent to such termination, Winsbury
will provide, for a reasonable fee, the Trust with reasonable access to any
Trust documents or records remaining in its possession. Further, this
Agreement is terminable with respect to a particular Fund only upon mutual
agreement of the parties hereto or for "cause" (as defined below) by the party
alleging "cause," in either case on not less than 60 days' notice by the
Trust's Board of Trustees or by Winsbury.
For purposes of this Agreement, "cause" shall mean (a) willful misfeasance,
bad faith, gross negligence, or reckless disregard on the part of either party
with respect to its obligations
-2-
<PAGE> 3
and duties set forth herein; (b) a final, unappealable judicial, regulatory or
administrative ruling or order in which either party has been found guilty of
criminal or unethical behavior in the conduct of its business; (c) the
dissolution or liquidation of either party or other cessation of business other
than a reorganization or recapitalization of such party as an ongoing business;
(d) financial difficulties on the part of either party which is evidenced by
the authorization or commencement of, or involvement by way of pleading,
answer, consent, or acquiescence in, a voluntary or involuntary case under
Title 11 of the United States Code, as from time to time is in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration
of the rights of creditors; or (e) any circumstance which substantially impairs
the performance of either party's obligations and duties as contemplated
herein.
6. UNCONTROLLABLE EVENTS. Winsbury assumes no responsibility hereunder, and
shall not be liable, for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
7. LEGAL ADVICE. Winsbury shall notify the Trust at any time Winsbury
believes that it is in need of the advice of counsel (other than counsel in the
regular employ of Winsbury or any affiliated companies) with regard to
Winsbury's responsibilities and duties pursuant to this Agreement; and after so
notifying the Trust, Winsbury, at its discretion, shall be entitled to seek,
receive and act upon advice of legal counsel of its choosing, such advice to be
at the expense of the Trust or Funds unless relating to a matter involving
Winsbury's willful misfeasance or gross negligence with respect to Winsbury's
responsibilities and duties hereunder and shall in no event be liable to the
Trust or any Fund or any shareholder or beneficial owner of the Trust for any
action reasonably taken pursuant to such advice.
8. INSTRUCTIONS. Whenever Winsbury is requested or authorized to take action
hereunder pursuant to instructions from a shareholder concerning an account in
the Trust, Winsbury shall be entitled to rely upon any certificate, letter or
other instrument or communication, whether in writing, by electronic or
telephone transmission, believed by Winsbury to be genuine and to have been
properly made, signed or authorized by an officer or other authorized agent of
the Trust or by the shareholder, as the case may be, and shall be entitled to
receive as conclusive proof of any fact or matter required to be ascertained by
it hereunder a certificate signed by an officer of the Trust or any other
person authorized by the Trust's Board of Trustees or by the shareholder, as
the case may be.
As to the services to be provided hereunder, Winsbury may rely conclusively
upon the terms of the Prospectuses and Statements of Additional Information of
the Trust to the extent that such services are described therein unless
Winsbury receives written instructions to the contrary in a timely manner from
the Trust.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS; INDEMNIFICATION.
Winsbury shall use its best efforts to ensure the accuracy of all services
performed under this Agreement, but shall not be liable to the Trust for any
action taken or
-3-
<PAGE> 4
omitted by Winsbury in the absence of bad faith, willful misfeasance or gross
negligence. The Trust agrees to indemnify and hold harmless Winsbury, its
employees, agents, directors, officers and nominees from and against any and
all claims, demands, actions and suits, whether groundless or otherwise, and
from and against any and all judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character arising
out of or in any way relating to Winsbury's actions taken or nonactions with
respect to the performance of services under this Agreement or based, if
applicable, upon reasonable reliance on information, records, instructions or
requests given or made to Winsbury by the Trust or the investment adviser and
on any records provided by any fund accountant or custodian thereof; provided
that this indemnification shall not apply to actions or omissions of Winsbury
in cases of its own willful misfeasance or gross negligence, and further
provided that prior to confessing any claim against it which may be the subject
of this indemnification, Winsbury shall give the Trust written notice of and
reasonable opportunity to defend against said claim in its own name or in the
name of Winsbury.
10. RECORD RETENTION AND CONFIDENTIALITY. Winsbury shall keep and maintain
on behalf of the Trust all books and records which the Trust or Winsbury is, or
may be, required to keep and maintain pursuant to any applicable statutes,
rules and regulations, including without limitation Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, relating to the maintenance of books and
records in connection with the services to be provided hereunder. Winsbury
further agrees that all such books and records shall be the property of the
Trust and to make such books and records available for inspection by the Trust
or by the Securities and Exchange Commission at reasonable times and otherwise
to keep confidential all books and records and other information relative to
the Trust and its shareholders; except when requested to divulge such
information by duly-constituted authorities or court process, or requested by a
shareholder with respect to information concerning an account as to which such
shareholder has either a legal or beneficial interest or when requested by the
Trust, the shareholder, or the dealer of record as to such account.
11. REPORTS. Winsbury will furnish to the Trust and to its
properly-authorized auditors, investment advisers, examiners, distributors,
dealers, underwriters, salesmen, insurance companies and others designated by
the Trust in writing, such reports at such times as are prescribed in Schedule
C attached hereto, or as subsequently agreed upon by the parties pursuant to an
amendment to Schedule C. The Trust agrees to examine each such report or copy
promptly and will report or cause to be reported any errors or discrepancies
therein no later than three business days from the receipt thereof. In the
event that errors or discrepancies, except such errors and discrepancies as may
not reasonably be expected to be discovered by the recipient within three days
after conducting a diligent examination, are not so reported within the
aforesaid period of time, a report will for all purposes be accepted by and
binding upon the Trust and any other recipient, and Winsbury shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
-4-
<PAGE> 5
12. RIGHTS OF OWNERSHIP. All computer programs and procedures developed to
perform services required to be provided by Winsbury under this Agreement are
the property of Winsbury. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable after termination of this Agreement for any reason.
13. RETURN OF RECORDS. Winsbury may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Winsbury's files, records and documents created and maintained by Winsbury
pursuant to this Agreement which are no longer needed by Winsbury in the
performance of its services or for its legal protection. If not so turned over
to the Trust, such documents and records will be retained by Winsbury for six
years from the year of creation. At the end of such six-year period, such
records and documents will be turned over to the Trust unless the Trust
authorizes in writing the destruction of such records and documents.
14. BANK ACCOUNTS. The Trust and the Funds shall establish and maintain
such bank accounts with such bank or banks as are selected by the Trust, as are
necessary in order that Winsbury may perform the services required to be
performed hereunder. To the extent that the performance of such services shall
require Winsbury directly to disburse amounts for payment of dividends,
redemption proceeds or other purposes, the Trust and Funds shall provide such
bank or banks with all instructions and authorizations necessary for Winsbury
to effect such disbursements.
15. REPRESENTATIONS OF THE TRUST. The Trust certifies to Winsbury that:
(A) as of the close of business on the Effective Date, each Fund which is in
existence as of the Effective Date has authorized unlimited shares, and (B) by
virtue of its Declaration of Trust, shares of each Fund which are redeemed by
the Trust may be sold by the Trust from its treasury, and (C) this agreement
has been duly authorized by the Trust and, when executed and delivered by the
Trust, will constitute a legal, valid and binding obligation of the Trust,
enforceable against the Trust in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF WINSBURY. Winsbury represents and warrants that: (A)
Winsbury has complied with, and shall continue to be in compliance with, all
provisions of law, including Section 17A(c) of the Securities Exchange Act of
1934, as amended, required in connection with the performance of its duties
under this Agreement; and (B) the various procedures and systems which Winsbury
has implemented with regard to safeguarding from loss or damage attributable to
fire, theft, or any other cause of the blank checks, records, and other data of
the Trust and Winsbury's records, data, equipment facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
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<PAGE> 6
17. INSURANCE. Winsbury shall notify the Trust should any of its insurance
coverage be changed for any reason. Such notification shall include the date
of change and the reasons therefor. Winsbury shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify
the Trust from time to time as may be appropriate of the total outstanding
claims made by Winsbury under its insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS. The Trust has
furnished to Winsbury the following:
A. Copies of the Declaration of Trust of the Trust and of any amendments
thereto, certified by the proper official of the state in which such
Declaration has been filed.
B. Copies of the following documents:
(1) The Trust's Code of Regulations and any amendments thereto;
(2) Certified copies of resolutions of the Board of Trustees covering the
following matters:
a. Approval of this Agreement, authorization of a specified officer of
the Trust to execute and deliver this Agreement and authorization for
specified officers of the Trust to instruct Winsbury hereunder; and
b. Authorization of Winsbury to act as Registrar, Transfer Agent and
Dividend Disbursing Agent for the Trust.
C. A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Winsbury in all
matters.
D. Two copies of the following (if such documents are employed by the
Trust):
(1) Prospectuses and Statements of Additional Information for each Fund;
(2) Distribution Agreements;
(3) Investment Advisory Agreements; and
(4) All other forms commonly used by the Trust or its Distributor with
regard to their relationships and transactions with shareholders of
the Trust.
-6-
<PAGE> 7
E. A certificate as to shares of beneficial interest of the Trust
authorized, issued, and outstanding as of the Effective Date of Winsbury's
appointment as Transfer Agent (or as of the date on which Winsbury's services
are commenced, whichever is the later date) and as to receipt of full
consideration by the Trust for all shares outstanding, such statement to be
certified by the Treasurer of the Trust.
19. INFORMATION FURNISHED BY WINSBURY. Winsbury has furnished to the Trust
the following:
A. Winsbury's Articles of Incorporation.
B. Winsbury's Code of Regulations and any amendments thereto.
C. Certified copies of actions of Winsbury covering the following matters:
(1) Approval of this Agreement, and authorization of a specified officer
of Winsbury to execute and deliver this Agreement;
(2) Authorization of Winsbury to act as Transfer Agent and Shareholder
Servicing Agent for the Trust.
20. AMENDMENTS TO DOCUMENTS. The Trust shall furnish Winsbury written
copies of any amendments to, and changes in, any of the items referred to in
Section 18 hereof forthwith upon such amendments and changes becoming
effective. In addition, the Trust agrees that no amendments will be made to
the Prospectuses or Statements of Additional Information of the Trust which
might have the effect of changing the procedures employed by Winsbury in
providing the services agreed to hereunder or which amendment might affect the
duties of Winsbury hereunder unless the Trust first obtains Winsbury's approval
of such amendments or changes.
21. RELIANCE ON AMENDMENTS. Winsbury may rely on any amendments to or
changes in any of the documents and other items to be provided by the Trust
pursuant to Sections 18 and 20 of this Agreement and the Trust hereby
indemnifies and holds harmless Winsbury from and against any all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character which
may result from actions or omissions on the part of Winsbury in reasonable
reliance upon such amendments and/or changes. Although Winsbury is authorized
to rely on the above-mentioned amendments to and changes in the documents and
other items to be provided pursuant to Sections 18 and 20 hereof, Winsbury
shall be under no duty to comply with or take any action as a result of any of
such amendments or changes unless the Trust first obtains Winsbury's written
consent to and approval of such amendments or changes.
22. COMPLIANCE WITH LAW. Except for the obligations of Winsbury's set forth
in Section 11 hereof, the Trust assumes full responsibility for the
preparation, contents and
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<PAGE> 8
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction. Winsbury shall
have no obligation to take cognizance of any laws relating to the sale of the
Trust's shares. The Trust represents and warrants that no shares of the Trust
will be offered to the public until the Trust's registration statement under
the Securities Act of 1933 and the Investment Company Act of 1940 has been
declared or becomes effective.
23. NOTICES. Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 1900 East Dublin-Granville Road,
Columbus, Ohio 43229, or at such other address as such party may from time to
time specify in writing to the other party pursuant to this Section.
24. HEADINGS. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this
Agreement.
25. ASSIGNMENT. This Agreement and the rights and duties hereunder shall
not be assignable by either of the parties hereto except by the specific
written consent of the other party.
26. GOVERNING LAW. This Agreement shall be governed by and provisions shall
be construed in accordance with the laws of the State of Ohio.
27. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. The names "The
Parkstone Group of Funds" and "Trustees of The Parkstone Group of Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust dated March 25, 1987, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Parkstone Group
of Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, Shareholders or representatives
of the Trust personally, but bind only the assets of the Trust, and all persons
dealing with any series of Shares of the Trust must look solely to the assets
of the Trust belonging to such series for the enforcement of any claims against
the Trust.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
THE PARKSTONE GROUP OF FUNDS
Seal
By /s/ G. Ronald Henderson
------------------------------
G. Ronald Henderson, President
THE WINSBURY SERVICE CORPORATION
Seal
By /s/ Kenneth B. Quintenz
------------------------------
Kenneth B. Quintenz, Chairman
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<PAGE> 10
SCHEDULE A
TRANSFER AGENCY SERVICES
I. RECORD MAINTENANCE.
Winsbury shall provide full maintenance of all shareholder records for each
account in the Trust. Such records will include:
A. Share balances.
B. Account transaction history, including dividends paid and the date and
price for all transactions.
C. Name and address of the record shareholder, including zip codes and tax
identification numbers (but shall not include responsibility for obtaining
certified tax identification numbers or impending back-up withholding).
D. Records of distributions and dividend payments.
E. Transfer records.
F. Overall control records.
II. REGULAR DAILY OPERATIONS.
Winsbury shall perform the following functions:
A. Process new accounts on the shareholder file by processing directly from the
dealer.
B. Process additional purchases to the records of accounts already on the
shareholder file. In such instances, on the dealer's instructions, allocate
investor payments among the Funds.
C. Transfer of shares upon the receipt of proper instructions from dealer.
D. Process changes of dealer/representative on accounts.
E. Process instructions from shareholders of the Trust to redeem shares of the
Trust as the agent for the Trust.
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<PAGE> 11
III. PERIODIC OPERATIONS.
A. Upon receipt of instructions as to payment of dividends and distributions,
which may be standing instructions, compute distributions and inform the
Trust of the amount to be reinvested in additional shares.
B. Process redemptions as instructed by dealer.
C. Mail semi-annual and annual Trust and/or Fund reports and prospectuses.
D. Produce transcripts of account history as requested by the Trust or by the
dealer.
E. Prepare and file Form 1099's with Internal Revenue Service.
IV. CONTROLS.
A. Maintain all balance controls daily and produce monthly summaries
expressed in:
1. shares
2. dollar amounts
V. SPECIAL SERVICES INCLUDED.
A. Prepare envelopes/labels (from address data supplied by dealer as to
transmission accounts) and mail proxy statements; tabulate and certify
votes from returned ballots.
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<PAGE> 12
SCHEDULE B
FEES
<TABLE>
<CAPTION>
Per Number of Accounts Annual Minimum Per Fund
---------------------- -----------------------
<S> <C>
1-500 $6,000.00 plus expenses
500-* $6,000.0* plus expenses
</TABLE>
* Base annual fee of $12.00 for Variable Net Asset Value Funds and $6.00 for
Money Market Funds (Daily Dividend) will apply after minimum of $6,000 per year
per Fund has been satisfied.
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<PAGE> 13
SCHEDULE C
REPORTS
I. Daily Activity Report (liquidations processed that day)
II. Daily Share Summary Report (by Fund)
A. Beginning balance
B. Liquidations
C. Payments
D. Exchanges
E. Adjustments
F. Ending Balance
III. Daily Proof Sheet Summary and Transaction Register
IV. Daily Share Reconciliation Report (reconciling Share Summary Report to
Daily Proof Summary Sheet)
V. Weekly Position Reports (showing all account balances)
VI. Monthly Dividend Reports
VII. Report by independent public accountants concerning Winsbury's accounting
system and internal accounting controls, at such times, as the Trust may
reasonably require. These reports shall be of sufficient detail and scope
to provide reasonable accuracy that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies,
shall state.
VIII. Sales Data Reports for blue sky reporting.
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<PAGE> 1
Exhibit 9(b)(i)
Dated: May 12, 1994
SCHEDULE B
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
THE WINSBURY SERVICE CORPORATION
AND
THE PARKSTONE GROUP OF FUNDS
DATED AUGUST 8, 1990
Revised Fee Schedule for The Parkstone Group of Funds effective May 12, 1994.
1. MINIMUM ANNUAL BASE FEES. The minimum Annual Base Fee shall be determined
as follows:
Investor A Shares
For a Fund with less than 100 shareholders: $18,000
For a Fund with more than 100 shareholders $24,000
Investor B Shares
For a Fund with less than 100 shareholders: $18,000
For a Fund with more than 100 shareholders
but less than 500 shareholders: $24,000
For a Fund with more than 500 shareholders: $36,000
Investor C Shares
For a Fund with less than 100 shareholders: $18,000
For a Fund with more than 100 shareholders
but less than 500 shareholders: $24,000
For a Fund with more than 500 shareholders: $36,000
Institutional Shares
For a Fund with less than 100 shareholders: $ 6,000
For a Fund with more than 100 shareholders
but less than 500 shareholders: $12,000
For a Fund with more than 500 shareholders: $24,000
<PAGE> 2
2. PER SHAREHOLDER FEES. Each Class of a Fund (portfolio) shall pay an
additional annual fee to be determined as follows:
Investor A Shares (per shareholder greater than 100)
Daily Dividend Fund: $16
Non-Daily Dividend Fund: $14
Investor B Shares (per shareholder greater than 500)
Daily Dividend Fund: $16
Non-Daily Dividend Fund: $14
Investor C Shares (per shareholder greater than 500)
Daily Dividend Fund: $16
Non-Daily Dividend Fund: $14
Institutional Shares (per shareholder greater than 500)
Daily Dividend Fund: $16
Non-Daily Dividend Fund: $14
3. OTHER PROVISIONS
a. Any Fund which requires processing of Retirement Plans shall pay
additional fees as agreed in writing between the parties.
b. All fees are subject to annual increases as agreed in writing between the
parties.
THE WINSBURY SERVICE CORPORATION
Dated as of May 12, 1994 By: /s/ Kenneth B. Quintenz
----------------------------
Title: Senior Vice President
-------------------------
THE PARKSTONE GROUP OF FUNDS
Dated as of May 12, 1994 By: /s/ G. Ronald Henderson
----------------------------
Title: President
-------------------------
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<PAGE> 1
Exhibit 9(c)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of February, 1993, between THE PARKSTONE GROUP OF
FUNDS (the "Trust"), a Massachusetts business trust having its principal place
of business at 1900 East Dublin-Granville Road; Columbus, Ohio 43229, and THE
WINSBURY SERVICE CORPORATION ("Winsbury"), a corporation organized under the
laws of the State of Ohio and having its principal place of business at 1900
East Dublin-Granville Road, Columbus, Ohio 43229.
WHEREAS, the Trust desires that Winsbury perform certain fund accounting
services for each investment portfolio of the Trust identified on Schedule A
hereto, as such Schedule shall be amended from time to time (individually
referred to herein as a "Fund" and collectively as the "Funds"); and
WHEREAS, Winsbury is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants herein
set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT. Winsbury will keep and maintain the
following books and records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(a) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of cash and
all other debits and credits, as required by subsection (b)(1) of the Rule;
(b) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest accrued and
interest received, as required by subsection (b)(2)(i) of the Rule;
(c) Separate ledger accounts required by subsection (b)(2)(ii) and (iii) of
the Rule; and
(d) A monthly trial balance of all ledger accounts (except shareholder
accounts) as required by subsection (b)(8) of the Rule.
In addition to the maintenance of the books and records specified above,
Winsbury shall perform the following accounting services daily for each Fund:
(a) Calculate the net asset value per share;
(b) Calculate the dividend and capital gain distribution, if any;
<PAGE> 2
(c) Calculate the yield;
(d) Reconcile cash movements with the Fund's custodian;
(e) Affirm to the Fund's custodian all portfolio trades and cash
settlements;
(f) Verify and reconcile with the Fund's custodian all daily trade
activity;
(g) Provide the following reports:
(i) A current security position report;
(ii) A summary report of transactions and pending maturities (including
the principal, cost, and accrued interest on each portfolio security
in maturity date order); and
(iii) A current cash position report (including cash available from
portfolio sales and maturities and sales of a Fund's Shares less
cash needed for redemptions and settlement of portfolio purchases);
and
(h) Such other similar services with respect to a Fund as may be
reasonably requested by the Trust.
Winsbury shall perform the following accounting services for each Fund at
least monthly:
(a) Obtain actual dealer quotations, prices from a pricing service, or
matrix prices on all portfolio securities (including those with less than 60
days to maturity) in order to mark the entire portfolio to the market; and
(b) Prepare an interim balance sheet, statement of income and expense, an
statement of changes in net assets for the Fund.
2. COMPENSATION. The Trust shall pay Winsbury for the services to be
provided by Winsbury under this Agreement in accordance with, and in the manner
set forth in, Schedule B hereto.
3. REIMBURSEMENT OF EXPENSES. In addition to paying Winsbury the fees
described in Section 2 hereof, the Trust agrees to reimburse Winsbury for
Winsbury's out-of-pocket expenses in providing services hereunder, including
without limitation the following:
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<PAGE> 3
A. All freight and other delivery and bonding charges incurred by Winsbury
in delivering materials to and from the Trust and in delivering all
materials to shareholders;
B. All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Winsbury in communication
with the Trust, the Trust's investment adviser or custodian, dealers or
others as required for Winsbury to perform the services to be provided
hereunder;
C. Costs of pricing the portfolio securities of each Fund;
D. The cost of microfilm or microfiche of records or other materials; and
E. Any expenses Winsbury shall incur at the written direction of an officer
of the Trust thereunto duly authorized.
4. EFFECTIVE DATE. This Agreement shall become effective with respect to a
Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date an amendment to Schedule A to this
Agreement relating to that Fund is executed) (the "Effective Date").
5. TERM. This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
December 31, 1995, and thereafter shall be renewed automatically for successive
five-year terms unless written notice not to renew is given by the non-renewing
party to the other party at least 60 days prior to the expiration of the
then-current term; provided, however, that after such termination, for so long
as Winsbury, with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due Winsbury and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Winsbury shall be entitled to collect from the Trust, in addition
to the compensation described under paragraph 1 hereof, the amount of all of
Winsbury's cash disbursements for services in connection with Winsbury's
activities in effecting such termination, including without limitation, the
delivery to the Trust and/or its designees of the Trust's property, records,
instruments and documents, or any copies thereof. Subsequent to such
termination for a reasonable fee, Winsbury will provide the Trust with
reasonable access to any Trust documents or records remaining in its
possession. This Agreement is terminable with respect to a particular Fund
only upon mutual agreement of the parties hereto or for "cause" (as defined
below) by the party alleging "cause," in either case on not less than 60 days'
notice by the Trust's Board of; Trustees or by Winsbury.
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<PAGE> 4
For purposes of this Agreement, "cause" shall mean (a) willful misfeasance,
bad faith, gross negligence, or reckless disregard on the part of either party
with respect to its obligations and duties set forth herein; (b) a final,
unappealable judicial, regulatory or administrative ruling or order in which
either party has been found guilty of criminal or unethical behavior in the
conduct of its business; (c) the dissolution or liquidation of either party or
other cessation of business other than a reorganization or recapitalization of
such party as an ongoing business; (d) financial difficulties on the part of
either party which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a
voluntary or involuntary case under Title 11 of the United States Code, as from
time to time is in effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization of debtors or to
the modification or alteration of the rights of creditors; or (e) any
circumstance which substantially impairs the performance of either party's
obligations and duties as contemplated herein.
6. STANDARD OF CARE: RELIANCE ON RECORDS AND INSTRUCTIONS: INDEMNIFICATION.
Winsbury shall use its best efforts to ensure the accuracy of all services
performed under this Agreement, but shall not be liable to the Trust for any
action taken or omitted by Winsbury in the absence of bad faith, willful
misfeasance or gross negligence. A Fund agrees to indemnify and hold harmless
Winsbury, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Winsbury's actions taken or
nonactions with respect to the performance of services under this Agreement
with respect to such Fund or based, if applicable, upon reasonable reliance on
information, records, instructions or requests with respect to such Fund given
or made to Winsbury by the Trust or the investment adviser and on any record
provided by any transfer agent or custodian thereof; provided that this
indemnification shall not apply to actions or omissions of Winsbury in cases of
its own willful misfeasance or gross negligence, and further provided that
prior to confessing any claim against it which may be the subject of this
indemnification, Winsbury shall give the Trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
Winsbury.
7. RECORD RETENTION AND CONFIDENTIALITY. Winsbury shall keep and maintain on
behalf of the Trust all books and records which the Trust or Winsbury is, or
may be, required to keep and maintain pursuant to any applicable statutes,
rules and regulations, including without limitation Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, relating to the maintenance of books and
records in connection with the services to be provided hereunder. Winsbury
further agrees that all such books and records shall be the property of the
Trust and to make such books and records available for inspection by the rust
or by the Securities and Exchange Commission at reasonable times and otherwise
to keep confidential all books and records and other information relative to
the Trust and its shareholders; except when requested to divulge such
information by duly-constituted authorities or court process, or requested by a
shareholder with respect to information concerning an account as to which such
shareholder has
-4-
<PAGE> 5
either a legal or beneficial interest or when requested by the Trust, the
shareholder, or the dealer of record as to such account.
8. UNCONTROLLABLE EVENTS. Winsbury assumes no responsibility hereunder, and
shall not be liable, for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
9. LEGAL ADVICE. Winsbury shall notify the Trust at any time Winsbury
believes that it is in need of the advice of counsel (other than counsel in the
regular employ of Winsbury or any affiliated companies) with regard to
Winsbury's responsibilities and duties pursuant to this Agreement; and after so
notifying the Trust, Winsbury, at its discretion, shall be entitled to seek,
receive and act upon advice of legal counsel of its choosing, such advice to be
at the expense of the Trust or Funds unless relating to a matter involving
Winsbury's willful misfeasance or gross negligence with respect to Winsbury's
responsibilities and duties hereunder and shall in no event be liable to the
Trust or any Fund or any shareholder or beneficial owner of the Trust for any
action reasonably taken pursuant to such advice.
10. REPORTS. Winsbury will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by
Winsbury, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Trust agrees to examine each such report or copy
promptly and will report or cause to be reported any errors or discrepancies
therein no later than three business days from the receipt thereof. In the
event that errors or discrepancies, except such errors and discrepancies as may
not reasonably be expected to be discovered by the recipient within three days
after conducting a diligent examination, are not so reported within the
aforesaid period of time, a report will for all purposes be accepted by and
binding upon the Trust and any other recipient, and Winsbury shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
11. RIGHTS OF OWNERSHIP. All computer programs and procedures developed to
perform services required to be provided by Winsbury under this Agreement are
the property of Winsbury. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable.after termination of this Agreement for any reason.
12. RETURN OF RECORDS. Winsbury may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Winsbury's files, records and documents created and maintained by Winsbury
pursuant to this Agreement which are no longer needed by Winsbury in the
performance of its services or for its legal protection. If not so turned over
to the Trust, such documents and records will be retained by Winsbury for six
years from the year of creation. At the end of such six-year period, such
records and documents
-5-
<PAGE> 6
will be turned over to the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
13. REPRESENTATIONS OF THE TRUST. The Trust certifies to Winsbury that:
(1) as of the close of business on the Effective Date, each Fund which is in
existence as of the Effective Date has authorized unlimited shares, and (2) by
virtue of its Declaration of Trust, shares of each Fund which are redeemed by
the Trust may be sold by the Trust from its treasury, and (3) this Agreement
has been duly authorized by the Trust and, when executed and delivered by the
Trust, will constitute a legal, valid and binding obligation of the Trust,
enforceable against the Trust in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
14. REPRESENTATIONS OF WINSBURY. Winsbury represents and warrants that the
various procedures and systems which Winsbury has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other
cause of the blank checks, records, and other data of the Trust and Winsbury's
records, data, equipment facilities and other property used in the performance
of its obligations hereunder are adequate and that it will make such changes
therein from time to time as are required for the secure performance of its
obligations hereunder.
15. INSURANCE. Winsbury shall notify the Trust should any of its insurance
coverage be changed for any reason. Such notification shall include the date
of change and the reasons therefor. Winsbury shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify
the Trust from time to time as may be appropriate of the total outstanding
claims made by Winsbury under its insurance coverage.
16. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS. The Trust has
furnished to Winsbury the following:
A. Copies of the Declaration of Trust of the Trust and of any amendments
thereto, certified by the proper official of the state in which such
Declaration has been filed.
B. Copies of the following documents:
1. The Trust's Code of Regulations and any amendments thereto;
2. Certified copies of resolutions of the Board of Trustees covering the
approval of this Agreement, authorization of a specified officer of
the Trust to execute and deliver this Agreement and authorization for
specified officers of the Trust to instruct Winsbury thereunder.
-6-
<PAGE> 7
C. A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Winsbury in
all matters.
D. Two copies of the following (if such documents are employed by the
Trust):
1. Prospectuses and Statements of Additional Information for each Fund;
2. Distribution Agreements;
3. Investment Advisory Agreements; and
4. All other forms commonly used by the Trust or its Distributor with
regard to their relationships and transactions with shareholders of
the Trust.
17. INFORMATION FURNISHED BY WINSBURY. Winsbury has furnished to the Trust
the following:
A. Winsbury's Articles of Incorporation.
B. Winsbury's Code of Regulations and any amendments thereto.
C. Certified copies of actions of Winsbury covering the following matters:
1. Approval of this Agreement, and authorization of a specified officer of
Winsbury to execute and deliver this Agreement;
2. Authorization of Winsbury to act as fund accountant for the Trust and to
provide accounting services by the Trust.
18. AMENDMENTS TO DOCUMENTS. The Trust shall furnish Winsbury written
copies of any amendments to, and changes in, any of the items referred to in
Section 17 hereof forthwith upon such amendments and changes becoming
effective. In addition, the Trust agrees that no amendments will be made to
the Prospectuses or Statements of Additional Information of the Trust which
might have the effect of changing the procedures employed by Winsbury in
providing the services agreed to hereunder or which amendment might affect the
duties of Winsbury hereunder unless the Trust first obtains Winsbury's approval
of such amendments or changes.
19. RELIANCE ON AMENDMENTS. Winsbury may rely on any amendments to or
changes in any of the documents and other items to be provided by the Trust
pursuant to Sections 17 and 19 of this Agreement and the Trust hereby
indemnifies and holds harmless Winsbury from and
-7-
<PAGE> 8
against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, counsel fees and other expenses of every
nature and character which may result from actions or omissions on the part of
Winsbury in reasonable reliance upon such amendments and/or changes. Although
Winsbury is authorized to rely on the above-mentioned amendments to and changes
in the documents and other items to be provided pursuant to Sections 17 and 19
hereof, Winsbury shall be under no duty to comply with or take any action as a
result of any of such amendments or changes unless the Trust first obtains
Winsbury's written consent to and approval of such amendments or changes.
20. COMPLIANCE WITH LAW. Except for the obligations of Winsbury's set forth
in Section 7 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to compliance with
all applicable requirements of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction. Winsbury shall
have no obligation to take cognizance of any laws relating to the sale of the
Trust's shares. The Trust represents and warrants that no shares of the Trust
will be offered to the public until the Trust's registration statement under
the Securities Act of 1933 and the Investment Company Act of 1940 has been
declared or becomes effective.
21. NOTICES. Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 1900 East Dublin-Granville Road,
Columbus, Ohio 43229, or at such other address as such party may from time to
time specify in writing to the other party pursuant to this Section.
22. HEADINGS. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this
Agreement.
23. ASSIGNMENT. This Agreement and the rights and duties hereunder shall
not be assignable with respect to a Fund by either of the parties hereto except
by the specific written consent of the other party.
24. GOVERNING LAW. This Agreement shall be governed by and provisions shall
be construed in accordance with the laws of the State of Ohio.
25. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. The names
"The Parkstone Group of Funds" and "Trustees of The Parkstone Group of Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of March 25, 1987, to which reference is hereby made and a copy
of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Parkstone Group
of Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, Shareholders
-8-
<PAGE> 9
or representatives of the Trust personally, but bind only the assets of the
Trust, and all persons dealing with any series of shares of the Trust must look
solely to the assets of the Trust belonging to such series for the enforcement
of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
THE PARKSTONE GROUP OF FUNDS
By: /s/ G. Ronald Henderson
---------------------------
G. Ronald Henderson, President
THE WINSBURY SERVICE CORPORATION
By: /s/ Kenneth B. Quintenz
---------------------------
Kenneth B. Quintenz, Chairman
-9-
<PAGE> 10
Dated: February 1, 1993
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUND
AND THE WINSBURY SERVICE CORPORATION
Name of Fund Date
------------ ----
Parkstone U.S. Government Obligations, Prime Obligations, February 1, 1993
Tax-Free, Equity, Small Capitalization, High Income Equity,
Bond, Limited Maturity Bond, Intermediate Government
Obligations, Municipal Bond, Michigan Municipal Bond,
Balanced, U.S. Government Income and International
Discovery Funds
THE PARKSTONE GROUP OF FUNDS
By: /s/ Ronald Henderson
------------------------
Title: President
---------------------
THE WINSBURY SERVICE CORPORATION
By: /s/ Kenneth B. Quintenz
------------------------
Title: Chairman
---------------------
-10-
<PAGE> 11
Dated: February 1, 1993
SCHEDULE B
TO THE
FUND ACCOUNTING AGREEMENT
BETWEEN
THE PARKSTONE GROUP OF FUND
AND
THE WINSBURY SERVICE CORPORATION
FEBRUARY 1, 1993
FEES
The fee for each money market fund shall be 0.016% of the average daily net
assets of each portfolio and shall be paid monthly.
The fee for each variable net asset value fund, except for the Parkstone
International Discovery Fund, shall be 0.022% of the average daily net assets
of each portfolio and shall be paid monthly.
The fee for the Parkstone International Discovery Fund shall be 0.035% of the
average daily net assets of the Parkstone International Discovery Fund and
shall be paid monthly.
-11-
<PAGE> 1
Exhibit 9(c)(i)
DATED: November 8, 1995
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN THE PARKSTONE GROUP OF FUNDS
AND BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP)
DATED FEBRUARY 1, 1993
<TABLE>
<CAPTION>
NAME OF FUND DATE
------------ ----
<S> <C>
Parkstone Prime Obligations, U.S. Government Obligations, Tax- February 1, 1993
Free, Equity Small Capitalization, High Income Equity, Bond,
Limited Maturity Bond, Intermediate Government Obligations,
Michigan Municipal Bond, Balanced, Government Income, and
International Discovery Funds
Parkstone Municipal Investor and Treasury Funds August 26, 1993
Parkstone Large Capitalization Fund November 8, 1995
</TABLE>
THE PARKSTONE GROUP OF FUNDS
By: /s/ George R. Landreth
-------------------------
George R. Landreth
President
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
1
<PAGE> 1
Exhibit 9(c)(ii)
Dated: April 1, 1993
AMENDED
SCHEDULE B
TO THE
FUND ACCOUNTING AGREEMENT
BETWEEN
THE PARKSTONE GROUP OF FUNDS
AND
THE WINSBURY SERVICE CORPORATION
APRIL 1, 1993
FEES
The Fee for each money market fund shall be 0.016% of the average daily net
assets of each portfolio and shall be paid monthly.
The fee for each variable net asset value fund, except for the Parkstone
International Discovery Fund, shall be 0.022% of the average daily net assets
of each portfolio and shall be paid monthly.
The fee for the Parkstone International Discovery Fund shall be 0.035% of the
average daily net assets of the Parkstone International Discovery Fund and
shall be paid monthly.
The fee for each additional class is $10,000 per year for each portfolio and
shall be paid monthly.
<PAGE> 1
Exhibit 9(d)
SUB-ADMINISTRATION AGREEMENT
SUB-ADMINISTRATION AGREEMENT made as of the 1st day of January, 1995, by and
between The Winsbury Company Limited Partnership, d/b/a The Winsbury Company,
an Ohio limited partnership (the "Administrator") and First of America
Investment Corporation (the "Sub-Administrator"), a Michigan corporation.
WHEREAS, the The Parkstone Group of Funds, a Massachussetts business trust,
(the "Group") is an open-end management investment company which has filed a
registration statement (the "Registration Statement" ) under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of
1933.
WHEREAS, the Group is comprised of several separate investment portfolios;
and
WHEREAS, the Group has availed itself of the services, information, advice,
assistance and facilities of the Administrator in performing services for its
portfolios (the "Funds") indicated on Schedule A to an Administration Agreement
dated as of January 1, 1995 (the "Group/Administrator Agreement"); and
NOW, THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. Appointment of the Sub-Administrator. The Administrator hereby appoints
the Sub-Administrator to provide, as it may request from time to time, services
intended to assist the Administrator in supervising all aspects of the
operations of the Funds except those performed by the investment adviser for
the Group under its Investment Advisory Agreements, the custodians for the
Group under its custodian agreements, the transfer agent for the Group under
its Transfer Agency Agreement and the fund accountant for the Group under its
Fund Accounting Agreement, subject to the control and direction of the Group's
Board of Trustees, for the period and on the terms hereinafter set forth. The
Sub- Administrator hereby accepts such appointment and agrees during such
period to render the services and to assume the obligations herein set forth
for the compensation herein provided.
2. Services as Sub-Administrator. Sub-Administrator shall be available to
provide, as the Administrator may request from time to time, services intended
to assist the Administrator in carrying out its duties to furnish statistical
and research data, clerical and certain bookkeeping services and stationery and
office supplies; prepare the periodic reports to the Securities and Exchange
Commission (the "Commission") on Form N-SAR or any replacement forms therefor;
compile data for, prepare for execution by the funds and file all the Funds'
federal and state tax returns and required tax filings other than those
required to be made by the Funds' custodian and transfer agent; prepare
compliance filings pursuant to state securities laws with the advice of the
Group's counsel; assist to the extent requested by the Group with the Group's
preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statements (on Form N-1A or any replacement therefor); compile
data for, prepare and file timely Notices to the Commission required pursuant
to Rule 24f-2 under the 1940 Act; keep and maintain the financial accounts and
records of the Funds, including calculation of daily expense accruals; in the
case
<PAGE> 2
of the money market funds, determine the actual variance from $1.00 of the
Fund's net asset value per share; and generally assist in all aspects of the
operations of the Funds. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Sub-Administrator hereby agrees that any records which it
maintains for the Group are the property of the Group and further agrees to
surrender promptly to the Group any of such records upon the Group's request.
