Commission File No. 33-48922
Commission File No. 811-6720
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 15
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
THE FLEX-PARTNERS
(Exact Name of Registrant as Specified in Charter)
P.O. BOX 7177, 6000 MEMORIAL DRIVE, DUBLIN, OHIO 43017
(Address of Principal Executive Offices-Zip Code)
Registrant's Telephone Number, including Area Code: (614)766-7000
DONALD F. MEEDER, SECRETARY - R. MEEDER & ASSOCIATES, INC.
P.O. BOX 7177, 6000 MEMORIAL DRIVE, DUBLIN, OHIO 43017
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective
(check appropriate box).
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ XXX / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) on Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Indefinite number of shares registered under Rule 24f-2 by filing of a
Pre-Effective Amendment No. 1, effective July 6, 1992. The 24(f)-2 Notice for
the fiscal year ended December 31,1996 was filed with the Commission on
February 19, 1997.
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THE FLEX-PARTNERS INTERNATIONAL EQUITY FUND
CROSS REFERENCE SHEET TO FORM N-1A
PART A.
ITEM A. PROSPECTUS CAPTION
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Not Applicable
4 The Trust and its Management
Investment Objective and Policies
5 The Trust and its Management
5A Not Applicable
6(a) Other Information - Shares of Beneficial Interest
6(b) Not Applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not Applicable
6(e) Highlights
6(f)(g) Income Dividends and Taxes
6(h) Not Applicable
7(a) The Trust and its Management
7(b) How Net Asset Value is Determined
How to Buy Shares
7(c) How To Buy Shares
Exchange Privilege
7(d) Highlights
How To Buy Shares
7(e) How To Buy Shares
7(f) Distribution Plan
7(g) Not Applicable
8(a) How To Make Withdrawals (Redemptions)
8(b) How To Make Withdrawals (Redemptions)
8(c) Shareholder Accounts
8(d) How To Make Withdrawals (Redemptions)
9 Not Applicable
<PAGE>
PROSPECTUS _____________, 1997
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
614-766-7074
The Flex-Partners Funds are a family of mutual funds organized as a
business trust (the "Trust"). One of the separate portfolios of the Trust is the
International Equity Fund (the "International Equity Fund" or the "Fund"). The
Fund seeks long-term growth from investing primarily in equity securities of
foreign issuers.
ADDITIONAL INFORMATION
This Prospectus sets forth basic information about the Trust and the Fund
that a prospective investor should know before investing and it should be
retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION, dated
____________, 1997, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available upon request and without charge by contacting the Fund at the
address given above or by calling 1-800-494-FLEX, or (614) 766-7074.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS Page
Highlights................................ 2
Synopsis of Financial Information......... 3
Investment Objective and Policies......... 4
Securities and Investment Practices....... 5
Risk Considerations....................... 10
The Trust and Its Management.............. 13
Distribution Plan......................... 16
Income Dividends and Taxes................ 17
How Net Asset Value is Determined......... 18
Performance Information and Reports....... 19
Other Information......................... 20
How to Buy Shares......................... 21
How to Make Withdrawals (Redemptions)..... 25
Exchange Privilege........................ 25
Retirement Plans.......................... 26
Other Shareholder Services................ 26
Shareholder Accounts...................... 27
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
INVESTMENT SUBADVISER: COMMERCIAL UNION INVESTMENT MANAGEMENT, LIMITED
PROSPECTUS DATED ________________, 1997
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HIGHLIGHTS
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INVESTMENT OBJECTIVE: The International Equity Fund seeks long-term growth
from investing primarily in equity securities of foreign issuers. See
"Investment Objective and Policies."
LIQUIDITY: As an open-end investment company, the Fund continuously offers
and redeems shares of beneficial interest at the next determined net asset value
per share plus any applicable sales charge. See "How to Buy Shares" and "How to
Make Withdrawals (Redemptions)."
DIVERSIFICATION: The Fund is a diversified mutual fund because 75% of its
assets are restricted by the following rules: (1) No more than 5% of the Fund's
assets may be invested in the securities of a single issuer (other than U.S.
Government Securities and securities of other investment companies, if otherwise
permissible) and (2) the Fund may not purchase more than 10% of any such
issuer's outstanding voting securities.
SALES CHARGE: Shares are offered at net asset value plus the applicable
sales charge (maximum of 4.00% of public offering price). See "Synopsis of
Financial Information" and "How to Buy Shares."
RETIREMENT PLANS AND OTHER SHAREHOLDER SERVICES: The Trust offers
retirement plans, which include a prototype Profit Sharing Plan, Money Purchase
Pension Plan, Salary Savings Plan--401(k), Individual Retirement Account (IRA),
Simple IRA, Simplified Employee Pension (SEP) Plan, and a number of other
special shareholder services. See "Retirement Plans."
MINIMUM INVESTMENT: A minimum investment of $2,500 is required to open an
account, except an IRA account for which the minimum is $500. Subsequent
investments must be at least $100. The Fund has the right to redeem the shares
in an account and pay the proceeds to the shareholder if the value of the
account drops below $1,000 ($500 for an IRA) because of shareholder redemptions.
The shareholder will be given 30 days written notice and an opportunity to
restore the account to $1,000 ($500 for an IRA). See "How to Buy Shares", "Other
Shareholder Services" and "Shareholder Accounts."
INVESTMENT ADVISER AND MANAGER: R. Meeder & Associates, Inc. is the Fund's
investment adviser and manager (the "Investment Adviser" or the "Manager"). The
Manager has been an investment adviser to individuals, retirement plans,
corporations and foundations since 1974 and to mutual funds since 1982. See "The
Trust and Its Management."
SUBADVISER: Commercial Union Investment Management, Limited is the Fund's
subadviser (the "Subadviser"). The Subadviser is a wholly-owned subsidiary of
Commercial Union plc., an international insurance and financial services
organization which has managed global and international assets since 1861, and
can trace its roots back to 1696. As of December 31, 1996, the Subadviser and
its affiliates have $111 billion in assets under management. The Subadviser has
been an investment adviser to mutual funds, public and corporate employee
benefit plans, charities, insurance companies, banks, investment trusts and
other institutions. See "The Trust and Its Management."
<PAGE>
SHARES AVAILABLE THROUGH: The Fund's transfer agent, Mutual Funds Service
Co. ("MFSCO"). See "The Trust and Its Management."
DISTRIBUTION PLAN: The Fund has adopted a Rule 12b-1 distribution plan for
using as much as 25/100 of 1% of net assets annually to aid in the distribution
of shares. The Fund has also adopted a service plan for using as much as 25/100
of 1% of net assets annually to pay broker-dealers or others for the provision
of personal continuing services to shareholders and/or the maintenance of
shareholder accounts. See "Distribution Plan."
HOW TO BUY SHARES: Complete the New Account Application and forward with
payment as directed. Orders accompanied by payment (ordinary check, bank check,
bank wire, and money order) are accepted immediately and priced at the next
determined net asset value per share after receipt of the order. See "How to Buy
Shares" and "How Net Asset Value is Determined."
SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the Fund
by writing or telephoning the Fund at the address or telephone numbers indicated
on the cover page of this Prospectus. To protect the confidentiality of
shareholder accounts, information relating to a specific account will be
disclosed pursuant to a telephone inquiry if the shareholder identifies the
account by account number or by the taxpayer identification number listed on the
account.
RISKS: For a discussion of the risks associated with an investment in the
Fund, see "Risk Considerations." The Fund should not be considered a complete
investment program.