Sub-Administrator further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records requested by the Administrator and
required to be maintained by Rule 31a-1 under the 1940 Act.
3. Fees and Expenses. In consideration of services rendered pursuant to this
Agreement, each of the Funds will pay to the Administrator on the first
business day of each month, or at such time(s) as Sub-Administrator shall
request and the parties hereto shall agree, a fee computed daily calculated at
the applicable annual rate of the value of each Fund's average daily net assets
set forth in Schedule A hereto or such other fee as may from time to time be
agreed upon in writing by the Administrator and the Sub-Administrator. If the
Sub-Administrator shall serve for less than the whole of any month, the
foregoing compensation shall be prorated. For the purpose of determining fees
payable to the Sub-Administrator, the value of each Fund's net assets shall be
computed at the times and in the manner specified in the Group's Registration
Statement.
Expenses to be incurred in the operation of the Funds including taxes,
interest, brokerage fees and commissions, if any, fees of Trustees who are not
partners, officers, directors, shareholders or employees of Sub-Administrator
or investment adviser or distributor of the Funds, Commission fees and state
Blue Sky qualification and renewal fees and expenses, investment advisory fees,
custodian fees, transfer and dividend disbursing agents' fees, fund accounting
fees including pricing of portfolio securities, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of corporate
existence, typesetting and printing prospectuses for regulatory purposes and
for distribution to current Shareholders of the Funds, costs of Shareholders'
and Trustees' reports and meetings and any extraordinary expenses will be borne
by the Funds.
4. Proprietary and Confidential Information. Sub-Administrator agrees on
behalf of itself and its partners and employees to treat confidentially and as
proprietary information of the Group all records and other information relative
to the Group and prior, present, or potential Shareholders, and not to use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Group or the Administrator, which approval shall not
be unreasonably withheld and may not be withheld where Sub-Administrator may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Group or the Administrator.
5. Liability. Sub-Administrator, in rendering its services hereunder,
agrees to use its best judgment and efforts, and the Administrator agrees that
Sub-Administrator shall not be liable hereunder for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
matters to which this Agreement relates, except for a loss resulting
2
<PAGE> 3
from willful misfeasance, bad faith or gross negligence on the part of
Sub-Administrator in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. Any person, even
though also a partner, employee, or agent of Sub- Administrator, who may be or
become an officer, Trustee, employee, or agent of the Group or the Funds shall
be deemed, when rendering services to the Group or the Funds, or acting on any
business of that party, to be rendering such services to or acting solely for
that party and not as a partner, employee, or agent or one under the control or
direction of Sub-Administrator even though paid by it.
6. Limitation of Group's Liability. The Sub-Administrator acknowledges that
it has received notice of and accepts the limitations upon the Group's
liability set forth in its Declaration of Trust. The Sub-Administrator agrees
that any of the Group's obligations shall be limited to the assets of the Funds
and that the Sub-Administrator shall not seek satisfaction of any such
obligation from the shareholders of the Group nor from any Trustee, Group
employee or agent of the Group.
7. Duration, Renewal and Termination. This Agreement shall become effective
as of the date first written above and, unless sooner terminated as provided
herein, shall continue until December 31, 1999 and thereafter shall be renewed
for successive five-year terms, unless written notice not to renew is given by
the non-renewing party to the other party at least 60 days prior to the
expiration of the then-current term. This Agreement is terminable with respect
to a particular Fund only upon mutual agreement of the parties hereto or for
"cause" (as defined below) by the party alleging "cause," in either case on not
less than 60 days' notice by the Group's Board of Trustees or by Administrator
or by Sub-Administrator.
For purposes of this Agreement, "cause" shall mean (a) willful misfeasance,
bad faith, gross negligence, or reckless disregard on the part of either party
with respect to its obligations and duties set forth herein; (b) a final,
unappealable judicial, regulatory or administrative ruling or order in which
either party has been found guilty of criminal or unethical behavior in the
conduct of its business; (c) the dissolution or liquidation of either party or
other cessation of business other than a reorganization or recapitalization of
such party as an ongoing business; financial difficulties on the part of either
party which is evidenced by the authorization or commencement of, or
involvement by way of pleading, aswer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors; or (e) any circumstance
which substantially impairs the performance of either party's obligations and
duties as contemplated herein.
8. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent applicable law of the State of Ohio, or any of the
provisions herein, conflict with applicable provisions of the 1940 Act, the
latter shall control.
3
<PAGE> 4
9. Names. The names "The Parkstone Group of Funds" and "Trustees of the
Parkstone Group of Funds" refer respectively to the Trust created and the
Trustees, as trustees but no individually or personally, acting from time to
time under an Agreement and Declaration of Trust dated March 25, 1987 which is
hereby referred to and a copy of which is on file at the office of the State
Secretary of the Commonwealth of Massachusetts and the principal office of the
Trust. The obligations of "The Parkstone Group of Funds" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities, and are not binding upon any of
the Trustees, shareholders, or representatives of the Trust personally, but
bind only the property of the Trust, and all persons dealing with any class of
shares of the Trust must look solely to the property of the Trust belonging to
such class for the enforcement of any claims against the Trust.
10. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on all parties.
IN WITNESS HEREOF, the parties have duly executed this Agreement as of the
date first written above.
FIRST OF AMERICA INVESTMENT CORPORATION
By: /s/ Richard A. Wolf
---------------------------
Richard A. Wolf
President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
Executive Vice President
4
<PAGE> 5
Dated: January 1, 1995
SCHEDULE A
To the Sub-Administration Agreement
between The Winsbury Company Limited Partnership
and First of America Investment Corporation
<TABLE>
<CAPTION>
NAME OF FUND DATE COMPENSATION
- ------------ ---- ------------
<S> <C> <C>
Parkstone Prime Obligations, January 1, 1995 Annual Rate of up to five one-
U.S. Government Obligations, hundredths of one percent
Tax-Free, Treasury, Municipal (0.05%) of each such Fund's
Investor, Equity, Small average daily net assets
Capitalization, High Income
Equity, Emerging Markets,
International Discovery, Bond,
Limited Maturity Bond,
Intermediate Government
Obligations, Municipal Bond,
U.S. Government Income,
Michigan Municipal Bond and
Balanced Funds
</TABLE>
FIRST OF AMERICA INVESTMENT CORPORATION
By: /s/ Richard A. Wolf
-------------------------
Richard A. Wolf
President
THE WINSBURY COMPANY LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
<PAGE> 1
Exhibit 9(d)(i)
DATED: November 8, 1995
SCHEDULE A
TO THE
SUB-ADMINISTRATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA INVESTMENT CORPORATION
DATED JANUARY 1, 1995
<TABLE>
<CAPTION>
NAME OF FUND DATE COMPENSATION
------------ ---- ------------
<S> <C> <C>
Parkstone Prime Obligations, U.S. Government January 1, 1995 Annual Rate of up to five
Obligations, Tax-Free, Treasury, Municipal one-hundredths of one percent (0.05%)
Investor, Equity, Small Capitalization, High of each such Fund's average daily net
Income Equity, Emerging Markets, International assets
Discovery, Bond, Limited Maturity Bond,
Intermediate Government Obligations, Municipal
Bond, U.S. Government Income, Michigan
Municipal Bond and Balanced Funds
Large Capitalization Fund November 8, 1995 Annual Rate of up to five
one-hundredths of one percent (0.05%)
of the Fund's average daily net assets
</TABLE>
FIRST OF AMERICA INVESTMENT
CORPORATION
By: /s/ Richard A. Wolf
-------------------------
Richard A. Wolf
President
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
<PAGE> 1
Exhibit 9(e)
SECURITIES LENDING RECORD ADMINISTRATION AGREEMENT
This SECURITIES LENDING RECORD ADMINISTRATION AGREEMENT made as of the 1st
day of June, 1995, by and between The Bank of California, N.A. (the "Bank")
and The Winsbury Company Limited Partnership, d/b/a The Winsbury Company, an
Ohio limited partnership (the "Record Administrator").
WHEREAS, The Parkstone Group of Funds, a Massachussetts business trust, (the
"Group") is an open-end management investment company which has filed a
registration statement (the "Registration Statement" ) under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of
1933.
WHEREAS, the Bank has been engaged by the Group to provide a program for the
lending of its portfolio securities (the "Program") pursuant to the Securities
Lending and Reverse Repurchase Agreement Addendum dated June 1, 1995 to the
Custody Agreement dated October 18, 1991 between the Group and the Bank (the
"Addendum"); and
WHEREAS, the Bank wishes to avail itself of the services, information,
advice, assistance and facilities of the Record Administrator to provide
assistance to the Bank in its operation and administration of the Program; and
NOW, THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. Appointment of the Record Administrator. The Bank hereby appoints the
Record Administrator to provide, as it may request from time to time, services
intended to assist the Administrator in supervising the aspects of the Program
as set forth below in Paragraph 2. The Record Administrator hereby accepts
such appointment and agrees during such period to render the services and to
assume the obligations herein set forth for the compensation herein provided.
2. Services as Record Administrator. Record Administrator shall be available
to provide, as the Administrator may request from time to time, services in
connection with the Program, including, but not limited to, reviewing the
Bank's monitoring of the market price of securities; reviewing the Bank's
recordkeeping of dividends, splits, exchanges and similar transactions
affecting the loaned securities; reviewing on a daily basis daily reports of
outstanding loan activity and reinvestments of cash collateral for compliance
with the Group's securities lending and collateral reinvestment parameters; and
reviewing the Bank's preparation of month-end security position reports for the
Program. Bank shall send all such reports to Record Administrator by facsimile
transmission. Based on its reviews as required hereunder. Record Administrator
shall notify Bank of any recommended adjustments, such notice to be provided to
Bank by facsimile transmission on or before the Business Day immediately
following the date such report was sent to Record Administrator.
3. Fees and Expenses. In consideration of services rendered pursuant to this
Agreement, Bank will pay to the Administrator on the first business day of each
month, or at such time(s) as Record Administrator shall request and the parties
hereto shall agree, a fee computed daily and equal to twenty-five percent of
the fees received by the Bank from the Group for services performed pursuant to
the Addendum. Such fees shall be calculated on net basis with respect to any
expenses which are required to be paid by the Bank pursuant to the Addendum.
Record
<PAGE> 2
Administrator shall make any required disclosures to the Group of the fee
arrangements hereunder.
4. Liability. Record Administrator, in rendering its services hereunder,
agrees to use its best judgment and efforts, and the Bank agrees that Record
Administrator shall not be liable hereunder for any loss suffered by the Bank
in connection with the matters to which this Agreement relates, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Record Administrator in the performance of or failure to perform its
obligations and duties under this Agreement. Any person, even though also a
partner, employee, or agent of Record Administrator, who may be or become an
officer, Trustee, employee, or agent of the Group or the Funds shall be deemed,
when rendering services to the Group or the Funds, or acting on any business of
that party, to be rendering such services to or acting solely for that party
and not as a partner, employee, or agent or one under the control or direction
of Record Administrator even though paid by it.
5. Duration, Renewal and Termination. This Agreement shall become effective
as of the date first written above and, unless sooner terminated as provided
herein, shall continue until the Addendum is terminated. Written notice of
termination must be given by the terminating party to the other party at least
60 days prior to termination. This Agreement is terminable for "cause" (as
defined below) by the party alleging "cause," in either case on not less than
30 days' notice by the Bank or by Record Administrator.
For purposes of this Agreement, "cause" shall mean (a) willful misfeasance,
bad faith, gross negligence, or reckless disregard on the part of either party
with respect to its obligations and duties set forth herein; (b) a final,
unappealable judicial, regulatory or administrative ruling or order in which
either party has been found guilty of criminal or unethical behavior in the
conduct of its business; (c) the dissolution or liquidation of either party or
other cessation of business other than a reorganization or recapitalization of
such party as an ongoing business; financial difficulties on the part of either
party which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a
voluntary or involuntary case under Title 11 of the United States code, as from
time to time is in effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization of debtors or to
the modification or alteration of the rights of creditors; or (e) any
circumstance which substantially impairs the performance of either party's
obligations and duties as contemplated herein.
8. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent applicable law of the State of Ohio, or any of the
provisions herein, conflict with applicable provisions of the 1940 Act, the
latter shall control.
9. Names. The names "The Parkstone Group of Funds" and "Trustees of the
Parkstone Group of Funds" refer respectively to the Trust created and the
Trustees, as trustees but no individually or personally, acting from time to
time under an Agreement and Declaration of Trust dated March 25, 1987 which is
hereby referred to and a copy of which is on file at the office of the State
Secretary of the Commonwealth of Massachusetts and the principal office of the
Trust. The obligations of "The Parkstone Group of Funds" entered into in the
name or on behalf thereof
2
<PAGE> 3
by any of the Trustees, representatives or agents are made not individually,
but in such capacities, and are not binding upon any of the Trustees,
shareholders, or representatives of the Trust personally, but bind only the
property of the Trust, and all persons dealing with any class of shares of the
Trust must look solely to the property of the Trust belonging to such class for
the enforcement of any claims against the Trust.
10. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on all parties.
IN WITNESS HEREOF, the parties have duly executed this Agreement as of the
date first written above.
THE BANK OF CALIFORNIA, N.A.
/s/ Ellen R. Koerner
-------------------------------
By: Ellen R. Koerner
---------------------------
Its: Vice President & Manager
--------------------------
THE WINSBURY COMPANY LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Stephen G. Mintos
--------------------------
Stephen G. Mintos
Its: Executive Vice President
3
<PAGE> 1
Exhibit 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 31 to the Registration Statement on Form N-1A (File No. 33- 13283) of The
Parkstone Group of Funds of our report dated August 23, 1996 on our audits of
the financial statements of the Prime Obligations Fund, the U.S. Government
Obligations Fund, the Treasury Fund, the Tax-Free Fund, the High Income Equity
Fund, the Equity Fund, the Small Capitalization Fund, the Large Capitalization
Fund, the International Discovery Fund, the Balanced Fund, the Limited Maturity
Bond Fund, the Intermediate Government Obligations Fund, the U.S. Government
Income Fund, the Bond Fund, the Municipal Bond Fund, and the Michigan Municipal
Bond Fund constituting the Parkstone Group of Funds as of June 30, 1996 and for
the periods then ended referred to in our report incorporated by reference in
the Statement of Additional Information. We also consent to the references to
our firm under the caption "Financial Highlights" in the Prospectuses for
Institutional Shares and Investor A Shares relating to the Prime Obligations
Fund, the U.S. Government Obligations Fund, the Treasury Fund, the Tax-Free
Fund, the High Income Equity Fund, the Equity Fund, the Small Capitalization
Fund, the Large Capitalization Fund, the International Discovery Fund, the
Balanced Fund, the Limited Maturity Bond Fund, the Intermediate Government
Obligations Fund, the U.S. Government Income Fund, the Bond Fund, the Municipal
Bond Fund, and the Michigan Municipal Bond Fund; the Prospectus for Investor B
Shares relating to the High Income Equity Fund, the Equity Fund, the Small
Capitalization Fund, the Large Capitalization Fund, the International Discovery
Fund, the Balanced Fund, the Limited Maturity Bond Fund, the Intermediate
Government Obligations Fund, the U.S. Government Income Fund, the Bond Fund,
the Municipal Bond Fund, and the Michigan Municipal Bond Fund; the Prospectus
for Investor C Shares relating to High Income Equity Fund, the Equity Fund, the
Small Capitalization Fund, the Large Capitalization Fund, the International
Discovery Fund, the Balanced Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the U.S. Government Income Fund, and
the Bond Fund and under the caption "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information of The Parkstone Group
of Funds in Post-Effective Amendment No. 31 to the Registration Statement on
Form N-1A (File No. 33-13283).
/s/ Coopers & Lybrand L.L.P.
----------------------------------
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
October 8, 1996
<PAGE> 1
Exhibit 11(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our firm
under the caption "Legal Counsel" included in or made a part of the
post-effective Amendment No. 31 to the Registration Statement on Form N-1A,
File No. 33-13283, filed under the Securities Act of 1933, as amended, and
Amendment No. 33 to the Registration Statement on Form N-1A, File No. 811-5105,
filed under the Investment Company Act of 1940, as amended, of the Parkstone
Group of Funds.
Bloomfield Hills, Michigan HOWARD & HOWARD ATTORNEYS, P.C.
October 8, 1996
By: /s/ Melanie Mayo West
---------------------------
Melanie Mayo West
<PAGE> 1
Exhibit 13
PURCHASE AGREEMENT
The Parkstone Group of Funds (the "Group"), a Massachusetts business trust,
and The Winsbury Corporation, an Ohio corporation, hereby agree with each other
as follows:
1. The Group hereby offers The Winsbury Corporation and The Winsbury
Corporation hereby purchases 65,000 Series A units of beneficial interest
(representing interests in the Prime Obligations Fund), 20,000 Series B units
of beneficial interest (representing interests in the U.S. Government
Obligations Fund), and 15,000 Series C units of beneficial interest
(representing interests in the Tax-Free Fund) in the Group (such 100,000 units
of beneficial interest being hereinafter collectively known as "Shares") at the
price of $1.00 per Share. The Winsbury Corporation hereby acknowledges
purchase of the Shares and the Group hereby acknowledges receipt from The
Winsbury Corporation of funds in the amount of $100,000 in full payment for the
Shares.
2. The Winsbury Corporation agrees that if it redeems any of the Shares prior
to the second anniversary of the date the Group begins its investment
activities, The Winsbury Corporation will pay to the Group an amount equal to
the number resulting from multiplying the Group's total unamortized
organizational expenses by a fraction, the numerator of which is equal to the
number of Shares redeemed by The Winsbury Corporation and the denominator of
which is equal to the number of Shares outstanding as of the date of such
redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement. The Winsbury
Corporation further agrees that in the event of any transfer of the Shares
prior to the expiration of the second anniversary of the date the Group begins
its investment activities, it will impose a written condition to such transfer
requiring the transferee as well as such transferee's direct or indirect
transferee to agree that upon redemption of any of the Shares prior to the
second anniversary of the date the Group begins its investment activities, such
transferee will pay to the Group an amount equal to the number resulting from
multiplying the Group's total unamortized organizational expenses by a
fraction, the numerator of which is equal to the number of Shares redeemed by
such transferee and the denominator of which is equal to the number of Shares
outstanding as of the date of such redemption, as long as the administrative
position of the staff of the Securities and Exchange Commissions requires such
reimbursement. The Winsbury Corporation agrees to give the Group's legal
counsel prior notice of any transfer of the Group's Shares.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the
2nd day of July, 1987.
Attest: THE PARKSTONE GROUP OF FUNDS
By /s/ Ronald Henderson
- --------------------------------- ------------------------
President
(SEAL)
Attest: THE WINSBURY CORPORATION
By /s/ Kenneth B. Quintenz
- --------------------------------- ------------------------
Authorized Officer
1
<PAGE> 1
Exhibit 14(a)
CUSTODIAL ACCOUNT AGREEMENT
(Under Section 408(a) of the Internal Revenue Code - Form 5305-A (Revised
October 1992))
The Depositor (Contributor), whose name appears in the accompanying
Application, is establishing a Parkstone Individual Retirement Account (IRA)
(under section 408(a) of the Internal Revenue Code of 1986, as amended October
1992 (the "Code")) to provide for his or her retirement and for the support of
his or her beneficiaries after death. The Custodian, The Union Bank of
California, has given the Depositor the disclosure statement required under
section 1.408-6 of the Income Tax Regulations.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in sections 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in sections 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the Custodial Account shall be
made in accordance with the following requirements and shall otherwise
comply with section 408(a)(6) and Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
<PAGE> 2
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 4.3, or to the surviving spouse under
paragraph 4.4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Depositor and the surviving spouse and shall apply to all subsequent
years. The life expectancy of a nonspouse beneficiary may not be
recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year in which the Depositor reaches age 70 1/2). By
that date, the Depositor may elect, in a manner acceptable to the Custodian,
to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire investment is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 4.3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the
Depositor's death. If,
<PAGE> 3
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in
which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial Account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case
of distributions under paragraph 4.3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance
with paragraph 4.4.(b)(ii) determine life expectancy using the attained age
of the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
7. Withholding (Purpose of Form W-4P). The IRA Owner must elect whether or not
to have money withheld for federal income tax purposes and on what basis.
You can make this election on this substitute Form W-4P or you could attach
an actual Form W-4P. Unless elected otherwise, IRA distributions will have
federal income tax withheld at a flat rate of 10%. You may use this form to
elect to have no income tax withheld (except for payments to U.S. citizens
delivered outside the U.S. or its possessions), to have 10% withheld, or to
have 10% plus an additional dollar or percentage amount withheld. Check the
box reflecting your choice. Generally, your election will apply to any
later distributions from the same IRA. You may, however, revoke your
previous exemption from withholding. Simply complete a new W-4P with your
Custodian/Trustee. Copies of Form W-4P will not be sent to the IRS by the
payer.
-3-
<PAGE> 4
Statement of Income Tax Withheld from Your IRA. By January 31 of next year,
you will receive a statement from your payer showing the total amount of your
IRA payments and the total income tax withheld during the year.
Exemption from Income Tax Withholding. The election to be exempt from income
tax withholding does not apply to any periodic payment or nonperiodic
distribution that is delivered outside the U.S. or its possessions to a U.S.
citizen or resident alien. Other recipients who have these payments
delivered outside the U.S. or its possessions can elect exemption only if an
individual certifies to the payer that the individual is not: (1) a U.S.
citizen or resident alien, or (2) an individual to whom Section 877 of the
Internal Revenue Code applies (concerning expatriation to avoid tax). The
certification can be made in a statement to the payer under penalties of
perjury.
For more information, please see Publication 505, Tax Withholding and
Estimated Tax, available from most IRS offices.
CAUTION: REMEMBER THAT THERE ARE PENALTIES FOR NOT PAYING ENOUGH TAX DURING
THE YEAR, EITHER THROUGH WITHHOLDING OR ESTIMATED TAX PAYMENTS. NEW
RETIREES, ESPECIALLY, SHOULD SEE IRS PUBLICATION 505. IT EXPLAINS THE
ESTIMATED TAX REQUIREMENTS AND PENALTIES IN DETAIL. YOU MAY BE ABLE TO AVOID
QUARTERLY ESTIMATED TAX PAYMENTS BY HAVING ENOUGH TAX WITHHELD FROM YOUR IRA
USING FORM W-4P.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and Custodian.
-4-
<PAGE> 5
ARTICLE VIII
The provisions of this Article shall apply to any and all Custodial Accounts
established pursuant to this Agreement.
1. Investment Powers of Custodian
The Custodian shall invest and reinvest all contributions to the Custodial
Account, plus any earnings in any or all of the following:
(a) Investment shares of the Mutual Funds (regulated investment companies
for which BISYS Fund Services is ("Distributor").
(b) Any other investments approved by the Custodian for investment in the
Custodial Account.
All dividends and capital gains distributions received on the shares of any
Mutual Fund held in the Depositor's account shall (unless received in
additional shares of the fund) be reinvested in shares of the same Mutual
Fund which paid the distribution, and credited to the Custodial Account.
2. Fees, Expenses, Taxes and Penalties
(a) Depositor agrees to pay to the Custodian fees for services performed
under this Agreement in any amount specified from time to time by the
Custodian. Such fees may include, but are not limited to, a fee to
establish the Custodial Account and the annual maintenance fee. The
Custodian shall have the right to change such fees at any time without
prior written notice to Depositor. As soon as practicable after any
change in fees, Custodian shall make available to Depositor a new fee
schedule. All fees may be billed to Depositor or deducted from the
Custodial Account, at the discretion of the Custodian. The Custodian
shall also be entitled to reimbursement for all reasonable and necessary
costs, expenses, and disbursement incurred by it in the performance of
services. Such fees and reimbursement shall be paid from the Account if
not paid directly by the Depositor and shall constitute a lien upon the
Account until paid, and shall be paid from the Account unless paid by
the Depositor.
(b) Depositor shall be responsible for the payment of any income, transfer
and other taxes of any kind that may be levied or assessed upon the
Custodial Account, and all other administrative expenses reasonably
incurred by Custodian in the performance of its duties, including any
fees for legal services provided to the Custodian. To the extent
Depositor fails to pay such taxes and expenses directly, Custodian may,
in its discretion, deduct them from the Custodial Account.
-5-
<PAGE> 6
(c) The Custodian and Distributor shall not be responsible for excise or
penalty taxes or interest imposed by the IRS by virtue of any premature
distributions, over-contributions or excess accumulations with respect
to the Depositor's account, or for the Depositor's failure to commence
distributions at age 70 1/2, nor shall the Custodian and Distributor be
responsible for providing any tax or legal advice with respect to the
account. The Custodian shall have no obligations to return any amounts
withheld for federal income tax purposes from any distribution as to
which the Depositor (or beneficiary, as applicable) has failed to
provide a withholding election notice prior thereto.
(d) Sales charges, if any, attributable to the acquisition of shares of a
Mutual Fund as stated in its then current prospectus may be charged to
the Depositor's account.
3. Responsibilities of Custodian
(a) The Custodian shall maintain the Custodial Account, distinct from all
other Custodial Accounts, for the exclusive benefit of Depositor and
Depositor's beneficiaries and shall be responsible for performing only
such services as are described in the Agreement.
(b) All contributions by Depositor to the Custodial Account shall be
invested according to Article 8.1 hereof at the sole direction of
Depositor, and Custodian shall not be responsible or liable for any
investment decisions or recommendations with respect to the investment,
reinvestment, or sale of assets in the Custodial Account. With regard
to the Mutual Funds listed on the Application and any other Mutual Fund,
the Depositor understands that neither the Custodian nor the Distributor
endorses the Mutual Funds as suitable investments for the Depositor. In
addition, neither the Custodian nor the Distributor will provide
investment advice to the Depositor. The Depositor assumes all
responsibility for the choice of his/her investments in the Custodial
Account. Custodian shall not be responsible for reviewing any assets
held in the Custodial Account and shall not be responsible for
questioning any investment decision of the Depositor. Custodian shall
not be liable for any loss resulting from any action taken by Custodian
at the direction of Depositor or any loss resulting from any failure to
act because of the absence of directions from Depositor.
(c) The Custodian shall not be responsible for inquiring into the nature or
amount of any contribution made by Depositor, nor into the amount or
timing of any distribution requested by Depositor, or whether such
contributions or distributions comply with the Code. Depositor shall
have full responsibility for any tax or investment consequences of all
contributions to and distribution from the Custodial Account.
-6-
<PAGE> 7
(d) If the Custodian receives any investment instructions from the Depositor
which in the opinion of the Custodian, are not in good order or are
unclear, or if the Custodian receives monies from the Depositor which
would exceed the amount that the Depositor may contribute to the
Custodial Account, the Custodian may hold all or a portion of the monies
uninvested pending receipt of written (or in any other manner permitted
by the Distributor) instructions or clarification. During any such
delay the Custodian will not be liable for any loss of income or
appreciation, loss of interest, or for any other loss. The Custodian
may also return all or a portion of the monies to the Depositor. Again,
in such situations, the Custodian will not be liable for any loss.
(e) The Custodian will designate contributions (other than rollover
contributions) as being made for any particular year as requested by the
Depositor. If the Depositor does not designate a year for any
contribution, the Custodian will designate the year the contribution was
actually made.
(f) The Custodian will accept transfers of a cash amount to the Custodial
Account from another custodian or trustee of an individual retirement
account, qualified retirement plan or individual retirement annuity upon
the Depositor's written direction. The Custodian will also transfer a
cash amount in the Custodial Account upon the written request of the
Depositor to another custodian or trustee of an individual retirement
account, qualified retirement plan or individual retirement annuity.
For such transfer, the Custodian may require a written acceptance of the
successor custodian. The Depositor warrants that all transfers to and
from the Custodial Account will be made in accordance with the rules and
regulations of the Internal Revenue Service.
(g) The Custodian is authorized to hire an agent to perform certain of its
duties hereunder, which agent may be the transfer agent for the Mutual
Fund shares authorized to be held hereunder.
(h) Depositor agrees to indemnify and hold harmless, and to defend Custodian
against any and all claims arising from and liabilities incurred by
reason of any action taken by Custodian in good faith pursuant to this
Agreement.
4. Judicial Settlement of Accounts
The Custodian may bring an action before a court of appropriate jurisdiction
at any time to resolve any dispute or ambiguity in its accounts. If a
dispute or ambiguity exists regarding who is entitled to receive funds from
the Custodial Accounts, the Custodian may withhold such funds until the
dispute or ambiguity is resolved through settlement by the parties or
determination by a court of appropriate jurisdiction. The court's resolution
shall be final and binding on all parties involved. All expenses incurred by
the Custodian, including, without limitation, all legal and accounting fees,
shall be paid for
-7-
<PAGE> 8
from the Custodial Account and the Custodian shall have a lien on the
Custodial Account until the expenses are paid.
5. Notice
(a) All notices or requests to the Custodian to make distributions from the
Custodial Account must conform to the requirements of the Internal
Revenue Code, the redemption requirements of the applicable fund
prospectus and the requirements of the Custodian and its duly appointed
agent, if any. The Custodian will make distributions from the Custodial
Account only after receiving a written request from the Depositor (or
any other party entitled to receive the assets of the Custodial Account)
in the form required by the Custodian. The Depositor (or any other
party entitled to receive the assets of the Custodial Account) must
provide to the Custodian any applications, certificates, tax waivers,
signature guarantees and any other documents (including proof of any
legal representatives' authority) that the Custodian requires. The
Custodian will not be liable for complying with a distribution request
that appears to be genuine, nor will the Custodian be liable for
refusing to comply with a distribution request which the Custodian is
not satisfied is genuine or in proper form. This includes any losses
which may occur while the Custodian waits for the distribution request
to be in the proper form. The Depositor (or any other party entitled to
receive the assets of the Custodial Account) also agrees to fully
indemnify the Custodian for any losses which may result from the
Custodian's failure to act upon an improperly made distribution request.
(b) Except as otherwise permitted by the Custodian, all instructions to the
Custodian under this Agreement must be in writing. The Depositor may
authorize an agent to act on behalf of the Custodian, provided that such
appointment and authorization is provided in writing to the Custodian in
the form required by the Custodian. Any instructions by an authorized
agent of Depositor will be binding upon the Depositor. Any
authorization given by the Depositor will remain in effect until the
Custodian receives written notice of the Depositor's revocation of the
authorization, or the death of the Depositor, whichever occurs first.
(c) Any notice, report, payment, distribution or other material required to
be delivered by the Custodian or the Depositor under this Agreement,
shall be deemed delivered and effective three days after the date mailed
by the Custodian to the Depositor at the Depositor's last address of
record as provided by the Depositor to the Custodian, and the Custodian
shall not be obligated to ascertain the actual address or whereabouts of
Depositor.
(d) Any notice or instructions required to be delivered by the Depositor to
the Custodian under this Agreement shall be deemed delivered when
actually received by the Custodian.
-8-
<PAGE> 9
(e) Any notice required to be given to Custodian under this Agreement shall
be given to the Mutual Fund Group, the name of which appears on the
front of the Agreement, and any notice required or permitted to be given
to Depositor under this Agreement shall be given to the Depositor at the
address filed with the Custodian from time to time. Notices may be
delivered in person or may be sent by United States mail, first class
with postage prepaid and properly addressed.
6. Reports, Records and Accounting
The Custodian shall maintain such records as may be reasonably necessary for
the proper administration of the Account. The Custodian shall render a
report to each Depositor (or his/her Beneficiaries), on the status of his/
her Account or Accounts at least annually. The report shall show
contributions (deposits) received, withdrawals made, dividend credits, other
credits and/or charges, and the balance at the end of the report period. The
report shall also furnish the Depositor such other information as the
Custodian may possess and as may be necessary for the Depositor to comply
with the reporting requirements for the Internal Revenue Code and any
applicable regulations. The Custodian shall have no duty to furnish
information about the Account to any person except as expressly provided
herein or as required by law. Any accounting when approved by the Depositor
will be binding and conclusive as to the Depositor, and the Custodian will
thereby be released and discharged from any liability or accountability to
the Depositor with respect to matters set forth therein. The Depositor or
Beneficiary shall advise the Custodian within 60 days following receipt of
the Custodian's report of any corrections to his/her Account. If the
Depositor or Beneficiary fails to advise the Custodian of any corrections
within the 60-day period, the Depositor or Beneficiary shall be deemed to
have approved the Custodian's report. The Custodian shall have the right to
have its account settled by a court of competent jurisdiction.
7. Records Retention
The Custodian shall retain its records relating to the Account as long as
necessary for the proper administration thereof and at least for any period
required by the Employee Retirement Income Security Act of 1974 or other
applicable law.
8. Resignation or Removal of Custodian
(a) Custodian may resign as Custodian hereunder without the consent of
Depositor, by providing notice of such resignation 30 days prior to the
effective date of the resignation. In the event of a resignation by
Custodian the Distributor must either appoint a successor custodian to
serve under this agreement or notify the Depositor that he/she must
appoint a successor custodian. Upon receipt by Custodian of a written
acceptance of such appointment by the successor custodian, Custodian
shall transfer and pay over to such successor the assets for the
Custodial Account. If after 30 days from notice of resignation,
Custodian has not received written acceptance of such appointment by
successor custodian,
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<PAGE> 10
Custodian shall pay or otherwise transfer to the Depositor the assets
remaining in the Custodial Account. Custodian is authorized, however, to
reserve such funds as it deems advisable for payment of any liabilities
constituting a charge against the assets of the Custodial Account or
against the Custodian, with any balance of such reserve remaining after
payment of all such items to be paid over the successor custodian.
(b) Upon the appointment and qualification of a successor custodian or
trustee, the successor custodian or trustee shall assume all rights,
powers, and privileges, liabilities and duties of the Custodian. Upon
acceptance of appointment by the successor custodian or trustee, the
Custodian shall assign, transfer, and deliver to the successor all funds
held in the Custodial Account in which such removal relates. The
Custodian is authorized, however, to reserve such funds as it deems
advisable for payment of any liabilities constituting a charge against
the assets of the Custodial Account or against the Custodian, with any
balance of such reserve remaining after the payment of all such items to
be paid over the successor custodian or trustee.
9. Designation of Beneficiary
(a) The Depositor has the right to designate a beneficiary(ies) of his/her
Account in writing on a form provided by the Custodian or in a format
approved by the Custodian. The purpose of this designation is to
identify the recipient(s) of the Custodial Account upon the Depositor's
death.
(b) The Depositor has the right to change this designation of beneficiary at
any time by writing to the Custodian. A beneficiary designation when
received by the Custodian shall relate back and be effective as of the
date it was signed by the Depositor, but without prejudice to or
liability of the Custodian, Mutual Fund or its agents, for any payout
made prior to receipt by them. If your beneficiary does not survive you
or if the Custodian can not locate your beneficiary after reasonable
search, any balance in the account will be paid to your estate.
10. Payment in the Event of Disability
A Depositor who becomes disabled under IRC Section 72(m) shall be entitled to
a distribution of his/her Custodial Account. The Custodian may require what
evidence it deems appropriate before distributing on account of such
disability. This determination by the Custodian shall not constitute any
warranty or assurance by the Custodian that the distribution to the Depositor
is free from the penalty on premature distribution described in IRC Section
72(t).
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<PAGE> 11
11. Exclusive Benefit
The Custodial Account is established for the exclusive benefit of the
Depositor and his or her Beneficiary(ies).
12. Amendment
(a) Custodian is authorized from time to time to amend this Agreement, in
whole or in part. The Custodian shall furnish copies of any such
amendments to the Depositor within 30 days of the date the amendments
are effective.
(b) This Agreement may not be amended in any manner that will cause or
permit any part of the assets of the Custodial Account to be divested
from any person having any interest in the Custodial Account unless such
amendment is necessary to satisfy the conditions of any law,
governmental regulation or ruling or to meet the requirement so the
Internal Revenue Code or any amendment thereof, in which case Custodian
is expressly authorized to make amendments that are necessary for such
purposes. Such amendments may be made retroactively to the later of the
effective date of this Agreement or the effective date of any future
legal requirements.
13. Continuance of the Custodial Relationship
The relationship created by this Agreement shall continue in effect until a
full distribution of the Custodial Account has been made and all accounts of
the Custodian have been settled.
14. Special Minimum Distribution Provisions
(a) Article IV permits the Depositor and/or spouse beneficiary to
irrevocably elect whether or not life expectancy(ies) will be
recalculated. Notwithstanding paragraph 4.2, if a timely election is
not made, distribution shall be made with life expectancy(ies) not being
recalculated.
(b) Failure by the Depositor to choose any methods of distribution described
in paragraph 4.3.(a) through 4.3.(e) by April 1 following the calendar
year in which he/she reaches age 70 1/2, will cause a total distribution
to be made to the Depositor by check or to non-IRA Mutual Fund accounts
established on behalf of the Depositor, at the discretion of the
Custodian.
(c) If any beneficiary fails to elect a distribution option on a timely
basis, distributions shall commence pursuant to paragraph 4.4.(b)(ii).
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<PAGE> 12
(d) A surviving spouse beneficiary who fails to timely elect recalculation
or no recalculation of life expectancies shall not have his/her life
expectancy recalculated.
(e) The provisions of paragraph 4.4.(d) above shall not apply if the
Depositor's death occurred prior to 1984.
(f) A surviving spouse beneficiary shall be permitted to make the election
specified under paragraph 4.4.(b)(i) or 4.4.(b)(ii) no later than the
earlier of December 31 or the fifth year after the year of death or the
year in which the Depositor would have attained age 70 1/2.
(g) A nonspouse beneficiary shall be permitted to make the election
specified under paragraph 4.4.(b)(i) or 4.4.(b)(ii) no later than
December 31 of the year following the year of death.
15. Simplified Employee Pension Plan
(a) The Custodial Account may accept contribution made through a Simplified
Employee Pension Plan (SEP) under Section 408(k).
(b) The provisions of Section 408(k) and the surrounding regulations for
proper maintenance of a SEP are the responsibility of the Depositor's
employer. The Custodian shall have no liability with respect to the
operation of the SEP.
(c) The Depositor's employer must retain on file an IRS Form 5305-SEP, IRS
Form 5305A-SEP, or another IRS approved SEP document, and must provide a
copy of the SEP document to each employer. The Custodian shall have no
responsibility to provide or to maintain the SEP documentation.
(d) The Custodian may require written documentation from the Depositor that
the SEP has been properly established before accepting a SEP
contribution to the Custodial Account.
16. Custodian's Limited Liability
The Custodian shall not be liable for any action taken or omitted at the
direction of the Depositor or Beneficiary, or with his/her consent and
approval, or for any action taken or omitted in accordance with the terms and
conditions of any time deposit or savings account agreement, this Agreement,
or applicable governmental regulations or law, or for any other action taken
or omitted by it in good faith for any mistake in judgement, or for any loss
suffered by the Custodial Account except those which are a result of its own
gross negligence or willful misconduct.
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<PAGE> 13
17. General Provisions
(a) Anything contained in this Agreement to the contrary notwithstanding,
neither Depositor nor any beneficiary of Depositor shall be entitled to
use the Custodial Account or any portion thereof, as security for a
loan, nor shall the Custodian or any other person or institution engage
in any prohibited transaction, within the meaning of Section 4975 of the
Code, with respect to any Custodial Account.
(b) Except to the extent otherwise required by law or this Agreement, none
of the amounts held in a Custodial Account shall be subject to the
claims of any creditor or Depositor, or any beneficiary of Depositor,
nor shall Depositor or any beneficiary have the right to anticipate,
sell or pledge, option, encumber or assign any of the benefits, payments
or proceeds to which he or she may be entitled under this Agreement.
(c) If any question arises as to the meaning of any provision of this
Agreement, the Custodian shall be authorized to construe or interpret
any such provision, and Custodian's construction and interpretation
shall be binding upon Depositor and any beneficiary of Depositor.
(d) Throughout this Agreement, the singular form includes the plural where
applicable.
(e) Any provision of this Agreement which would disqualify the Custodial
Account as an Individual Retirement Account shall be disregarded to the
extent necessary to make the Custodial Account qualify as an Individual
Retirement Account under the Code.
(f) The headings and articles of this Agreement are for convenience of
reference only, and shall have no substantive effect on provisions of
this Agreement.
(g) This Agreement and the Custodial Account created hereby shall be
governed by the laws of the State in which the Custodian maintains its
principal place of business. All contributions to the Custodial Account
shall be deemed to take place in said state.
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<PAGE> 14
OFFICIAL IRS GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An
individual retirement account (IRA) is established after the form is fully
executed by both the individual (Depositor) and the Custodian and must be
completed no later than the due date of the individual's income tax return for
the tax year (without regard to extensions). This account must be created in
the United States for the exclusive benefit of the Depositor or his or her
beneficiaries .
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations .
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get
from your Custodian, obtain IRS Publication 590, Individual Retirement
Arrangements (IRAs), from any office of the IRS or by calling 1-800-TAX-FORM.
DEFINITIONS
Custodian - The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as Custodian.
Depositor - The Depositor is the person who establishes the Custodial Account.
IDENTIFYING NUMBER
The Depositor's Social Security number will serve as the identification number
of his or her IRA for the Internal Revenue Service. An employer identification
number is required only for an IRA for which a return is filed to report
unrelated business taxable income. An employer identification number is
required for a common fund created for IRAs.
IRA FOR NON-WORKING SPOUSE
Form 5305-A may be used to establish the IRA Custodial Account for a
non-working spouse.
Contributions to an IRA custodial account for a non-working spouse must be made
to a separate IRA Custodial Account established by the non-working spouse.
<PAGE> 15
SPECIFIC INSTRUCTIONS
ARTICLE IV - Distributions made under this article may be made in a lump sum,
periodic payment or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of section 408(a)(6) have been met.
ARTICLE VIII - Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the Custodian, Custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the Depositor, etc. Use additional pages if
necessary and attach them to this form.
Note: Form 5305-A may be reproduced and reduced in size for adoption to
passbook purposes.
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<PAGE> 1
Exhibit 14(b)
National Financial Services Corporation Individual Retirement Account
CUSTODIAL AGREEMENT
Under Section 408(a) of the Internal Revenue Code
The Depositor whose name appears on the attached Application is establishing an
individual retirement account (under Section 408(a) of the Internal Revenue
Code) to provide for his or her retirement and for the support of his or her
beneficiaries after death.
The Custodian named on the attached Application has given the Depositor the
Disclosure Statement required under the Income Tax Regulations under Section
408(i) of the Code.
The Depositor has deposited with the Custodian an initial contribution in cash,
as set forth in the attached Application.
The Depositor and the Custodian make the following Agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) of the Code (but only after December
31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
Simplified Employee Pension plan as described in Section 408(k). Rollover
contributions before January 1, 1993, include rollovers described in Section
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a Simplified Employee Pension Plan as described in
Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of Section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m) of the Code) except as otherwise permitted by
Section 408(m)(3) which provides an exception for certain gold and silver
coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial Account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401 (a)(9)-2, the provisions of which are incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be recalculated.
<PAGE> 2
3. The Depositor's entire interest in the Custodial Account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial Account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated Beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated Beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the Beneficiary or Beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated Beneficiary or Beneficiaries
starting by December 31 of the year following the year of the
Depositor's death. If, however, the Beneficiary is the Depositor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the Beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accePted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial Account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated Beneficiary, or the life
expectancy of the designated Beneficiary, whichever applies). In the case
of distributions under paragraph 3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated Beneficiary as of their birthdays in the year the
Depositor reached age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age of
the designated Beneficiary as of the Beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524 to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
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<PAGE> 3
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) of the
Code and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Article I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) of the Code and
the related regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and the Custodian.
ARTICLE VIII
1. DEFINITIONS. The following definition shall apply to terms used in this
Article VIII:
(a) "Account" or "Custodial Account" means the custodial account established
hereunder for the benefit of the Depositor.
(b) "Agreement" means the National Financial Services Corporation IRA
Custodial Agreement, including the information and provisions set forth
in any Account Application and any designation of Beneficiary filed with
the Custodian, may be proved either by an original copy or by a
reproduced copy thereof including, without limitation copy reproduced by
photocopying facsimile transmission, or electronic imaging.
(c) "Application" shall mean the Application by which this Agreement, as may
be amended from time to time, is established between the Depositor and
the Custodian. The statements contained therein shall be incorporated
into this Agreement.
(d) "Authorized Agent" means the person or persons authorized by the
Depositor, on a signed form acceptable to and filed with the Custodian,
to purchase or sell shares in the Depositor's Account.
(e) "Beneficiary" means the person or persons (including a trust or estate)
designated as such by the Depositor on a signed form acceptable to and
filed with the Custodian pursuant to Article VIII, Section 8 of this
Agreement.
(f) "Broker-Dealer" shall mean the securities broker-dealer registered as
such under the Securities Exchange Act of 1934, which the Depositor has
designated as his or her Broker-Dealer in the Account Application.
(g) "Code" shall mean the internal Revenue Code of 1986, as amended.
(h) "Company" shall mean FMR Corp., a Massachusetts corporation, or any
successor or affiliate thereof to which FMR Corp. may, from time to
time, delegate or assign any or all of its rights or responsibilities
under this Agreement.
(i) "Custodian" shall mean the custodian specified in the Account
Application.
(j) "Depositor" means the person named in the Account Application.
(k) "Funding Vehicles" shall include (i) all marketable securities traded
over the counter or on a recognized securities exchange which are
eligible for registration on the book entry system maintained by
Depository Trust Company ("DTC") or its successor; (ii) if permitted by
the Custodian, interest-bearing accounts of the Custodian, and (iii)
such other non-DTC eligible assets (but not including futures contract)
which are permitted to be acquired under a custodial account pursuant to
Section 408 of the Code and which are acceptable to the Custodian.
Notwithstanding the above, the Custodian reserves the right to refuse to
accept and hold any specific asset.
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<PAGE> 4
(l) "Money Market Shares" shall mean any shares which are issued by a money
market mutual fund.
2. BROKER-DEALER. The Broker-Dealer shall be appointed by the Depositor in the
Application as his or her agent to execute such investment directions as the
Depositor may give under the terms of the Custodial Account including the
execution of purchase and sale orders. All assets of the Custodial Account
shall be registered in the name of the Custodian or its nominee, but such
assets shall generally be held in a brokerage account with the Broker-Dealer
in the name of the Custodian. Any security may be held in bearer from, or
in a central depository (including National Financial Services Corporation)
so long as of the Custodian. Any security may be held in bearer form, or in
a central depository (including National Financial Services Corporation) so
long as
(i) the books and records of the Custodian or its agent show that all such
securities are part of the Custodian Account.
(ii) a separate account thereof is maintained by the party having actual
custody of such securities and
(iii) such securities are held in individual or bulk segregation in such
party's vault or in depositories approved by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
In all cases the Broker-Dealer, and not the Custodian, shall have the
responsibility for delivering to the Depositor all notices and prospectuses
relating to such Securities. To the extent that the Custodian delivers to
the Broker-Dealer confirmations, statements and other notices with respect to
the Account, any such communications delivered to the Broker-Dealer shall be
deemed to have been delivered to the Depositor. The Depositor agrees to hold
the Custodian and the Company harmless from and against any losses, cost or
expenses arising in connection with the delivery or receipt of any such
communication(s), provided the Custodian has acted in accordance with the
above.
3. INVESTMENT OF CONTRIBUTIONS. Contributions to the Account may be invested
only in Funding Vehicles and shall be invested as follows:
(a) GENERAL. Contributions will be invested in accordance with the
Depositor's written instructions in the Application, and with subsequent
instructions given by the Depositor or the Authorized Agent appointed by
the Depositor (or, following the death of the Depositor, his or her
Beneficiary) through the Broker-Dealer to the Custodian in a manner
acceptable to the Custodian. By giving such instructions to the
Custodian such person will be deemed to have acknowledged receipt of the
then current prospectus, if any, for any Funding Vehicles in which the
Depositor (or the Authorized Agent appointed by the Depositor), through
the Broker-Dealer directs the Custodian to invest assets in his or her
Account. All charges incidental to carrying out such instructions shall
be charged and collected in accordance with Article VIII, Section 18.
The Depositor may, by delivery of specific instructions to the Broker-Dealer,
purchase an option or direct that covered call options be written on
securities held in his or her Custodial Account. Covered call instructions
must specify the number and identity of shares to which the option applies,
the term of the option, and the option's exercise price.
(b) INITIAL CONTRIBUTION. The Custodian will invest all contributions
promptly after their receipt, as set forth below; provided, however,
that the Custodian shall not be obligated to invest the Depositor's
initial contribution to his Custodial Account as indicated on the
Application, until at least seven (7) calendar days have elapsed from
the date of acceptance of the Application by or on behalf of the
Custodian.
(c) UNCLEAR INSTRUCTIONS. If the Depositor's Custodial Account at any time
contains cash as to which investment instructions in accordance with
this Section 3 have not been received by the Custodian, or if the
Custodian receives instructions as to investment selection or allocation
which are, in the opinion of the Custodian, not clear, the Custodian may
request instructions from the Depositor (or the Depositor's Authorized
Agent, Beneficiary, executor or administrator). Pending receipt of such
instructions any cash may be invested in Money Market Shares, and any
other investment may remain unchanged. The Custodian shall not be
liable to anyone for any loss resulting from delay in investing such
cash or in implementing such instructions. Notwithstanding the above,
the Custodian may, but need not, for administrative convenience,
maintain a balance of up to $100 of uninvested cash in the Depositor's
Custodial Account.
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<PAGE> 5
(d) NO DUTY. The Custodian shall not have any duty to question the
directions of a Depositor (or the Depositor's Broker-Dealer, Authorized
Agent, Beneficiary executor, or administrator) in the investment of his
or her Custodial Account or to advise the Depositor or the Deposit's
Broker-Dealer regarding the purchase retention or sale of assets
credited to the Custodial account. The Custodian, or any of its
affiliates, shall not be liable for any loss which results from the
Depositor's (or the Depositor's Broker-Dealer, Authorized Agent,
Beneficiary, executor, or administrator) exercise of control (whether by
his or her action or inaction) over the Custodial Account.
4. CONTRIBUTIONS BY DIVORCED OR SEPARATED SPOUSES. All alimony and separate
maintenance payments received by a divorced or separated spouse, and taxable
under Section 71 of the code, shall be considered compensation for purposes
of computing the maximum annual contribution to the Custodial Account, and
the limitations for contributions by a divorced or separated spouse shall be
the same as for any other individual.
5. TIMING OF CONTRIBUTIONS. A contribution is deemed to have been made on the
last day of the preceding taxable year if the contribution is made by the
deadline for filing the Depositor's income tax return (not including
extensions), or such later date as may be determined by the Department of
the Treasury or the IRS, provided the Depositor (or the Depositor's
Broker-Dealer or Authorized Agent) designates, in a manner acceptable to the
Custodian, the contribution as a contribution for the preceding taxable
year.
6. ROLLOVER CONTRIBUTIONS. The Custodian will accept for the Custodial Account
all rollover contributions which consist of cash, and it may, but shall be
under no obligation to, accept all or any part of any other rollover
contribution. The Depositor shall designate each rollover contribution as
such to the Custodian through the Broker-Dealer and by such designation
shall confirm to the Custodian that a proposed rollover contribution
qualifies as a rollover contribution within the meaning of Sections
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), and/or 408(d)(3) of
the Code. Submission by or on behalf of a Depositor of a rollover
contribution consisting of assets other than cash or property permitted as
an investment under this Article VIII shall be deemed to be the instruction
of the Depositor to the Custodian that, if such rollover contribution is
accepted, the Custodian will use its best efforts to sell those assets for
the Depositor's account, and to invest the proceeds of any such sale in
accordance with Section 3. To the extent permitted by law, the Custodian
shall not be liable to anyone for any loss resulting from such sale or delay
in effecting such sale; or for any loss of income or appreciation with
respect to the proceeds thereof after such sale and prior to investment
pursuant to Section 3; or for any failure to effect such sale if such
property proves not readily marketable in the ordinary course of business.
All brokerage and other costs incidental to the sale or attempted sale of
such property will be charged to the Custodial Account in accordance with
Article VIII, Section 18.
7. REINVESTMENT OF EARNINGS: In the absence of other instructions pursuant to
Section 3 distributions of every nature received in respect of the assets in
a Depositor's Custodial Account shall be liquidated to cash, if necessary,
and shall be reinvested in accordance with the Depositor's instructions
pursuant to Section 3.
8. DESIGNATION OF BENEFICIARY: A Depositor may designate a Beneficiary as
follows:
(a) GENERAL. A Depositor may designate a Beneficiary or Beneficiaries at
any time, and any such designation may be changed or revoked at any
time, by written designation signed by the Depositor on a form
acceptable to, and filed with, the Custodian; provided, however that
such designation, or change or revocation of a prior designation, shall
not be effective unless it is received and accepted by the Custodian no
later than thirty (30) days after the death of the Depositor and
provided further that the latest such designation or change or
revocation shall control. If the Depositor had not by the date of his
or her death properly designated a Beneficiary in accordance with the
preceding sentence, or if no designated Beneficiary survives the
Depositor, the Depositor's Beneficiary shall be his or her surviving
spouse, but if he or she has no surviving spouse, his or
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her estate. Unless otherwise specified in the Depositor's designation of
Beneficiary, if a Beneficiary dies before receiving his or her entire
interest in the Custodial Account, his or her remaining interest in the
Custodial Account shall be paid to the Beneficiary's estate.
(b) MINORS. If a distribution upon the death of the Depositor is payable to
a person known by the Custodian to be a minor or otherwise under a legal
disability the Custodian may in its absolute discretion, make all, or
any part of the distribution to (a) a parent of such person, (b) the
guardian, conservator, or other legal representative, wherever
appointed, of such person, (c) a custodial account established under a
Uniform Gifts to Minors Act Uniform Transfers to Minors Act, or similar
act, (d) any person having control or custody of such person, or (e) to
such person directly.
(c) QTlPs and QDOTs. A Depositor may designate as Beneficiary of his or her
Account a trust for the benefit of his or her surviving spouse that is
intended to satisfy the conditions of Sections 2056(b)(7) or 2056A of
the Code (a "Spousal Trust"). In that event, if the Depositor is
survived by his or her spouse, the following provisions shall apply to
the Account, from and after the death of the Depositor until the death
of the Depositor's surviving spouse: (1) all of the income of the
Account shall be paid to the Spousal Trust annually or at more frequent
intervals, and (2) no person shall have the power to appoint any part of
the Account to any person other than the Spousal Trust. To the extent
permitted by Section 401(a)(9) of the Code, as determined by the
trustee(s) of the Spousal Trust, the surviving spouse of the Depositor
who has designated a Spousal Trust as his or her Beneficiary may be
treated as his or her "designated beneficiary" for purposes of the
distribution requirements of that Code section. The Custodian shall
have no responsibility to determine whether such treatment is
appropriate.
(d) JUDICIAL DETERMINATION. Anything to the contrary herein
notwithstanding, in the event of reasonable doubt respecting the proper
course of action to be taken, the Custodian may in its sole and absolute
discretion resolve such doubt by judicial determination which shall be
binding on all parties claiming any interest in the Account. In such
event all court costs, legal expenses, reasonable compensation of time
expended by the Custodian in the performance of its duties, and other
appropriate and pertinent expenses and costs shall be collected by the
Custodian from the Custodial Account in accordance with Article VIII,
Section 18.
(e) NO DUTY. The Custodian shall not have any duty to question the
directions of a Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor or administrator) as to the time(s) and amount(s)
of distributions from the Custodial Account, or to advise him or her
regarding the compliance of such distributions with Section 401 (a)(9),
Section 2056(b)(7) or Section 2056A of the Code.
9. PAYROLL DEDUCTION. Subject to approval of the Custodian and the
Broker-Dealer, a Depositor may choose to have contributions to his or her
Custodial Account made through payroll deduction if the Account is
maintained as part of a program sponsored by the Depositor's employer. In
order to establish payroll deduction the Depositor must authorize his or her
employer to deduct a fixed amount from each pay period's salary up to a
total amount of $2 000 per year, unless such contributions are being made
pursuant to a Simplified Employee Pension Plan described under Section
408(k) of the Code, in which case, contributions can be made up to 15% of
the Depositor's earned income, up to $30,000 per year. Contributions to the
Custodial Account of the Depositor's spouse may be made through payroll
deduction if the employer authorizes the use of payroll deductions for such
contributions, but such contributions must be made to a separate Account
maintained for the benefit of the Depositor's spouse. The payroll deduction
authorization shall continue in force until such time as written amendment
or revocation is received by the Depositor's employer and the Custodian with
reasonable advance notice.
10. TRANSFERS TO OR FROM THE ACCOUNT. Assets held on behalf of the Depositor
in another IRA may be transferred by the trustee or custodian thereof
directly to the Custodian, in a form and manner acceptable to the
Custodian, to be held in the Custodial Account for the Depositor under
this Agreement. The Custodian will not be responsible for any losses the
Depositor may incur as a result of the timing of any transfer from another
trustee or custodian that are due to circumstances reasonably beyond the
control of the Custodian.
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Assets held on behalf of the Depositor in the Account may be transferred
directly to a trustee of custodian of another IRA established for the
Depositor if so directed by the Depositor in a form and manner acceptable to
the Custodian; provided, however, that it shall be the Depositor's
responsibility to ensure that any minimum distribution required by Section
401 (a)(9) of the Code is made prior to giving the Custodian such transfer
instructions.
11. DISTRIBUTIONS FROM THE ACCOUNT. Subject to Section 13 below distributions
from the Account will be made only upon the request of the Depositor (or
the Depositor's Authorized Agent, Beneficiary, executor, or administrator)
to the Custodian through the Broker-Dealer in such form and in such manner
as is acceptable to the Custodian. For distributions requested pursuant
to Article IV, life expectancy and joint life and last survivor expectancy
are calculated based on information provided by the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor, or administrator)
using the Expected Return Multiples in Section 1.72-9 of the income Tax
Regulations. The Custodian shall not incur any liability for errors in
such calculations as a result of reliance on information provided by the
Depositor (or the Depositor's Authorized Agent, Beneficiary, executor, or
administrator) or the Depositor's Broker-Dealer. Without limiting the
generality of the foregoing the Custodian is not obligated to make any
distribution, including a minimum required distribution as specified in
Article IV above, absent a specific written direction from the Depositor
(or the Depositor's Authorized Agent, Beneficiary, executor, or
administrator) through the Broker-Dealer to do so.
12. ACTIONS IN THE ABSENCE OF SPECIFIC INSTRUCTIONS. If the Custodian
receives no response to communications sent to the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor, or administrator) at
the Depositor's (or the Depositor's Authorized Agent, beneficiary,
executor, or administrator's) last known address as shown in the records
of the Custodian, or if the Custodian determines, on the basis of evidence
satisfactory to it, that the Depositor is legally incompetent the
Custodian thereafter may make such determinations with respect to
distributions, investments, and other administrative matters arising under
this Agreement as it considers reasonable, notwithstanding any prior
instructions or directions given by or on behalf of the Depositor. Any
determinations so made shall be binding on all persons having or claiming
any interest under the Custodial Account, and the Custodian shall not
incur any obligation or liability for any such determination made in good
faith, for any action taken in pursuance thereof, or for any fluctuations
in the value of the Account in the event of a delay resulting from the
Custodian's good faith decision to await additional information or
evidence.
13. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS. The Custodian will
not under any circumstances be responsible for the timing, purpose or
propriety of any contribution or of any distribution made hereunder, nor
shall the Custodian incur any liability or responsibility for any tax
imposed on account of any such contribution or distribution.
Notwithstanding Section 11 above, the Custodian is empowered to make a
distribution absent such an instruction if directed to do so pursuant to a
court order of any kind and neither the Custodian nor the Company shall in
such event incur any liability for acting in accordance with such court
order.
14. WRITTEN INSTRUCTIONS AND NOTICES. All written notices or communications
required to be given by the Custodian to the Depositor shall be deemed to
have been given when sent by mail to either the Broker-Dealer or to the
last known address of the Depositor in the records of the Custodian. All
written instructions notices, or communications required to be given the
Depositor to the Custodian shall be mailed or delivered to the Custodian
at its designated mailing address as specified on the Application, and no
such instruction, notice, or communication shall be effective until the
Custodian's actual receipt thereof.
15. EFFECT OF WRITTEN INSTRUCTIONS AND NOTICES. The Custodian shall be
entitled to rely conclusively upon, and shall be fully protected in any
action or non-action taken in good faith in reliance upon, any written
instruction, notices, communications or instruments believed to have been
genuine and properly executed. Any such notification may be proved by
original copy or reproduced copy thereof, including, without limitations,
a copy produced by photocopying, facsimile transmission, or electronic
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imaging. For this purpose, the Custodian may (but is not required to) give
the same effect to a telephonic instruction as it gives to a written
instruction, and the Custodian's action in doing so shall be protected to the
same extent as if such telephonic instructions were, in fact, a written
instruction. Any such telephonic instruction may be proved by audio recorded
tape.
16. TAX MATTERS.
(a) GENERAL. The Custodian shall submit required reports to the IRS and the
Depositor (or the Depositor's Authorized Agent, Beneficiary, executor,
or administrator); provided, however, that such individual shall prepare
any return or report required in connection with maintaining the
Account, or as a result of liability incurred by the Account for tax or
unrelated business taxable income, or windfall profits tax.
(b) ANNUAL REPORT. As soon as is practicable after the close of each
taxable year, and whenever required by the Code, the Custodian shall
deliver to the Depositor a written report(s) reflecting receipts,
disbursements and other transactions effected in the Custodial Account
during such period and the fair market value of the assets and
liabilities of the Custodial Account as of the close of such period in a
manner prescribed by the Internal Revenue Service. Unless the Depositor
sends the Custodian written objection to a report within ninety (90)
days of receipt, the Depositor shall be deemed to have approved of such
report, and the Custodian and the Company, and their officers, employees
and agents shall be forever released and discharged from all liability
and accountability to anyone with respect to their acts, transactions,
duties and responsibilities as shown on or reflected by such report(s).
The Company shall not incur any liability in the event the Custodian
does not satisfy is obligations as described herein.
(c) WITHHOLDING. Any distributions from the Custodial Account may be made
by the Custodian net of any required tax withholding.
17. SPENDTHRIFT PROVISION. The interest of a Depositor in the Account shall
not be transferred or assigned by voluntary or involuntary act of the
Depositor or by operation of law; nor shall it be subject to alienation,
assignment, garnishment, attachment, receivership, execution or levy of
any kind. Notwithstanding the foregoing, in the event of a property
settlement between a Depositor and his or her former spouse pursuant to
which the transfer of a Depositor's interest hereunder, or a portion
thereof, is incorporated in a divorce decree or in a written instrument
incident to such divorce or legal separation, then the interest so decreed
by a Court to be the property of such former spouse shall be transferred
to separate Custodial account for the benefit of such former spouse, in
accordance with Section 408(d)(6) of the Code.
18. FEES AND EXPENSES.
(a) GENERAL. The fees of the Custodian for performing its duties hereunder
shall be in such amount as it shall establish from time to time. All
such fees, as well as expenses (such as without limitation brokerage
commissions upon the investment of funds, fees for special legal
services, taxes levied or assessed, or expenses in connection with the
liquidation or retention of all or part of a rollover contribution),
shall be collected by the Custodian from cash available in the Custodial
Account, or if insufficient cash shall be available, by sale of
sufficient assets in the Custodial Account and application of the sales
proceeds to pay such fees and expenses. Alternatively, but only with
the consent of the Custodian, fees and expenses may be paid directly to
the Custodian by the Depositor by separate check.
(b) ADVISOR FEES. The Custodian shall, upon direction from the Depositor,
disburse from the Custodial Account payment to the Depositor's
registered investment advisor of any fees for financial advisory
services rendered with regard to the assets held in the Account. Such
direction must be provided in a form and manner acceptable to the
Custodian, and the Custodian shall not incur any liability for executing
such direction.
(c) SALE OF ASSETS. Whenever it shall be necessary in accordance with this
Section 18 to sell assets in order to pay fees or expenses, the
Custodian shall request the Depositor (Or the Deposit's Authorized
Agent, Beneficiary, executor, or administrator) through the
Broker-Dealer, to provide specific instructions. If such instructions
are not received by the Custodian within ten (10) business
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<PAGE> 9
days of the Custodian's request, the Custodian may sell any or all of the
assets credited to the Custodial Account at that time, and shall invest the
portion of the sales proceeds remaining after collection of the applicable
fees and expenses therefrom in accordance with Section 3. The Custodian
shall not incur any liability on account of its sale or retention of assets
under such circumstances.
19. ESCROW. With the consent of the Custodian, the Custodial Account may
serve as an escrow arrangement to hold restricted distributions from
defined benefit plans pursuant to Section 1.401(a)(4)-5(b) of the Income
Tax Regulations. In such event, the Custodian will act in accordance with
an escrow arrangement acceptable to it and pursuant to which it will only
act upon the direction of the trustee of the distributing plan with
respect to distributions from the Account. Such agreement will remain in
place until the trustee of the distribution plan releases the Custodian
from such escrow agreement.
20. VOTING WITH RESPECT TO SECURITIES. The Custodian shall mail to the
Depositor all prospectuses and proxies that may come into the Custodian's
possession by reason of its holding of Funding Vehicles in the Custodial
Account. A Depositor may direct the Custodian as to the manner in which
any securities held in the Custodial Account shall be voted with respect
to any matters as to which the Custodian as holder of record is entitled
to vote, coming before any meeting of shareholders of the corporation
which issued such securities. All such directions shall be in writing on
a form approved by the Custodian and signed by the Depositor, and
delivered to the Custodian within the time prescribed by it. The
Custodian shall vote only those securities with respect to which it has
received timely written directions from the Depositor; provided, however,
that the Custodian may without such direction vote shares of investment
companies advised by Fidelity Management & Research Company "present" to
the extent such a vote is needed to establish a quorum.
21. LIMITATIONS ON CUSTODIAL LIABILITY AND INDEMNIFICATION. The Depositor,
the Depositor's Broker-Dealer, and the Custodian intend that the Custodian
shall have and exercise no discretion, authority, or responsibility as to
any investment in connection with the Account and the Custodian or of any
distribution or any other action or nonaction taken pursuant to the
Depositor's direction (or that of the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) through the Broker-Dealer. The
Depositor who directs the investment of his or her Account shall bear sole
responsibility for the suitability of any directed investment and for any
adverse consequences arising from such an investment including, without
limitation, the inability of the Custodian to value or to sell an illiquid
investment, or the generation of unrelated business taxable income with
respect to an investment. To the fullest extent permitted by law, the
Depositor (or the Depositor's Authorized Agent, Beneficiary,, executor, or
administrator, as appropriate) shall at all times fully indemnify and save
harmless the Custodian, the Company and their agents, affiliates,
successors and assigns and their officers, directors and employees, from
any and all liability arising from the Depositor's investment direction
under this Account, or from the Broker-Dealer's execution of such
direction, and from any and all other liability whatsoever which may arise
in connection with this Agreement except liability arising under
applicable law or liability arising from gross negligence or willful
misconduct on the part of the indemnified person. Although the Custodian
shall have no responsibility to give effect to a direction from anyone
other than the Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) the Custodian may, in its
discretion, establish procedures pursuant to which the Depositor may
delegate to a third party any or all of the Depositor's powers and duties
hereunder, provided, however, that in no event may anyone other than the
Depositor execute the application by which this Agreement is adopted or
the form by which the Beneficiary is appointed, and provided, further,
that any such third party to whom the Depositor has so delegated powers
and duties shall be treated as the Depositor for purposes of applying the
preceding sentences of this paragraph and the provision of Article VIII,
Section 3.
22. DELEGATION TO AGENTS. The Custodian may delegate to one or more
corporations affiliated with the Custodian the performance of record
keeping and other ministerial serviced in connection with the Custodial
Account, for a reasonable fee to be borne by the Custodian and not by the
Custodial Account. Any such
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agent's duties and responsibilities shall be confined solely to the
performance of such services, and shall continue only for so long as the
Custodian named in the Application serves as Custodian.
23. AMENDMENT OF AGREEMENT. The Depositor the Broker-Dealer and Custodian
authorize and direct the Company to amend this Agreement in any respect at
any time (including retroactively), so that it may conform with applicable
provisions of the Internal Revenue Code, or with any other applicable law
as in effect from time to time, or to make such other changes to this
Agreement as the Company deems advisable. Any such amendment shall be
effected by delivery to the Custodian and mailing to the Depositor at his
or her last known address as shown in the records of the Custodian a copy
of such amendment, or a restatement of this Custodial Agreement including
any such amendment. The Depositor shall be deemed to consent to any such
amendment(s) if he or she fails to object thereto by written notice
received by the Custodian within fifteen (15) calendar days from the date
of the Company's mailing to the Depositor a copy of such amendment(s) or
restatement.
24. RESIGNATION OR REMOVAL OF CUSTODIAN. The Company may remove the Custodian
at any time, and the Custodian may resign at any time, upon thirty (30)
days' written notice to the Depositor and the Broker-Dealer. Upon the
removal or resignation of the Custodian, the Company may, but shall not be
required to, appoint a successor custodian under this Custodial Agreement;
provided that any successor custodian shall satisfy the requirements of
Section 408(a)(2) of the Code. Upon any such successor's acceptance of
appointment, the Custodian shall transfer the assets of the Custodial
Account, together with copies of relevant books and records, to such
successor custodian; provided, however, that the Custodian is authorized
to reserve such sum of money or property as it may deem advisable for
payment of any liabilities constituting a charge on or against the assets
of the Custodial Account, or on or against the Custodian or the Company.
The Custodian shall not be liable for the acts or omissions of any
successor to it. If no successor custodian is appointed by the Company,
the Custodial account shall be terminated and the assets of the Account,
reduced by the amount of any unpaid fees or expenses, will be distributed
to the Depositor.
25. TERMINATION OF THE CUSTODIAL ACCOUNT. The Depositor may terminate the
Custodial Account at any time upon notice to the Custodian in a manner and
form acceptable to the Custodian. Upon such termination the Custodian
shall transfer the assets of the Custodial account, reduced by the amount
of any unpaid fees or expenses, to the custodial or trustee of another
individual retirement account (within the meaning of Section 408 of the
Code) or other retirement plan designated by the Depositor, as described
in Article VIII, Section 10. The Custodian shall not be liable for losses
arising from the acts, omissions, delays or other inaction of any such
transferee custodian or trustee. If notice of the Depositor's intention
to terminate the Custodial account is received by the Custodian and the
Depositor had not designated a transferee custodian or trustee for the
assets in the Account, then the Account, reduced by any unpaid fees or
expenses, will be distributed to the Depositor.
26. GOVERNING LAW. THIS AGREEMENT, AND THE DUTIES AND OBLIGATIONS OF THE
COMPANY AND THE CUSTODIAN UNDER THE AGREEMENT, SHALL BE CONSTRUED,
ADMINISTERED AND ENFORCED ACCORDING TO THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, EXCEPT AS SUPERSEDED BY FEDERAL LAW OR STATUTE.
27. WHEN EFFECTIVE. This Agreement shall not become effective until
acceptance of the Application by or on behalf of the Custodian at its
principal office, as evidenced by a written notice to the Depositor.
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NATIONAL FINANCIAL SERVICES CORPORATION
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and should be reviewed
in conjunction with both the Custodial Agreement and the Application for your
Individual Retirement Account ("IRA"). This information reflects the
provisions of the Internal Revenue Code as are effective January 1, 1987 and
therefore applies to contributions for years after, and to distributions taken
after 1986.
RIGHT TO CANCEL
You may revoke this Account, but only if you had not received this Disclosure
Statement within Seven (7) calendar days prior to the establishment of this
IRA. In such as instance, revocation of the IRS is permitted only if your
request for revocation is made in writing and is received by the Custodian
within seven (7) calendar days of the establishment date of your Account.
To revoke this account, send your written revocation request to the Custodian
of your IRA at the address below:
Fidelity Management Trust Company
c/o National Financial Services Corporation
New Accounts Department
One World Financial Center, Tower A
200 Liberty Street
New York, NY 10281
Upon revocation you will receive a full refund of your initial contribution
including sales commissions (if any) and/or administrative fees. To determine
where to send a revocation request, or if you have any questions relative to
this procedure, please call your Broker-Dealer.
TYPES OF IRAS.
REGULAR IRA. You may make a Regular IRA contribution of $2,000 or 100% of your
compensation, whichever is less. (To determine the amount of your income tax
deduction for your IRA contribution, see "limits on Deductible contributions"
below.)
SPOUSAL IRA. If you and your spouse file a joint federal income tax return,
you may make a Spousal IRA contribution even if your spouse has received
compensation during the tax year. Your contribution to a Spousal IRA must not
exceed the lesser of (1) $2,000 or (2) the excess of $2,250 (or if less, 100%
of your compensation) over your contribution to your Regular IRA. Note: if
your spouse has more than $250 in compensation for the tax year, the two of you
may make a larger total contribution if you each contribute to a Regular IRA.
ROLLOVER IRA. If you retire or change jobs, you may be eligible for a
distribution from your employer's retirement plan. To avoid mandatory
withholding of 20% of your distribution for federal income tax, and to preserve
the tax-deferred status of this distribution, you can transfer it directly to a
Rollover IRA. If you choose to have the distribution paid directly to you, you
will be subject to the 20% withholding rules. You may still reinvest up to
100% of the total amount of your distribution which is eligible for rollover in
a Rollover IRA by replacing the 20% which was withheld for taxes with other
assets you own. You must reinvest in a Rollover IRA within 60 days of receipt
of your distribution. The amount invested in a Rollover IRA will not be
included in your taxable income for the year in which you receive the qualified
plan distribution.
DESCRIPTION OF ACCOUNT
Your IRA is a custodial account created for your exclusive benefit. Your
interest in the account is nonforfeitable.
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<PAGE> 12
ELIGIBILITY
Employees and self-employed individual are eligible to contribute to an IRA
even if they are already covered under another tax-qualified plan. Employers
may contribute to IRAs established by their employees, and employers may
contribute to IRAs used as part of a Simplified Employee Pension plan ("SEP,"
described below).
CONTRIBUTIONS
GENERAL. You may make annual cash contributions to an IRA in any amount up to
100% of your compensation for the year or $2,000 whichever is less. Your
employer may make contributions to your account, but, except as noted below
under a SEP, the total contributions from you and your employer may not exceed
this limitation Contributions (other than rollover contributions described
below) must be made in "cash" and not in "kind". Therefore, securities or
other assets already owned cannot be contributed to an IRA but can be converted
to cash and then contributed. No part of your contribution may be invested in
life insurance or be commingled with other property, except in a common trust
or common investment fund.