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SYNOPSIS OF FINANCIAL INFORMATION
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases (as a percentage
of offering price)................................ 4.00%(1)
Maximum Deferred Sales Load ........................... none
Maximum Sales Load Imposed on Reinvested
Dividends............................................ none
Redemption Fees ....................................... none
Exchange Fee........................................... none
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees........................................ 1.00%
Rule 12b-1 Fees........................................ 0.25%
Other Expenses*........................................ 0.62%
(including Service Fees) ------
TOTAL FUND OPERATING EXPENSES 1.87%
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CUMULATIVE EXPENSES
PAID FOR THE PERIOD OF:
EXAMPLE: 1 YEAR 3 YEARS
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An investor would pay the following expense
on a $1,000 investment, assuming (1) an
operating expense ratio of 1.87% for the Fund,
and (2) a 5% annual return throughout the
period and (3) redemption at the end of each
time period: $58 $96
*"Other Expenses" is based on estimated amounts for the current fiscal year.
(1)The sales charge applied to purchases of shares declines as the amount
invested increases. See "How to Buy Shares."
The expense table is meant to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose an exchange fee or redemption fee. For more
complete descriptions of the various costs and expenses of the Fund see "The
Trust and Its Management" and "Distribution Plan."
The table and hypothetical examples on the previous page are for
illustrative purposes only. The investment rate of return and expenses should
not be considered a representation of past or future performance or expenses as
actual rates of return and expenses may be more or less than the rate and
amounts shown.
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INVESTMENT OBJECTIVE AND POLICIES
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The Fund seeks long-term growth from investing primarily in equity
securities of foreign issuers. Normally, the Fund invests at least 70% of its
assets in equity securities of foreign issuers. Equity securities include common
and preferred stocks, convertible securities and warrants or rights to subscribe
to or purchase such securities, American Depositary Receipts ("ADR's"), European
Depositary Receipts ("EDR's") and Global Depositary Receipts ("GDR's")
(collectively, "depositary receipts"). However, the Fund is not required to
invest in equity securities of foreign issuers and may invest in any type of
investment grade securities, including debt securities of foreign issuers, and
obligations of the U.S. and foreign governments and their political
subdivisions.
The Fund intends to diversify its assets broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. Investments
may be made in developed as well as developing countries. The Fund currently
does not intend to invest more than 30% of its total assets in issuers in, or
governments of, developing countries. Investing in issuers located in developing
countries involves exposure to economies that are generally less diverse and
mature, and to political systems that can be expected to have less stability,
than those of developed countries.
<PAGE>
Currently, assets of the Fund invested in developed countries are primarily
invested in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
the Netherlands, Norway, Spain, Sweden, Switzerland, United Kingdom, Australia,
Hong Kong, Japan, Malaysia, New Zealand and Singapore. Currently, assets of the
Fund invested in developing countries are invested primarily in Portugal,
Poland, Czech Republic, Hungary, Turkey, India, Pakistan, Israel, Sri Lanka,
Russia, China, Indonesia, Korea, Greece, Jordan, Philippines, Taiwan, Venezuela,
Thailand, the Republic of South Africa, Peru, Brazil, Colombia, Argentina, Chile
and Mexico.
The Fund may attempt to hedge against unfavorable changes in currency
exchange rates by engaging in forward currency transactions, purchasing and
writing put and call options on foreign currencies and trading currency futures
contracts and options thereon. The Fund may purchase temporary investments, lend
its portfolio securities and purchase stock index futures contracts and purchase
and write options thereon. See "Securities and Investment Practices."
As a fundamental policy, with respect to 75% of the total assets of the
Fund, the Fund will not purchase a security of any issuer (other than U.S.
Government Securities or securities of other investment companies, if otherwise
permissible) if such purchase would cause the Fund's holdings of that issuer to
amount to more than 5% of the Fund's total assets, and the Fund may not own more
than 10% of the outstanding voting shares of any such issuer.
The Fund will not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, 25% or more of the Fund's total assets would
be invested in securities of companies whose principal business activities are
in the same industry.
The Trust may, in the future, seek to achieve the Fund's investment
objective by investing all of the Fund's assets in a separate diversified,
open-end management investment company having substantially the same investment
objective as the Fund. The Fund's investment policies permit such an investment.
Shareholders will receive 30 days prior written notice with respect to any such
investment.
Except as otherwise expressly provided herein, the investment objective and
policies of the Fund are not fundamental and may be changed by the Trustees
without approval of the Fund's shareholders. No such change would be made in the
Fund without 30 days prior written notice to shareholders.
Additional information about the investment policies of the Fund appears in
the Statement of Additional Information. There can be no assurance that the
investment objective of the Fund will be achieved.
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SECURITIES AND INVESTMENT PRACTICES
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In seeking to meet its investment objective, the Fund may invest in any
type of security whose investment characteristics are consistent with the Fund's
investment program. These and some of the other investment strategies the Fund
may use are described below. Although these strategies are regularly used by
some investment companies and other institutional investors in various markets,
some of these strategies cannot at the present time be used to a significant
extent by the Fund in some of the markets in which the Fund will invest and may
not be available for extensive use in the future.
<PAGE>
When allocating investments among countries, the Subadviser will consider
various criteria, including the relative economic growth potential of the
various countries' economies; expected levels of inflation; government policies
influencing business conditions; and the outlook for currency relationships. By
investing in foreign securities, the Subadviser will attempt to take advantage
of differences between economic trends and performance of securities markets in
various countries.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a
company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stock in its claim on income for dividend payments and
on assets if the company is liquidated. After other claims are satisfied, common
stockholders participate in company profits on a pro rata basis; profits may be
paid out in dividends or reinvested in the company to help it grow. Increases
and decreases in earnings are usually reflected in a company's stock price, so
common stocks generally have the greatest appreciation and depreciation
potential of all corporate securities. While most preferred stocks pay a
dividend, the Fund may purchase preferred stock where the issuer has omitted, or
is in danger of omitting, payment of its dividend. Such investments would be
made primarily for their capital appreciation potential.
CONVERTIBLE SECURITIES AND WARRANTS. The Fund may invest in debt or
preferred equity securities convertible into or exchangeable for equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than non-convertible
securities. They generally participate in the appreciation or depreciation of
the underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertibles have been developed which combine higher or lower
current income with options and other features. Warrants are options to buy a
stated number of shares of common stock at a specified price any time during the
life of the warrants (generally, two or more years).
FIXED INCOME SECURITIES. The Fund may invest up to 10% of its total assets
in any type of investment-grade security. Such securities would be purchased in
companies which meet the investment criteria for the Fund. The price of a bond
fluctuates with changes in interest rates, rising when interest rates fall and
falling when interest rates rise.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
the Subadviser, under the supervision of the Board of Trustees, to be illiquid,
which means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities and some other securities may be subject to
legal restrictions. Difficulty in selling securities may result in a loss or may
be costly to the Fund.
<PAGE>
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may
invest up to 20% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued by
entities organized in the U.S. or any foreign country: short-term (less than
twelve months to maturity) and medium-term (not greater than five years to
maturity) obligations issued or guaranteed by the U.S. government or the
governments of foreign countries, their agencies or instrumentalities; finance
company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or, if
unrated, of comparable quality as determined by the Subadviser; obligations
(including certificates of deposit, time deposits and bankers' acceptances) of
banks; and repurchase agreements with banks and broker-dealers with respect to
such securities.