SPOUSAL ACCOUNTS. If you are married and file a joint tax return, you may make
cash contributions to a "spousal" IRA in addition to your own IRA (even if your
spouse has compensation). The total amounts contributed to your own and to
your spouse's IRA may not exceed 100% of your combined compensation or $2,250,
whichever is less. In no event, however, may the annual contribution to either
your account or your spouse's account exceed $2,000.
COMPENSATION means wages, salaries, professional fees, or other amounts derived
from or received for personal service actually rendered and includes the earned
income of a self-employed individual, and any alimony or separate maintenance
payment includable in the individual's gross income.
ADJUSTED GROSS INCOME is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the IRA
deduction (see below), adjusted gross income is modified to take into account
deductions for IRA contributions, taxable benefits under the Social Security
Act and the Railroad Retirement Act, and passive loss limitations under Code
Section 86.
TIME OF CONTRIBUTION. You may make contributions to your IRA any time up to
and including the due date for filing your tax return for the year. You may
continue to make annual contributions to your IRA up to (but not including) the
calendar year in which you reach age 70 1/2. You may continue to make annual
contributions to your spouse's IRA up to (but not including) the calendar year
in which your spouse reaches age 70 1/2.
ROLLOVER IRA CONTRIBUTIONS. Qualifying distributions from tax-qualified plans
(for example, pension, profit-sharing, and Keogh plans) may be eligible for
rollover into your IRA. However, strict limitations apply to such rollovers
and you should seek competent tax advice regarding these restrictions.
SIMPLIFIED EMPLOYEE PENSION PLAN CONTRIBUTIONS. A separate IRA may be
established for use by your employer as part of a SEP arrangement. Your
employer may contribute to your SEP-IRA up to a maximum of 15% of your
compensation or $30,000, whichever is less. If your SEP-IRA is used as part of
a salary reduction SEP, you may elect to reduce your annual compensation, up to
a maximum of 15% of your compensation or $7,000 (indexed to reflect
cost-of-living adjustments), whichever is less, and have your employer
contribute that amount to your SEP-IRA. If your employer maintains both a
salary reduction SEP and a regular SEP, the annual contribution limit to both
SEPs together is 15% of your compensation or $30,000, whichever is less. You
may contribute, in addition to the amount contributed by your employer to your
SEP-IRA, an amount not in excess of the limits referred to under "General"
above. It is your and your employer's responsibility to see that contributions
in excess of normal IRA limits are made under a valid SEP and are, therefore,
proper.
EXCESS CONTRIBUTIONS. Contributions which exceed the allowable maximum per
year are considered excess contributions. A nondeductible penalty tax of 6% of
the excess amount contributed will be incurred for each year in which the
excess contribution remains in your IRA. If you make a contribution (or your
employer makes a SEP contribution, including a salary reduction contribution,
on your behalf) in excess of your allowable maximum for
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<PAGE> 13
any taxable year, you may correct the excess contribution and avoid the 6%
penalty tax for that year by withdrawing the excess contribution and its
earnings on or before the date, including extensions, for filing your tax
return for that year. The amount of the excess contribution withdrawn will not
be considered a premature distribution nor (except in the case of a salary
reduction contribution) be taxed as ordinary income but the earnings withdrawn
will be taxed as ordinary income to you. Alternatively excess contributions
for one year may be carried forward and reported in the next year to the extent
that the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum amount for that year. The 6%
excise tax will be imposed on excess contributions in each year they are
neither returned nor carried forward.
DEDUCTIBLE IRA CONTRIBUTIONS
If you are not married and are not an active participant in an
employer-maintained retirement plan, you may make a fully deductible IRA
contribution in any amount up to 100% of your compensation for the year or
$2,000, whichever is less. The same limits apply if you are married and you
file a joint return with your spouse, and neither of you is an active
participant in an employer-maintained retirement plan. An "employer-maintained
retirement plan" includes any of the following types of retirement plans:
- a qualified pension, profit-sharing, or stock bonus plan established in
accordance with IRC Section 401(a) or 401(k).
- a Simplified Employee Pension Plan (SEP) (IRC Section 408(k)).
- a deferred compensation plan maintained by a governmental unit or agency.
- tax sheltered annuities and custodial accounts (IRC Section 403(b) and
403(b)(7)).
- a qualified annuity plan under IRC Section 403(a).
You are an active participant in an employer maintained retirement plan even if
you do not have a vested right to any benefits under your employer's plan.
Whether you are an "active participant" depends on the type of plan maintained
by your employer. Generally, you are considered an active participant in a
defined contribution plan if an employer contribution or forfeiture was
credited to your account under the plan during the year. You are considered an
active participant in a defined benefit plan if you are eligible to participate
in the plan, even though you elect not to participate. You are also treated as
an active participant for a year during which you make a voluntary or mandatory
contribution to any type of plan, even though your employer makes no
contribution to the plan.
If you, (or your spouse, if your filing a joint tax return) are covered by an
employer-maintained retirement plan, your IRA contribution is tax deductible
only to the extent that your adjusted gross income does not exceed the
deductibility limits discussed below.
LIMITS ON DEDUCTIBLE CONTRIBUTIONS
The deduction of your IRA contribution is reduced proportionately for adjusted
gross income which exceeds the applicable dollar amount. The applicable dollar
amount for an individual is $25,000 and $40,000 for married couples filing a
joint tax return. The applicable dollar limit for married individuals filing
separate returns is $0. If your adjusted gross income exceeds the applicable
dollar amount by not more than $10,000, you may make a deductible IRA
contribution (but the deductible amount will be less than $2,000). To
determine the amount of your deductible contribution, use the following
calculation:
1. Subtract the applicable dollar amount from your adjusted gross income. If
the result is $10,000 or more, stop; you can only make a nondeductible
contribution.
2. Subtract the above figure from $10,000.
3. Divide the above figure by $10,000.
4. Multiply $2,000 by the fraction resulting from the above steps. This is
your maximum deductible contribution limit.
If the deduction limit is not a multiple of $10, then it is to be rounded up to
the next highest $10. There is a $200 minimum floor on the deduction limit if
your adjusted gross income does not exceed $35,000 (for a single taxpayer) $50
000 (for married taxpayers filing jointly) or $10,000 (for a married taxpayer
filing separately).
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<PAGE> 14
Adjusted gross income for married couples filing a joint tax return is
calculated by aggregating the compensation of both spouses. The deduction
limitations on IRA contributions, as determined above, then apply to each
spouse.
NONDEDUCTIBLE IRA CONTRIBUTIONS
Even if your income exceeds the limits described above, you may make a
contribution to your IRA up to the lesser of $2,000 or 100% of your
compensation. To the extent that your contribution exceeds the deductible
limits, it will be nondeductible. Earnings on all IRA contributions are tax
deferred until distribution. You are required to designate on your tax return
the extent to which your IRA contributions is nondeductible. Therefore, your
designation must be made by the due date (including extensions) for filing your
tax return. If you overstate the amount of nondeductible contributions for a
taxable year, a penalty of $100 will be assessed for each overstatement unless
you can show that the overstatement was due to a reasonable cause.
INVESTMENT OF ACCOUNT
The assets in your IRA will be invested in accordance with your instructions.
As with any investment, you should read any publicly available information
(e.g., prospectuses, annual reports, the terms and conditions of any insurance
annuity contract, etc.) which would enable you to make an informed investment
decision. If no investment instructions are received from you or if the
instructions received are in the opinion of the Custodian unclear you may be
requested to provide instructions. In the absence of such instructions, your
investment may be invested in Money Market Shares, which strive to maintain a
stable $1 per share balance. Keep in mind that with respect to investments in
regulated investment company shares (i.e., mutual funds) or other securities
held in your account, growth in the value of your account cannot be guaranteed
or projected.
DISTRIBUTIONS
GENERAL. Distributions from your IRA should begin no earlier than the date you
reach age 59 1/2 (except in cases of your earlier disability or death) and no
later than the April 1 following the year in which you reach age 70 1/2.
Distributions from your account will be included in your gross income for
federal income tax purposes for the year in which you receive them.
PREMATURE DISTRIBUTIONS. To the extent they are included in income,
distributions from your IRA made before you reach age 59 1/2 will be subject to
a 10% nondeductible penalty tax (in addition to being taxable as ordinary
income) unless the distribution is an exempt withdrawal of an excess
contribution, or the distribution is rolled over to another qualified
retirement plan, or the distribution is one of a scheduled series of payments
over your life or life expectancy or the joint life expectancies of yourself
and your Beneficiary.
LATEST TIME TO WITHDRAW. You must begin receiving distributions of the assets
in your account by April 1 of the calendar year following the calendar year in
which you reach age 70 1/2. Subsequent distributions must be made by December
31 of each year. If you maintain more than one IRA, you may take from any of
your IRAs the aggregate amount to be withdrawn.
MINIMUM DISTRIBUTIONS. Once distributions are required to begin, they must not
be less than the amount each year (determined by actuarial tables) which would
exhaust the value of the account over the required distribution period, which
is generally your life expectancy or the joint life and last survivor
expectancy of you and an individual you have designated as your Beneficiary.
You will be subject to a 50% excise tax on the amount by which the distribution
you actually received in any year falls short of the minimum distribution
required for the year.
METHODS OF DISTRIBUTION. Assets may be distributed from your account according
to one or more of the following methods selected by you:
(a) total distribution
(b) distribution over a certain period
(c) purchase of an annuity contract (See Article IV of the IRA Custodial
Agreement for a full description of these distribution methods.)
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<PAGE> 15
DISTRIBUTION UPON DEATH. The assets remaining in your Account will be
distributed upon your death to the beneficiary(ies) named by you on record with
the Custodian. If there is no beneficiary designated for your Account in the
Custodian's records, or if the beneficiary you had designated dies before you
do, your Account will be paid to your surviving spouse, or in none, to your
estate.
If your spouse was your primary beneficiary and you had started to receive
distributions from your account, but die before receiving the balance of your
account, your spouse has several options. Your spouse can either keep
receiving distributions from your account at least as rapidly, or roll over all
or part of your account into an IRA in his or her name. If distributions from
your account had not yet begun, your spouse may defer taking distributions over
his or her life expectancy, or roll over the account into an IRA in their name,
and treat the IRA as his or her own.
If your beneficiary is not your spouse, and distributions had begun from you
account, your beneficiary may continue to receive them at least as rapidly as
the payment schedule you had established. If distributions had not yet begun,
your beneficiary must deplete your account within 5 years of your death, or
start taking distributions from your account within one year of your death over
their own life expectancy.
DISTRIBUTION OF NONDEDUCTIBLE CONTRIBUTIONS. To the extent that a distribution
constitutes a return of your nondeductible contributions, it will not be
included in your income. The amount of any distribution excludable from income
is the portion that bears the same ratio to the total distribution that your
aggregate nondeductible contributions bear to the balance at the end of the
year (calculated after adding back distributions during the year) of your IRA
For this purpose, all of your IRAs are treated as a single IRA. Furthermore,
all distributions from an IRA during a taxable year are to be treated as one
distribution. The aggregate amount of distributions excludable from income for
all years is not to exceed the aggregate nondeductible contributions for all
calendar years. There is a 10% additional income tax assessed against
premature distributions to the extent such distributions are includible in
income (See "Premature Distributions" above).
EXCESS DISTRIBUTIONS. There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which exceed
the greater of $150,000 or $112,500 (indexed to reflect cost-of-living
increases). To determine whether you have distributions in excess of this
limit, you must aggregate the amounts of all distributions received by you
during the calendar year from all retirement plans, including IRAs. Please
consult with your tax advisor for more complete information, including the
availability of favorable elections.
ROLLOVER TREATMENT. Distributions from your IRA representing all or any part
of the assets in your IRA account are also eligible for rollover treatment You
may roll over all or any part of the same property from this distribution of
assets, within 60 days of receipt, into another IRA or individual retirement
annuity, and maintain the tax-deferred status of these assets. A 60-day
rollover can be made once every twelve months per IRA.
DIVORCE OR LEGAL SEPARATION
If all or any part of your IRA is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an IRA in the
receiving spouse's name. This transaction can be processed without any tax
implication to you provided a written instrument executed by a court incident
to the divorce or legal separation in accordance with Section 408(d)(6) of the
Code is received by the Custodian, and specifically directs such transfer. In
addition, you must also provide the Custodian with a letter of instruction and
an IRA application executed by the receiving spouse, if she or he doesn't
already maintain an NFSC IRA through your broker-dealer.
FEES AND EXPENSES
Fees and other expenses of maintaining your IRA account are described in the
Application and may be changed from time to time, as provided in the Custodial
Agreement.
PROHIBITED TRANSACTIONS
If any of the events prohibited by Section 4975 of the Code (such as any sale
exchange or leasing of any property between you and your IRA) occurs during the
existence of your IRA, your account will be disqualified and the entire balance
in your account will be treated as if distributed to you as of the first day of
the year in which the prohibited
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<PAGE> 16
event occurs. This "distribution" would be subject to ordinary income tax and,
if you were under age 59 1/2 at the time, to the 10% penalty tax on premature
distributions.
If you or your Beneficiary use (pledge) all or any part of your IRA as security
for a loan, then the portion so pledged will be treated as if distributed to
you, and will be taxable to you as ordinary income and subject to the 10%
penalty during the year in which you make such a pledge.
OTHER TAX CONSIDERATIONS
NO SPECIAL TAX TREATMENT. No distribution to you or anyone else from your
account can qualify for capital gain treatment under the federal income tax
law. It is taxed to the person receiving the distribution as ordinary income.
(Similarly, you are not entitled to the five-year averaging rule for lump sum
distributions available to persons receiving distributions from certain other
types of retirement plans.)
GIFT TAX. If you elect during your lifetime to have all or any part of your
account payable to a Beneficiary at or after your death, the election will not
subject you to any gift tax liability.
TAX WITHHOLDING. Federal income tax will be withheld from distributions you
receive from an IRA unless you elect not to have tax withheld. However, if IRA
distributions are to be delivered outside of the United States, this tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code section 877. Federal income tax will be
withheld at the rate of 10%.
REPORTING FOR TAX PURPOSES. Contributions to your IRA must be reported on your
tax Form 1040 or 1040A for the taxable year contributed. You will be required
to designate your IRA contribution as deductible or nondeductible. You are
also required to attach a Form 8606 to your 1040 or 1040A form. Form 8606 is
used to report nondeductible IRA contributions and to calculate the basis
(nontaxable part) of your IRA. Other reporting will be required by you in the
event that special taxes or penalties described herein are due. You must also
file Treasury Form 5329 with the IRS for each taxable year in which the
contribution limits are exceeded a premature distribution takes place or less
than the required minimum amount is distributed from your IRA. The Tax Reform
Act of 1986 also required you to report the amount of all distributions you
received from your IRA and the aggregate account balance of all IRAs as of the
end of the calendar year.
IRS APPROVAL. The form of your individual Retirement Account has been approved
by the Internal Revenue Service. The Internal Revenue Service approval is a
determination only as to the form and does not represent a determination of the
merits of the Account. You may obtain further information with respect to your
IRA from any district office of the Internal Revenue Service.
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<PAGE> 1
Exhibit 15(a)
THE PARKSTONE GROUP OF FUNDS
INVESTOR A DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Investor A Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
(the "Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor A Plan relates to the
Investor A Shares of those investment portfolios identified on Schedule B to
the Trust's Distribution Agreement and as amended form time to time (the
"Investor A Plan Funds").
Section 1. Each Investor A Plan Fund shall pay to The Winsbury Company
Limited Partnership, an Ohio limited partnership and the distributor (the
"Distributor") of the Trust's shares of beneficial interest of its Investor A
class (the "Investor A Shares"), a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of the Investor A Shares of
such Fund (the "Investor A Plan Fee") for: (a) payments the Distributor makes
to banks and other institutions and broker/dealers (a "Participating
Organization") for distribution assistance and/or Shareholder service pursuant
to an agreement with the Participating Organization or for distribution
assistance and/or Shareholder service provided by the Distributor pursuant to
an agreement between the Distributor and the Trust; or (b) reimbursement of
expenses incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance and/or Shareholder service including,
but not limited to, the reimbursement of expenses relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor A
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders used in connection with the sale of Investor A Shares,
and personnel and communication equipment used in servicing Shareholder
accounts and prospective shareholder inquiries. For purposes of the Investor A
Plan, a Participating Organization may include the Distributor or any of its
affiliates or subsidiaries.
Section 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Funds to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Investor A Plan shall not take effect with respect to an
Investor A Plan Fund until it has been approved by a vote of at least a
majority of the outstanding Investor A Shares of such Fund.
Section 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
<PAGE> 2
Section 5. The Investor A Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor A Plan Funds pursuant to the Investor A Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor A Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor A Shares of an Investor A Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor A Plan shall be in writing, and any agreement related to the Investor
A Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan Fund,
on not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor A Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material
amendments to the Investor A Plan shall be approved in the manner provided for
approval of the Investor A Plan in Section 4.
Section 10. As used in the Investor A Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor A Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
Adopted by the Trustees: January 26, 1993
Adopted by Investor A Shareholders: March 31, 1993
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<PAGE> 1
Exhibit 15(a)(i)
PARTICIPATING ORGANIZATION AGREEMENT
PARTICIPATING ORGANIZATION AGREEMENT made as of the 1st day of October, 1993,
by and between The Winsbury Company Limited Partnership d/b/a The Winsbury
Company, an Ohio Limited Partnership (the "Distributor"), and National
Financial Services Corporation, a corporation duly created under the laws of
its state of incorporation, (the "Participating Organization").
WHEREAS, the Distributor serves as the Distributor of The Parkstone Group of
Funds (the "Group"), a Massachusetts business trust, which has filed a
Registration Statement under the Investment Company Act of 1940 as amended (the
"1940 Act") and the Securities Act of 1933 (the "Securities Act", and, together
with the 1940 Act, the "Acts"); and
WHEREAS, the Group is comprised of several separate investment portfolios,
each of which is segregated by class;
WHEREAS, the holders of Investor A shares ("Investor A Shares" or "Shares")
of each of the investment portfolios of the Group that are identified in
Exhibit A attached hereto (individually, a "Fund," collectively the "Funds")
have adopted an Investor A Distribution and Shareholder Services Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act;
WHEREAS, the Plan authorizes the Distributor to enter into agreements with
third parties to implement the Plan; and
WHEREAS, it is intended that the Participating Organization provide certain
distribution services in connection with the purchase of Investor A Shares of
the Group through certain accounts on behalf of customers ("Customers") of the
Participating Organization (the "Qualified Accounts") and the Participating
Organization has arrangements with First of America Brokerage Service, Inc.
(the "correspondent"), for the provision of brokerage clearing services by the
Participating Organization.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. REFERENCE TO PROSPECTUSES; DETERMINATION OF NET ASSET VALUE
1.1 Reference is hereby made to the prospectuses (individually a "Prospectus,"
collectively the "Prospectuses") for Investor A Shares of each Fund as
from time to time are effective under the Securities Act. Terms defined
therein and not otherwise defined herein are used herein with the meaning
so defined.
1.2 For purposes of determining the fees payable to the Participating
Organization under Section 3, the average daily net asset value of a
Fund's Shares will be computed in the manner specified in the Group's
registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of such Fund's
Shares for purposes of purchases and redemptions.
<PAGE> 2
2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 The Distributor hereby represents and warrants that it is the principal
underwriter of each portfolio of the Investor A Shares of each Fund, which
are identified in the Group's Registration Statement and that it is
authorized to enter into this Agreement pursuant to the Plan. The
Distributor has furnished the Participating Organization or its
correspondent with a list of the various states and other jurisdictions in
which the Investor A Shares of each Fund have been qualified for sale
under, or are exempt from the requirements of, the respective securities
laws of such states and jurisdictions, and will promptly notify the
Participating Organization or its correspondent of any changes in such
list.
2.2 Participating Organization hereby represents, warrants and covenants that
it is and will be at all times relevant to this Agreement registered as a
broker-dealer under applicable state or federal securities laws and is
otherwise qualified under all applicable federal, state and local laws to
engage in the business and transactions described in this Agreement. The
Participating Organization agrees to comply with the requirements of all
applicable laws, including any applicable federal and state securities
laws, the rules and regulations of the SEC, and the rules and regulations
issued by applicable federal bank regulatory agencies. The Participating
Organization further agrees that it will maintain all records required by
applicable law or otherwise reasonably requested by the Distributor in
relation to fund transactions that it has executed.
2.3 By written acceptance of this Agreement, the Participating Organization,
who pays the fees in full to the correspondent, agrees to and does waive
such portion of the fee payable under Section 3 as is necessary to assure
that the amount of such fee which is required to be accrued by the Funds
on any day with respect to such Funds' Shares does not exceed the income
to be accrued to the Shares on such Funds on that day. The amount of the
fee which must be waived by the Participating Organization under this
Section 2.4 will be determined by the Distributor and will be based on the
Participating Organization's pro rata portion of the fees payable under
the Funds' Plan (including those fees payable to the Distributor and other
organizations providing distribution assistance with respect to such
Funds' Shares and/or Shareholder services to the holders of such Funds'
Shares) that exceed the daily income to be accrued to the Shares of such
Funds.
2.4 By written acceptance of this Agreement, the Participating Organization
represents, warrants and agrees that: (i) the Participating Organization
or its correspondent will disclose to Customers the order execution that
they will perform pursuant to this agreement, other than those already
disclosed in the Prospectuses and in Fund applications, and a schedule of
any fees that the Participating Organization or its correspondent may
charge directly to Customers for services it performs in connection with
investments in the Group on the customer's behalf and (ii) any and all
compensation payable to the Participating Organization or its
correspondent by customers in connection with the investment of their
assets in the Group will be disclosed by the Participating Organization to
Customers. This shall not be construed to prohibit or require disclosure
to customers of compensation to the Participating Organization payable by
its correspondent for brokerage clearing services rendered.
2
<PAGE> 3
3. PURCHASE AUTHORIZATION; ORDER EXECUTION; OFFERING PRICE; DISTRIBUTION FEE
3.1 In all sales of Shares to Qualified Accounts, the Participating
Organization shall act as agent for its Customers and in no transaction
shall Participating Organization act as dealer for its own account. As
agent for its Customers, the Participating Organization is hereby
authorized to: (i) place orders directly with the Funds' transfer agent
for the purchase of Shares and (ii) tender Shares to the transfer agent
for redemption, in each case subject to the terms and conditions set forth
in the Prospectus and the operating procedures and policies established by
the Distributor. The minimum dollar purchase of Shares shall be the
applicable minimum amount set forth in the Prospectus, and no order for
less than such amount shall be accepted by the Participating Organization.
The procedures relating to the handling of orders will be subject to
instructions which the Distributor shall forward to the Participating
Organization from time to time. For purposes of this Agreement, the
Participating Organization will be deemed to be independent contractors,
and will have no authority to act as agent for the Distributor in any
matter or in any respect.
3.2 All orders are subject to acceptance or rejection by the Distributor in
its sole discretion. No person is authorized to make any representations
concerning the Distributor, the Group, or a Fund's Shares except such
representations contained in the relevant then- current Prospectuses and
Statement of Additional Information and in such printed information as the
Group or the Distributor may subsequently prepare. The Participating
Organization or its designee is specifically authorized to distribute the
Prospectuses and Statement of Additional Information and sales material
received by it from the Distributor. No person is authorized to
distribute any other sales material relating to a Fund without the prior
approval of the Distributor. The Participating Organization or its
designee agrees to deliver, upon the request of the Distributor, copies of
any relevant amended Prospectuses and Statement of Additional Information
to Shareholders of a Fund to whom Shares have been sold.
3.3 Participating Organization shall not withhold placing Customers' orders
for any Shares so as to profit themselves as a result of such withholding.
Distributor shall not purchase any Shares from the Funds except for the
purpose of covering purchase orders already received, and the
Participating Organization shall not purchase any Shares from the
Distributor except for the purpose of covering the purchase orders already
received.
3.4 If any Shares purchased by the Participating Organization are repurchased
by the Funds or by the Distributor for the account of the Funds, or are
tendered for redemption within seven (7) business days after confirmation
by the Distributor of the original purchase order for such Shares, (1) the
Participating Organization agrees forthwith to refund to the Distributor
the full concession allowed to the Participating Organization, if any, on
the original sale, such refund to be paid by the Distributor to the Fund
whose Shares have been so repurchased upon receipt and (2) the Distributor
shall forthwith pay to such Fund that part of the discount retained by the
Distributor on the original sale. Notice will be
3
<PAGE> 4
given to the Participating Organization of any such repurchase or
redemption within ten (10) days of the date which the repurchase or
redemption is requested.
3.5 Neither party to this Agreement shall, as agent, purchase any Shares from
a Qualified Account at a price lower than the net asset value next
computed by or for the issuer thereof. Nothing in this subparagraph shall
prevent the Participating Organization or its correspondent from selling
Shares for the account of a Qualified Account to the Distributor or the
issuer and charging the investor a fair commission for handling the
transaction.
3.6 The Distributor will furnish the Participating Organization, on request,
with offering prices for the Shares in accordance with the then- current
Prospectuses of the respective Funds of the Group, and the Participating
Organization agrees to quote such prices subject to the confirmation by
the Distributor on any Shares offered to the Participating Organization
for sale. The public offering price equals the net asset value per Share
of the prospective Fund plus a sales charge, if any, as disclosed in the
Prospectus of the individual Fund. The Distributor hereby may, at its
discretion, waive the front-end sales charges, if any, typically charged
for the purchase of Investor A Shares for purchases executed by the
Participating Organization on behalf of the Qualified Accounts. The
Participating Organization acknowledges the fact that each price is always
subject to confirmation, and will be the price next computed after receipt
of an order. The Participating Organization acknowledges that it is its
responsibility to transmit purchase orders promptly to the Distributor.
The Participating Organization further acknowledges that any failure to
promptly transmit such orders to the Distributor that causes a Qualified
Account to receive an improper price, based upon the requirements of Rule
22c-1 under the 1940 Act, shall be the responsibility of the Participating
Organization and shall not be the responsibility of the Distributor. The
Distributor reserves the right to cancel this Agreement at any time
without notice if any Share shall be offered for sale by the Participating
Organization at less than the then- current offering price determined by
or for the respective Fund.
3.7 Participating Organization shall be entitled to receive a distribution fee
("12b-1 Fee"), pursuant to the Plan, attached as Exhibit B, from
Distributor at a rate of 0.10% per annum of the net asset value of the
Group's Investor A Shares, as computed in the manner specified in the
Group's registration statement (as the same is in effect from time to
time), purchased by such Participating Organization as agent for its
Customers. Such fee shall be paid in full to the Participating
Organization's correspondent by the Participating Organization.
3.8 The Participating Organization and its employees will, upon request, be
available during normal business hours to consult with the Distributor or
its designees concerning the performance of the Participating
Organization's responsibilities under this Agreement. Any person
authorized to direct the disposition of monies paid or payable by the
Distributor pursuant to Section 3 of this Agreement will provide to the
Distributor the Group's Board of Trustees, and the Group's Trustees will
review at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures
4
<PAGE> 5
were made. In addition, the Participating Organization will furnish to the
Distributor, the Group or their designees such information as the
Distributor, the Group or their designees may reasonably request
(including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and will
otherwise cooperate with the Distributor, the Group and their designees
(including, without limitation, any auditors designed by the Group), in the
preparation of reports to the Group's Board of Trustees concerning this
Agreement and the monies paid or payable by the Distributor pursuant
hereto, as well as any other reports or filings that may be required by
law.
4. EXCULPATION; INDEMNIFICATION
4.1 The Distributor shall not be liable to the Participating Organization and
the Participating Organization shall not be liable to the Distributor
except for acts or failures to act which constitute lack of good faith or
gross negligence and for obligations expressly assumed by either party
hereunder. Nothing contained in this Agreement is intended to operate as
a waiver by the Distributor or by the Participating Organization of
compliance with any provisions of the Securities Act, the Securities
Exchange Act of 1934, the 1940 Act, the rules and regulations promulgated
by the SEC, the NASD or any state securities administrator, or the
applicable rules and regulations promulgated by federal banking agencies.
4.2 The Participating Organization will indemnify the Distributor and hold it
harmless from any claims or assertions relating to the lawfulness of the
Participating Organization's participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with the Participating Organization which
are performed in connection with the discharge of the Participating
Organization's responsibilities under this Agreement. If such claims are
asserted, the Distributor shall have the right to manage its own defense,
including the selection and engagement of legal counsel, and all costs of
such defense shall be born by the Participating Organization.
4.3 The Distributor will indemnify the Participating Organization and will
hold the Participating Organization harmless from any claims or assertions
relating to the lawfulness of the Distributor's participation in this
Agreement and the transactions contemplated hereby or relating to any
activities or any persons or entities affiliated with the Distributor
which are performed in connection with the discharge of the Distributor's
responsibilities under this Agreement. If any such claims are asserted,
the Participating Organization shall have the right to manage its own
defense, including the selection and engagement of legal counsel, and all
costs of such defense shall be born by the Distributor.
5. GENERAL
5.1 This Agreement will become effective with respect to each Fund on the date
indicated on the first page of this Agreement. Unless sooner terminated
with respect to any Fund, this Agreement may also be terminated at any
time without penalty by the vote of a majority
5
<PAGE> 6
of the members of the Board of Trustees of the Group who are not
"interested persons" (as such term is defined in the 1940 Act) and who have
no direct or indirect interest in the Plan relating to such Fund or any
agreement relating to such Plan, including this Agreement, or (with respect
to a Fund) by a vote of the majority of the outstanding voting securities
of that Fund (as such term is defined in the Statement of Additional
Information), cast in person at a meeting called for the approval of voting
on such approval, on sixty (60) days' written notice.
5.2 This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by the Distributor or by the
Participating Organization, without penalty, upon sixty (60) days' prior
written notice to the other party. This Agreement may also be terminated
at any time without penalty by the vote of a majority of the members of
the Board of Trustees of the Group who are not "interested persons" (as
such term is defined in the 1940 Act) and who have no direct or indirect
interest in the Plan relating to such Fund or any agreement relating to
such Plan, including this Agreement, or (with respect to a Fund) by a vote
of the majority of the outstanding voting securities of that Fund (as such
term is defined in the Statement of Additional Information), cast in
person at a meeting called for the purpose of voting on such approval, on
sixty (60) days' written notice.
5.3 All communications to the Distributor shall be sent to the address set
forth in this Agreement or at such other address as the Distributor may
designate to the Participating Organization in writing. Any notice to
Participating Organization shall be duly given if mailed or telecopied to
Participating Organization at the address or addresses as the
Participating Organization may provide in writing to the Distributor.
5.4 This Agreement supersedes any other Agreement between the Distributor and
Participating Organization with respect to the offer and sales of Investor
A Shares of the Group to Qualified Accounts and relating to any other
matters discussed herein. All covenants, agreements, and representations
and warranties made herein shall be deemed to have been material and
relied on by each party, not withstanding any investigation by either
party or on behalf of either party, and shall survive the execution and
delivery of this Agreement. The invalidity or unenforceability of any
term or provision hereof shall not affect the validity or enforceability
of any other term or provision hereof. The headings in this Agreement are
for convenience of reference only and shall alter or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts which together shall constitute one instrument and shall be
governed by a construed in accordance of the laws (other than the conflict
of laws rules) of the State of Ohio and shall bind and inure to the
benefit of the parties hereto and the respective successors and assigns.
5.5 This Agreement is a Related Agreement under the Plan.
5.6 The names "The Parkstone Group of Funds" and "Trustees of the Parkstone
Group of Funds" refer respectively to the trust created and the trustees,
as trustees but not
6
<PAGE> 7
individually or personally, acting from time to time under a Declaration of
Trust dated as of March 25, 1987, to which reference is hereby made and a
copy of which is on file at the Office of the Secretary of the Commonwealth
of Massachusetts and elsewhere as required by law, and to any and all
amendments thereto so filed or hereafter filed. The obligations of "The
Parkstone Group of Funds" entered into in the name of or on behalf thereof
by any of the trustees, representatives or agents are not made
individually, but in such capacities, and are not binding upon any of the
trustees, shareholders, or representatives of the Group personally, but
bind only the assets of the Group and all persons dealing with any series
of shares of the Group must look solely to the assets of the Group
belonging to such series for the enforcement of any claims against the
Group.
5.7 All communications to the Distributor shall be sent to the following
address:
The Winsbury Company
1900 East Dublin-Granville Road
Columbus, OH 43229
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation, General Partner
/s/ Stephen G. Mintos
-------------------------------
By: Stephen G. Mintos
---------------------------
Title: Executive Vice President
General Manager
Fund Services Division
NATIONAL FINANCIAL SERVICES CORPORATION
/s/ Robert P. Mazzarella
-------------------------------
By: Robert P. Mazzarella
---------------------------
Title: Vice President
7
<PAGE> 8
EXHIBIT A
The Parkstone Group of Funds
Investor A Shares
1. Parkstone U.S. Government Obligations Fund
2. Parkstone Tax-Free Fund
3. Parkstone Prime Obligations Fund
4. Parkstone Treasury Fund
5. Parkstone Municipal Investor Fund
6. Parkstone Equity Fund
7. Parkstone Small Capitalization Fund
8. Parkstone High Income Equity Fund
9. Parkstone International Discovery Fund
10. Parkstone Balanced Fund
11. Parkstone Bond Fund
12. Parkstone Limited Maturity Bond Fund
13. Parkstone Michigan Municipal Bond Fund
14. Parkstone Municipal Bond Fund
15. Parkstone U.S. Government Income Fund
16. Parkstone Intermediate Government Obligations Fund
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
Dated: , 1994 By: The Winsbury Corporation,
---------- ---- General Partner
/s/ Stephen G. Mintos By: Stephen G. Mintos
-----------------------
Title: Executive Vice President
General Manager
Fund Services Division
NATIONAL FINANCIAL SERVICES CORPORATION
Dated: 5 10 , 1994 /s/ Robert P. Mazzarella
------- ---- --------------------------
By: Robert P. Mazzarella
-----------------------
Title: Vice President
A-1
<PAGE> 9
EXHIBIT B
Investor A Distribution and Shareholder Service Plan
This Plan (the "Investor A Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
(the "Trust"), adopted pursuant Rule 12b-1 under the Investment Company Act of
1940, as amended, (the "1940 Act"). The Investor A Plan relates to the
Investor A Shares of those investment portfolios identified on Schedule B to
the Trust's Distribution Agreement and as amended form time to time (the
"Investor A Plan Funds").
Section 1. Each Investor A Plan Fund shall pay to The Winsbury Company
Limited Partnership, an Ohio limited partnership and the distributor (the
"Distributor") of the Trust's shares of beneficial interest of its Investor A
class (the "Investor A Shares"), a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of the Investor A Shares of
such Fund (the "Investor A Plan Fee") for: (a) payments the Distributor makes
to banks and other institutions and broker/dealers (a "Participating
Organization") for distribution assistance and/or Shareholder service pursuant
to an agreement with the Participating Organization or for distribution
assistance and/or Shareholder service provided by the Distributor pursuant to
an agreement between the Distributor and the Trust; or (b) reimbursement of
expenses incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance and/or Shareholder service including,
but not limited to, the reimbursement of expenses relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor A
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders used in connection with the sale of Investor A Shares,
and personnel and communication equipment used in servicing Shareholder
accounts and prospective shareholder inquiries. For purposes of the Investor A
Plan, a Participating Organization may include the Distributor or any of its
affiliates or subsidiaries.
Section 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Funds to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Investor A Plan shall not take effect with respect to an
Investor A Plan Fund until it has been approved by a vote of at least a
majority of the outstanding Investor A Shares of such Fund.
Section 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
B-1
<PAGE> 10
Section 5. The Investor A Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor A Plan Funds pursuant to the Investor A Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor A Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor A Shares of an Investor A Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor A Plan shall be in writing, and any agreement related to the Investor
A Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan Fund,
on not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor A Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material
amendments to the Investor A Plan shall be approved in the manner provided for
approval of the Investor A Plan in Section 4.
Section 10. As used in the Investor A Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor A Plan or any agreements related to it, and (b) the
terms "assignment", "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
B-2
<PAGE> 1
Exhibit 15(a)(i)(a)
DATED: NOVEMBER 8, 1995
EXHIBIT A
TO
PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP)
AND NATIONAL FINANCIAL SERVICES CORPORATION
DATED OCTOBER 1, 1993
NAME OF INVESTOR A FUND
1. Parkstone U.S. Government Obligations Fund
2. Parkstone Tax-Free Fund
3. Parkstone Prime Obligations Fund
4. Parkstone Treasury Fund
5. Parkstone Municipal Investor Fund
6. Parkstone Equity Fund
7. Parkstone Small Capitalization Fund
8. Parkstone High Income Equity Fund
9. Parkstone International Discovery Fund
10. Parkstone Balanced Fund
11. Parkstone Bond Fund
12. Parkstone Limited Maturity Bond Fund
13. Parkstone Michigan Municipal Bond Fund
14. Parkstone Municipal Bond Fund
15. Parkstone U.S. Government Income Fund
16. Parkstone Intermediate Government Obligations Fund
17. Parkstone Large Capitalization Fund
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G Mintos
-----------------------
Stephen G. Mintos
Executive Vice President
NATIONAL FINANCIAL SERVICES
CORPORATION
By: /s/ Robert J. Adams
-----------------------
Name: Robert J. Adams
---------------------
Title: Vice President
<PAGE> 1
Exhibit 15(a)(ii)
PARTICIPATING ORGANIZATION AGREEMENT
PARTICIPATING ORGANIZATION AGREEMENT made as of the 1st day of October, 1993,
by and between The Winsbury Company Limited Partnership d/b/a The Winsbury
Company, an Ohio Limited Partnership (the "Distributor"), and First of America
Bank Corporation, a Michigan corporation (the "Agent"), on behalf of its
wholly-owned subsidiaries (the "Participating Organizations").
WHEREAS, the Distributor serves as the Distributor of The Parkstone Group of
Funds (the "Group"), a Massachusetts business trust, which has filed a
Registration Statement under the Investment Company Act of 1940 as amended (the
"1940 Act") and the Securities Act of 1933 (the "Securities Act", and, together
with the 1940 Act, the "Acts"); and
WHEREAS, the Group is comprised of several separate investment portfolios,
each of which is segregated by class;
WHEREAS, the holders of Investor A shares ("Investor A Shares" or "Shares")
of each of the investment portfolios of the Group that are identified in
Exhibit A attached hereto (individually, a "Fund," collectively the "Funds")
have adopted an Investor A Distribution and Shareholder Services Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act;
WHEREAS, the Plan authorizes the Distributor to enter into agreements with
third parties to implement the Plan; and
WHEREAS, it is intended that each of the Participating Organizations provide
certain distribution services in connection with the purchase of Investor A
Shares of the Group through certain accounts on behalf of customers
("Customers") of the various Participating Organizations (the "Qualified
Accounts").
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. REFERENCE TO PROSPECTUSES; DETERMINATION OF NET ASSET VALUE
1.1 Reference is hereby made to the prospectuses (individually a "Prospectus,"
collectively the "Prospectuses") for Investor A Shares of each Fund as
from time to time are effective under the Securities Act. Terms defined
therein and not otherwise defined herein are used herein with the meaning
so defined.
1.2 For purposes of determining the fees payable to the Participating
Organizations under Section 3, the average daily net asset value of a
Fund's Shares will be computed in the manner specified in the Group's
registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of such Fund's
Shares for purposes of purchases and redemptions.
<PAGE> 2
2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 The Distributor hereby represents and warrants that it is the principal
underwriter of each portfolio of the Investor A Shares of each Fund, which
are identified in the Group's Registration Statement and that it is
authorized to enter into this Agreement pursuant to the Plan. The
Distributor has furnished the Agent and the Participating Organizations
with a list of the various states and other jurisdictions in which the
Investor A Shares of each Fund have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such
states and jurisdictions, and will promptly notify the Participating
Organizations of any changes in such list.
2.2 Agent hereby represents, warrants and covenants that it has the authority
to enter into this Agreement on behalf of the Participating Organizations.
Notwithstanding the provisions of Section 4 of this Agreement, the Agent
agrees to indemnify the Distributor from any liability arising from a
finding, by a court or regulatory body, that Agent lacks such authority.
2.3 Agent hereby represents, warrants and covenants that the Participating
Organizations are and will be at all times relevant to this Agreement
banks chartered either under federal or state law, and Participating
Organizations are and will be at all times relevant to this Agreement
banks which are exempt from registration as broker-dealers under
applicable state or federal securities laws and are otherwise qualified
under all applicable federal, state and local laws to engage in the
business and transactions described in this Agreement. The Participating
Organizations agree to comply with the requirements of all applicable
laws, including any applicable federal and state securities laws, the
rules and regulations of the SEC, and the rules and regulations issued by
applicable federal bank regulatory agencies. The Participating
Organizations agree that they will not make Investor A Shares available
for purchase to persons in any jurisdiction in which such Shares are not
registered for sale or in which such Shares may not be lawfully sold. The
Participating Organizations further agree that they will maintain all
records required by applicable law or otherwise reasonably requested by
the Distributor in relation to fund transactions that it has executed.
2.4 By written acceptance of this Agreement, the Agent and the Participating
Organizations agree to and does waive such portion of the fee payable
under Section 3 as is necessary to assure that the amount of such fee
which is required to be accrued by the Funds on any day with respect to
such Funds' Shares does not exceed the income to be accrued to the Shares
on such Funds on that day. The amount of the fee which must be waived by
the Agent and the Participating Organizations under this Section 2.4 will
be determined by the Distributor and will be based on the Participating
Organization's pro rata portion of the fees payable under the Funds' Plan
(including those fees payable to the Distributor and other organizations
providing distribution assistance with respect to such Funds' Shares
and/or Shareholder services to the holders of such Funds' Shares) that
exceed the daily income to be accrued to the Shares of such Funds.
2
<PAGE> 3
2.5 By written acceptance of this Agreement, the Agent and the Participating
Organizations represent, warrant and agree that: (i) the Participating
Organizations will disclose to Customers the order execution that they
will perform pursuant to this agreement, other than those already
disclosed in the Prospectuses and in Fund applications, and a schedule of
any fees that the Participating Organizations may charge directly to
Customers for services they perform in connection with investments in the
Group on the customer's behalf and (ii) any and all compensation payable
to the Participating Organizations by customers in connection with the
investment of their assets in the Group will be disclosed by the
Participating Organizations to Customers.
2.6 By written acceptance of this Agreement, the Agent and the Participating
Organizations further represent, warrant, and agree that they possess the
legal authority to perform the services contemplated by this Agreement
without violation of applicable Federal banking laws (including the
Glass-Steagall Act) and regulations.
2.7 The Agent shall furnish to the Distributor a list of the Participating
Organizations which have agreed to be bound by the terms of this
Agreement. The Agent shall, at least quarterly, update this list to
indicate the addition or deletion of Participating Organizations that will
be bound by the terms of this Agreement.
3. PURCHASE AUTHORIZATION; ORDER EXECUTION; OFFERING PRICE; DISTRIBUTION FEE
3.1 In all sales of Shares to Qualified Accounts, the Participating
Organizations shall act as agent for their Customers and in no transaction
shall Participating Organizations act as dealer for their own account. As
agent for its Customers, the Participating Organizations are hereby
authorized to: (i) place orders directly with the Funds' transfer agent
for the purchase of Shares and (ii) tender Shares to the transfer agent
for redemption, in each case subject to the terms and conditions set forth
in the Prospectus and the operating procedures and policies established by
the Distributor. The minimum dollar purchase of Shares shall be the
applicable minimum amount set forth in the Prospectus, and no order for
less than such amount shall be accepted by the Participating
Organizations. The procedures relating to the handling of orders will be
subject to instructions which the Distributor shall forward to the
Participating Organizations from time to time. For purposes of this
Agreement, the Agent and the Participating Organizations will be deemed to
be independent contractors, and will have no authority to act as agent for
the Distributor in any matter or in any respect.
3.2 All orders are subject to acceptance or rejection by the Distributor in
its sole discretion. No person is authorized to make any representations
concerning the Distributor, the Group, or a Fund's Shares except such
representations contained in the relevant then- current Prospectuses and
Statement of Additional Information and in such printed information as the
Group or the Distributor may subsequently prepare. The Participating
Organizations are specifically authorized to distribute the Prospectuses
and Statement of Additional Information and sales material received by it
from the Distributor. No person
3
<PAGE> 4
is authorized to distribute any other sales material relating to a Fund
without the prior approval of the Distributor. The Participating
Organizations agree to deliver, upon the request of the Distributor, copies
of any relevant amended Prospectuses and Statement of Additional
Information to Shareholders of a Fund to whom Shares have been sold.
3.3 Participating Organizations shall not withhold placing Customers' orders
for any Shares so as to profit themselves as a result of such withholding.
Distributor shall not purchase any Shares from the Funds except for the
purpose of covering purchase orders already received, and the
Participating Organizations shall not purchase any Shares from the
Distributor except for the purpose of covering the purchase orders already
received.
3.4 If any Shares purchased by the Participating Organizations are repurchased
by the Funds or by the Distributor for the account of the Funds, or are
tendered for redemption within seven (7) business days after confirmation
by the Distributor of the original purchase order for such Shares, (1) the
Participating Organizations agree forthwith to refund to the Distributor
the full concession allowed to the Participating Organizations, if any, on
the original sale, such refund to be paid by the Distributor to the Fund
whose Shares have been so repurchased upon receipt and (2) the Distributor
shall forthwith pay to such Fund that part of the discount retained by the
Distributor on the original sale. Notice will be given to the
Participating Organizations of any such repurchase or redemption within
ten (10) days of the date which the repurchase or redemption is requested.
3.5 Neither party to this Agreement shall, as agent, purchase any Shares from
a Qualified Account at a price lower than the net asset value next
computed by or for the issuer thereof. Nothing in this subparagraph shall
prevent the Participating Organizations from selling Shares for the
account of a Qualified Account to the Distributor or the issuer and
charging the investor a fair commission for handling the transaction.
3.6 The Distributor will furnish the Participating Organizations, on request,
with offering prices for the Shares in accordance with the then- current
Prospectuses of the respective Funds of the Group, and the Participating
Organizations agree to quote such prices subject to the confirmation by
the Distributor on any Shares offered to the Participating Organizations
for sale. The public offering price equals the net asset value per Share
of the prospective Fund plus a sales charge, if any, as disclosed in the
Prospectus of the individual Fund. The Distributor hereby agrees to waive
the front-end sales charges, if any, typically charged for the purchase of
Investor A Shares for purchases executed by the Participating
Organizations on behalf of the Qualified Accounts. The Participating
Organizations acknowledge the fact that each price is always subject to
confirmation, and will be the price next computed after receipt of an
order. The Participating Organizations acknowledge that it is their
responsibility to transmit purchase orders promptly to the Distributor.
The Participating Organizations further acknowledge that any failure to
promptly transmit such orders to the Distributor that causes a Qualified
Account to receive an improper price, based upon the requirements of Rule
22c-1 under the 1940 Act, shall be the responsibility of the Participating
Organizations and shall not be the responsibility
4
<PAGE> 5
of the Distributor. The Distributor reserves the right to cancel this
Agreement at any time without notice if any Share shall be offered for sale
by the Participating Organizations at less than the then-current offering
price determined by or for the respective Fund.
3.7 Participating Organizations shall be entitled to receive a distribution
fee ("12b-1 Fee"), pursuant to the Plan, attached as Exhibit B, from
Distributor at a rate of 0.10% per annum of the net asset value of the
Group's Investor A Shares, as computed in the manner specified in the
Group's registration statement (as the same is in effect from time to
time), purchased by such Participating Organizations as agent for its
Customers. Pursuant to an arrangement between the Agent and the
Participating Organizations, all of the 12b-1 Fees payable to
Participating Organizations under this Agreement shall be made to Agent
for allocation to the various Participating Organizations.
3.8 The Participating Organizations and their employees will, upon request, be
available during normal business hours to consult with the Distributor or
its designees concerning the performance of each of the Participating
Organization's responsibilities under this Agreement. Any person
authorized to direct the disposition of monies paid or payable by the
Distributor pursuant to Section 3 of this Agreement will provide to the
Distributor the Group's Board of Trustees, and the Group's Trustees will
review at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made. In addition, the
Participating Organizations will furnish to the Distributor, the Group or
their designees such information as the Distributor, the Group or their
designees may reasonably request (including, without limitation, periodic
certifications confirming the provision to Customers of the services
described herein), and will otherwise cooperate with the Distributor, the
Group and their designees (including, without limitation, any auditors
designed by the Group), in the preparation of reports to the Group's Board
of Trustees concerning this Agreement and the monies paid or payable by
the Distributor pursuant hereto, as well as any other reports or filings
that may be required by law.
4. EXCULPATION; INDEMNIFICATION
4.1 The Distributor shall not be liable to the Participating Organizations and
the Participating Organizations shall not be liable to the Distributor
except for acts or failures to act which constitute lack of good faith or
gross negligence and for obligations expressly assumed by either party
hereunder. Nothing contained in this Agreement is intended to operate as
a waiver by the Distributor or by the Participating Organizations of
compliance with any provisions of the Securities Act, the Securities
Exchange Act of 1934, the 1940 Act, the rules and regulations promulgated
by the SEC, the NASD or any state securities administrator, or the
applicable rules and regulations promulgated by federal banking agencies.
4.2 The Agent and the Participating Organizations will indemnify the
Distributor and hold it harmless from any claims or assertions relating to
the lawfulness of the Agent's or the
5
<PAGE> 6
Participating Organization's participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with the Participating Organizations which
are performed in connection with the discharge of the Participating
Organizations's responsibilities under this Agreement. If such claims are
asserted, the Distributor shall have the right to manage its own defense,
including the selection and engagement of legal counsel, and all costs of
such defense shall be born by the Agent or the Participating Organizations
involved. In addition, the Agent and the Participating Organizations agree
to indemnify and hold the Distributor harmless from any claims or
assertions relating to the lawfulness of the Participating Organizations'
participation in this Agreement under the Glass-Steagall Act. At this
time, the Agent, the Participating Organizations, and the Distributor are
not otherwise aware of any violations under the Glass-Steagall Act pursuant
to this Agreement.
4.3 The Distributor will indemnify the Agent and the Participating
Organizations and will hold the Participating Organizations harmless from
any claims or assertions relating to the lawfulness of the Distributor's
participation in this Agreement and the transactions contemplated hereby
or relating to any activities or any persons or entities affiliated with
the Distributor which are performed in connection with the discharge of
the Distributor's responsibilities under this Agreement. If any such
claims are asserted, the Participating Organizations shall have the right
to manage their own defense, including the selection and engagement of
legal counsel, and all costs of such defense shall be born by the
Distributor.
4.4 The Agent hereby represents that it will notify the Participating
Organizations of their responsibilities under this Agreement and assist
the Distributor in its efforts to ensure compliance with the terms of this
Agreement. In the event that a Participating Organization fails to so
comply, Agent hereby represents that it will report any such failure, of
which it has become aware, to the Distributor, and will take whatever
action deemed reasonably necessary by the Distributor to bring the
Participating Organization in compliance with this Agreement.
5. GENERAL
5.1 This Agreement will become effective with respect to each Fund on the date
indicated on the first page of this Agreement. Unless sooner terminated
with respect to any Fund, this Agreement may also be terminated at any
time without penalty by the vote of a majority of the members of the Board
of Trustees of the Group who are not "interested persons" (as such term is
defined in the 1940 Act) and who have no direct or indirect interest in
the Plan relating to such Fund or any agreement relating to such Plan,
including this Agreement, or (with respect to a Fund) by a vote of the
majority of the outstanding voting securities of that Fund (as such term
is defined in the Statement of Additional Information), cast in person at
a meeting called for the approval of voting on such approval, on sixty
(60) days' written notice.
6
<PAGE> 7
5.2 This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by the Distributor or by the
Participating Organizations, without penalty, upon sixty (60) days' prior
written notice to the other party, with respect to some or all of the
Participating Organizations. This Agreement may also be terminated at any
time without penalty by the vote of a majority of the members of the Board
of Trustees of the Group who are not "interested persons" (as such term is
defined in the 1940 Act) and who have no direct or indirect interest in
the Plan relating to such Fund or any agreement relating to such Plan,
including this Agreement, or (with respect to a Fund) by a vote of the
majority of the outstanding voting securities of that Fund (as such term
is defined in the Statement of Additional Information), cast in person at
a meeting called for the purpose of voting on such approval, on sixty (60)
days' written notice. For purposes of this Agreement, the merger of one
of the Participating Organizations with another Participating Organization
shall not be deemed an assignment.
5.3 All communications to the Distributor shall be sent to the address set
forth in this Agreement or at such other address as the Distributor may
designate to the Participating Organizations in writing. Any notice to
Participating Organizations shall be duly given if mailed or telecopied to
Participating Organizations at the address or addresses as the Agent or
Participating Organizations may provide in writing to the Distributor.
5.4 This Agreement supersedes any other Agreement between the Distributor and
Participating Organizations (or with Agent on behalf of the Participating
Organizations) with respect to the offer and sales of Investor A Shares of
the Group to Qualified Accounts and relating to any other matters
discussed herein. All covenants, agreements, and representations and
warranties made herein shall be deemed to have been material and relied on
by each party, not withstanding any investigation by either party or on
behalf of either party, and shall survive the execution and delivery of
this Agreement. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any
other term or provision hereof. The headings in this Agreement are for
convenience of reference only and shall alter or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts which together shall constitute one instrument and shall be
governed by a construed in accordance of the laws (other than the conflict
of laws rules) of the State of Ohio and shall bind and inure to the
benefit of the parties hereto and the respective successors and assigns.
5.5 This Agreement is a Related Agreement under the Plan.
5.6 The names "The Parkstone Group of Funds" and "Trustees of the Parkstone
Group of Funds" refer respectively to the trust created and the trustees,
as trustees but not individually or personally, acting from time to time
under a Declaration of Trust dated as of March 25, 1987, to which
reference is hereby made and a copy of which is on file at the Office of
the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Parkstone Group of Funds"
entered into in the name of or on behalf
7
<PAGE> 8
thereof by any of the trustees, representatives or agents are not made
individually, but in such capacities, and are not binding upon any of the
trustees, shareholders, or representatives of the Group personally, but
bind only the assets of the Group and all persons dealing with any series
of shares of the Group must look solely to the assets of the Group
belonging to such series for the enforcement of any claims against the
Group.
5.7 All communications to the Distributor shall be sent to the following
address:
The Winsbury Company
1900 East Dublin-Granville Road
Columbus, OH 43229
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA BANK CORPORATION
As Agent for the various Participating
Organizations
By: /s/ John B. Rapp
---------------------------
John B. Rapp
Executive Vice President
8
<PAGE> 9
EXHIBIT A
The Parkstone Group of Funds
Investor A Share Fund
1. Parkstone U.S. Government Obligations Fund
2. Parkstone Tax-Free Fund
3. Parkstone Prime Obligations Fund
4. Parkstone Treasury Fund
5. Parkstone Municipal Investor Fund
6. Parkstone Equity Fund
7. Parkstone Small Capitalization Fund
8. Parkstone High Income Equity Fund
9. Parkstone International Discovery Fund
10. Parkstone Balanced Fund
11. Parkstone Bond Fund
12. Parkstone Limited Maturity Bond Fund
13. Parkstone Michigan Municipal Bond Fund
14. Parkstone Municipal Bond Fund
15. Parkstone U.S. Government Income Fund
16. Parkstone Intermediate Government Obligations Fund
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA BANK CORPORATION
As Agent for the various Participating
Organizations
By: /s/ John B. Rapp
---------------------------
John B. Rapp
Executive Vice President
A-1
<PAGE> 10
EXHIBIT B
Investor A Distribution and Shareholder Service Plan
This Plan (the "Investor A Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
(the "Trust"), adopted pursuant Rule 12b-1 under the Investment Company Act of
1940, as amended, (the "1940 Act"). The Investor A Plan relates to the
Investor A Shares of those investment portfolios identified on Schedule B to
the Trust's Distribution Agreement and as amended form time to time (the
"Investor A Plan Funds").
Section 1. Each Investor A Plan Fund shall pay to The Winsbury Company
Limited Partnership, an Ohio limited partnership and the distributor (the
"Distributor") of the Trust's shares of beneficial interest of its Investor A
class (the "Investor A Shares"), a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of the Investor A Shares of
such Fund (the "Investor A Plan Fee") for: (a) payments the Distributor makes
to banks and other institutions and broker/dealers (a "Participating
Organizations") for distribution assistance and/or Shareholder service pursuant
to an agreement with the Participating Organizations or for distribution
assistance and/or Shareholder service provided by the Distributor pursuant to
an agreement between the Distributor and the Trust; or (b) reimbursement of
expenses incurred by a Participating Organizations pursuant to an agreement in
connection with distribution assistance and/or Shareholder service including,
but not limited to, the reimbursement of expenses relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor A
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders used in connection with the sale of Investor A Shares,
and personnel and communication equipment used in servicing Shareholder
accounts and prospective shareholder inquiries. For purposes of the Investor A
Plan, a Participating Organizations may include the Distributor or any of its
affiliates or subsidiaries.
Section 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Funds to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Investor A Plan shall not take effect with respect to an
Investor A Plan Fund until it has been approved by a vote of at least a
majority of the outstanding Investor A Shares of such Fund.
Section 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
B-1
<PAGE> 11
Section 5. The Investor A Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor A Plan Funds pursuant to the Investor A Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor A Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor A Shares of an Investor A Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor A Plan shall be in writing, and any agreement related to the Investor
A Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan Fund,
on not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor A Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material
amendments to the Investor A Plan shall be approved in the manner provided for
approval of the Investor A Plan in Section 4.
Section 10. As used in the Investor A Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor A Plan or any agreements related to it, and (b) the
terms "assignment", "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
B-2
<PAGE> 1
Exhibit 15(a)(ii)(a)
AMENDMENT TO PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA BANK CORPORATION
DATED OCTOBER 1, 1993
This Amendment supersedes the Amendment to the Participating Organization
Agreement dated as of September 21, 1994.
Article 3.7 of the Participating Organization Agreement is hereby amended to
read as follows:
3.7 Participating Organizations shall be entitled to receive a distribution
fee ("12b-1 Fee"), pursuant to the Plan, attached as Exhibit B, from
Distributor at a rate per annum based on the net asset value of the
Group's Investor A Shares, as computed in the manner specified in the
Group's registration statement, purchased by each Participating
Organizations as agent for its Customers. Pursuant to an arrangement
between the Agent and the Participating Organization, all of the 12b-1
Fees payable to Participating Organizations shall be made to Agent for
allocation to the various Participating Organizations. The rate at
which such 12b-1 Fees shall be paid is set forth on the attached Exhibit
C as amended from time to time.
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA BANK
CORPORATION, as Agent for the
various Participating Organizations
By: /s/ John B. Rapp
-----------------------
John B. Rapp
Executive Vice President
<PAGE> 2
DATED: NOVEMBER 8, 1995
EXHIBIT C
TO
PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA BANK CORPORATION
DATED OCTOBER 1, 1993
NAME OF INVESTOR A FUND FEE
1. Parkstone U.S. Government Obligations Fund 0.10%
2. Parkstone Tax-Free Fund 0.10%
3. Parkstone Prime Obligations Fund 0.10%
4. Parkstone Treasury Fund 0.10%
5. Parkstone Municipal Investor Fund 0.10%
6. Parkstone Equity Fund 0.25%
7. Parkstone Small Capitalization Fund 0.25%
8. Parkstone High Income Equity Fund 0.25%
9. Parkstone International Discovery Fund 0.25%
10. Parkstone Balanced Fund 0.25%
11. Parkstone Bond Fund 0.25%
12. Parkstone Limited Maturity Bond Fund 0.25%
13. Parkstone Michigan Municipal Bond Fund 0.25%
14. Parkstone Municipal Bond Fund 0.25%
15. Parkstone U.S. Government Income Fund 0.25%
16. Parkstone Intermediate Government Obligations Fund 0.25%
17. Parkstone Large Capitalization Fund 0.25%
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly, The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA BANK CORPORATION
As Agent for the various
Participating Organizations
By: /s/ John B. Rapp
----------------------
John B. Rapp
Executive Vice President
<PAGE> 1
Exhibit 15(a)(ii)(b)
DATED: NOVEMBER 8, 1995
EXHIBIT A
TO
PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA BANK CORPORATION
DATED OCTOBER 1, 1993
NAME OF INVESTOR A FUND
- -----------------------
1. Parkstone U.S. Government Obligations Fund
2. Parkstone Tax-Free Fund
3. Parkstone Prime Obligations Fund
4. Parkstone Treasury Fund
5. Parkstone Municipal Investor Fund
6. Parkstone Equity Fund
7. Parkstone Small Capitalization Fund
8. Parkstone High Income Equity Fund
9. Parkstone International Discovery Fund
10. Parkstone Balanced Fund
11. Parkstone Bond Fund
12. Parkstone Limited Maturity Bond Fund
13. Parkstone Michigan Municipal Bond Fund
14. Parkstone Municipal Bond Fund
15. Parkstone U.S. Government Income Fund
16. Parkstone Intermediate Government Obligations Fund
17. Parkstone Large Capitalization Fund
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly, The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G. Mintos
------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA BANK CORPORATION
As Agent for the various
Participating Organizations
By: /s/ John B. Rapp
----------------------
John B. Rapp
Executive Vice President
<PAGE> 1
Exhibit 15(a)(iii)
PARTICIPATING ORGANIZATION AGREEMENT
PARTICIPATING ORGANIZATION AGREEMENT made as of the 21st day of September,
1994, by and between The Winsbury Company Limited Partnership d/b/a The
Winsbury Company, an Ohio Limited Partnership (the "Distributor"), First of
America Securities, Inc., a Michigan corporation (the "Agent") as a party and
on behalf of its affiliate, First of America Brokerage Service, a Michigan
corporation (the "Participating Organization").
WHEREAS, the Distributor serves as the Distributor of The Parkstone Group of
Funds (the "Group"), a Massachusetts business trust, which has filed a
Registration Statement under the Investment Company Act of 1940 as amended (the
"1940 Act") and the Securities Act of 1933 (the "Securities Act", and, together
with the 1940 Act, the "Acts"); and
WHEREAS, the Group is comprised of several separate investment portfolios,
each of which is segregated by class;
WHEREAS, the holders of Investor A shares ("Investor A Shares" or "Shares")
of each of the investment portfolios of the Group that are identified in
Exhibit A attached hereto (individually, a "Fund," collectively the "Funds")
have adopted an Investor A Distribution and Shareholder Services Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act;
WHEREAS, the Plan authorizes the Distributor to enter into agreements with
third parties to implement the Plan; and
WHEREAS, it is intended that the Agent and Participating Organization provide
certain distribution services in connection with the purchase of Investor A
Shares of the Group through certain accounts on behalf of Customers
("Customers") of Agent and the Participating Organization (the "Qualified
Accounts").
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. REFERENCE TO PROSPECTUSES; DETERMINATION OF NET ASSET VALUE
1.1 Reference is hereby made to the prospectuses (individually a "Prospectus,"
collectively the "Prospectuses") for Investor A Shares of each Fund as
from time to time are effective under the Securities Act. Terms defined
therein and not otherwise defined herein are used herein with the meaning
so defined.
1.2 For purposes of determining the fees payable to Agent under Section 3, the
average daily net asset value of a Fund's Shares will be computed in the
manner specified in the Group's registration statement (as the same is in
effect from time to time) in connection with the computation of the net
asset value of such Fund's Shares for purposes of purchases and
redemptions.
<PAGE> 2
2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 The Distributor hereby represents and warrants that it is the principal
underwriter of each portfolio of the Investor A Shares of each Fund, which
are identified in the Group's Registration Statement and that it is
authorized to enter into this Agreement pursuant to the Plan. The
Distributor has furnished the Agent with a list of the various states and
other jurisdictions in which the Investor A Shares of each Fund have been
qualified for sale under, or are exempt from the requirements of, the
respective securities laws of such states and jurisdictions, and will
promptly notify the Agent of any changes in such list.
2.2 Agent and the Participating Organization hereby represent, warrant and
covenant that they are each and will each be at all times relevant to this
Agreement registered as a broker-dealer under applicable state or federal
securities laws and are otherwise qualified under all applicable federal,
state and local laws to engage in the business and transactions described
in this Agreement. Agent and the Participating Organization agree to
comply with the requirements of all applicable laws, including any
applicable federal and state securities laws, the rules and regulations of
the SEC, and the rules and regulations issued by applicable federal bank
regulatory agencies. Agent and the Participating Organization agree that
they will not make Investor A Shares available for purchase to persons in
any jurisdiction in which such Shares are not registered for sale or in
which such Shares may not be lawfully sold. Agent and the Participating
Organization further agree that they will maintain all records required by
applicable law or otherwise reasonably requested by the Distributor in
relation to fund transactions that they have executed.
2.3 By written acceptance of this Agreement, Agent and the Participating
Organization agree to and do waive such portion of the fee payable under
Section 3 as is necessary to assure that the amount of such fee which is
required to be accrued by the Funds on any day with respect to such Funds'
Shares does not exceed the income to be accrued to the Shares on such
Funds on that day. The amount of the fee which must be waived by Agent
and the Participating Organization under this Section 2.4 will be
determined by the Distributor and will be based on Agent's pro rata
portion of the fees payable under the Funds' Plan (including those fees
payable to the Distributor and other organizations providing distribution
assistance with respect to such Funds' Shares and/or Shareholder services
to the holders of such Funds' Shares) that exceed the daily income to be
accrued to the Shares of such Funds.
2.4 By written acceptance of this Agreement, Agent and Participating
Organization represent, warrant and agree that: (i) the Participating
Organization will disclose to Customers the order execution that it or
Agent will perform pursuant to this agreement, other than those already
disclosed in the Prospectuses and in Fund applications, and a schedule of
any fees that the Participating Organization or Agent may charge directly
to Customers for services it performs in connection with investments in
the Group on the customer's behalf and (ii) any and all compensation
payable to Agent and the Participating Organization by Customers in
connection with the investment of their assets in the Group will be
disclosed by the Participating Organization to Customers.
2
<PAGE> 3
3. PURCHASE AUTHORIZATION; ORDER EXECUTION; OFFERING PRICE; DISTRIBUTION FEE
3.1 In all sales of Shares to Qualified Accounts, Agent and the Participating
Organization shall act as agent for their Customers and in no such
transaction shall Agent or Participating Organization act as dealer for
its own account. As agent for its Customers, Agent is hereby authorized
to: (i) place orders directly with the Funds' transfer agent for the
purchase of Shares and (ii) tender Shares to the transfer agent for
redemption, in each case subject to the terms and conditions set forth in
the Prospectus and the operating procedures and policies established by
the Distributor. The minimum dollar purchase of Shares shall be the
applicable minimum amount set forth in the Prospectus, and no order for
less than such amount shall be accepted by Agent or the Participating
Organization. The procedures relating to the handling of orders will be
subject to instructions which the Distributor shall forward to Agent or
the Participating Organization from time to time. For purposes of this
Agreement, Agent and the Participating Organization will be deemed to be
independent contractors, and will have no authority to act as agent for
the Distributor in any matter or in any respect.
3.2 All orders are subject to acceptance or rejection by the Distributor in
its sole discretion. No person is authorized to make any representations
concerning the Distributor, the Group, or a Fund's Shares except such
representations contained in the relevant then- current Prospectuses and
Statement of Additional Information and in such printed information as the
Group or the Distributor may subsequently prepare. Agent and the
Participating Organization are specifically authorized to distribute the
Prospectuses and Statement of Additional Information and sales material
received by them from the Distributor. No person is authorized to
distribute any other sales material relating to a Fund without the prior
approval of the Distributor. Agent and the Participating Organization
agree to deliver, upon the request of the Distributor, copies of any
relevant amended Prospectuses and Statement of Additional Information to
Customers to whom Shares have been sold.
3.3 Agent and the Participating Organization shall not withhold placing
Customers' orders for any Shares so as to profit themselves as a result of
such withholding. Distributor shall not purchase any Shares from the
Funds except for the purpose of covering purchase orders already received,
and Agent and the Participating Organization shall not purchase any Shares
from the Distributor except for the purpose of covering the purchase
orders already received.
3.4 If any Shares purchased by Agent or the Participating Organization are
repurchased by the Funds or by the Distributor for the account of the
Funds, or are tendered for redemption within seven (7) business days after
confirmation by the Distributor of the original purchase order for such
Shares, (1) Agent and the Participating Organization agree forthwith to
refund to the Distributor the full concession allowed to Agent, if any, on
the original sale, such refund to be paid by the Distributor to the Fund
whose Shares have been so repurchased upon receipt and (2) the Distributor
shall forthwith pay to such Fund that part of the discount retained by the
Distributor on the original sale. Notice will be given to Agent of any
such repurchase or redemption within ten (10) days of the date which the
repurchase or redemption is requested.
3
<PAGE> 4
3.5 No party to this Agreement shall, as agent, purchase any Shares from a
Qualified Account at a price lower than the net asset value next computed
by or for the issuer thereof. Nothing in this subparagraph shall prevent
Agent or the Participating Organization from selling Shares for the
account of a Qualified Account to the Distributor or the issuer and
charging the investor a fair commission for handling the transaction.
3.6 The Distributor will furnish Agent and Participating Organization, on
request, with offering prices for the Shares in accordance with the
then-current Prospectuses of the respective Funds of the Group, and Agent
and the Participating Organization agree to quote such prices subject to
the confirmation by the Distributor on any Shares offered to Agent and the
Participating Organization for sale. The public offering price equals the
net asset value per Share of the respective Fund plus a sales charge, if
any, as disclosed in the Prospectus of the individual Fund. The
Distributor hereby may, at its discretion, waive the front-end sales
charges, if any, typically charged for the purchase of Investor A Shares
for purchases executed by Agent on behalf of the Qualified Accounts.
Agent and the Participating Organization acknowledge the fact that each
price is always subject to confirmation, and will be the price next
computed after receipt of an order. Agent and the Participating
Organization acknowledge that it is Agent's responsibility to transmit
purchase orders promptly to the Distributor. Agent and the Participating
Organization further acknowledge that any failure to promptly transmit
such orders to the Distributor that causes a Qualified Account to receive
an improper price, based upon the requirements of Rule 22c-1 under the
1940 Act, shall be the joint and several responsibility of Agent and the
Participating Organization and shall not be the responsibility of the
Distributor. The Distributor reserves the right to cancel this Agreement
at any time without notice if any Share shall be offered for sale by Agent
or the Participating Organization at less than the then-current offering
price determined by or for the respective Fund.
3.7 Agent shall be entitled to receive a distribution fee ("12b-1 Fee"),
pursuant to the Plan, attached as Exhibit B, from Distributor at a rate
calculated on a per annum basis of the net asset value of the Group's
Investor A Shares, as computed in the manner specified in the Group's
registration statement (as the same is in effect from time to time) and
indicated on Exhibit A, purchased by Agent and the Participating
Organization as agent for their Customers. Agent shall also be entitled
to a concession which shall be that portion of the front-end sales load
identified in the Prospectuses payable by Winsbury as a commission for
sales of Shares to Qualified Accounts. Any amounts payable to
Participating Organization for services under this Agreement shall be paid
by Agent and shall not be the responsibility of the Distributor.
3.8 Agent, the Participating Organization and their employees will, upon
request, be available during normal business hours to consult with the
Distributor or its designees concerning the performance of Agent's or the
Participating Organization's responsibilities under this Agreement. Any
person authorized to direct the disposition of monies paid or payable by
the Distributor pursuant to Section 3 of this Agreement will provide to
the Distributor the Group's Board of Trustees, and the Group's Trustees
will review at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In
addition, Agent and the Participating Organization will furnish to the
Distributor, the Group or their designees such information as the
Distributor, the Group
4
<PAGE> 5
or their designees may reasonably request (including, without limitation,
periodic certifications confirming the provision to Customers of the
services described herein), and will otherwise cooperate with the
Distributor, the Group and their designees (including, without limitation,
any auditors designed by the Group), in the preparation of reports to the
Group's Board of Trustees concerning this Agreement and the monies paid or
payable by the Distributor pursuant hereto, as well as any other reports or
filings that may be required by law.
4. EXCULPATION; INDEMNIFICATION
4.1 The Distributor shall not be liable to Agent nor the Participating
Organization and Agent and the Participating Organization shall not be
liable to the Distributor except for acts or failures to act which
constitute lack of good faith or gross negligence and for obligations
expressly assumed by either party hereunder. Nothing contained in this
Agreement is intended to operate as a waiver by the Distributor or by
Agent or the Participating Organization of compliance with any provisions
of the Securities Act, the Securities Exchange Act of 1934, the 1940 Act,
the rules and regulations promulgated by the SEC, the NASD or any state
securities administrator, or the applicable rules and regulations
promulgated by federal banking agencies.
4.2 Agent and the Participating Organization will indemnify the Distributor
and hold it harmless from any claims or assertions relating to the
lawfulness of Agent's or the Participating Organization's participation in
this Agreement and the transactions contemplated hereby or relating to any
activities of any persons or entities affiliated with Agent or the
Participating Organization which are performed in connection with the
discharge of Agent's or the Participating Organization's responsibilities
under this Agreement. If such claims are asserted, the Distributor shall
have the right to manage its own defense, including the selection and
engagement of legal counsel, and all costs of such defense shall be born
by Agent and the Participating Organization.
4.3 The Distributor will indemnify Agent and the Participating Organization
and will hold Agent and the Participating Organization harmless from any
claims or assertions relating to the lawfulness of the Distributor's
participation in this Agreement and the transactions contemplated hereby
or relating to any activities or any persons or entities affiliated with
the Distributor which are performed in connection with the discharge of
the Distributor's responsibilities under this Agreement. If any such
claims are asserted, Agent and the Participating Organization shall have
the right to manage their own defense, including the selection and
engagement of legal counsel, and all costs of such defense shall be born
by the Distributor.
5. GENERAL
5.1 This Agreement will become effective with respect to each Fund on the date
indicated on the first page of this Agreement. Unless sooner terminated
with respect to any Fund, this Agreement may also be terminated at any
time without penalty by the vote of a majority of the members of the Board
of Trustees of the Group who are not "interested persons" (as such term is
defined in the 1940 Act) and who have no direct or indirect interest in
5
<PAGE> 6
the Plan relating to such Fund or any agreement relating to such Plan,
including this Agreement, or (with respect to a Fund) by a vote of the
majority of the outstanding voting securities of that Fund (as such term is
defined in the Statement of Additional Information), cast in person at a
meeting called for the approval of voting on such approval, on sixty (60)
days' written notice.
5.2 This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by the Distributor or by the
Agent or by the Participating Organization, without penalty, upon sixty
(60) days' prior written notice to the other party. This Agreement may
also be terminated at any time without penalty by the vote of a majority
of the members of the Board of Trustees of the Group who are not
"interested persons" (as such term is defined in the 1940 Act) and who
have no direct or indirect interest in the Plan relating to such Fund or
any agreement relating to such Plan, including this Agreement, or (with
respect to a Fund) by a vote of the majority of the outstanding voting
securities of that Fund (as such term is defined in the Statement of
Additional Information), cast in person at a meeting called for the
purpose of voting on such approval, on sixty (60) days' written notice.
5.3 All communications to the Distributor shall be sent to the address set
forth in this Agreement or at such other address as the Distributor may
designate to Agent in writing. Any notice to Agent or Participating
Organization shall be duly given if mailed or telecopied to Agent at the
address or addresses as the Agent may provide in writing to the
Distributor. All communications delivered to Agent pursuant to this
Agreement shall be deemed to be delivered to Participating Organization.