BORROWING. As a fundamental policy, the Fund may borrow up to one-third of
the value of its total assets from banks to increase its holdings of portfolio
securities. Under the Investment Company Act of 1940 (the "1940 Act"), the Fund
is required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's holdings may
be disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Fund's net asset value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances), which may or may not exceed
the income or gains received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets to generate income. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. government securities or
irrevocable letters of credit) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities loaned.
The Fund may terminate the loans at any time and obtain the return of the
securities loaned within five business days. The Fund will continue to receive
any interest or dividends paid on the loaned securities and will continue to
retain any voting rights with respect to the securities. In the event that the
borrower defaults on its obligation to return borrowed securities, because of
insolvency or otherwise, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value of
the collateral falls below the market value of the borrowed securities.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on U.S. and foreign exchanges or in the
over-the-counter markets. An option on a security is a contract that permits the
purchaser of the option, in return for the premium paid, the right to buy a
specified security (in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the writer of the option at a
designated price during the term of the option. An option on a securities index
permits the purchaser of the option, in return for the premium paid, the right
<PAGE>
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may write a
call or put option to generate income, and will do so only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or hold
a call at the same or lower exercise price, for the same exercise period, and on
the same securities as the written call. A put is covered if the Fund maintains
liquid assets with a value at least equal to the exercise price in a segregated
account, or holds a put on the same underlying securities at an equal or greater
exercise price. The value of the underlying securities on which options may be
written at any one time will not exceed 15% of the total assets of the Fund. The
Fund will not purchase put or call options if the aggregate premium paid for
such options would exceed 5% of its total assets at the time of purchase.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES. The Fund will normally 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 entering into forward contracts
to purchase or sell foreign currencies. The Fund will generally not enter into a
forward contract with a term of greater than one year. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers. The Fund will generally enter into forward
contracts only under two circumstances. First, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security in
relation to another currency by entering into a forward contract to buy the
amount of foreign currency needed to settle the transaction. Second, when the
Subadviser believes that the currency of a particular foreign country may suffer
or enjoy a substantial movement against another currency, it may enter into a
forward contract to sell or buy the former foreign currency (or another currency
which acts as a proxy for that currency) approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. This
second investment practice is generally referred to as "cross-hedging." The Fund
will not enter into forward contracts if, as a result, the Fund will have more
than 20% of its total assets committed to the consummation of such contracts.
Although forward contracts will be used primarily to protect the Fund from
adverse currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
<PAGE>
CLOSED-END INVESTMENT COMPANIES. Some countries have authorized the
formation of closed-end investment companies to facilitate indirect foreign
investment in their capital markets. In accordance with the 1940 Act, the Fund
may invest up to 10% of its total assets in securities of closed-end investment
companies. This restriction on investments in securities of closed-end
investment companies may limit opportunities for the Fund to invest indirectly
in certain developing markets. Shares of certain closed-end investment companies
may at times be acquired only at market prices representing premiums to their
net asset values. If the Fund acquires shares of closed-end investment
companies, shareholders would bear both their proportionate share of expenses of
the Fund (including management and advisory fees) and, indirectly, the expenses
of such closed-end investment companies.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock index futures contracts, foreign currency
futures contracts and options on any of the foregoing. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency fluctuates,
either party to the contract is required to make additional margin payments,
known as "variation margin," to cover any additional obligation it may have
under the contract. In addition, when the Fund enters into a futures contract,
it will segregate assets or "cover" its position in accordance with the 1940
Act. See "Asset Coverage for Futures and Options Positions" in the Statement of
Additional Information. The Fund may not commit more than 5% of its total assets
to initial margin deposits on futures contracts and related options. The value
of the underlying securities on which futures contracts will be written at any
one time will not exceed 25% of the total assets of the Fund.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may enter into repurchase agreements with U.S.
banks and broker-dealers. Under a repurchase agreement the Fund acquires a
security from a U.S. bank or a registered broker-dealer who simultaneously
agrees to repurchase the security at a specified time and price. The repurchase
price is in excess of the purchase price by an amount which reflects an
agreed-upon rate of return, which is not tied to the coupon rate on the
underlying security. Under the 1940 Act, repurchase agreements are considered to
be loans collateralized by the underlying security and therefore will be fully
collateralized. However, if the seller should default on its obligation to
repurchase the underlying security, the Fund may experience delay or difficulty
in exercising its rights to realize upon the security and might incur a loss if
the value of the security declines, as well as incur disposition costs in
liquidating the security.
<PAGE>
DEPOSITARY RECEIPTS. ADR's are depositary receipts typically issued by a
U.S. bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDR's and GDR's are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a U.S. corporation. Generally, depositary receipts in
registered form are designed for use in the U.S. securities market and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Depositary receipts may be issued pursuant to sponsored or unsponsored programs.
In sponsored programs, an issuer has made arrangements to have its securities
traded in the form of depositary receipts. In unsponsored programs, the issuer
may not be directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Fund's investment policies,
the Fund's investments in depositary receipts will be deemed to be investments
in the underlying securities.
PORTFOLIO TURNOVER
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary greatly from year to year, the Subadviser
anticipates that the Fund's annual portfolio turnover rate will not exceed 200%.
High transaction costs could result when compared with other funds. Trading may
also result in realization of net short-term capital gains upon which
shareholders may be taxed at ordinary tax rates when distributed from the Fund.
See "Income Dividends and Taxes."
The Fund intends to comply with the short-term trading restrictions of
Subchapter M of the Internal Revenue Code of 1986, as amended, although these
restrictions could inhibit a rapid change in the Fund's investments.
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RISK CONSIDERATIONS
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As with any investment in securities, the value of, and income from, an
investment in the Fund can decrease as well as increase, depending on a variety
of factors which may affect the values and income generated by the Fund's
portfolio securities, including general economic conditions and market factors.
<PAGE>
In addition to the factors which affect the value of individual securities, you
may anticipate that the value of the shares of the Fund will fluctuate with
movements in the broader equity and bond markets. A decline in the stock market
of any country in which the Fund is invested may also be reflected in declines
in the price of the shares of the Fund. Changes in currency valuations will also
affect the price of the shares of the Fund. History reflects both decreases and
increases in stock markets and currency valuations, and these may occur
unpredictably in the future. The value of debt securities held by the Fund
generally will vary inversely with changes in prevailing interest rates.
Additionally, investment decisions made by the Subadviser will not always be
profitable or prove to have been correct. The Fund is not intended as a complete
investment program.
The Fund has the right to purchase securities in any foreign country,
developed or developing. You should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. These risks are often heightened for investments in developing
markets. See "Foreign Investments" in the Statement of Additional Information.
There is the possibility of expropriation, nationalization or confiscatory
taxation, taxation of income earned in foreign nations (including, for example,
withholding taxes on interest and dividends) or other taxes imposed with respect
to investments in foreign nations, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given country), foreign
investment controls on daily stock market movements, default in foreign
government securities, political or social instability, or diplomatic
developments which could affect investment in securities of issuers in foreign
nations. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
U.S. Foreign companies are not generally subject to uniform accounting or
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to U.S. companies. The Fund may encounter
difficulties or be unable to vote proxies, exercise shareholder rights, pursue
legal remedies, and obtain judgments in foreign courts. Also, some countries may
withhold portions of income and dividends at the source. These considerations
generally are more of a concern in developing countries, where the possibility
of political instability (including revolution) and dependence on foreign
economic assistance may be greater than in developed countries. Investments in
companies domiciled in developing countries therefore may be subject to
potentially higher risks than investment in developed countries.