5.4 This Agreement supersedes any other Agreement between the Distributor and
Participating Organization and any other Agreement between the Distributor
and Agent with respect to the offer and sales of Investor A Shares of the
Group to Qualified Accounts and relating to any other matters discussed
herein. All covenants, agreements, and representations and warranties
made herein shall be deemed to have been material and relied on by each
party, not withstanding any investigation by either party or on behalf of
either party, and shall survive the execution and delivery of this
Agreement. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term
or provision hereof. The headings in this Agreement are for convenience
of reference only and shall alter or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts which
together shall constitute one instrument and shall be governed by a
construed in accordance of the laws (other than the conflict of laws
rules) of the State of Ohio and shall bind and inure to the benefit of the
parties hereto and the respective successors and assigns.
5.5 This Agreement is a Related Agreement under the Plan.
5.6 The names "The Parkstone Group of Funds" and "Trustees of the Parkstone
Group of Funds" refer respectively to the trust created and the trustees,
as trustees but not individually or personally, acting from time to time
under a Declaration of Trust dated as of March 25, 1987, to which
reference is hereby made and a copy of which is on file at the Office of
the Secretary of the Commonwealth of Massachusetts and elsewhere as
6
<PAGE> 7
required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Parkstone Group of Funds" entered
into in the name of or on behalf thereof by any of the trustees,
representatives or agents are not made individually, but in such
capacities, and are not binding upon any of the trustees, shareholders, or
representatives of the Group personally, but bind only the assets of the
Group and all persons dealing with any series of shares of the Group must
look solely to the assets of the Group belonging to such series for the
enforcement of any claims against the Group.
5.7 All communications to the Distributor shall be sent to the following
address:
The Winsbury Company
1900 East Dublin-Granville Road
Columbus, OH 43229
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
On behalf of itself and First of
America Brokerage Service, Inc.
By: /s/ Susan L. Currier
-------------------------
Susan L. Currier
President
7
<PAGE> 8
EXHIBIT A
The Parkstone Group of Funds
Investor A Share Fund Fee
--------------------- ---
1. Parkstone U.S. Government Obligations Fund 0.10%
2. Parkstone Tax-Free Fund 0.10%
3. Parkstone Prime Obligations Fund 0.10%
4. Parkstone Treasury Fund 0.10%
5. Parkstone Municipal Investor Fund 0.10%
6. Parkstone Equity Fund 0.25%
7. Parkstone Small Capitalization Fund 0.25%
8. Parkstone High Income Equity Fund 0.25%
9. Parkstone International Discovery Fund 0.25%
10. Parkstone Balanced Fund 0.25%
11. Parkstone Bond Fund 0.25%
12. Parkstone Limited Maturity Bond Fund 0.25%
13. Parkstone Michigan Municipal Bond Fund 0.25%
14. Parkstone Municipal Bond Fund 0.25%
15. Parkstone U.S. Government Income Fund 0.25%
16. Parkstone Intermediate Government Obligations Fund 0.25%
The Fees indicated above are subject to disclosure in the Prospectuses. The
parties hereto agree that Fees payable shall be governed by such Prospectus
disclosure notwithstanding any conflict with the figures set forth above.
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
On behalf of itself and First of America
Brokerage Service, Inc.
By: /s/ Susan L. Currier
-------------------------
Susan L. Currier
President
A-1
<PAGE> 9
EXHIBIT B
Investor A Distribution and Shareholder Service Plan
This Plan (the "Investor A Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
(the "Trust"), adopted pursuant Rule 12b-1 under the Investment Company Act of
1940, as amended, (the "1940 Act"). The Investor A Plan relates to the
Investor A Shares of those investment portfolios identified on Schedule B to
the Trust's Distribution Agreement and as amended form time to time (the
"Investor A Plan Funds").
Section 1. Each Investor A Plan Fund shall pay to The Winsbury Company
Limited Partnership, an Ohio limited partnership and the distributor (the
"Distributor") of the Trust's shares of beneficial interest of its Investor A
class (the "Investor A Shares"), a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of the Investor A Shares of
such Fund (the "Investor A Plan Fee") for: (a) payments the Distributor makes
to banks and other institutions and broker/dealers (a "Participating
Organization") for distribution assistance and/or Shareholder service pursuant
to an agreement with the Participating Organization or for distribution
assistance and/or Shareholder service provided by the Distributor pursuant to
an agreement between the Distributor and the Trust; or (b) reimbursement of
expenses incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance and/or Shareholder service including,
but not limited to, the reimbursement of expenses relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor A
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders used in connection with the sale of Investor A Shares,
and personnel and communication equipment used in servicing Shareholder
accounts and prospective shareholder inquiries. For purposes of the Investor A
Plan, a Participating Organization may include the Distributor or any of its
affiliates or subsidiaries.
Section 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Funds to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Investor A Plan shall not take effect with respect to an
Investor A Plan Fund until it has been approved by a vote of at least a
majority of the outstanding Investor A Shares of such Fund.
Section 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
B-1
<PAGE> 10
Section 5. The Investor A Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor A Plan Funds pursuant to the Investor A Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor A Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor A Shares of an Investor A Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor A Plan shall be in writing, and any agreement related to the Investor
A Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan Fund,
on not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor A Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material
amendments to the Investor A Plan shall be approved in the manner provided for
approval of the Investor A Plan in Section 4.
Section 10. As used in the Investor A Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor A Plan or any agreements related to it, and (b) the
terms "assignment", "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
B-2
<PAGE> 1
Exhibit 15(a)(iii)(a)
DATED: NOVEMBER 8, 1995
EXHIBIT A
TO THE
PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA SECURITIES, INC.
DATED SEPTEMBER 21, 1994
<TABLE>
<CAPTION>
NAME OF INVESTOR A FUND FEE
- ----------------------- ---
<S> <C>
1. Parkstone U.S. Government Obligations Fund 0.10%
2. Parkstone Tax-Free Fund 0.10%
3. Parkstone Prime Obligations Fund 0.10%
4. Parkstone Treasury Fund 0.10%
5. Parkstone Municipal Investor Fund 0.10%
6. Parkstone Equity Fund 0.25%
7. Parkstone Small Capitalization Fund 0.25%
8. Parkstone High Income Equity Fund 0.25%
9. Parkstone International Discovery Fund 0.25%
10. Parkstone Balanced Fund 0.25%
11. Parkstone Bond Fund 0.25%
12. Parkstone Limited Maturity Bond Fund 0.25%
13. Parkstone Michigan Municipal Bond Fund 0.25%
14. Parkstone Municipal Bond Fund 0.25%
15. Parkstone U.S. Government Income Fund 0.25%
16. Parkstone Intermediate Government Obligations Fund 0.25%
17. Parkstone Large Capitalization Fund 0.25%
</TABLE>
The Fees indicated above are subject to disclosure in the Prospectuses. The
parties hereto agree that Fees payable shall be governed by such Prospectus
disclosure notwithstanding any conflict with the figures set forth above.
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury
Company Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
On behalf of itself and First of
America Brokerage Service, Inc.
By: /s/ Susan L. Currier
-------------------------
Susan L. Currier
President & CEO
<PAGE> 1
Exhibit 15(b)
THE PARKSTONE GROUP OF FUNDS
INVESTOR B DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Investor B Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
("the Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor B Plan relates to the
Investor B Shares of those investment portfolios identified on Schedule D to
the Trust's Distribution Agreement and as amended from time to time (the
"Investor B Plan Funds").
Section 1. Each Investor B Plan Fund is authorized to pay to The Winsbury
Company Limited Partnership, an Ohio limited partnership and the distributor
("the Distributor") of the Trust's shares of beneficial interest of its
Investor B class (the "Investor B Shares");
(a) a distribution fee in an amount not to exceed on an annual basis .75% of
the average daily net asset value of the Investor B Shares of such Fund (the
"Distribution Fee") for: (i) payments the Distributor makes to banks and
other institutions and broker/dealers (a "Participating Organization") for
distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (ii)
reimbursement of expenses incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including, but not
limited to, the reimbursement of expense relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor B
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders for use in connection with the sales of Investor B
Shares, processing purchase, exchange and redemption requests from customers
and placing orders with the Distributor or the Trust's transfer agent, and
personnel and communication equipment used in servicing Shareholder accounts
and prospective shareholder inquiries; and
(b) a service fee in an amount not to exceed on an annual basis .25% of the
average daily net asset value of the Investor B Shares of such Fund (the
"Service Fee") for (i) payments the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust;
or (ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with Shareholder service including,
but not limited to, personal, continuing services to investors in the
Investor B Shares of a Fund, providing sub-accounting, arranging for bank
wires, and providing office space, equipment, telephone facilities and
various personnel including clerical, supervisory and computer, as is
necessary or beneficial in connection therewith.
For purposes of the Investor B Plan, a Participating Organization may include
the Distributor or any of its affiliates or subsidiaries.
<PAGE> 2
Section 2. The Distribution Fee and the Service Fee shall be paid by the
Investor B Plan Funds to the Distributor only to compensate or to reimburse the
Distributor for payments or expenses incurred pursuant to Section 1.
Section 3. The Investor B Plan shall not take effect with respect to the
Investor B Shares of any Investor B Plan Fund until it has been approved by a
vote of the initial Shareholder of the Investor B Shares of such Fund.
Section 4. The Investor B Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor B Plan or
such agreement.
Section 5. The Investor B Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor B Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor B Plan Funds pursuant to the Investor B Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor B Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor B Shares of an Investor B Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor B Plan shall be in writing, and any agreements related to the Investor
B Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor B Shares of the Investor B Plan Fund,
on not more than 50 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor B Plan may not be amended to increase materially the
amount of the Distribution Fee and Service Fee permitted pursuant to Section 1
hereof without approval in the manner provided in Section 3 hereof, and all
material amendments to the Investor B Plan shall be approved in the manner
provided for approval of the Investor B Plan in Section 4.
-2-
<PAGE> 3
Section 10. As used in the Investor B Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor B Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
Adopted by the Trustees: January 26, 1993
Adopted by the initial Investor B Shareholder: November 1, 1993
-3-
<PAGE> 1
Exhibit (15)(b)(i)
SHAREHOLDER SERVICES
AND FINANCING AGREEMENT
AGREEMENT made as of this 1st day of February, 1994, by and between The
Winsbury Company Limited Partnership d/b/a The Winsbury Company (the
"Distributor"), having its principal place of business at 1900 East
Dublin-Granville Road, Columbus, Ohio, and Security Distributors, Inc.
("SDI"), having its principal place of business at 700 Harrison Street, Topeka,
Kansas 66636, relating to financing assistance and shareholder support services
in connection with the sale of certain units of beneficial interest ("Investor
B Shares") of The Parkstone Group of Funds (the "Trust").
WHEREAS, the Trust is an open-end management investment company, organized as
a Massachusetts business trust and registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act");
WHEREAS, the Trust offers three separate classes of shares, including
Investor B Shares for each of the non-money market investment portfolios of the
Trust (individually, a "Fund"; collectively the "Funds") that are identified in
Schedule A hereto;
WHEREAS, the Investor B Shareholders of each Fund have adopted a Distribution
Plan (the "Investor B Plan") pursuant to Rule 12b-1 under the 1940 Act;
WHEREAS, the Investor B Plan authorizes the Distributor to enter into
agreements with third parties to implement such Plan;
WHEREAS, it is intended that SDI (a) arrange for an affiliate, Security
Benefit Group, Inc. (the "Affiliate"), to provide financing assistance in the
form of commission payments made to participating organizations (as defined
below) who sell Investor B Shares and (b) provide shareholder support services
to certain Investor B Shareholders, each in accordance with the Investor B
Plan; and
WHEREAS, it is intended that SDI or the Affiliate be compensated for such
financing assistance, as more fully described below.
NOW, THEREFORE, intending to be legally bound, the Distributor and SDI hereby
agree as follows:
1. REFERENCE TO PROSPECTUS; DETERMINATION OF NET ASSET VALUE.
1.1 Reference is made to the prospectus for Investor B Shares of each Fund
(individually, a "Prospectus"; collectively, the "Prospectuses") as from
time to time are effective under the Securities Act of 1933 (the "1933
Act"). Terms defined therein and not otherwise defined herein are used
herein with the meaning so defined.
<PAGE> 2
1.2 For purposes of determining the fees payable to SDI under Section 4, the
average daily net asset value of a Fund's Investor B Shares will be
computed in the manner specified in the Trust's registration statement (as
the same is in effect from time to time) in connection with the
computation of the net asset value of such Fund's Investor B Shares for
purposes of purchases and redemptions.
2. PROVISION OF FINANCING ASSISTANCE.
Under the terms of each Prospectus for Investor B Shares, the public
offering price of such Shares is equal to the net asset value per Share,
subject to a contingent deferred sales charge ("CDSC") that is more fully
described therein. The Distributor will receive CDSC payments from
Investor B Shareholders when such Shareholders redeem their Shares under
certain circumstances described in the Prospectuses. The Distributor shall
be responsible for the proper calculation of all CDSC payments due from
Investor B Shareholders and shall maintain such records as are necessary to
document the proper calculation of such payments. The Distributor shall
make such records available to SDI for inspection upon not more than five
business days notice. The purpose of a CDSC is to provide compensation to
participating organizations (i.e., (a) broker-dealers that are registered
pursuant to the Securities Exchange Act of 1934, as amended (the "1934
Act"), and that are members of the National Association of Securities
Dealers, Inc. (the "NASD") and (b) banks as defined in Section 3(a)(6) of
the 1934 Act that are not required to register as broker-dealers pursuant
to the 1934 Act) ("Participating Organizations") for the sale of Investor B
Shares. In order to compensate Participating Organizations for such sales
at the time those sales take place, SDI agrees to arrange for payments to
be made by the Affiliate to those Participating Organizations that may,
from time to time, enter into agreements with the Distributor for the
distribution of Investor B Shares. The terms and conditions of such
payments shall be set forth in separate agreements between SDI, the
Affiliate, the Distributor and those Participating Organizations (the
"Service and Commission Agreements"), which terms and conditions shall
include representations and warranties by such Participating Organizations
as to the legal authority for their entry into and performance of
obligations under the Service and Commission Agreements.
3. PROVISION OF SHAREHOLDER SUPPORT SERVICES.
3.1 SDI is hereby authorized and agrees to provide assistance to Investor B
Shareholders that are customers of First of America Bank Corporation or
its affiliates or customers of other organizations ("Customers"). Such
assistance shall be in the form of responding to inquiries from such
Customers regarding their fund accounts.
3.2 Upon receiving written consent of the Distributor, SDI may, at its
expense, subcontract with any entity or person concerning the provision of
the services contemplated under paragraph 3.1; provided, however, that (a)
SDI shall not be relieved of any of its obligations under this Agreement
by the appointment of such subcontractor, (b) SDI shall
-2-
<PAGE> 3
be responsible, to the extent provided in paragraph 6.1 hereof, for all
acts of such subcontractor as if such acts were its own and (c) the
Distributor acknowledges that such subcontractors may not be under the
direct supervision and control of SDI and SDI may obtain indemnification
making such subcontractor responsible for SDI's obligations under this
Agreement.
3.3 SDI will provide or, subject to paragraph 3.2, will arrange for a
subcontractor to provide, such office space and equipment, telephone
facilities, and personnel as may be reasonably necessary or beneficial in
order to provide such services to Customers.
4. FINANCING ASSISTANCE FEE AND SHAREHOLDER SERVICES FEE; PAYMENT OF
CONTINGENT DEFERRED SALES CHARGE AMOUNTS.
4.1 In consideration of the financing assistance provided by SDI hereunder,
the Distributor will pay to the Affiliate, and SDI will accept as full
payment therefor, subject to the provisions of paragraphs 4.3 and 7.2, (a)
a fee calculated at the applicable annual rate set forth in Schedule B
hereto with respect to the average daily net asset value of each Fund's
Investor B Shares, which fee will be computed daily and paid monthly and
(b) all CDSCs that are received by the Distributor from Investor B
Shareholders in accordance with the schedule and all other applicable
provisions contained in the then-current prospectuses for each Fund's
Investor B Shares.
4.2 In consideration of the shareholder support services provided by SDI
hereunder, the Distributor will pay to SDI, and SDI will accept as full
payment therefor, a fee calculated at the applicable annual rate set forth
in Schedule C hereto with respect to the average daily net asset value of
each Fund's Investor B Shares which are held of record by First of America
Bank Corporation from time to time on behalf of Customers, which fee will
be computed daily and paid monthly.
4.3 With respect to the fee rates set forth in Schedules B and C hereto and
the CDSC described herein, it is understood that such rates and charges
may be prospectively increased or decreased by the Trust at any time upon
notice to SDI. It is hereby agreed that, in the event of such an increase
or decrease, the commission amounts payable to broker-dealers described in
Section 2 above shall be adjusted upward or downward as is reasonably
necessary upon mutual agreement of the parties hereto. In the event that
the parties hereto fail to mutually agree upon an acceptable adjustment of
the commission amounts described in Section 2 above, either of the parties
hereto may terminate this Agreement in accordance with paragraph 7.2
below.
4.4 The fees that are otherwise payable pursuant to paragraphs 4.1 and 4.2
above shall be subject to the limitations on the payment of asset- based
sales charges that are set forth in Article III, Section 26 of the Rules
of Fair Practice promulgated by the NASD.
-3-
<PAGE> 4
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
5.1 The Distributor represents and warrants that it is the duly authorized and
appointed distributor of the Investor B Shares of each Fund, and that it
is authorized to enter into this Agreement pursuant to the Investor B
Plan.
5.2 In the event it subcontracts, pursuant to paragraph 3.2, its rights and
responsibilities to provide shareholder support services hereunder,
subject to the prior written consent of the Distributor, SDI represents,
warrants and agrees that it will use its best efforts to determine that
the subcontractor possesses the legal authority to perform such services
without violation of any applicable laws and regulations (including
Federal banking laws, if applicable). If requested by SDI to assist in
the determination that a subcontractor possesses such legal authority, the
Distributor will use its best efforts to provide such assistance.
6. EXCULPATION; INDEMNIFICATION.
6.1 The Distributor shall not be liable to SDI and SDI shall not be liable to
the Distributor except for acts or failures to act which constitute a lack
of good faith or gross negligence and for obligations expressly assumed by
either party hereunder. Nothing contained in this Agreement is intended
to operate as a waiver by the Distributor or by SDI of compliance with any
applicable federal or state law, rule, or regulation or the rules and
regulations promulgated by the NASD.
6.2 Each party (the "Indemnifying Party") hereto shall indemnify the other
party to this Agreement (the "Indemnified Party") and hold the Indemnified
Party harmless from any claims or assertions relating to the lawfulness of
the Indemnifying Party's participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with the Indemnifying Party performed in
connection with the discharge of its responsibilities under this
Agreement. If any such claims are asserted, the Indemnified Party shall
have the right to manage its own defense, including the selection and
engagement of legal counsel of its choosing, and all costs of such defense
shall be borne by the Indemnifying Party.
7. EFFECTIVE DATE; TERMINATION.
7.1 This Agreement will become effective with respect to each Fund on the date
a fully executed copy of this Agreement is received by the Distributor or
its designee. Unless sooner terminated with respect to any Fund, this
Agreement will continue with respect to a Fund until December 31, 1995,
and thereafter will continue automatically for successive annual periods
ending on December 31 of each year, provided such continuance is
specifically approved at least annually by the vote of a majority of the
members of the Board of Trustees of the Trust who are not "interested
persons" (as such term is defined in the 1940 Act) and who have no direct
or indirect financial interest in
-4-
<PAGE> 5
the Plan relating to such Fund or any agreement relating to such Plan,
including this Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
7.2 This Agreement will automatically terminate with respect to a Fund in the
event of its assignment (as such term is defined in the 1940 Act) with
respect to such Fund. This Agreement may be terminated with respect to
any Fund by the Distributor or by SDI, without penalty, upon sixty days'
prior written notice to the other party. This Agreement may also be
terminated with respect to any Fund at any time without penalty by the
vote of a majority of the members of the Board of Trustees of the Trust
who are not "interested persons" (as such term is defined in the 1940 Act)
and who have no direct or indirect financial interest in the Plan relating
to such Fund or any agreement relating to such Plan, including this
Agreement, or by a vote of a majority of the Shares of such Fund on sixty
days' written notice.
8. GENERAL.
8.1 All notices and other communications to either SDI or the Distributor will
be duly given if mailed, telegraphed or telecopied to the appropriate
address set forth on page 1 hereof, or at such other address as either
party may provide in writing to the other party.
8.2 The Distributor may enter into other similar agreements for the provision
of Shareholder services with any other person or persons without SDI's
consent.
8.3 This Agreement supersedes any other agreement between the Distributor and
SDI relating to the provision of financing assistance and shareholder
support services. All covenants, agreements, representations, and
warranties made herein shall be deemed to have been material and relied on
by each party, notwithstanding any investigation made by either party or
on behalf of either party, and shall survive the execution and delivery of
this Agreement. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any
other term or provision hereof. The headings in this Agreement are for
convenience of references only and shall not alter or otherwise affect the
meaning hereof This Agreement may be executed in any number of
counterparts which together shall constitute one instrument and shall be
governed by and construed in accordance with the laws (other than the
confLict of laws rules) of the State of Ohio and shall bind and inure to
the benefit of the parties hereto and their respective successors and
assigns.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first
written above.
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Kenneth B. Quintenz
--------------------------
Title: Senior Vice President
SECURITY DISTRIBUTORS, INC.
By: /s/ James R. Schmank
-------------------------
Title: Treasurer
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<PAGE> 7
SCHEDULE A
TO THE
SHAREHOLDER SERVICES AND FINANCING AGREEMENT
BETWEEN THE WINSBURY COMPANY LIMITED PARTNERSHIP
AND SECURITY DISTRIBUTORS, INC.
NAME OF THE FUND
Parkstone Bond Fund
Parkstone Limited Maturity Fund
Parkstone Intermediate Government Obligations Fund
Parkstone Municipal Bond Fund
Parkstone U.S. Government Income Fund
Parkstone Michigan Municipal Bond Fund
Parkstone Equity Fund
Parkstone Small Capitalization Fund
Parkstone High Income Equity Fund
Parkstone International Discovery Fund
Parkstone Balanced Fund
THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By: The Winsbury Corporation, SECURITY DISTRIBUTORS, INC.
General Partner
By: /s/ Kenneth B. Quintenz By: /s/ James R. Schmank
-------------------------- --------------------------
Title: Senior Vice President Title: Treasurer
---------------------- ----------------------
Date: March 4, 1994 Date: 5/20/94
------------------------ -----------------------
A-1
<PAGE> 8
SCHEDULE B
TO THE
SHAREHOLDER SERVICES AND FINANCING AGREEMENT
BETWEEN THE WINSBURY COMPANY LIMITED PARTNERSHIP
AND SECURITY DISTRIBUTORS, INC.
Compensation for Financing Assistance*__
Annual rate of up to 75 one-hundredths of one percent (.75%) of the
average daily net assets of the Investor B Shares of each Fund that is
identified in Schedule A.
THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By: The Winsbury Corporation, SECURITY DISTRIBUTORS, INC.
General Partner
By: /s/ Kenneth B. Quintenz By: /s/ James R. Schmank
-------------------------- -----------------------
Title: Senior Vice President Title: Treasurer
---------------------- --------------------
Date: March 4, 1994 Date: 5/20/94
----------------------- ---------------------
____________
*All fees are computed daily and paid monthly.
B-1
<PAGE> 9
SCHEDULE C
TO THE
SHAREHOLDER SERVICES AND FINANCING AGREEMENT
BETWEEN THE WINSBURY COMPANY LIMITED PARTNERSHIP
AND SECURITY DISTRIBUTORS, INC.
Compensation for Shareholder Support Services
Annual rate of up to 25 one-hundredths of one percent (.25%) of the
average daily net assets of the Investor B Shares of each Fund identified
in Schedule A that are held of record by First of America Bank Corporation
from time to time on behalf of Customers.
THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By: The Winsbury Corporation, SECURITY DISTRIBUTORS, INC.
General Partner
By: /s/ Kenneth B. Quintenz By: /s/ James R. Schmank
-------------------------- ----------------------
Title: Senior Vice President Title: Treasurer
----------------------- -------------------
Date: March 4, 1994 Date: 5/20/94
----------------------- --------------------
C-1
<PAGE> 1
Exhibit (15)(b)(ii)
SERVICE AND COMMISSION AGREEMENT
Agreement made as of this 1st day of February, 1994, by and between The
Winsbury Company Limited Partnership d.b.a. The Winsbury Company (the
"Distributor"), having its principal place of business at 1900 East
Dublin-Granville Road, Columbus, Ohio, and Security Distributors, Inc.
("SDI"), having its principal place of business at 700 Harrison Street, Topeka,
Kansas 66636, and Security Benefit Group, Inc. ("SBG"), having its principal
place of business at 700 Harrison Street, Topeka, Kansas 66636, and First of
America Brokerage Services, Inc. ("FOABS"), having its principal place of
business at 157 South Kalamazoo Mall, Kalamazoo, Michigan 49003-4077, relating
to shareholder support services in connection with the sale of certain units of
beneficial interest ("Investor B Shares") of The Parkstone Group of Funds (the
"Trust").
WHEREAS, the Trust is an open-end management investment company, organized as a
Massachusetts business trust and registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act");
WHEREAS, the Trust offers three separate classes of shares, including Investor
B Shares for each of the non-money market investment portfolios of the Trust
(individually, a "Fund"; collectively the "Funds") that are identified in
Schedule A hereto;
WHEREAS, the Investor B shareholders of each Fund have adopted a Distribution
Plan (the "Investor B Plan") pursuant to Rule 12b-1 under the 1940 Act;
WHEREAS, the Investor B Plan authorizes the Distributor to enter into
agreements with third parties to implement such Plan;
WHEREAS, it is intended (1) that SBG provide financing assistance related to
the distribution of Investor B shares and (2) that shareholder support services
be provided to certain Investor B shareholders, each in accordance with the
Investor B Plan;
WHEREAS, the Distributor and SDI have entered into a Shareholder Services and
Financing Agreement dated as of February 1, 1994 (the "Financing Agreement");
WHEREAS, the Distributor and FOABS have entered into a Dealer Agreement dated
as of February 1, 1994 (the "Dealer Agreement");
WHEREAS, FOABS intends to perform certain brokerage and related services in
connection with the purchase of Investor B shares by its customers
("Customers") and to maintain shareholder accounts by such Customers; and
WHEREAS, SBG intends to provide financing assistance, consistent with the
Investor B Plan, in connection with the services performed by FOABS.
<PAGE> 2
NOW, THEREFORE, intending to be legally bound, the Distributor, SDI, SBG and
FOABS hereby agree as follows:
1. SERVICES
1.1 FOABS shall place orders to purchase Investor B Shares, as agent for
Customers, pursuant to the terms of the Dealer Agreement.
1.2 FOABS shall continuously provide shareholder liaison services to
Customers who become Investor B shareholders, responding to inquiries
and providing such information as FOABS and SDI mutually determine to be
appropriate in order to properly maintain such shareholder accounts.
1.3 FOABS shall provide at its own expense such office space, equipment,
facilities and personnel as may be reasonably necessary or beneficial in
order to provide such services to Customers.
2. FEES
2.1 FOABS shall be entitled to receive from SBG, within seven business days
from the date of receipt by the Fund's transfer agent of a purchase
order in proper form, the fees determined in accordance with the terms
set forth in Schedule B hereto.
2.2 The Distributor shall within two business days from the date of receipt
by the Fund's transfer agent of a purchase order in proper form, notify
SDI and SBG by facsimile transmission of the Customer account number,
Fund and purchase amount of each order for which FOABS shall be entitled
to a fee pursuant to Section 2.1 of this Agreement.
2.3 SDI or SBG shall notify the Distributor of the amount of all fees paid
to FOABS pursuant to Section 2.1 during a calendar month within five (5)
business days of the end of such month.
3. PAYMENTS TO SBG AND SDI
The parties acknowledge that SBG and SDI shall be entitled to receive the
amounts identified in the Financing Agreement and the schedules thereto, as now
in effect or subsequently amended, including any contingent deferred sales
charges applicable to redemptions by Customers, in consideration of their
service hereunder and under the Financing Agreement.
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<PAGE> 3
4. REPRESENTATIONS AND WARRANTIES
4.1 Each party hereto represents and warrants to each other party to this
Agreement that it has full corporate power and authority to enter into
and perform this Agreement and that it is not subject to any order,
writ, injunction, law, rule or regulation of any governmental authority
which would be violated by its execution, delivery or performance of
this Agreement.
4.2 FOABS represents and warrants to SDI and SBG that, to the best of its
knowledge after due inquiry and investigation, each party other than
FOABS with whom SDI, SBG and the Distributor enter into an agreement for
terms and conditions substantially similar to this Agreement shall
possess the legal authority to provide shareholder support services
without violation of any applicable laws and regulations (including
Federal banking laws, if applicable).
5. INDEMNIFICATION
5.1 Each party (the "Indemnifying Party") hereto shall indemnify all other
parties to this Agreement and hold such parties harmless from any claims
or assertions relating to the lawfulness of the Indemnifying Party's
participation in this Agreement and the performance of such Indemnifying
Party's obligations hereunder, as well as such Indemnifying Party's
activities relating to the performance of its obligations, if any, under
the Dealer Agreement and the Financing Agreement.
5.2 FOABS shall indemnify SDI and hold SDI harmless from any claims or
assertions arising from the acts of any other entity or person with
which SDI subcontracts for the provision of shareholder support services
to Investor B shareholders and shall further indemnify SDI and hold it
harmless from any claims or assertions relating to the legal authority
of such other entity or person to provide shareholder support services
without violation of any applicable laws and regulations (including
Federal banking laws, if applicable).
5.3 If any claim is asserted for which one party may seek indemnification
from an Indemnifying Party, the Indemnifying Party shall be given notice
and shall have the right to manage its own defense, including the
selection and engagement of legal counsel and the Indemnifying party
shall bear all costs of such defense.
6. EFFECTIVE DATE
This Agreement will become effective on the date indicated on the first page of
this Agreement.
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<PAGE> 4
7. TERMINATION
7.1 This Agreement will automatically terminate in the event of its
assignment, as that term is defined in the Investment Company Act of
1940 and rules thereunder.
7.2 This Agreement will automatically terminate in the event of the
termination of the Dealer Agreement or Financing Agreement.
7.3 This Agreement may be terminated without penalty by any party hereto
upon sixty (60) days' prior written notice to each other party or upon
such earlier date to which the parties hereto may agree.
7.4 This Agreement may also be terminated with respect to any Fund at any
time without penalty by the vote of a majority of the members of the
Board of Trustees of the Trust who are not "interested persons" (as such
term is defined in the 1940 Act) and who have no direct or indirect
financial interest in the Plan relating to such Fund or any agreement
relating to such Plan, including this Agreement, or by a vote of a
majority of the Shares of such Fund on sixty (60) days' written notice.
8. COMMISSION CHARGEBACK
8.1 In the event that with respect to a Fund or Funds, the Investor B Plan,
the Dealer Agreement, the Financing Agreement, and this Agreement, or
any of them is terminated, and SBG has not been otherwise paid the
Unrecovered Commissions (as defined in Section 8.3), SDI may request and
FOABS agrees to refund to SBG the Unrecovered Commissions (as defined in
Section 8.3) within 30 days of the Termination Date.
8.2 Each party hereto acknowledges and agrees that payments of the
distribution fees and service fees payable to SDI and SBG under the
Financing Agreement may be suspended with respect to a Fund by the
Distributor to effect compliance with Article III, Section 26(d)(2) of
the Rules of Fair Practice promulgated by the National Association of
Securities Dealers (the "NASD Asset-Backed Sales Charge Rule"). In the
event that the NASD Asset-Backed Sales Charge Rule requires suspension
of such payments with respect to a Fund, FOABS agrees to refund to SBG
commissions received pursuant to this Agreement in an amount equal to
the payments suspended thereby ("Suspended Payments"). FOABS shall make
such refund to SBG in the same manner and frequency as such Suspended
Payments would have been received by SBG under the Financing Agreement;
provided, however, that FOABS shall be obligated to make such refund
with respect to a Fund only for such time as the NASD Asset-Backed Sales
Charge Rule prohibits the payment of distribution fees and service fees
by the Distributor.
-4-
<PAGE> 5
8.3 "Unrecovered Commissions" shall be calculated as of the Termination Date
by adding (1) "Net Commission Payments" and (2) the sum of the "Monthly
Yield Payments." Net Commission Payments are the total cumulative
commissions paid or accrued to be paid by SBG to participating
organizations in connection with sales of Investor B shares pursuant to
this Agreement or a similar agreement from the date of this Agreement to
the Termination Date, less an amount equal to the total cumulative
distribution fees, service fees and CDSCs paid or accrued for payment by
the Distributor to SBG pursuant to the Financing Agreement and amounts
paid by FOABS pursuant to Section 8.2. A Monthly Yield Payment is
determined for each month (or portion of a month) in the period from the
date of this Agreement to the Termination Date by multiplying the
"Average Daily Net Cumulative Payment" by the Rate in effect for that
month. The Rate is based on the Prime Rate as published in the Wall
Street Journal on the first business day of each month plus .25 percent.
The Average Daily Net Cumulative Payment is the average of the amounts
determined, on each day of the month for which the calculation is being
made, by subtracting the cumulative distribution fees, service fees and
CDSCs received by SBG from the Distributor and amounts paid by FOABS
pursuant to Section 8.2 from the cumulative commission payments made by
SBG to participating organizations in connection with sales of Investor
B shares.
In the event that the Termination Date occurs more than twelve (12)
months following the date of this Agreement, then the sum of the Monthly
Yield Payments calculated in each successive 12-month period during the
period from the date of this Agreement to the Termination Date shall be
considered, only for purposes of calculating subsequent Monthly Yield
Payments, to be a commission payment made by SBG to participating
organizations in connection with sales of Investor B shares on the first
day of the succeeding 12-month period. The total commissions paid to
participating organizations in connection with sales of Investor B shares
as referred to in this Section shall not include any amounts refunded to
SBG pursuant to Section 8.2.
In the event that Unrecovered Commissions calculated as of the
Termination Date is an amount of $0 or less, FOABS shall have no
obligation to refund such commissions to SBG.
8.4 The "Termination Date" shall be determined as follows: (i) in the event
of assignment of this Agreement as set forth in Section 7.1, the date on
which the assignment is deemed to have occurred under the 1940 Act; (ii)
in the event that the Dealer Agreement or Financing Agreement is
terminated, the date upon which such termination is deemed to have
occurred; (iii) in the event this Agreement is terminated by either
party as set forth in Section 7.3, the date upon which such termination
is deemed to have occurred; or (iv) in the event this Agreement is
-5-
<PAGE> 6
terminated by the Trustees or Shareholders as set forth in Section 7.4,
the date on which such vote is certified by inspectors of the vote.
9. GENERAL
9.1 Except as otherwise specified herein, all notices and other
communications to a party will be duly given if mailed, telegraphed or
telecopied to the appropriate address set forth on page 1 hereof, or at
such other address as the party may provide in writing to the other
parties.
9.2 All covenants, agreements, representations, and warranties made herein
shall be deemed to have been material and relied on by each party,
notwithstanding any investigation made by any other party or on behalf
of any party, and shall survive the execution and delivery of this
Agreement. If this Agreement terminates, the parties agree that the
provisions set forth in 8.1 through 8.4 will remain in effect. The
invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of any other term or provision
hereof. The headings in this Agreement are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof. This
Agreement may be executed in any number of counterparts which together
shall constitute one instrument and shall be governed by and construed
in accordance with the laws (other than the conflict of laws rules) of
the State of Ohio.
9.3 The names "The Parkstone Group of Funds" and "Trustees of The Parkstone
Group of Funds" refer respectively to the trust created and the
trustees, as trustees but not individually or personally, acting from
time to time under a Declaration of Trust dated as of March 25, 1987, to
which reference is hereby made and a copy of which is on file at the
Office of the Secretary of the Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so
filed or hereafter filed. The obligations of "The Parkstone Group of
Funds" entered into in the name of or on behalf thereof by any of the
trustees, representatives or agents are not made individually, but in
such capacities, and are not binding upon any of the trustees,
shareholders, or representatives of the Group personally, but bind only
the assets of the Group and all persons dealing with any series of
shares of the Group must look solely to the assets of the Group
belonging to such series for the enforcement of any claims against the
Group.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first
written above.
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation, General Partner
By: /s/ Kenneth B. Quintenz
----------------------------
Kenneth B. Quintenz
Senior Vice President
SECURITY DISTRIBUTORS, INC.
By: /s/ James R. Schmank
----------------------------
Vice President
SECURITY BENEFIT GROUP, INC.
By: /s/ Gary L. Eisenbarth
----------------------------
Gary L. Eisenbarth
Executive Vice President
FIRST OF AMERICA BROKERAGE SERVICES,
INC.
By: /s/ Susan L. Currier
----------------------------
Susan L. Currier
President and Chief Executive Officer
-7-
<PAGE> 8
SCHEDULE A Dated: January 31, 1994
THE PARKSTONE GROUP OF FUNDS
Investor B Shares
1. Parkstone Equity Fund
2. Parkstone Small Capitalization Fund
3. Parkstone International Discovery Fund
4. Parkstone High Income Equity Fund
5. Parkstone Balanced Fund
6. Parkstone Bond Fund
7. Parkstone Limited Maturity Bond Fund
8. Parkstone U.S. Government Income Fund
9. Parkstone Intermediate Government Obligations Fund
10. Parkstone Municipal Bond Fund
11. Parkstone Michigan Municipal Bond Fund
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: /s/ Kenneth B. Quintenz
----------------------------
Kenneth B. Quintenz
Senior Vice President
SECURITY DISTRIBUTORS, INC.