Brokerage commissions, custodial services, and other costs relating to
investment in developing markets are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlement have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is earned
<PAGE>
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
Prior governmental approval of non-domestic investments may be required
under certain circumstances in some developing countries, and the extent of
foreign investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among other
concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries with which they trade.
In many developing markets, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. There is an increased risk, therefore, of
uninsured loss due to lost, stolen, or counterfeit stock certificates. In
addition, the foreign securities markets of many of the countries in which the
Fund may invest may also be smaller, less liquid, and subject to greater price
volatility than those in the U.S.
The Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. However,
some price spread on currency exchange transactions (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
Leveraging by means of borrowing may exaggerate the effect of any increase
or decrease in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average balances)
which may or may not exceed the income or gains received from the securities
purchased with borrowed funds.
<PAGE>
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or options
contract is based and movements in the securities or currency in the Fund's
portfolio. Successful use of futures or options contracts is further dependent
on the Subadviser's ability to correctly predict movements in the securities or
foreign currency markets and no assurance can be given that its judgment will be
correct. Successful use of options on securities or securities indices is
subject to similar risk considerations. In addition, by writing covered call
options, the Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories,
described elsewhere in this Prospectus and the Statement of Additional
Information.
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THE TRUST AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
The Trust was organized as a Massachusetts business trust on June 22, 1992.
All of its constituent funds are open-end management companies. The Fund is a
diversified open-end management company. The Trust's offices are at 6000
Memorial Drive, Dublin, OH 43017. The business and affairs of the Trust are
under the direction of its Board of Trustees.
The Fund has retained the services of R. Meeder & Associates, Inc. as
investment adviser. R. Meeder & Associates, Inc. (the "Manager"), has been an
investment adviser to individuals and retirement plans since 1974 and to mutual
funds since 1982. The Manager serves the Fund pursuant to an Investment Advisory
Contract under the terms of which it has agreed to provide an investment program
within the limitations of the Fund's investment policies and restrictions, and
to furnish all executive, administrative, and clerical services required for the
transaction of Fund business, other than accounting services and services which
are provided by the Fund's custodian, transfer agent, independent accountants
and legal counsel, and investment advisory services provided by the Subadviser.
The Manager was incorporated in Ohio in 1974 and maintains its principal
offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a wholly-owned
subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled by Robert S.
Meeder, Sr. through ownership of voting common stock. MII conducts business only
through its six subsidiaries which are R. Meeder & Associates, Inc.; Mutual
Funds Service Co., the Fund's transfer agent; Adviser Dealer Services, Inc., the
Fund's distributor; Opportunities Management Co., a venture capital investor;
Meeder Advisory Services, Inc., a registered investment adviser; and OMCO, Inc.,
a registered commodity trading adviser and commodity pool operator.
<PAGE>
The Manager earns an annual fee, payable in monthly installments, from the
Fund at the rate of 1.00% of the Fund's average net assets. These fees are
higher than the fees charged to most other investment companies.
Accounting, stock transfer, and dividend disbursing services are provided
to the Fund by Mutual Funds Service Co., 6000 Memorial Drive, Dublin, Ohio
43017, a wholly-owned subsidiary of MII. The minimum annual fee, payable
monthly, for accounting services for the Fund is $30,000. Subject to the
applicable minimum fee, the Fund's annual fee is computed at the rate of .03% of
the first $100 million, .02% on the next $150 million and .01% in excess of $250
million of the Fund's average net assets. In addition, the Fund incurs (subject
to a $4,000 annual minimum fee) an annual fee of the greater of $15 per
shareholder account or .10% of the Fund's average net assets, payable monthly,
for stock transfer and dividend disbursing services. Mutual Funds Service Co.
also serves as Administrator to the Fund pursuant to an Administration Services
Agreement. Services provided to the Fund include coordinating and monitoring any
third party services to the Fund; providing the necessary personnel to perform
administrative functions for the Fund; assisting in the preparation, filing and
distribution of proxy materials, periodic reports to Trustees and shareholders,
registration statements and other necessary documents. The Fund incurs an annual
fee for these administrative services, payable monthly, of .05% of the Fund's
average net assets, subject to a minimum annual fee of $30,000. These fees are
reviewable annually by the Board of Trustees.
A broker-dealer may use a portion of the commissions paid by the Fund to
reduce the Fund's expenses. The Manager or the Subadviser may take into account
sales of shares of the Fund and other funds advised by the Manager or the
Subadviser in selecting broker-dealers to effect portfolio transactions on
behalf of the Fund.
Information concerning the Trustees and officers of the Trust appears in
the Statement of Additional Information.
SUBADVISER
Commercial Union Investment Management, Limited (the "Subadviser") is a
wholly-owned subsidiary of Commercial Union plc., an international insurance and
financial services organization which has managed global and international
assets since 1861, and can trace its roots back to 1696. The Subadviser was
established in 1986 by the CU Group as an independent investment management
company in its own right, and as of December 31, 1996, the Subadviser and its
affiliates have $111 billion in assets under management. The Subadviser has been
an investment adviser to mutual funds, public and corporate employee benefit
plans, charities, insurance companies, banks, investment trusts and other
institutions.
The Subadviser serves as the Fund's subadviser under an Investment
Subadvisory Agreement between the Manager and the Subadviser. The Subadviser and
its affiliates have their principal offices at St. Helen's, 1 Undershaft,
London, England EC3P 3DQ and have investment offices in Amsterdam, Paris,
Boston, Toronto, Tokyo, Singapore, Johannesburg and Melbourne. The Subadviser is
compensated for its services by the Manager in an amount equal to 100% of the
investment advisory fees received by the Manager under its investment advisory
<PAGE>
contract with the Fund with regard to the first $10 million of average net
assets of the Fund, 30% of such advisory fees received by the Manager with
regard to the next $10 million of average net assets of the Fund and 65% of such
advisory fees received by the Manager with regard to average net assets of the
Fund greater than $20 million. The Manager continues to have responsibility for
all investment advisory services in accordance with the investment advisory
contract and supervises the Subadviser's performance of such services.
PORTFOLIO MANAGERS
The lead portfolio manager of the Fund is David Keen. Mr. Keen is
responsible for managing the overall strategic asset allocation of the Fund. Mr.
Keen joined the Subadviser in 1971 and is a Director of the Subadviser. Mr. Keen
is also Chief Investment Officer for all North American based accounts of the
Subadviser, and fund director of the Subadviser's Staff Pension Fund.
John Manning, Rodney Reid, Andrew Hitchings, Mamoru Imai and Roger Bade
exercise regional portfolio management responsibilities for the Fund. John
Manning, European Fund Manager of the Subadviser, joined the Subadviser in 1973
and is the portfolio manager responsible for the Fund's European (excluding the
United Kingdom) portfolio. Mr. Reid, Associate Director of the Subadviser,
joined the Subadviser in 1985 and is the portfolio manager responsible for the
Fund's United Kingdom portfolio. Mr. Hitchings, Managing Director of Commercial
Union Investment Management Singapore, joined the Subadviser in 1985 and is the
portfolio manager responsible for the Fund's Far Eastern portfolio. Mr. Imai,
Managing Director of Commercial Union Investment Management Japan, joined
Commercial Union Investment Management Japan in 1989 and is the portfolio
manager responsible for the Fund's Japanese portfolio. Mr. Bade, the
Subadviser's Head of Emerging Markets, joined the Subadviser in 1983 and is the
portfolio manager responsible for the Fund's emerging markets portfolio.
DISTRIBUTOR
Adviser Dealer Services, Inc. (the "Distributor"), 6000 Memorial Drive,
Dublin, Ohio 43017, an affiliate of the Manager, serves as the distributor of
the shares of the Fund. The Manager or the Subadviser may select the Distributor
to execute transactions for the Fund, provided that the commissions, fees or
other remuneration received by the Distributor are reasonable and fair compared
to those paid to other brokers in connection with comparable transactions.
TRANSFER AGENT
Mutual Funds Service Co. ("MFSCO"), 6000 Memorial Drive, Dublin, Ohio
43017, an affiliate of the Manager, provides stock transfer, dividend disbursing
and administrative services to the Fund.
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Fund has adopted a distribution plan pursuant to Rule 12b-1 (the
"Distribution Plan") in accordance with the regulations under the 1940 Act.
Under the provisions of the Distribution Plan, the Fund makes payments to the
Distributor based on 0.25% annually of the average daily value of the net assets
of the Fund.
The Fund has also adopted a service plan (the "Service Plan"). Under the
provisions of the Service Plan, the Fund makes payments to the Distributor based
on 0.25% annually of the average daily value of the net assets of the Fund.
Some or all of the service fees are used to reimburse securities dealers or
others for personal services and/or the maintenance of shareholder accounts. A
portion of any initial commission paid to dealers for the sale of shares of the
Fund represents payment for personal services and/or the maintenance of
shareholder accounts by such dealers. Dealers are eligible for further
reimbursement commencing as of the time of such sale. Any service fees received
by the Distributor and not allocated to dealers or others may be applied by the
Distributor in reduction of expenses incurred by it directly for personal
services and the maintenance of shareholder accounts.
The distribution fees are used primarily to pay ongoing commissions to
securities dealers for selling such shares. Any distribution fees received by
the Distributor and not allocated to dealers may be applied by the Distributor
in connection with sales or marketing efforts, including special promotional
fees and cash and noncash incentives based upon sales by securities dealers.
The Manager or the Subadviser may use its resources to pay expenses
associated with the sale of the Funds' shares. This may include payments to
third parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the Fund's shares. However, the Fund does not
pay the Manager or the Subadviser any separate fees for this service.
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits the annual expenditures which the Fund may incur under the Distribution
Plan and the Service Plan to a total of 1%, of which 0.75% may be used to pay
distribution expenses and 0.25% may be used to pay shareholder service fees. The
NASD rules also limits the aggregate amount which the Fund may pay for such
distribution costs to 6.25% of gross share sales since the inception of any
asset-based sales charge plus interest at the prime rate plus 1% on unpaid
amounts thereof (less any applicable contingent deferred sales charge). Such
limitation does not apply to shareholder service fees.
<PAGE>
- --------------------------------------------------------------------------------
INCOME DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. The Fund's dividends will be
declared payable to shareholders on at least an annual basis.
In December, the Fund may distribute an additional ordinary income dividend
(consisting of net short-term capital gains and undistributed income) in order
to preserve its status as a registered investment company (mutual fund) under
the Internal Revenue Code. Net long-term capital gains, if any, also are
declared and distributed in December.
DISTRIBUTION OPTIONS. You may choose to receive dividends and capital gain
distributions in cash or to reinvest them in additional shares. Please indicate
your choice on your New Account Application or contact your dealer. If you elect
to receive dividends or capital gain distributions in cash and the U.S. Postal
Service returns your checks to us, the checks will be reinvested in your account
at the Fund's then-current net asset value. Until we receive instructions to the
contrary, subsequent distributions will be reinvested in your account. In
addition, we may reinvest, at the Fund's then-current net asset value, any
distribution checks that remain uncashed for six months.
TAXES. The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code by distributing all, or substantially
all, of its net investment income and net realized capital gains to shareholders
each year.
The Fund's dividends and capital gain distributions are subject to federal
income tax whether they are received in cash or reinvested in additional shares.
Distributions declared in October, November, December and paid in January of the
following year are taxable as if they were paid on December 31.
Dividends from net investment income (including net short-term capital
gains) are taxable as ordinary income. Distributions from net long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long
you have held your shares.
A portion of the Fund's dividends may qualify for the dividends-received
deduction available to corporations. The Fund will send you a tax statement by
January 31 showing the tax status of distributions you received in the previous
year and will file a copy with the IRS.
Form 1099-DIV, Dividends and Distributions will not be provided to
individuals if gross dividends and other distributions are less than $10 or to
corporations, retirement plans (including IRA's), tax-exempt organizations or to
registered securities dealers.
You may realize a capital gain or loss when you redeem (sell) or exchange
shares of the Fund. For most types of accounts, the proceeds from your
redemption transactions will be reported to you and the IRS annually. However,
because the tax treatment depends on your purchase price and personal tax
position, you should keep your regular account statements to use in determining
your taxes.
<PAGE>
"BUYING A DIVIDEND." The timing of your investment in the Fund could have
undesirable tax consequences.
If you opened a new account or bought more shares for your current account
just before the day a dividend or capital gain distribution was reflected in the
Fund's share price, you would receive a portion of your investment back as a
taxable distribution. This practice is sometimes referred to as "buying a
dividend."
BACKUP WITHHOLDING. The Fund is required by federal law to withhold 31% of
reportable dividends, capital gain distributions, or redemptions payable to
shareholders who have not complied with IRS regulations. To avoid this
withholding requirement, you must certify on your account application (or on IRS
Form W-9) that your social security or taxpayer identification number (TIN) is
correct and that you are not subject to back-up withholding for previous under
reporting to the IRS, or that you are exempt from backup withholding.
The Fund may refuse to sell shares to investors who have not complied with
these requirements, either before or at the time of purchase. Until we receive
your certified TIN, we may redeem your shares in the Fund at any time.
CURRENCY CONSIDERATIONS. If the Fund's dividends exceed its taxable income
in any year, which is sometimes the result of currency-related losses, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. To minimize the risk of a return of capital, the
Fund may adjust the dividends to take currency fluctuations into account, which
may cause the dividends to vary. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or a
lower reported capital loss when you sell your shares. The statement you receive
in January will specify if any distributions included a return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the Fund
and its investments and these taxes generally will reduce the Fund's
distributions. However, an offsetting tax credit or deduction may be available
to you. If so, your tax statement will show more taxable income or capital gains
than were actually distributed by the Fund, but will also show the amount of the
available offsetting credit or deduction.
- --------------------------------------------------------------------------------
HOW NET ASSET VALUE IS DETERMINED
- --------------------------------------------------------------------------------
Net asset value per share is determined at each closing of the New York
Stock Exchange each day the Exchange is open for business and each other day
during which there is a sufficient degree of trading that the current net asset
value of a Fund's shares might be materially affected by changes in the value of
the securities held by the Fund. Net asset value is obtained by dividing the
value of the Fund's assets, less its liabilities, by the total number of its
shares of beneficial interest outstanding at the time.
<PAGE>
The Fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of 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. If quotations are not readily available,
or if the values have been materially affected by events occurring after the
closing of a foreign market, assets are valued by a method that the Board of
Trustees believes accurately reflects fair value.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION AND REPORTS
- --------------------------------------------------------------------------------
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment results
and/or comparisons of its investment results to the Morgan Stanley Capital
International - Europe, Australasia, Far East (EAFE) Index, the Morgan Stanley
Capital International Emerging Markets Free Index or other various unmanaged
indices or results of other mutual funds or investment or savings vehicles. The
Fund's investment results as used in such communications will be calculated on a
total rate of return basis in the manner set forth below. From time to time,
fund rankings may be quoted from various sources, such as Lipper Analytical
Services, Inc. and Morningstar Mutual Fund Report.