By: /s/ Amy J. Lee
----------------------------
Amy J. Lee
Secretary
SECURITY BENEFIT GROUP, INC.
By: /s/ Gary L. Eisenbarth
----------------------------
Gary L. Eisenbarth
Executive Vice President
FIRST OF AMERICA BROKERAGE SERVICE,
INC.
By: /s/ Susan L. Currier
----------------------------
Susan L. Currier
President and Chief Executive Officer
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<PAGE> 9
SCHEDULE B
COMMISSION RATE
The amounts payable pursuant to this Agreement shall be computed at the rate of
4.00% of the net asset value of Investor B Shares purchased by FOABS, as agent
for its customers.
These amounts may be changed as the parties hereto may agree and as disclosed
in the most current prospectuses of the Investor B Shares.
-9-
<PAGE> 1
Exhibit 15(b)(iii)
DEALER AGREEMENT
DEALER AGREEMENT made as of the 1st day of February, 1994, by and between the
Winsbury Company Limited Partnership d/b/a the Winsbury Company, an Ohio
Limited Partnership (the "Distributor"), and First of America Brokerage
Service, Inc., a Michigan corporation, (the "Broker- Dealer").
WHEREAS, the Distributor serves as the Distributor of The Parkstone Group of
Funds (the "Group"), a Massachusetts business trust, which has filed a
Registration Statement under the Investment Company Act of 1940 as amended (the
"1940 Act") and the Securities Act of 1933 (the "Securities Act", and, together
with the 1940 Act, the "Acts"); and
WHEREAS, the Group is comprised of several separate investment portfolios,
each of which is segregated by class;
WHEREAS, the holders of Investor B shares ("Investor B Shares" or "Shares")
of each of the investment portfolios of the Group that are identified in
Exhibit A attached hereto (individually, a "Fund," collectively the "Funds")
have adopted an Investor B Distribution and Shareholder Services Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act, attached hereto as
Exhibit B;
WHEREAS, the Plan authorizes the Distributor to enter into agreements with
third parties to implement the Plan;
WHEREAS, the Distributor and Security Distributors, Inc. ("SDI") have entered
into a Shareholder Services and Financing Agreement dated as of February 1,
1994 (the "Financing Agreement");
WHEREAS, the Broker-Dealer and SDI have entered into a Service and Commission
Agreement dated as of February 1, 1994 (the "Commission Agreement"); and
WHEREAS, it is intended that the Broker-Dealer provide certain distribution
services in connection with the purchase of Investor B Shares of the Group on
behalf of its customers ("Customers").
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. REFERENCE TO PROSPECTUSES; DETERMINATION OF NET ASSET VALUE
1.1 Reference is hereby made to the prospectuses (individually a "Prospectus,"
collectively the "Prospectuses") for Investor B Shares of each Fund as
from time to time are effective under the Securities Act. Terms defined
therein and not otherwise defined herein are used herein with the meaning
so defined.
<PAGE> 2
1.2 For purposes of determining the fees payable to the Broker-Dealer under
Section 3, the average daily net asset value of a Fund's Shares will be
computed in the manner specified in the Group's registration statement (as
the same is in effect from time to time) in connection with the
computation of the net asset value of such Fund's Shares for purposes of
purchases and redemptions.
2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 The Distributor hereby represents and warrants that it is the principal
underwriter of the Investor B Shares of each Fund, which are identified in
Exhibit A and in the Group's Registration Statement and that it is
authorized to enter into this Agreement pursuant to the Plan. The
Distributor has furnished the Broker-Dealer with a list of the various
states and other jurisdictions in which the Investor B Shares of each Fund
have been qualified for sale under, or are exempt from the requirements
of, the respective securities laws of such states and jurisdictions, and
will promptly notify the Broker-Dealer of any changes in such list.
2.2 The Broker-Dealer hereby represents, warrants and covenants that it is and
will be at all times relevant to this Agreement a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"), and
the Broker-Dealer is and will be at all times relevant to this Agreement a
broker-dealer properly registered and qualified under all applicable
federal, state and local laws to engage in the business and transactions
described in this Agreement. The Broker-Dealer agrees to comply with the
requirements of all applicable laws, including federal and state
securities laws, the rules and regulations of the SEC, the Rules of Fair
Practice of the NASD, and the rules and regulations issued by applicable
federal bank regulatory agencies. The Broker-Dealer agrees that it will
not make Investor B Shares available for purchase to persons in any
jurisdiction in which such Shares are not registered for sale or in which
such Shares may not be lawfully sold. The Broker-Dealer further agrees
that it will maintain all records required by applicable law or otherwise
reasonably requested by the Distributor in relation to fund transactions
that it has executed.
2.3 By written acceptance of this Agreement, the Broker-Dealer further
represents, warrants and agrees that it possesses the legal authority to
perform the services contemplated by this Agreement without violation of
applicable Federal banking laws (including the Glass-Steagall Act) and
regulations.
3. PURCHASE AUTHORIZATION; ORDER EXECUTION; OFFERING PRICE; DISTRIBUTION FEE
3.1 In all sales of Shares to Customers, the Broker-Dealer shall act as agent
for its Customers and in no transaction shall the Broker-Dealer act as
dealer for its own account. As agent for its Customers, the Broker-Dealer
is hereby authorized to: (i) place orders directly with the Funds'
transfer agent for the purchase of Shares and (ii) tender Shares to the
transfer agent for redemption, in each case subject to the terms and
conditions set forth in the
2
<PAGE> 3
Prospectus and the operating procedures and policies established by the
Distributor. The minimum and maximum dollar purchase of Shares shall be
the applicable minimum and maximum amounts set forth in the Prospectus, and
no order for less than such minimum amount or more than such maximum amount
shall be accepted by the Broker-Dealer. The procedures relating to the
handling of orders will be subject to instructions which the Distributor
shall forward to the Broker-Dealer from time to time. For purposes of this
Agreement, the Broker-Dealer will be deemed to be an independent
contractor, and will have no authority to act as agent for the Distributor
in any matter or in any respect.
3.2 All orders are subject to acceptance or rejection by the Distributor in
its sole discretion. No person is authorized to make any representations
concerning the Distributor, the Group, or a Fund's Shares except such
representations contained in the relevant then- current Prospectuses and
Statement of Additional Information and in such printed information as the
Group or the Distributor may subsequently prepare. The Broker-Dealer is
specifically authorized to distribute the Prospectuses and Statement of
Additional Information and sales material received by it from the
Distributor. No person is authorized to distribute any other sales
material relating to a Fund without the prior approval of the Distributor.
The Broker-Dealer agrees to deliver, upon the request of the Distributor,
copies of any relevant amended Prospectuses and Statement of Additional
Information to Shareholders of a Fund to whom Shares have been sold.
3.3 The Broker-Dealer shall not withhold placing Customers' orders for any
Shares so as to profit itself as a result of such withholding. The
Distributor shall not purchase any Shares from the Funds except for the
purpose of covering purchase orders already received, and the
Broker-Dealer shall not purchase any Shares from the Distributor except
for the purpose of covering purchase orders already received.
3.4 If any Shares purchased by the Broker-Dealer are repurchased by the Funds
or by the Distributor for the account of the Funds, or are tendered for
redemption within seven (7) business days after confirmation by the
Distributor of the original purchase order for such Shares, the
Broker-Dealer agrees forthwith to refund to the Distributor, or it
financing agent, the full commission paid to the Broker- Dealer, if any,
on the original sale. Notice will be given to the Broker-Dealer of any
such repurchase or redemption within ten (10) days of the date which the
repurchase or redemption is requested.
3.5 Neither party to this Agreement shall, as agent, purchase any Shares from
a Customer at a price lower than the net asset value next computed by or
for the issuer thereof.
3.6 The Distributor will furnish the Broker-Dealer, on request, with offering
prices for the Shares in accordance with the then-current Prospectuses of
the respective Funds of the Group, and the Broker-Dealer agrees to quote
such prices subject to the confirmation by the Distributor on any Shares
offered to the Broker-Dealer for sale. The public offering price equals
the net asset value per Share of the prospective Fund as disclosed in the
Prospectus of the individual Fund. The Broker-Dealer acknowledges the
fact that each
3
<PAGE> 4
price is always subject to confirmation, and will be the price next
computed after receipt of an order. The Broker-Dealer acknowledges that it
is the Broker-Dealer's responsibility to transmit purchase orders promptly
to the Distributor. The Broker-Dealer further acknowledges that any
failure to promptly transmit such orders to the Distributor that causes a
Customer to receive an improper price, based upon the requirements of Rule
22c-1 under the 1940 Act, shall be the responsibility of the Broker-Dealer
and shall not be the responsibility of the Distributor. The Distributor
reserves the right to cancel this Agreement at any time without notice if
any Share shall be offered for sale by the Broker-Dealer at less than the
then-current offering price determined by or for the respective Fund.
3.7 The Broker-Dealer recognizes that, pursuant to the Commission Agreement,
SDI shall receive a distribution fee ("12b-1 fee"), as authorized by the
Plan, from the Distributor at a rate of 0.75% per annum of the net asset
value of the Group's Investor B Shares purchased by the Broker-Dealer as
agent for its customers.
3.8 The Broker-Dealer recognizes that, upon redemption of Investor B Shares
purchased by the Broker-Dealer for the account of customers, SDI, pursuant
to the Financing Agreement, shall be entitled to receive from the
Distributor all contingent deferred sales charges (individually, a "CDSC";
collectively, "CDSCs") that are payable in accordance with the terms and
conditions of the then-current Prospectus for each Fund. Such CDSC shall
be calculated in the manner disclosed in the Prospectus for the Investor B
Shares so redeemed.
3.9 The Broker-Dealer will receive consideration for services performed
pursuant to this Agreement pursuant to the Commission Agreement; the
payment of such consideration will be governed by the terms of the
Commission Agreement.
3.10 The Broker-Dealer and its employees will, upon request, be available
during normal business hours to consult with the Distributor or its
designees concerning the performance of the Broker-Dealer's
responsibilities under this Agreement. Any person authorized to direct
the disposition of monies paid or payable by the Distributor pursuant to
Section 3 of this Agreement will provide to the Distributor the Group's
Board of Trustees, and the Group's Trustees will review at least
quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made. In addition, the Broker-Dealer
will furnish to the Distributor, the Group or their designees such
information as the Distributor, the Group or their designees may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein),
and will otherwise cooperate with the Distributor, the Group and their
designees (including, without limitation, any auditors designed by the
Group), in the preparation of reports to the Group's Board of Trustees
concerning this Agreement and the monies paid or payable by the
Distributor pursuant hereto, as well as any other reports or filings that
may be required by law.
4
<PAGE> 5
4. EXCULPATION; INDEMNIFICATION
4.1 The Distributor shall not be liable to the Broker-Dealer and the
Broker-Dealer shall not be liable to the Distributor except for acts or
failures to act which constitute lack of good faith or gross negligence
and for obligations expressly assumed by either party hereunder. Nothing
contained in this Agreement is intended to operate as a waiver by the
Distributor or by the Broker-Dealer of compliance with any provisions of
the Securities Act, the Securities Exchange Act of 1934, the 1940 Act, the
rules and regulations promulgated by the SEC, the NASD or any state
securities administrator, or the applicable rules and regulations
promulgated by federal banking agencies.
4.2 The Broker-Dealer will indemnify the Distributor and hold it harmless from
any claims or assertions relating to the lawfulness of the Broker-Dealer's
participation in this Agreement and the transactions contemplated hereby
or relating to any activities of any persons or entities affiliated with
the Broker-Dealer which are performed in connection with the discharge of
the Broker-Dealer's responsibilities under this Agreement. If such claims
are asserted, the Distributor shall have the right to manage its own
defense, including the selection and engagement of legal counsel, and all
costs of such defense shall be born by the Broker-Dealer. In addition,
the Broker- Dealer agrees to indemnify and hold the Distributor harmless
from any claims or assertions relating to the lawfulness of the Broker-
Dealer's participation in this Agreement under the Glass-Steagall Act. At
this time, the Broker-Dealer and the Distributor are not otherwise aware
of any violations under the Glass-Steagall Act pursuant to this Agreement.
4.3 The Distributor will indemnify the Broker-Dealer and will hold the
Broker-Dealer harmless from any claims or assertions relating to the
lawfulness of the Distributor's participation in this Agreement and the
transactions contemplated hereby or relating to any activities or any
persons or entities affiliated with the Distributor which are performed in
connection with the discharge of the Distributor's responsibilities under
this Agreement. If any such claims are asserted, the Broker-Dealer shall
have the right to manage its own defense, including the selection and
engagement of legal counsel, and all costs of such defense shall be born
by the Distributor.
5. GENERAL
5.1 This Agreement will become effective with respect to each Fund on the date
indicated on the first page of this Agreement. Unless sooner terminated
with respect to any Fund, this Agreement may also be terminated at any
time without penalty by the vote of a majority of the members of the Board
of Trustees of the Group who are not "interested persons" (as such term is
defined in the 1940 Act) and who have no direct or indirect interest in
the Plan relating to such Fund or any agreement relating to such Plan,
including this Agreement, or (with respect to a Fund) by a vote of the
majority of the outstanding voting securities of that Fund (as such term
is defined in the Statement of Additional
5
<PAGE> 6
Information), cast in person at a meeting called for the approval of voting
on such approval, on sixty (60) days' written notice.
5.2 This Agreement will automatically terminate in the event of its assignment
or in the event of the termination of either of the Financing Agreement or
the Commission Agreement. This Agreement may be terminated by the
Distributor or by the Broker-Dealer, without penalty, upon sixty (60)
days' prior written notice to the other party. This Agreement may also be
terminated at any time without penalty by the vote of a majority of the
members of the Board of Trustees of the Group who are not "interested
persons" (as such term is defined in the 1940 Act) and who have no direct
or indirect interest in the Plan relating to such Fund or any agreement
relating to such Plan, including this Agreement, or (with respect to a
Fund) by a vote of the majority of the outstanding voting securities of
that Fund (as such term is defined in the Statement of Additional
Information), cast in person at a meeting called for the purpose of voting
on such approval, on sixty (60) days' written notice.
5.3 All communications to the Distributor shall be sent to the address set
forth in this Agreement or at such other address as the Distributor may
designate to the Broker-Dealer in writing. Any notice to the
Broker-Dealer shall be duly given if mailed or telecopied to Broker-
Dealer at the address or addresses as the Broker-Dealer may provide in
writing to the Distributor.
5.4 This Agreement supersedes any other Agreement between the Distributor and
the Broker-Dealer with respect to the offer and sale of Investor B Shares
of the Group to Customers and relating to any other matters discussed
herein. All covenants, agreements, and representations and warranties
made herein shall be deemed to have been material and relied on by each
party, not withstanding any investigation by either party or on behalf of
either party, and shall survive the execution and delivery of this
Agreement. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term
or provision hereof. The headings in this Agreement are for convenience
of reference only and shall alter or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts which
together shall constitute one instrument and shall be governed by a
construed in accordance of the laws (other than the conflict of laws
rules) of the State of Ohio and shall bind and inure to the benefit of the
parties hereto and the respective successors and assigns.
5.5 This Agreement is a Related Agreement under the Plan.
5.6 The names "The Parkstone Group of Funds" and "Trustees of the Parkstone
Group of Funds" refer respectively to the trust created and the trustees,
as trustees but not individually or personally, acting from time to time
under a Declaration of Trust dated as of March 25, 1987, to which
reference is hereby made and a copy of which is on file at the Office of
the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or
hereafter filed. The
6
<PAGE> 7
obligations of "The Parkstone Group of Funds" entered into in the name of
or on behalf thereof by any of the trustees, representatives or agents are
not made individually, but in such capacities, and are not binding upon any
of the trustees, shareholders, or representatives of the Group personally,
but bind only the assets of the Group and all persons dealing with any
series of shares of the Group must look solely to the assets of the Group
belonging to such series for the enforcement of any claims against the
Group.
5.7 All communications to the Distributor shall be sent to the following
address:
The Winsbury Company
1900 East Dublin-Granville Road
Columbus, OH 43229
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
/s/ Kenneth B. Quintenz
-----------------------------
By: Kenneth B. Quintenz
Title: Senior Vice President
FIRST OF AMERICA BROKERAGE SERVICE, INC.
/s/ Susan L. Currier
-----------------------------
By: Susan L. Currier
Title: President
7
<PAGE> 8
EXHIBIT A
The Parkstone Group of Funds
Investor B Shares
1. Parkstone Equity Fund
2. Parkstone Small Capitalization Fund
3. Parkstone International Discovery Fund
4. Parkstone High Income Equity Fund
5. Parkstone Balanced Fund
6. Parkstone Bond Fund
7. Parkstone Limited Maturity Bond Fund
8. Parkstone U.S. Government Income Fund
9. Parkstone Intermediate Government Obligations Fund
10. Parkstone Municipal Bond Fund
11. Parkstone Michigan Municipal Bond Fund
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
/s/ Kenneth B. Quintenz
---------------------------
By: Kenneth B. Quintenz
Title: Senior Vice President
FIRST OF AMERICA BROKERAGE SERVICE, INC.
/s/ Susan L. Currier
---------------------------
By: Susan L. Currier
Title: President
<PAGE> 9
EXHIBIT B
Investor B Distribution and Shareholder Service Plan
This Plan (the "Investor B Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
("the Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor B Plan relates to the
Investor B Shares of those investment portfolios identified on Schedule D to
the Trust's Distribution Agreement and as amended from time to time (the
"Investor B Plan Funds").
Section 1. Each Investor B Plan Fund is authorized to pay to The Winsbury
Company Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Trust's shares of beneficial interest of its
Investor B class (the "Investor B Shares");
(a) a distribution fee in an amount not to exceed on an annual basis .75%
of the average daily net asset value of the Investor B shares of such Fund
(the "Distribution Fee") for: (i) payments the Distributor makes to banks
and other institutions and broker/dealers (a "Participating Organization")
for distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (ii)
reimbursement of expenses incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including, but
not limited to, the reimbursement of expense relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor
B Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders for use in connection with the sales of Investor B
Shares, processing purchase, exchange and redemption requests from customers
and placing orders with the Distributor or the Trust's transfer agent, and
personnel and communication equipment used in servicing Shareholder accounts
and prospective shareholder inquiries; and
(b) a service fee in an amount not to exceed on an annual basis .25% of the
average daily net asset value of the Investor B Shares of such Fund (the
"Service Fee") for (i) payments the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust;
or (ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with Shareholder service including,
but not limited to, personal, continuing services to investors in the
Investor B Shares of a Fund, providing sub-accounting with respect to
Investor B Shares beneficially owned by customers or the information
necessary for sub-accounting, arranging for bank wires, and providing office
space, equipment, telephone facilities and various personnel including
clerical, supervisory and computer, as is necessary or beneficial in
connection therewith.
<PAGE> 10
For purposes of the Investor B Plan, a Participating Organization may include
the Distributor or any of its affiliates or subsidiaries.
Section 2. The Distribution Fee and the Service Fee shall be paid by the
Investor B Plan Funds to the Distributor only to compensate or to reimburse the
Distributor for payments or expenses incurred pursuant to Section 1.
Section 3. The Investor B Plan shall not take effect with respect to the
Investor B Shares of any Investor B Plan Fund until it has been approved by a
vote of the initial Shareholder of the Investor B Shares of such Fund.
Section 4. The Investor B Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor B Plan or
such agreement.
Section 5. The Investor B Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor B Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor B Plan Funds pursuant to the Investor B Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor B Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor B Shares of an Investor B Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor B Plan shall be in writing, and any agreements related to the Investor
B Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor B Shares of the Investor B Plan Fund,
on not more than 60 days' written notice to any other party to the
agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor B Plan may not be amended to increase materially the
amount of the Distribution Fee and Service Fee permitted pursuant to Section 1
hereof until any such amendment has been approved by a vote of at least a
majority of the outstanding Investor B
<PAGE> 11
Shares of such Fund, and all material amendments to the Investor B Plan shall
be approved in the manner provided for approval of the Investor B Plan in
Section 4.
Section 10. As used in the Investor B Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor B Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
<PAGE> 1
Exhibit 15(b)(iii)(a)
DATE: NOVEMBER 8, 1995
EXHIBIT A
TO THE DEALER AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP
(FORMERLY THE WINSBURY COMPANY LIMITED PARTNERSHIP)
AND FIRST OF AMERICA BROKERAGE SERVICES, INC.
DATED FEBRUARY 1, 1994
The Parkstone Group of Funds
Investor B Shares
1. Parkstone Equity Fund
2. Parkstone Small Capitalization Fund
3. Parkstone International Discovery Fund
4. Parkstone High Income Equity Fund
5. Parkstone Balanced Fund
6. Parkstone Bond Fund
7. Parkstone Limited Maturity Bond Fund
8. Parkstone U.S. Government Income Fund
9. Parkstone Intermediate Government Obligations Fund
10. Parkstone Municipal Bond Fund
11. Parkstone Michigan Municipal Bond Fund
12. Parkstone Large Capitalization Fund
BISYS FUND SERVICES LIMITED
PARTNERSHIP (FORMERLY THE WINSBURY
COMPANY LIMITED PARTNERSHIP)
By: BISYS FUND SERVICES, INC.
General Partner
/s/ Stephen G. Mintos
----------------------
By: Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA BROKERAGE
SERVICE, INC.
/s/ Susan L. Currier
----------------------
By: Susan L. Currier
President
<PAGE> 1
Exhibit 15(c)
THE PARKSTONE GROUP OF FUNDS
INVESTOR C DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Investor C Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
("the Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor C Plan relates to the
Investor C Shares of those investment portfolios identified on Schedule I to
the Trust's Distribution Agreement and as amended from time to time (the
"Investor C Plan Funds").
Section 1. Each Investor C Plan Fund is authorized to pay to The Winsbury
Company Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Trust's shares of beneficial interest of its
Investor C class (the "Investor C Shares");
(a) a distribution fee in an amount not to exceed on an annual basis .75% of
the average daily net asset value of the Investor C Shares of such Fund (the
"Distribution Fee") for: (i) payments the Distributor makes to banks and
other institutions and broker/dealers (a "Participating Organization") for
distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (ii)
reimbursement of expenses incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including, but not
limited to, the reimbursement of expenses relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor C
Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders for use in connection with the sales of Investor C
Shares, processing purchase, exchange and redemption requests from customers
and placing orders with the Distributor or the Trust's transfer agent, and
personnel and communication equipment used in servicing Shareholder accounts
and prospective shareholder inquiries; and
(b) a service fee in an amount not to exceed on an annual basis .25% of the
average daily net asset value of the Investor C Shares of such Fund (the
"Service Fee") for (i) payments the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust;
or (ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with Shareholder service including,
but not limited to, personal, continuing services to investors in the
Investor C Shares of a Fund, providing sub-accounting with respect to
Investor C Shares beneficially owned by customers or the information
necessary for sub-accounting, arranging for bank wires, and providing office
space, equipment, telephone facilities and various personnel including
clerical, supervisory and computer, as is necessary or beneficial in
connection therewith.
For purposes of the Investor C Plan, a Participating Organization may include
the Distributor or any of its affiliates or subsidiaries.
<PAGE> 2
Section 2. The Distribution Fee and the Service Fee shall be paid by the
Investor C Plan Funds to the Distributor only to compensate or to reimburse the
Distributor for payments or expenses incurred pursuant to Section 1.
Section 3. The Investor C Plan shall not take effect with respect to the
Investor C Shares of any Investor C Plan Fund until it has been approved by a
vote of the initial Shareholder of the Investor C Shares of such Fund.
Section 4. The Investor C Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor C Plan or
such agreement.
Section 5. The Investor C Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor C Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor C Plan Funds pursuant to the Investor C Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor C Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor C Shares of an Investor C Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor C Plan shall be in writing, and any agreements related to the Investor
C Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor C Shares of the Investor C Plan Fund,
on not more than 60 days' written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor C Plan may not be amended to increase materially the
amount of the Distribution Fee and Service Fee permitted pursuant to Section 1
hereof until any such amendment has been approved by a vote of at least a
majority of the outstanding Investor C Shares of such Fund, and all material
amendments to the Investor C Plan shall be approved in the manner provided for
approval of the Investor C Plan in Section 4.
-2-
<PAGE> 3
Section 10. As used in the Investor C Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor C Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
Adopted by the Trustees: May 12, 1994
Adopted by the initial Investor C Shareholder: June 1, 1994.
-3-
<PAGE> 1
Exhibit 15(c)(i)
PARTICIPATING ORGANIZATION AGREEMENT
PARTICIPATING ORGANIZATION AGREEMENT made as of the 21st day of September,
1994, by and between the Winsbury Company Limited Partnership d/b/a the
Winsbury Company, an Ohio Limited Partnership (the "Distributor"), and First of
America Securities, Inc., a Michigan corporation (the "Participating
Organization").
WHEREAS, the Distributor serves as the Distributor of The Parkstone Group of
Funds (the "Group"), a Massachusetts business trust, which has filed a
Registration Statement under the Investment Company Act of 1940 as amended (the
"1940 Act") and the Securities Act of 1933 (the "Securities Act", and, together
with the 1940 Act, the "Acts"); and
WHEREAS, the Group is comprised of several separate investment portfolios,
each of which is segregated by class;
WHEREAS, the holders of Investor C shares ("Investor C Shares" or "Shares")
of each of the investment portfolios of the Group that are identified in
Exhibit A attached hereto (individually, a "Fund," collectively the "Funds")
have adopted an Investor C Distribution and Shareholder Services Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act;
WHEREAS, the Plan authorizes the Distributor to enter into agreements with
third parties to implement the Plan; and
WHEREAS, it is intended that Participating Organization provide certain
distribution and shareholder services in connection with the purchase of
Investor C Shares of the Group through accounts on behalf of customers
("Customers") of the Participating Organization (the "Qualified Accounts").
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. REFERENCE TO PROSPECTUSES; DETERMINATION OF NET ASSET VALUE
1.1 Reference is hereby made to the prospectuses (individually a "Prospectus,"
collectively the "Prospectuses") for Investor C Shares of each Fund as
from time to time are effective under the Securities Act. Terms defined
therein and not otherwise defined herein are used herein with the meaning
so defined.
1.2 For purposes of determining the fees payable to the Participating
Organization under Section 3, the average daily net asset value of a
Fund's Shares will be computed in the manner specified in the Group's
registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of such Fund's
Shares for purposes of purchases and redemptions.
1
<PAGE> 2
2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 The Distributor hereby represents and warrants that it is the principal
underwriter of each portfolio of the Investor C Shares of each Fund, which
are identified in the Group's Registration Statement and that it is
authorized to enter into this Agreement pursuant to the Plan. The
Distributor has furnished Participating Organization with a list of the
various states and other jurisdictions in which the Investor C Shares of
each Fund have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states and
jurisdictions, and will promptly notify Participating Organization of any
changes in such list.
2.2 Participating Organization hereby represents, warrants and covenants that
it is and will be at all times relevant to this Agreement registered as a
broker-dealer under applicable state or federal securities laws and are
otherwise qualified under all applicable federal, state and local laws to
engage in the business and transactions described in this Agreement.
Participating Organization agrees to comply with the requirements of all
applicable laws, including any applicable federal and state securities
laws, the rules and regulations of the SEC, and the rules and regulations
issued by applicable federal bank regulatory agencies. The Participating
Organization agrees that it will not make Investor C Shares available for
purchase to persons in any jurisdiction in which such Shares are not
registered for sale or in which such Shares may not be lawfully sold. The
Participating Organization further agrees that it will maintain all
records required by applicable law or otherwise reasonably requested by
the Distributor in relation to fund transactions that it has executed.
2.3 By written acceptance of this Agreement, Participating Organization agrees
to and does waive such portion of the fee payable under Section 3 as is
necessary to assure that the amount of such fee which is required to be
accrued by the Funds on any day with respect to such Funds' Shares does
not exceed the income to be accrued to the Shares on such Funds on that
day. The amount of the fee which must be waived by Participating
Organization under this Section 2.3 will be determined by the Distributor
and will be based on the Participating Organization's pro rata portion of
the fees payable under the Funds' Plan (including those fees payable to
the Distributor and other organizations providing distribution assistance
with respect to such Funds' Shares and/or Shareholder services to the
holders of such Funds' Shares) that exceed the daily income to be accrued
to the Shares of such Funds.
2.4 By written acceptance of this Agreement, Participating Organization
represents, warrants and agrees that: (i) Participating Organization will
disclose to Customers the order execution that they will perform pursuant
to this agreement, other than those already disclosed in the Prospectuses
and in Fund applications, and a schedule of any fees that the
Participating Organization may charge directly to Customers for services
they perform in connection with investments in the Group on the customer's
behalf and (ii) any and all compensation payable to the Participating
Organization by customers in connection with the investment of their
assets in the Group will be disclosed by the Participating Organization to
Customers.
2
<PAGE> 3
2.5 By written acceptance of this Agreement, Participating Organization
further represents, warrants and agrees that it possesses the legal
authority to perform the services contemplated by this Agreement without
violation of applicable Federal banking laws (including the Glass-Steagall
Act) and regulations.
3. PURCHASE AUTHORIZATION; ORDER EXECUTION; OFFERING PRICE; DISTRIBUTION FEE
3.1 In all sales of Shares to Customers, Participating Organization shall act
as agent for its Customers and in no transaction shall Participating
Organization act as dealer for its own account. As agent for its
Customers, Participating Organization is hereby authorized to: (i) place
orders directly with the Funds' transfer agent for the purchase of Shares
and (ii) tender Shares to the transfer agent for redemption, in each case
subject to the terms and conditions set forth in the Prospectus and the
operating procedures and policies established by the Distributor. The
minimum dollar purchase of Shares shall be the applicable minimum amount
set forth in the Prospectus, and no order for less than such amount shall
be accepted by the Participating Organization. The procedures relating to
the handling of orders will be subject to instructions which the
Distributor shall forward to the Participating Organization from time to
time. For purposes of this Agreement, Participating Organization will be
deemed to be an independent contractor, and will have no authority to act
as agent for the Distributor in any matter or in any respect.
3.2 All orders are subject to acceptance or rejection by the Distributor in
its sole discretion. No person is authorized to make any representations
concerning the Distributor, the Group, or a Fund's Shares except such
representations contained in the relevant then- current Prospectuses and
Statement of Additional Information and in such printed information as the
Group or the Distributor may subsequently prepare. Participating
Organization is specifically authorized to distribute the Prospectuses and
Statement of Additional Information and sales material received by it from
the Distributor. No person is authorized to distribute any other sales
material relating to a Fund without the prior approval of the Distributor.
The Participating Organization agrees to deliver, upon the request of the
Distributor, copies of any relevant amended Prospectuses and Statement of
Additional Information to Shareholders of a Fund to whom Shares have been
sold.
3.3 Participating Organization shall not withhold placing Customers' orders
for any Shares so as to profit themselves as a result of such withholding.
Distributor shall not purchase any Shares from the Funds except for the
purpose of covering purchase orders already received, and Participating
Organization shall not purchase any Shares from the Distributor except for
the purpose of covering the purchase orders already received.
3.4 If any Shares purchased by Participating Organization are repurchased by
the Funds or by the Distributor for the account of the Funds, or are
tendered for redemption within seven (7) business days after confirmation
by the Distributor of the original purchase order for such Shares, (1)
Participating Organization agrees forthwith to refund to the Distributor
the full concession allowed to the Participating Organization, if any, on
the original sale, such refund to be paid by the Distributor to the Fund
whose Shares have been so repurchased upon receipt and (2) the Distributor
shall forthwith pay to such Fund that part of the discount retained by the
Distributor on the original sale. Notice will be
3
<PAGE> 4
given to the Participating Organization of any such repurchase or
redemption within ten (10) days of the date which the repurchase or
redemption is requested.
3.5 Neither party to this Agreement shall, as agent, purchase any Shares from
a Qualified Account at a price lower than the net asset value next
computed by or for the issuer thereof. Nothing in this subparagraph shall
prevent the Participating Organization from selling Shares for the account
of a Qualified Account to the Distributor or the issuer and charging the
investor a fair commission for handling the transaction.
3.6 The Distributor will furnish the Participating Organization, on request,
with offering prices for the Shares in accordance with the then- current
Prospectuses of the respective Funds of the Group, and Participating
Organization agrees to quote such prices subject to the confirmation by
the Distributor on any Shares offered to the Participating Organization
for sale. The public offering price equals the net asset value per Share
of the prospective Fund plus a sales charge, if any, as disclosed in the
Prospectus of the individual Fund. Participating Organization
acknowledges the fact that each price is always subject to confirmation,
and will be the price next computed after receipt of an order.
Participating Organization acknowledges that it is its responsibility to
transmit purchase orders promptly to the Distributor. Participating
Organization further acknowledges that any failure to promptly transmit
such orders to the Distributor that causes a Qualified Account to receive
an improper price, based upon the requirements of Rule 22c-1 under the
1940 Act, shall be the responsibility of the Participating Organization
that transmitted the order and shall not be the responsibility of the
Distributor. The Distributor reserves the right to cancel this Agreement
at any time without notice if any Share shall be offered for sale by the
Participating Organization at less than the then-current offering price
determined by or for the respective Fund.
3.7 Participating Organization shall be entitled to receive a distribution fee
("12b-1 Fee"), pursuant to the Plan, attached as Exhibit B, from
Distributor at a rate per annum of the net asset value of the Group's
Investor C Shares, as computed in the manner specified in the Group's
registration statement (as the same is in effect from time to time),
purchased by Participating Organization as agent for its Customers. The
rate at which such 12b-1 Fees shall be paid is set forth on the schedule
attached hereto as Exhibit C.
3.8 Participating Organization and its employees will, upon request, be
available during normal business hours to consult with the Distributor or
its designees concerning the performance of Participating Organization's
responsibilities under this Agreement. Any person authorized to direct
the disposition of monies paid or payable by the Distributor pursuant to
Section 3 of this Agreement will provide to the Distributor the Group's
Board of Trustees, and the Group's Trustees will review at least
quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made. In addition, Participating
Organization will furnish to the Distributor, the Group or their designees
such information as the Distributor, the Group or their designees may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein),
and will otherwise cooperate with the Distributor, the Group and their
designees (including, without limitation, any auditors designed by the
Group), in the preparation of reports to the Group's Board of
4
<PAGE> 5
Trustees concerning this Agreement and the monies paid or payable by the
Distributor pursuant hereto, as well as any other reports or filings that
may be required by law.
4. PROVISION OF SHAREHOLDER SERVICES; SHAREHOLDER SERVICE FEE
4.1 Participating Organization is hereby authorized and agrees to provide
assistance to Investor C Shareholders that are its Customers or Customers
of its affiliates. Such assistance shall be in the form of responding to
inquiries from such Customers regarding their fund accounts, providing
sub-accounting with respect to Investor C Shares beneficially owned by
customers or the information necessary for sub- accounting and/or
arranging for bank wires. Participating Organization will provide such
office space and equipment, telephone facilities and personnel as may be
reasonably necessary or beneficial in order to provide such services to
Customers.
4.2 Participating Organization shall be entitled to receive a shareholder
service fee ("Service Fee"), pursuant to the Plan, attached as Exhibit B,
from Distributor at a rate per annum of the net asset value of the Group's
Investor C Shares, as computed in the manner specified in the Group's
registration statement (as the same is in effect from time to time),
purchased by Participating Organization as agent for its Customers. The
rate at which such Service Fees shall be paid is set forth on the schedule
attached hereto as Exhibit C.
5. EXCULPATION; INDEMNIFICATION
5.1 The Distributor shall not be liable to the Participating Organization and
the Participating Organization shall not be liable to the Distributor
except for acts or failures to act which constitute lack of good faith or
gross negligence and for obligations expressly assumed by either party
hereunder. Nothing contained in this Agreement is intended to operate as
a waiver by the Distributor or by the Participating Organization of
compliance with any provisions of the Securities Act, the Securities
Exchange Act of 1934, the 1940 Act, the rules and regulations promulgated
by the SEC, the NASD or any state securities administrator, or the
applicable rules and regulations promulgated by federal banking agencies.
5.2 Participating Organization will indemnify the Distributor and hold it
harmless from any claims or assertions relating to the lawfulness of the
Participating Organization's participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with the Participating Organizations which
are performed in connection with the discharge of Participating
Organization's responsibilities under this Agreement. If such claims are
asserted, the Distributor shall have the right to manage its own defense,
including the selection and engagement of legal counsel, and all costs of
such defense shall be born by Participating Organization. In addition,
Participating Organization agrees to indemnify and hold the Distributor
harmless from any claims or assertions relating to the lawfulness of the
Participating Organization's participation in this Agreement under the
Glass-Steagall Act. At this time, Participating Organization and the
Distributor are not otherwise aware of any violations under the
Glass-Steagall Act pursuant to this Agreement.
5
<PAGE> 6
5.3 The Distributor will indemnify Participating Organization and will hold
Participating Organization harmless from any claims or assertions relating
to the lawfulness of the Distributor's participation in this Agreement and
the transactions contemplated hereby or relating to any activities or any
persons or entities affiliated with the Distributor which are performed in
connection with the discharge of the Distributor's responsibilities under
this Agreement. If any such claims are asserted, Participating
Organization shall have the right to manage its own defense, including the
selection and engagement of legal counsel, and all costs of such defense
shall be born by the Distributor.
6. GENERAL
6.1 This Agreement will become effective with respect to the Investor C Shares
of each Fund on the date indicated on the first page of this Agreement.
Unless sooner terminated with respect to any Fund, this Agreement may also
be terminated at any time without penalty by the vote of a majority of the
members of the Board of Trustees of the Group who are not "interested
persons" (as such term is defined in the 1940 Act) and who have no direct
or indirect interest in the Plan relating to such Fund or any agreement
relating to such Plan, including this Agreement, or (with respect to a
Fund) by a vote of the majority of the outstanding voting securities of
that Fund (as such term is defined in the Statement of Additional
Information), cast in person at a meeting called for the approval of
voting on such approval, on sixty (60) days' written notice.