The Fund may provide period and average annualized "total return"
quotations. The Fund's "total return" refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. Average annual total return smoothes out variations in
performance and takes into account any applicable initial sales charge.
An annualized total return is a compounded total return which assumes that
the period total return is generated over a one-year period, and that all
dividends and capital gain distributions are reinvested. An annualized total
return will be slightly higher than a period total return if the period is
shorter than one year, because of the assumed reinvestment.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Fund and
changes in the Fund's expenses. In addition, during certain periods for which
total return quotations may be provided, the Manager or the Subadviser may have
voluntarily agreed to waive portions of its fees or reimburse Fund expenses on a
month-to-month basis. Such waivers and reimbursements will have the effect of
increasing the Fund's net income (and therefore its total return) during the
period such waivers are in effect.
<PAGE>
Shareholders will receive financial reports semi-annually that include the
Fund's financial statements, including listings of investment securities held by
the Fund at those dates. Annual reports are audited by independent accountants.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest in each of
the Trust's existing funds and to create additional funds. All shares have a par
value of $.10 per share, are fully paid, non-assessable and fully transferable
when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full share.
Each fund of the Trust issues its own series of shares of beneficial interest.
The shares of each fund represent an interest only in the fund's assets (and
profits or losses) and in the event of liquidation, each share of a particular
fund would have the same rights to dividends and assets as every other share of
the fund. The Board of Trustees may authorize the creation of additional series
under the Declaration of Trust, each of which would invest its assets in
separate, individually managed portfolios.
Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares of the Trust vote together as one
series. On an issue affecting a particular fund, only its shares vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one fund. In voting on a Distribution Plan,
approval of the Plan by the shareholders of a particular fund would make the
Plan effective as to that fund, whether or not it had been approved by the
shareholders of any other fund.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss as a
result of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the fund itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of each fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. A separate vote of a fund is required on any matter
affecting the fund on which shareholders are entitled to vote. Shareholders of
one fund are not entitled to vote on a matter that does not affect that fund but
<PAGE>
that does require a separate vote of any other fund. There normally will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. Shareholders have under
certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees of the Trust by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT -- The minimum investment to open an account is $2,500,
except an Individual Retirement Account (IRA) which has a $500 minimum.
Subsequent investments in any account may be made in amounts of at least $100.
You may open an account and make an investment by purchasing shares through
securities dealers having sales agreements with the Distributor. A minimum
investment of $2,500 ($500 for an IRA) is required to establish an account in
each Fund. The minimum for subsequent investments in each Fund is $100.
Direct purchase orders may be made by submitting a check. In the case of a
new account, fill out the New Account Application accompanying this Prospectus.
A check payable to the "International Equity Fund" must accompany the New
Account Application. Payments may be made by check or Federal Reserve Draft
payable to the Fund should be mailed to the following address: THE
FLEX-PARTNERS, C/O MUTUAL FUNDS SERVICE CO., P. O. BOX 7177, DUBLIN, OHIO 43017.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred in the
transaction. All orders for the purchase of shares are subject to acceptance or
rejection by the Fund or by the Distributor. Direct purchase orders received by
MFSCO by 4:00 p.m., Eastern time, are confirmed at that day's public offering
price. Direct purchase orders received by MFSCO after 4:00 p.m., Eastern time,
are confirmed at the public offering price on the following business day.
<PAGE>
Wire orders for shares of the Fund received by dealers prior to 4:00 p.m.,
Eastern time, and received by MFSCO before 5:00 p.m., Eastern time, on the same
day are confirmed at that day's public offering price. Orders received by
dealers after 4:00 p.m., Eastern time, are confirmed at the public offering
price on the following business day. It is the dealer's obligation to place the
order with MFSCO before 5:00 p.m., Eastern time, and to forward payment to Star
Bank, N.A.
If the wire order is for a new account, or to open an account in a
different Fund, you must telephone the Fund prior to making your initial
investment. Call 1-800-494-FLEX, or (614) 766-7074. Be sure to specify the name
of the Fund. Advise the Fund of the amount you wish to invest and obtain an
account number and instructions. Have your bank wire federal funds to:
Star Bank, N.A. Cinti/Trust
ABA #: 042-00001-3
Attention: The Flex-Partners
International Equity Fund
Credit Account Number: ___________
Account Name (your name)
Personal Account Number (your International Equity Fund account number)
Direct purchase orders received by MFSCO by 4:00 p.m., Eastern time, are
confirmed at that day's net asset value. Direct investments received by MFSCO
after 4:00 p.m. and orders received by dealers after 5:00 p.m. are confirmed at
the net asset value next determined on the following business day.
No stock certificates will be issued. Instead, an account with MFSCO is
established for each investor and all shares purchased or received, including
those acquired through the reinvestment of dividends and distributions, are
registered on the books of each Fund and credited to such account.
The Fund will not permit redemptions until it receives the New Account
Application in good order.
SUBSEQUENT INVESTMENTS -- Subsequent investments in an existing account in
the Fund may be made by mailing a check payable to "The International Equity
Fund." Please include your account number on the check and mail as follows:
<PAGE>
THE FLEX-PARTNERS
C/O MUTUAL FUNDS SERVICE CO.
P. O. BOX 7177
DUBLIN, OHIO 43017
Subsequent investments may also be made by bank wire as described above. It
is necessary to notify the Fund prior to each wire purchase. Wires sent without
notifying the Fund will result in a delay of the effective date of your
purchase.
PURCHASING SHARES. Shares are sold with a sales charge at the time of
purchase, which varies with the amount invested. Maximum sales charges and fees
are set forth under "Synopsis of Financial Information" above and quantity
discounts for the initial sales charge are set forth below.
Shares of the Fund are sold at net asset value plus the applicable sales
charge as shown in the table below (the "Offering Price") for purchases made at
one time by a single purchaser, by an individual, his or her spouse and their
children under age 21, or by a single trust account. Shares also bear a Rule
12b-1 fee of .25% per annum (paid to the Distributor, Adviser Dealer Services,
Inc.), of their average net asset value. In addition, shares bear an asset based
service fee of .25% per annum. The sales charge is allocated between your
investment dealer and Adviser Dealer Services, Inc. as shown below:
AS A PERCENTAGE AS A PERCENTAGE
OF OFFERING OF NET ASSET
PRICE OF THE VALUE OF THE DEALER'S
SHARES SHARES SALES
AMOUNT INVESTED PURCHASED PURCHASED CONCESSION
- -------------------------------------------------------------------------------
Up to $100,000 4.00% 4.17% 3.50%
$100,001 to $249,999 3.50% 3.63% 3.00%
$250,000 to $499,999 3.00% 3.09% 2.50%
$500,000 to $999,999 2.50% 2.56% 2.00%
$1,000,000 or more none none none
CUMULATIVE QUANTITY DISCOUNT. The above tables of reduced sales charges
also apply if the dollar amount of a purchase plus the net asset value of shares
then owned by the purchaser is more than $100,000. The sales charge on the
shares being purchased will then be at the rate applicable to the aggregate
value of such shares then owned plus the amount of the purchase.