6.2 This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by the Distributor or by
Participating Organization, without penalty, upon sixty (60) days' prior
written notice to the other party. This Agreement may also be terminated
at any time without penalty by the vote of a majority of the members of
the Board of Trustees of the Group who are not "interested persons" (as
such term is defined in the 1940 Act) and who have no direct or indirect
interest in the Plan relating to such Fund or any agreement relating to
such Plan, including this Agreement, or (with respect to a Fund) by a vote
of the majority of the outstanding voting securities of that Fund (as such
term is defined in the Statement of Additional Information), cast in
person at a meeting called for the purpose of voting on such approval, on
sixty (60) days' written notice.
6.3 All communications to the Distributor shall be sent to the address set
forth in this Agreement or at such other address as the Distributor may
designate to Participating Organization in writing. Any notice to
Participating Organization shall be duly given if mailed or telecopied to
Participating Organization at the address as Participating Organization
may provide in writing to the Distributor.
6.4 This Agreement supersedes any other Agreement between the Distributor and
Participating Organization with respect to the offer and sales of Investor
C Shares of the Group to Qualified Accounts and relating to any other
matters discussed herein. All covenants, agreements, and representations
and warranties made herein shall be deemed to have been material and
relied on by each party, not withstanding any investigation by either
party or on behalf of either party, and shall survive the execution and
delivery of this Agreement. The invalidity or unenforceability of any
term or provision hereof shall not
6
<PAGE> 7
affect the validity or enforceability of any other term or provision
hereof. The headings in this Agreement are for convenience of reference
only and shall alter or otherwise affect the meaning hereof. This
Agreement may be executed in any number of counterparts which together
shall constitute one instrument and shall be governed by a construed in
accordance of the laws (other than the conflict of laws rules) of the State
of Ohio and shall bind and inure to the benefit of the parties hereto and
the respective successors and assigns.
6.5 This Agreement is a Related Agreement under the Plan.
6.6 The names "The Parkstone Group of Funds" and "Trustees of the Parkstone
Group of Funds" refer respectively to the trust created and the trustees,
as trustees but not individually or personally, acting from time to time
under a Declaration of Trust dated as of March 25, 1987, to which
reference is hereby made and a copy of which is on file at the Office of
the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Parkstone Group of Funds"
entered into in the name of or on behalf thereof by any of the trustees,
representatives or agents are not made individually, but in such
capacities, and are not binding upon any of the trustees, shareholders, or
representatives of the Group personally, but bind only the assets of the
Group and all persons dealing with any series of shares of the Group must
look solely to the assets of the Group belonging to such series for the
enforcement of any claims against the Group.
6.7 All communications to the Distributor shall be sent to the following
address:
The Winsbury Company
1900 East Dublin-Granville Road
Columbus, OH 43229
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
Dated: September 21, 1994 By: The Winsbury Corporation,
General Partner
/s/ Stephen G. Mintos
-----------------------------
By: Stephen G. Mintos
Title: Senior Vice President
FIRST OF AMERICA SECURITIES, INC.
Dated: September 21, 1994 /s/ Susan L. Currier
------------------------------
By: Susan L. Currier
Title: President
7
<PAGE> 8
EXHIBIT A
THE PARKSTONE GROUP OF FUNDS
INVESTOR C SHARES
Name of Investor C Fund
- -----------------------
Parkstone Equity Fund - Investor C Shares
Parkstone Small Capitalization Fund - Investor C Shares
Parkstone High Income Equity Fund - Investor C Shares
Parkstone Bond Fund - Investor C Shares
Parkstone Limited Maturity Bond Fund - Investor C Shares
Parkstone Intermediate Government Obligations Fund -
Investor C Shares
Parkstone Municipal Bond Fund - Investor C Shares
Parkstone Michigan Municipal Bond Fund - Investor C Shares
Parkstone Balanced Fund - Investor C Shares
Parkstone U.S. Government Income Fund - Investor C Shares
Parkstone International Discovery Fund - Investor C Shares
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
Dated: September 21, 1994 By: The Winsbury Corporation,
General Partner
/s/ Stephen G. Mintos
-------------------------------
By: Stephen G. Mintos
Title: Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
Dated: September 21, 1994 /s/ Susan L. Currier
-------------------------------
By: Susan L. Currier
Title: President
<PAGE> 9
EXHIBIT B
Investor C Distribution and Shareholder Service Plan
This Plan (the "Investor C Plan") constitutes a distribution and shareholder
service plan of The Parkstone Group of Funds, a Massachusetts business trust
("the Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Investor C Plan relates to the
Investor C Shares of those investment portfolios identified on Schedule I to
the Trust's Distribution Agreement and as amended from time to time (the
"Investor C Plan Funds").
Section 1. Each Investor C Plan Fund is authorized to pay to The Winsbury
Company Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Trust's shares of beneficial interest of its
Investor C class (the "Investor C Shares");
(a) a distribution fee in an amount not to exceed on an annual basis .75%
of the average daily net asset value of the Investor C shares of such Fund
(the "Distribution Fee") for: (i) payments the Distributor makes to banks
and other institutions and broker/dealers (a "Participating Organization")
for distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (ii)
reimbursement of expenses incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including, but
not limited to, the reimbursement of expense relating to printing and
distributing prospectuses to persons other than Shareholders of an Investor
C Plan Fund, printing and distributing advertising and sales literature and
reports to Shareholders for use in connection with the sales of Investor C
Shares, processing purchase, exchange and redemption requests from customers
and placing orders with the Distributor or the Trust's transfer agent, and
personnel and communication equipment used in servicing Shareholder accounts
and prospective shareholder inquiries; and
(b) a service fee in an amount not to exceed on an annual basis .25% of the
average daily net asset value of the Investor C Shares of such Fund (the
"Service Fee") for (i) payments the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust;
or (ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with Shareholder service including,
but not limited to, personal, continuing services to investors in the
Investor C Shares of a Fund, providing sub-accounting with respect to
Investor C Shares beneficially owned by customers or the information
necessary for sub-accounting, arranging for bank wires, and providing office
space, equipment, telephone facilities and various personnel including
clerical, supervisory and computer, as is necessary or beneficial in
connection therewith.
B-1
<PAGE> 10
For purposes of the Investor C Plan, a Participating Organization may include
the Distributor or any of its affiliates or subsidiaries.
Section 2. The Distribution Fee and the Service Fee shall be paid by the
Investor C Plan Funds to the Distributor only to compensate or to reimburse the
Distributor for payments or expenses incurred pursuant to Section 1.
Section 3. The Investor C Plan shall not take effect with respect to the
Investor C Shares of any Investor C Plan Fund until it has been approved by a
vote of the initial Shareholder of the Investor C Shares of such Fund.
Section 4. The Investor C Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the 1940 Act or the rules and regulations thereunder of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Investor C Plan or
such agreement.
Section 5. The Investor C Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor C Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or
payable by the Investor C Plan Funds pursuant to the Investor C Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Investor C Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Investor C Shares of an Investor C Plan Fund.
Section 8. All agreements with any person relating to implementation of the
Investor C Plan shall be in writing, and any agreements related to the Investor
C Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding Investor C Shares of the Investor C Plan Fund,
on not more than 60 days' written notice to any other party to the
agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Investor C Plan may not be amended to increase materially the
amount of the Distribution Fee and Service Fee permitted pursuant to Section 1
hereof until any such amendment has been approved by a vote of at least a
majority of the outstanding Investor C Shares of such Fund, and all material
amendments to the Investor C Plan shall be approved in the manner provided for
approval of the Investor C Plan in Section 4.
B-2
<PAGE> 11
Section 10. As used in the Investor C Plan, (a) the term "Independent
Trustees" shall mean those Trustees of the Trust who are not interested persons
of the Trust, and have no direct or indirect financial interest in the
operation of the Investor C Plan or any agreements related to it, and (b) the
terms "assignment," "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and
the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
B-3
<PAGE> 12
EXHIBIT C
The Parkstone Group of Funds
12b-1 and Service Fees Payable to Participating Organization
Name of Investor C Fund 12b-1 Fee Service Fee
- ----------------------- --------- -----------
Parkstone Equity Fund - Investor C Shares 0.75% 0.25%
Parkstone Small Capitalization Fund - Investor C Shares 0.75% 0.25%
Parkstone High Income Equity Fund - Investor C Shares 0.75% 0.25%
Parkstone Bond Fund - Investor C Shares 0.75% 0.25%
Parkstone Limited Maturity Bond Fund - Investor C Shares 0.75% 0.25%
Parkstone Intermediate Government Obligations Fund - 0.75% 0.25%
Investor C Shares
Parkstone Municipal Bond Fund - Investor C Shares 0.75% 0.25%
Parkstone Michigan Municipal Bond Fund - Investor C 0.75% 0.25%
Shares
Parkstone Balanced Fund - Investor C Shares 0.75% 0.25%
Parkstone U.S. Government Income Fund - Investor C 0.75% 0.25%
Shares
Parkstone International Discovery Fund - Investor C Shares 0.75% 0.25%
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
Dated: September 21, 1994 By: The Winsbury Corporation,
General Partner
/s/ Stephen G. Mintos
---------------------------
By: Stephen G. Mintos
Title: Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
Dated: September 21, 1994 /s/ Susan L. Currier
---------------------------
By: Susan L. Currier
Title: President
<PAGE> 1
Exhibit 15(c)(i)(a)
DATED: NOVEMBER 8, 1995
EXHIBIT A
TO THE
PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP (FORMERLY
THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA SECURITIES, INC.
DATED SEPTEMBER 21, 1994
INVESTOR C SHARES
NAME OF INVESTOR C FUND
Parkstone Equity Fund - Investor C Shares
Parkstone Small Capitalization Fund - Investor C Shares
Parkstone High Income Equity Fund - Investor C Shares
Parkstone Bond Fund - Investor C Shares
Parkstone Limited Maturity Bond Fund - Investor C Shares
Parkstone Intermediate Government Obligations Fund - Investor C Shares
Parkstone Balanced Fund - Investor C Shares
Parkstone U.S. Government Income Fund - Investor C Shares
Parkstone International Discovery Fund - Investor C Shares
Parkstone Large Capitalization Fund - Investor C Shares
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury Company
Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ Stephen G. Mintos
------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
By: /s/ Susan L. Currier
------------------------
Susan L. Currier
President & CEO
<PAGE> 1
Exhibit 15(c)(i)(b)
DATED: NOVEMBER 8, 1995
EXHIBIT C
TO THE
PARTICIPATING ORGANIZATION AGREEMENT
BETWEEN BISYS FUND SERVICES LIMITED PARTNERSHIP (FORMERLY
THE WINSBURY COMPANY LIMITED PARTNERSHIP) AND
FIRST OF AMERICA SECURITIES, INC.
DATED SEPTEMBER 21, 1994
12B-1 AND SERVICE FEES PAYABLE TO PARTICIPATING ORGANIZATION
<TABLE>
<CAPTION>
NAME OF INVESTOR C FUND 12B-1 FEE SERVICE FEE
----------------------- --------- -----------
<S> <C> <C>
Parkstone Equity Fund - Investor C Shares 0.75% 0.25%
Parkstone Small Capitalization Fund - Investor C Shares 0.75% 0.25%
Parkstone High Income Equity Fund - Investor C Shares 0.75% 0.25%
Parkstone Bond Fund - Investor C Shares 0.75% 0.25%
Parkstone Limited Maturity Bond Fund - Investor C Shares 0.75% 0.25%
Parkstone Intermediate Government Obligations Fund - Investor C Shares 0.75% 0.25%
Parkstone Balanced Fund - Investor C Shares 0.75% 0.25%
Parkstone U.S. Government Income Fund - Investor C Shares 0.75% 0.25%
Parkstone International Discovery Fund - Investor C Shares 0.75% 0.25%
Parkstone Large Capitalization Fund - Investor C Shares 0.75% 0.25%
</TABLE>
BISYS FUND SERVICES LIMITED
PARTNERSHIP (formerly The Winsbury Company
Limited Partnership)
By: BISYS FUND SERVICES, INC.
General Partner
By: /s/ Stephen G. Mintos
-------------------------
Stephen G. Mintos
Executive Vice President
FIRST OF AMERICA SECURITIES, INC.
By: /s/ Susan L. Currier
-------------------------
Susan L. Currier
President & CEO
<PAGE> 1
Exhibit 16(a)
PARKSTONE GROUP OF FUNDS
COMPUTATION OF TOTAL RETURNS
EXAMPLES INVOLVING A
HYPOTHETICAL INVESTMENT OF $1,000
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL [REDEEMABLE VALUE AT THE END OF ] (1/NUMBER
TOTAL RETURN = [THE PERIOD OF SHARES PURCHASED ] OF YEARS)
[WITH $1,000 (LESS THE MAXIMUM ]
[SALES CHARGE, IF APPLICABLE) PLUS]
[ANY DIVIDENDS OR DISTRIBUTIONS ON] -1
[SUCH SHARES (LESS THE MAXIMUM ]
[CONTINGENT DEFERRED SALES CHARGE,]
[IF APPLICABLE) ]
[---------------------------------]
[VALUE AT BEGINNING OF PERIOD ]
AGGREGATE [REDEEMABLE VALUE AT THE END OF ]
TOTAL RETURN = [THE PERIOD OF SHARES PURCHASED ]
[WITH $1,000 (LESS THE MAXIMUM ]
[SALES CHARGE, IF APPLICABLE) PLUS]
[ANY DIVIDENDS OR DISTRIBUTIONS ON] -1
[SUCH SHARES (LESS THE MAXIMUM ]
[CONTINGENT DEFERRED SALES CHARGE,]
[IF APPLICABLE) ]
[---------------------------------]
[VALUE AT BEGINNING OF PERIOD ]
</TABLE>
EXAMPLES:
1/1/YR0 = DATE OF FUND INCEPTION
6/30/YR12 = DATE OF CALCULATIONS
$1,246.9 = VALUE OF SHARES ON 7/1/YR2
$1,775.2 = VALUE OF SHARES ON 7/1/YR7
$2,104.7 = VALUE OF SHARES ON 7/1/YR11
$2,223.5 = REDEEMABLE VALUE OF SHARES ON 6/30/YR12
(1/12.5)
AVERAGE ANNUAL TOTAL RETURN [2,233.5]
[-------] - 1 = 6.60%
SINCE INCEPTION: [1,000 ]
ONE-YEAR PERIOD ENDED 6/30/YR12: [2,223.5]
[-------] - 1 = 5.64%
[2,104.7]
(1/5)
FIVE-YEAR PERIOD ENDED 6/30/YR12: [2,223.5]
[-------] - 1 = 4.61%
[1,775.2]
(1/10)
TEN-YEAR PERIOD ENDED 6/30/YR12: [2,223.5]
[-------] - 1 = 5.95%
[1,246.9]
<PAGE> 2
AGGREGATE TOTAL RETURN [2,233.5]
[-------] - 1 = 122.35%
SINCE INCEPTION: [1,000 ]
ONE-YEAR PERIOD ENDED 6/30/YR12: [2,223.5]
[-------] - 1 = 5.64%
[2,104.7]
FIVE-YEAR PERIOD ENDED 6/30/YR12: [2,223.5]
[-------] - 1 = 25.25%
[1,775.2]
TEN-YEAR PERIOD ENDED 6/30/YR12: [2,223.5]
[-------] - 1 = 78.32%
[1,246.9]
<PAGE> 1
Exhibit 16(b)
PARKSTONE GROUP OF FUNDS
COMPUTATION OF YIELDS
[SEVEN-DAY RETURN x 365 ]
SEVEN-DAY YIELD = [-----------------------]
[ 7 ]
[ (365/7)]
SEVEN-DAY EFFECTIVE YIELD = [(SEVEN-DAY RETURN + 1) ] -1
[THIRTY-DAY RETURN x 365]
THIRTY-DAY YIELD = [-----------------------]
[ 30 ]
[ (365/30)]
THIRTY-DAY EFFECTIVE YIELD = [(THIRTY-DAY RETURN + 1) ] -1
[ (SEVEN-DAY YIELD) ]
SEVEN-DAY TAX-EQUIVALENT YIELD* - [------------------------]
[ (1 - 0.396) ]
[SEVEN-DAY EFFECTIVE YIELD]
SEVEN-DAY TAX-EQUIVALENT [-------------------------]
EFFECTIVE YIELD* = [ (1 - 0.396) ]
[ (THIRTY-DAY YIELD) ]
THIRTY-DAY EQUIVALENT YIELD* = [-------------------------]
[ (1 - 0.396) ]
[(THIRTY-DAY EFFECTIVE YIELD]
THIRTY-DAY TAX-EQUIVALENT [---------------------------]
EFFECTIVE YIELD* = [ (1 - 0.396) ]
EXAMPLES:
1/31/YR0 = DATE OF CALCULATIONS
SEVEN-DAY RETURN = 0.00020
THIRTY-DAY RETURN = 0.00062
[0.00020 X 365]
SEVEN-DAY YIELD = [-------------] = 1.04%
[ 7 ]
[ (365/7)]
SEVEN-DAY EFFECTIVE YIELD = [(1 + 0.00020) ] - 1 = 1.05%
[0.00062 X 365 ]
THIRTY-DAY YIELD = [------------- ] = 0.75%
[ 30 ]
<PAGE> 2
[ (365/30)]
THIRTY-DAY EFFECTIVE YIELD = [(1 + 0.00062) ] - 1 = 0.76%
[ 0.0104 ]
SEVEN-DAY TAX-EQUIVALENT YIELD* = [----------- ] = 1.72%
[(1 - 0.396) ]
[ 0.0105 ]
SEVEN-DAY TAX-EQUIVALENT [------------ ] = 1.74%
EFFECTIVE YIELD* = [(1 - 0.396) ]
[ 0.0075 ]
THIRTY-DAY TAX-EQUIVALENT YIELD* = [------------ ] = 1.24%
[(1 - 0.396) ]
[ 0.0076 ]
THIRTY-DAY TAX-EQUIVALENT [------------ ] = 1.26%
EFFECTIVE YIELD* = [(1 - 0.396) ]
* If applicable (assuming the entire portion of the yield or effective yield
is tax-exempt).
<PAGE> 1
Exhibit 16(c)
PARKSTONE GROUP OF FUNDS
COMPUTATION OF DISTRIBUTION RATES
DISTRIBUTION RATE INCLUDING [INCOME AND CAPITAL GAINS ]
CAPITAL GAINS (AND SALES [DISTRIBUTIONS PER SHARE OVER ]
LOADS, IF APPLICABLE) = [A TWELVE-MONTH PERIOD ]
[------------------------------]
[SHARE PRICE (INCLUDING SALES ]
[LOADS, IF APPLICABLE) AT THE ]
[END OF THE TWELVE-MONTH PERIOD]
DISTRIBUTION RATE EXCLUDING [INCOME DISTRIBUTIONS PER SHARE]
CAPITAL GAINS (BUT INCLUDING [OVER A TWELVE-MONTH PERIOD ]
SALES LOADS, IF APPLICABLE) = [------------------------------]
[SHARE PRICE (INCLUDING SALES ]
[LOADS, IF APPLICABLE) AT THE ]
[END OF THE TWELVE-MONTH PERIOD]
DISTRIBUTION RATE INCLUDING [INCOME AND CAPITAL GAINS ]
CAPITAL GAINS (BUT EXCLUDING [DISTRIBUTIONS PER SHARE OVER ]
SALES LOADS, IF APPLICABLE) = [A TWELVE-MONTH PERIOD ]
[------------------------------]
[NET ASSET VALUE AT THE END OF ]
[THE TWELVE-MONTH PERIOD ]
DISTRIBUTION RATE EXCLUDING [INCOME DISTRIBUTIONS PER SHARE]
CAPITAL GAINS (AND EXCLUDING SALES [OVER A TWELVE-MONTH PERIOD ]
LOADS, IF APPLICABLE) = [------------------------------]
[NET ASSET VALUE AT THE END OF ]
[THE TWELVE-MONTH PERIOD ]
EXAMPLES:
FOR THE YEAR ENDED 12/31/YR1:
INCOME AND CAPITAL GAINS DISTRIBUTIONS = $1.0603
INCOME DISTRIBUTIONS = $0.2483
SHARE PRICE INCLUDING SALES LOAD = $15.43
NET ASSET VALUE = $14.74
DISTRIBUTION RATE INCLUDING $1.0603
CAPITAL GAINS AND SALES LOADS = ------- = 6.87%
$ 15.43
DISTRIBUTION RATE EXCLUDING $0.2483
CAPITAL GAINS, BUT INCLUDING = ------- = 1.61%
SALES LOADS $ 15.43
DISTRIBUTION RATE INCLUDING $1.0603
CAPITAL GAINS, BUT EXCLUDING = ------- = 7.19%
SALES LOADS $ 14.74
DISTRIBUTION RATE EXCLUDING $0.2483
CAPITAL GAINS AND SALES LOADS = ------- = 1.68%
$ 14.74
<PAGE> 1
Exhibit 17(a)
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints the
President, Secretary, and Assistant Secretary of The Parkstone Group of Funds,
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, the Securities Exchange Act of 1934, and the Investment Company Act of
1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to sign and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as each of them might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes, may lawfully do or cause to be done by
virtue thereof.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ George R. Landreth Trustee and May 23, 1996
- -------------------------- Chairman of the Board
George R. Landreth
/s/ Lawrence D. Bryan Trustee May 23, 1996
- --------------------------
Lawrence D. Bryan
/s/ Robert M. Beam Trustee May 23, 1996
- --------------------------
Robert M. Beam
/s/ Adrian Charles Edwards Trustee May 23, 1996
- --------------------------
Adrian Charles Edwards
Sworn to and subscribed before me this 23rd day of May, 1996.
/s/ Stephen Mintos
- -------------------------
Notary Public
Franklin County, Ohio
- -------------- ------
My Commission Expires: Lifetime Commission
Attorney at Law
<PAGE> 1
Exhibit 18
THE PARKSTONE GROUP OF FUNDS
RULE 18F-3 MULTIPLE CLASS PLAN
WHEREAS, The Parkstone Group of Funds (the "Group") is open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, shares of beneficial interest of the Group are currently divided into
a number of separate series (the "Funds"), including the Parkstone Prime
Obligations Fund, the Parkstone Treasury Fund, the Parkstone Tax-Free Fund, the
Parkstone U.S. Government Obligations Fund and the Parkstone Municipal Investor
Fund (collectively, the "Money Market Funds"); the Parkstone Large
Capitalization Fund, the Parkstone Equity Fund, the Parkstone Small
Capitalization Fund, the Parkstone International Discovery Fund, the Parkstone
Emerging Markets Fund, the Parkstone Balanced Fund, the Parkstone High Income
Equity Fund, the Parkstone Bond Fund, the Parkstone Limited Maturity Bond Fund,
the Parkstone Intermediate Government Obligations Fund, the Parkstone U.S.
Government Income Fund, the Parkstone Michigan Municipal Bond Fund and the
Parkstone Municipal Bond Fund (the "Non-Money Market Funds");
WHEREAS, the Group desires to offer multiple classes of shares pursuant to
Rule 18f-3 under the 1940 Act;
WHEREAS, Rule 18f-3 requires that the Trustees of the Group adopt a written
plan setting forth (1) the specific arrangement for shareholder services and
the distribution of securities for each class, (2) the allocation of expenses
for each class and (3) any related conversion features or exchange privileges;
and
WHEREAS, the Trustees of the Group, including a majority of the Independent
Trustees, as defined in Section 7 below, have determined that the following
plan (the "Plan"), adopted pursuant to Rule 18f-3 under the 1940 Act, is in the
best interests of each class individually and the Group as a whole.
NOW, THEREFORE, the Group hereby adopts, on behalf of the Funds, the Plan, in
accordance with Rule 18f-3 under the 1940 Act on the following terms and
conditions:
1. FEATURES OF THE CLASSES:
Each of the Money Market Funds issues its shares of beneficial interest in two
classes: "Investor A Shares" and "Institutional Shares." Each of the Non-Money
Market Funds issues its shares of beneficial interest in four classes:
"Investor A Shares," "Investor B Shares," "Investor C Shares" and
"Institutional Shares." Shares of each class of a Fund shall represent an
equal pro rata interest in such Fund and, generally, shall have identical
voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except
that: (a) each class shall have a different designation; (b) each class shall
bear any Class Expenses, as defined in Section 4 below; (c) each class shall
have exclusive voting rights on any matter submitted to shareholders that
relates solely to its distribution arrangement; and (d) each class shall have
separate voting rights on any matter submitted to shareholders in which the
Rule 18f-3 Plan page 1
<PAGE> 2
THE PARKSTONE GROUP OF FUNDS
interests of one class differ from the interest of any other class. In
addition, Investor A Shares, Investor B Shares, Investor C Shares and
Institutional Shares shall have the features described in Sections 2, 3, 4 and
5 below.
2. SALES CHARGE STRUCTURE.
(a) Institutional Shares. Institutional Shares of each Fund shall be offered
at the then-current net asset value without the imposition of a front-end or
contingent deferred sales charge.
(b) Investor A Shares. Investor A Shares of the Money Market Funds shall be
offered at the then-current net asset value without the imposition of a
front-end or contingent deferred sales charge. Investor A Shares of the
Non-Money Market Funds shall be offered at the then- current net asset value
plus a front-end sales charge. The front-end sales charge shall be in such
amount as is disclosed in such Fund's current prospectus or prospectus
supplement and shall be subject to reductions for larger purchases and such
waivers or reductions as are determined or approved by the Board of Trustees.
(c) Investor B Shares. Investor B Shares of each of the Non-Money Market
Funds shall be offered at the then-current net asset value without the
imposition of a front-end sales charge. A contingent deferred sales charge in
such amount as is described in each Fund's current prospectus or prospectus
supplement shall be imposed on Class B Shares subject to such waivers or
reductions as are determined or approved by the Board of Trustees.
(d) Investor C Shares. Investor C Shares of each of the Non-Money Market
Funds shall be offered at the then-current net asset value without the
imposition of a front-end sales charge. A contingent deferred sales charge in
such amount as is described in each Fund's current prospectus or prospectus
supplement shall be imposed on Class B Shares subject to such waivers or
reductions as are determined or approved by the Board of Trustees.
3. ADMINISTRATION, SERVICE AND DISTRIBUTION PLANS.
(a) Institutional Shares. Institutional Shares of each of the Funds will not
pay a fee for distribution, account administration and/or shareholder liaison
services (each as defined in paragraph (e) below).
(b) Investor A Shares. Investor A Shares of the Funds shall pay a fee for
distribution, account administration and/or shareholder liaison services in
such amount as is disclosed in such Funds' prospectus or prospectus supplement.
Such fee will be paid to the distributor for such Funds pursuant to a
distribution and shareholder service plan for Investor A Shares (the "Investor
A Plan"), which is more fully described in paragraph (e) below.
(c) Investor B Shares. Investor B Shares of the Funds shall pay a fee for
distribution, account administration and/or shareholder liaison services in
such amount as is disclosed in such Funds' prospectus or prospectus supplement.
Such fee will be paid to the distributor for such
Rule 18f-3 Plan page 2
<PAGE> 3
THE PARKSTONE GROUP OF FUNDS
Funds pursuant to a distribution and shareholder service plan for Investor B
Shares (the "Investor B Plan"), which is more fully described in paragraph (e)
below.
(d) Investor C Shares. Investor C Shares of the Funds shall pay a fee for
distribution, account administration and/or shareholder liaison services in
such amount as is disclosed in such Funds' prospectus or prospectus supplement.
Such fee will be paid to the distributor for such Funds pursuant to a
distribution and shareholder service plan for Investor C Shares (the "Investor
C Plan"), which is more fully described in paragraph (e) below.
(e) Account Administration Services, Shareholder Liaison Services and
Distribution Services.
(i) As used herein, the term "account administration services" shall include
(A) aggregating and processing purchase, exchange and redemption requests from
customers and placing net purchase, exchange and redemption orders with the
distributor; (B) providing customers with a service that invests the assets of
their accounts in shares pursuant to specific or pre-authorized instructions;
(C) processing dividend payments from an investment company on behalf of
customers and assisting customers in changing dividend options, account
designations and addresses; (D) providing and maintaining elective services
such as check writing and wire transfer services; (E) acting as sole
shareholder of record and nominee for customers; (F) maintaining account
records for customers; (G) issuing confirmations of transactions; (H) providing
sub-accounting with respect to shares beneficially owned by customers or
providing the information to an investment company necessary for such
sub-accounting; (I) if required by law, forwarding shareholder communications
from the investment company (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
customers; and (J) providing other similar administrative services.
(ii) As used herein, the term "shareholder liaison services" shall include
(A) forwarding sales literature and engaging in advertising provided on behalf
of the investment company; (B) preparing, printing and distributing
prospectuses and shareholder reports; (C) providing facilities to answer
questions from prospective investors about Fund shares; (D) receiving and
answering correspondence, including requests for prospectuses and statements of
additional information; (E) complying with federal and state securities laws
pertaining to the sale of Fund shares; (F) assisting investors in completing
application forms and selecting dividend and other account options; and (G)
other reasonable assistance in connection with the distribution of Fund shares.
(iii) As used herein, the term "distribution services" shall include
services rendered by the Funds' distributor, broker-dealers and other financial
institutions including, but not limited to, service organizations, in
connection with the distribution of Investor A, Investor B or Investor C Shares
and/or the provision of support services to Investor A, Investor B or Investor
C shareholders. Such services may include, but are not limited to, printing of
prospectuses and reports for other than existing shareholders, preparation and
distribution of advertising material and sales literature, organizing and
conducting sales seminars and payments
Rule 18f-3 Plan page 3
<PAGE> 4
THE PARKSTONE GROUP OF FUNDS
made to financial institutions in the form of transactional compensation or
promotional incentives.
4. ALLOCATION OF INCOME AND EXPENSES.
(a) Daily Dividend Funds. Funds that daily declare distributions of net
investment income and that maintain the same net asset value per share in each
class ("Daily Dividend Funds") will allocate gross income, realized and
unrealized capital gains and losses and expenses (other than Class Expenses, as
defined below) to each class on the basis of relative net assets (settled
shares). "Relative net assets (settled shares)," for this purpose, are net
assets valued in accordance with generally accepted accounting principles,
excluding the value of subscriptions receivable, in relation to the net assets
of the particular Daily Dividend Fund. Expenses to be so allocated include
expenses of the Group that are allocated to a Fund and which are not
attributable to a particular Fund or class of a Fund ("Group Expenses") and
expenses of the particular Fund that are not attributable to a particular class
of the Fund ("Fund Expenses"). Group Expenses include, but are not limited to,
Trustees' fees, insurance costs and certain legal fees. Fund expenses include,
but are not limited to, certain registration fees, advisory fees, custodial
fees and other expenses relating to the management of the Fund's assets.
(b) Non-Daily Dividend Funds. The gross income, realized and unrealized
capital gains and losses and expenses (other than Class Expenses, as defined
below) of each Fund, other that the Daily Dividend Funds, shall be allocated to
each class on the basis of its net asset value relative to the net asset value
of the Fund. Expenses to be so allocated include Group Expenses and Fund
Expenses (as those terms are defined in paragraph (a), above).
(c) Class Expenses. Expenses attributable to a particular class ("Class
Expenses") shall be limited to: (i) payments made pursuant to a Rule 12b-1 plan
("12b-1 Plan Fee"); (ii) transfer agent fees attributable to a specific class;
(iii) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders of a specific class; (iv) Blue Sky registration fees incurred by a
class; (v) Securities and Exchange Commission registration fees incurred by a
class; (vi) expenses of administrative personnel and services to support the
shareholders of a specific class; (vii) litigation or other legal expenses
relating solely to one class; and (viii) Trustees' fees incurred as a result of
issues relating to one class. Expenses in category (i) above must be allocated
to the class for which such expenses are incurred. All other "Class Expenses"
listed in categories (ii) - (viii) above may be allocated to a class, but only
if the President and Treasurer of the Group have determined, subject to Board
approval or ratification, which of such categories of expenses will be treated
as Class Expenses, consistent with applicable legal principles under the 1940
Act and the Internal Revenue Code of 1986, as amended (the "Code").
Therefore, expenses of a Fund shall be apportioned to each class of shares
depending on the nature of the expense item. Group Expenses and Fund Expenses
will be allocated among the classes of shares based on their relative net asset
values in relation to the net asset value of the Group. Approved Class
Expenses shall be allocated to the particular class to which they are
attributable. In addition, certain expenses may be allocated differently if
their method of
Rule 18f-3 Plan page 4
<PAGE> 5
THE PARKSTONE GROUP OF FUNDS
imposition changes. Thus, if a Class Expense can no longer be attributed to a
class, it shall be charged to a Fund for allocation among classes, as
determined by the Board of Trustees. Any additional Class Expenses not
specifically identified above which are subsequently identified and determined
to be properly allocated to one class of shares shall not be so allocated until
approved by the Board of Trustees of the Group in light of the requirements of
the 1940 Act and the Code.
5. EXCHANGE PRIVILEGES.
Subject to the restrictions and conditions set forth in the Funds'
prospectuses, shareholders may exchange shares of one class of a Fund for
shares of the same class of another Fund, provided that the amount to be
exchanged meets the applicable minimum investment requirements and the exchange
is made in states where it is legally authorized. Exchanges from one class of
shares into another class of shares are not permitted; provided, however, that
exchanges between the Investor A Shares of a Fund and the Institutional Shares
of a Fund may be made for the purpose of addressing a change in a Fund
shareholder's standing which qualifies him or her for that particular Class.
6. CONVERSION FEATURES.
(a) Investor B Shares. Eight years after purchase, Investor B Shares will
convert automatically to Investor A Shares. The conversion from Investor B
Shares to Investor A Shares takes place at net asset value, which results in an
investor receiving Investor A Shares with the same dollar value as the Investor
B Shares held at the time of conversion. The conversion occurs eight years
after the beginning of the calendar month in which the shares are purchased.
As a result of the conversion the converted Shares are relieved of the Rule
12b-1 fees borne by Investor B Shares, and instead are subject to the Rule
12b-1 fees borne by Investor A Shares.
(b) Investor C Shares. Nine years after purchase, Investor C Shares will
convert automatically to Investor A Shares. The conversion from Investor C
Shares to Investor A Shares takes place at net asset value, which results in an
investor receiving Investor A shares with the same dollar value as the Investor
C Shares held at the time of conversion. The conversion occurs nine years
after the beginning of the calendar month in which the shares are purchased.
As a result of the conversion the converted Shares are relieved of the Rule
12b-1 fees borne by Investor C Shares and instead are subject to the Rule 12b-1
fees borne by Investor A Shares.
7. QUARTERLY AND ANNUAL REPORTS.
The Trustee shall receive quarterly and annual statements (the "Statements")
concerning all allocated Class Expenses and distribution and servicing
expenditures complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may be
amended from time to time. In the Statements, only expenditures properly
attributable to the sale or servicing of a particular class of shares will be
used to justify any distribution or servicing fee or other expenses charged to
that class. Expenditures not related to the sale or servicing of a particular
class shall not be presented to the Trustees to justify any fee attributable to
that class. The Statements, including the allocations
Rule 18f-3 Plan page 5
<PAGE> 6
THE PARKSTONE GROUP OF FUNDS
upon which they are based, shall be subject to the review and approval of those
Trustees of the Group who are not "interested persons" of the Group (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan (the "Independent Trustees") in the exercise of their
fiduciary duties.
8. ACCOUNTING METHODOLOGY.
The following procedures shall be implemented in order to meet the objective
of properly allocating income and expenses among the Funds:
(a) On a daily basis, the fund accountant shall calculate the 12b-1 Plan Fee
to be charged to each 12b-1 class of shares by calculating the average daily
net asset value of such shares outstanding and applying the applicable fee rate
of the respective class to the result of that calculation.
(b) The fund accountant will allocate all other designated Class Expenses, if
any, to the respective classes.
(c) The fund accountant shall allocate income and Group and Fund Expenses
among the respective classes of shares based on the net asset value of each
class in relation to the net asset value of the Fund for Fund Expenses, and in
relation to the net asset value of the Group for Group Expenses. These
calculations shall be based on net asset values for all Non-Money Market Funds
and the relative value of settled shares for the Money Market Funds.
(d) The fund accountant shall then complete a worksheet developed for purposes
of complying with Section 8 of this Plan, using the allocated income and
expense calculations from paragraph (3) above, and the additional fees
calculated from paragraphs (1) and (2) above.
(e) The fund accountant shall develop and use appropriate internal control
procedures to assure the accuracy of its calculations and the appropriate
allocation of income and expenses in accordance with this Plan.
9. WAIVER OR REIMBURSEMENT OF EXPENSES.
Expenses may be waived or reimbursed by any adviser to the Group, by the
Group's underwriter or by any other provider of services to the Group without
the prior approval of the Group's Board of Trustees.
10. EFFECTIVENESS OF PLAN.
This Plan shall not take effect until it has been approved by votes of a
majority of both (a) the Trustees of the Group and (b) the Independent
Trustees.
Rule 18f-3 Plan page 6
<PAGE> 7
THE PARKSTONE GROUP OF FUNDS
11. MATERIAL MODIFICATIONS.
This Plan may not be amended to modify materially its terms unless such
amendment is approved in the manner provided for initial approval in Section 10
herein.
IN WITNESS WHEREOF, the Group, on behalf of the Funds, has adopted this
Multiple Class Plan as of the 8th day of November, 1995, to be effective
November 8, 1995.
THE PARKSTONE GROUP OF FUNDS
By: /s/ TIMOTHY A. THIEBOUT
--------------------------
Timothy A. Thiebout
Secretary
Rule 18f-3 Plan page 7