To receive the cumulative quantity discount, the investor or securities
dealer must request the discount at the time of placing the purchase order and
give the Transfer Agent sufficient information to determine and confirm that the
purchase will qualify for the discount. The cumulative quantity discount may be
amended or terminated at any time as to all purchases occurring thereafter.
<PAGE>
LETTER OF INTENTION. An investor may also pay reduced sales charges by
signing and fulfilling the Letter of Intention on the New Account Application
which expresses the investor's intention to invest within the specified 13-month
period the amount in shares indicated. The Letter of Intention may be back dated
to include purchases made within 90 days prior the signing of the Letter of
Intention. The Letter of Intention will not be a binding obligation on either
the purchaser or the Fund.
Purchases made under the Letter of Intention are made at the sales charge
applicable to the aggregate amount to be invested under the Letter of Intention
as if all shares were purchased in a single transaction. During the period
covered by the Letter of Intention, the Transfer Agent will escrow shares
representing 5% of the intended purchase. If the intention is not completed, a
price adjustment is made, based upon the actual amount invested within the
period covered by the Letter of Intention, by redemption of escrowed shares. A
Letter of Intention can be amended: (a) during the 13-month period if the
purchaser files an amended Letter of Intention with the same expiration date as
the original and (b) automatically after the end of the period, if the total
purchases credited to the Letter of Intention qualify for an additional
reduction in sales charge.
SALES CHARGE WAIVERS: Directors, Trustees, officers and full-time employees
of the Trust, the Manager, the Subadviser or the Distributor, including members
of the immediate families of such individuals and employee benefit plans
established by such entities, may purchase shares of the Fund at net asset
value.
In addition, shares of the Fund may be sold at net asset value without an
initial sales charge to shareholders who (i) have invested on or before December
31, 1997 in mutual funds whose portfolios are advised by the Manager, and (ii)
remain continously invested in those mutual funds up to the date they purchase
shares of the Fund.
The Fund may also sell shares at net asset value without an initial sales
charge to clients of the Manager, the Subadviser, registered investment advisers
and financial planners, who are purchasing on behalf of their clients, by making
arrangements to do so with the Trust and the transfer agent.
Shares of the Fund may be sold at net asset value to participants in
certain retirement and deferred compensation plans, including qualified or
non-qualified plans under the Internal Revenue Code and certain affinity group
and group savings plans, provided that the plan has at least 100 eligible
employees or members.
Shares of the Fund may be purchased at net asset value by broker-dealers
who have a sales agreement with the Distributor and by their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees (i.e., spouse and minor children only).
No sales charge will be charged on accounts that are opened for
shareholders by dealers where the amount invested represents redemption proceeds
from funds distributed other than by Adviser Dealer Services, Inc., and where
the shareholder has paid a sales charge in connection with the purchase of such
other fund's shares; provided that (i) shares of the Fund are purchased within
60 days after redemption of such other fund's shares; and (ii) sufficient
documentation of such redemption as the Transfer Agent may require shall be
provided at the time Fund shares are purchased. In addition, shareholders who
have redeemed shares of a mutual fund which is a series of The Flex-Partners
(each a "Flex-Partners Fund") may reinvest the proceeds in any Flex-Partners
Fund at net asset value if such proceeds are reinvested within 60 days after the
date of redemption.
<PAGE>
- --------------------------------------------------------------------------------
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
- --------------------------------------------------------------------------------
Shares are redeemed and funds withdrawn at net asset value per share, and
there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY MAIL -- A shareholder may redeem shares by mailing a written request in
good order to: The Flex-Partners, c/o Mutual Funds Service Co., P. O. Box 7177,
Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange, clearing
agency or savings association). Further documentation may be required as to the
authority of the person requesting redemption of shares held of record in the
name of corporations or trustees, and other fiduciaries.
Amounts withdrawn are mailed without charge to the address printed on your
account statement.
BY BANK WIRE -- A shareholder may redeem by telephone by placing a wire
redemption through a securities dealer. Wire redemption requests received by
dealers prior to 4:00 p.m., Eastern time, and received by MFSCO before 5:00
p.m., Eastern time on the same day, are confirmed at that day's net asset value
per share. Direct wire redemption requests must be received by 4:00 p.m. to be
confirmed at that day's net asset value.
WHEN REDEMPTIONS ARE EFFECTIVE -- Redemptions are made at the net asset
value per share next determined after receipt of a redemption request in good
order. (See "How Net Asset Value Is Determined.")
WHEN PAYMENTS ARE MADE -- Shares are redeemed at their net asset value per
share next determined after receipt by MFSCO of the redemption request in the
form described above. Payment is normally made within seven days after the
redemption request, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen (15) days from the purchase date. To eliminate this delay it is
advisable to purchase shares of the Fund by certified check or wire.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
An exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes.
Your exchange will be processed at the net asset value next determined
after the Transfer Agent receives your exchange request. You will receive a
prospectus of the fund into which you are exchanging along with your
confirmation. The exchange feature may be modified or discontinued at any time,
upon notice to shareholders in accordance with applicable rules adopted by the
Securities and Exchange Commission.
<PAGE>
Your exchange may be processed only if the shares of the fund to be
acquired are eligible for sale in your state and if the amount of your
transaction meets the minimum requirements for that fund. The exchange privilege
is only available in states in which it may be legally offered.
You may exchange your shares for Class A shares of any Flex-Partners Fund
and for shares of The Flex-funds Money Market Fund, a single-class money market
fund managed by the Manager.
The Fund reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if in the Manager or Subadviser's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be adversely
affected.
IF YOU HAVE ANY QUESTIONS ON EXCHANGE OR REDEMPTION PROCEDURES, CALL YOUR DEALER
OR THE TRANSFER AGENT.
- --------------------------------------------------------------------------------
RETIREMENT PLANS
- --------------------------------------------------------------------------------
The Trust offers retirement plans which include a prototype Profit Sharing
Plan, a Money Purchase Pension Plan, a Salary Savings Plan--401(k),
Tax-Sheltered Custodial Account - 403(b)(7), an Individual Retirement Account
(IRA), a Simple IRA, and a Simplified Employee Pension (SEP) Plan. Plan Adoption
Agreements and other information required to establish a Flex-Partners
Retirement Plan are available from The Flex-Partners, c/o R. Meeder &
Associates, Inc., P.O. Box 7177, Dublin, Ohio 43017; or call 1-800-494-3539.
Minimum purchase requirements for retirement plan accounts are subject to
the same requirements as regular accounts, except for an IRA, which has a
reduced minimum purchase requirement. (See "How to Buy Shares.")
- --------------------------------------------------------------------------------
OTHER SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC ACCOUNT BUILDER: Regular investments in the Fund of $100 or more
will be deducted from a shareholder's checking or savings account and invested
in shares of the Fund. A shareholder's bank must be a member of the Automated
Clearing House (ACH). Shareholders wishing to add to their investment account
must complete the Automatic Account Builder section of the New Account
Application. There is no additional charge for this service.
<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is offered
for any investor who wishes to receive regular distributions of $100 or more
from his account. The investor must either own or purchase shares having a value
of at least $10,000 and advise the Fund in writing of the amount to be
distributed and the desired frequency, i.e., monthly, quarterly or annually.
This option may be exercised by completing the appropriate section of the New
Account Application. The investor should realize that if withdrawals exceed
income dividends, the invested principal may be depleted.
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- --------------------------------------------------------------------------------
The Fund maintains an account for each shareholder in full and fractional
shares. The Fund reserves the right to reject any purchase order, and to waive
minimum purchase requirements.
CONFIRMATION STATEMENT -- All purchase and sale transactions, and dividend
reinvestments, are confirmed promptly after they become effective.
ACCOUNTS BELOW MINIMUM -- The Fund reserves the right to redeem shares in
any account for their then current net asset value and pay the proceeds to the
shareholder if at any time the account has shares valued at less than $1,000
($500 for an IRA) as a result of redemptions by the shareholder. The Fund also
reserves the right to redeem the shares in any account which may have been
opened under a waiver of minimum purchase requirements if sufficient additional
shares were not subsequently purchased to meet these requirements. Before a
redemption is processed, the shareholder will be allowed 30 days after written
notice from the Fund to make an additional investment sufficient to bring the
value of shares in the account to $1,000 ($500 for an IRA).
<PAGE>
INVESTMENT ADVISER
R. Meeder & Associates, Inc.
ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
614-766-7074 (in Central Ohio)
SUBADVISER
Commercial Union Investment Management, Limited
St. Helen's
1 Undershaft
London, England EC3P 3DQ
Tel: 0171-6626000
DISTRIBUTOR
Adviser Dealer Services, Inc.
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
(614) 766-7074 (in Central Ohio)
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
614-766-7074 (in Central Ohio)
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
PROSPECTUS ____________, 1997
<PAGE>
THE FLEX-PARTNERS INTERNATIONAL EQUITY FUND
CROSS REFERENCE SHEET TO FORM N-1A
PART B.
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
10 Cover Page
11 Table of Contents
12 Not applicable
13 Investment Policies and Limitations
14 Trustees and Officers
15(a)(b) Not applicable
15(c) Trustees and Officers
16(a)(b) Investment Adviser and Manager
Investment Subadviser
16(c) Not applicable
16(d) Contracts with Companies Affiliated With Manager
16(e) Not applicable
16(f) The Distributor
16(g) Not applicable
16(h) Description of the Trust
16(i) Contracts with Companies Affiliated With Manager
17 Portfolio Transactions
18(a) Cover Page
Description of the Trust
18(b) Not applicable
19(a) Additional Purchase and Redemption Information
Flex-Partners Retirement Plans
19(b) Valuation of Portfolio Securities
Additional Purchase and Redemption Information
19(c) Not applicable
20 Distributions and Taxes
21(a) The Distributor
21(b) The Distributor
21(c) Not applicable
22(a) Not applicable
22(b) Performance
23 Financial Statements
<PAGE>
INTERNATIONAL EQUITY FUND
A FUND OF THE FLEX-PARTNERS TRUST
STATEMENT OF ADDITIONAL INFORMATION
___________, 1997
This Statement is not a prospectus but should be read in conjunction with
the Prospectus of The Flex-Partners International Equity Fund (dated __________,
1997). Please retain this document for future reference. A copy of the
Prospectus may be obtained from The Flex-Partners, 6000 Memorial Drive, Dublin,
Ohio 43017 or by calling 1-800-494-3539. Capitalized terms used and not
otherwise defined herein have the same meanings as defined in the Prospectus.
TABLE OF CONTENTS PAGE
Investment Policies and Related Matters 2
Portfolio Transactions 16
Valuation of Portfolio Securities 18
Performance 19
Additional Purchase and Redemption Information 23
Distributions and Taxes 26
Investment Adviser and Manager 27
Investment Subadviser 29
The Distributor 30
Trustees and Officers 31
Flex-Partners Retirement Plans 33
Contracts With Companies Affiliated With Manager 34
Description of the Trust 34
Principal Holders of Outstanding Shares 36
Financial Statements 36
INVESTMENT ADVISER INVESTMENT SUBADVISER
R. Meeder & Associates, Inc. Commercial Union Investment
Management, Limited
DISTRIBUTOR TRANSFER AGENT
Adviser Dealer Services, Inc. Mutual Funds Service Co.
<PAGE>
INVESTMENT POLICIES AND RELATED MATTERS
GENERAL
INVESTMENT APPROACH. The Subadviser's philosophy is founded on a top down,
theme-driven approach to investment management. The Subadviser aims to add value
to the Fund at all stages of the investment process, from the Subadviser's
strategic top down approach to asset allocation and currency hedging to the
Subadviser's sector and individual stock selection. While the Subadviser's
portfolio managers operate within a disciplined and structured environment, they
have a high degree of freedom over stock selection, enabling them to exercise
their individual flair.
ASSET ALLOCATION. Asset allocation decisions are made by the lead portfolio
manager. The Subadviser's lead portfolio manager takes a top down view,
considering the results of economic analysis, currency forecasts, political
issues and market valuations to establish structural guidelines to which the
portfolio must adhere. He or she seeks to contribute to performance by making
strategic switches between asset classes and geographical regions. Once these
asset allocation guidelines are set, stock selection decisions are made by
specialist regional portfolio managers in accordance with country and sector
strategy.
COUNTRY AND SECTOR STRATEGY. Country and sector strategy is determined
within the guidelines set by the Subadviser's portfolio managers following
consulation with their teams on the implications of trends in interest rates,
exchange rates and other economic fundamentals.
The objective is to pinpoint countries and sectors which are likely to
outperform based on where each market is in terms of its business cycle. The
Subadviser recognizes that different economic and monetary backgrounds result in
good performance by different groups of stocks and the Subadviser judges the
broad areas of a market (growth stocks, value stocks, interest rate sensitives,
etc.) which are likely to outperform at any particular stage of the cycle. At
the same the Subadviser pays close attention to the themes on which a market is
likely to concentrate at a particular time (such as brand values, takeover
activity, or balance sheet strength). Once all these factors are considered, a
formal country and sector strategy is constructed to which all relevant
portfolios must conform. In order to control risk and the extent of the view
taken, limits are set on the deviations that may be made from the country and
sector matrices.
<PAGE>
EQUITY STOCK SELECTION. The Subadviser's portfolio managers have the
freedom to choose stocks within the framework of this matrix structure. In
reaching stock selection decisions, the Subadviser uses the commonly recognized
yardsticks of price/earnings ratios and dividend yields, comparing stocks to
market valuations, relevant sector variations and the history of the particular
stock. The Subadviser looks for excesses of overvaluation/undervaluation in the
market which are tested against the Subadviser's top down view, and make a
qualitative judgment about what is already discounted in the market and what is
likely to occur in the future.
The continued holding of a stock is constantly tested against the reason
for purchase. Once valuation measures no longer warrant the holding of a
security, it is sold. If purchase was based on a single event which occurs, or
which now appears unlikely to occur, the stock would be sold. A change in top
down view may also necessitate a sale where a holding represents only a thematic
or sector view. Price targets are only set for short-term trading.
CURRENCY. The Subadviser treats currency as a separate asset class and it
is analyzed as such. The Subadviser does not believe in speculating in
currencies and it is the Subadviser's normal stance to take on the natural
currency exposure that comes with the Subadviser's portfolio positions. However,
when the Subadviser does take on a currency position, the Subadviser does so
because the Subadviser believes a significant long-term trend is developing
which suggests hedging will both enhance returns and markedly contribute to
reduced risk and volatility in the Fund.
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted whenever an investment policy or limitation
states a maximum percentage of the Fund's assets that may be invested in any
security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Fund's acquisition of such security or other asset.
Accordingly any subsequent change in net asset values or other circumstances
will not be considered when determining whether the investment complies with the
Fund's investment policies and limitations.
The Fund's fundamental investment limitations cannot be changed without
approval by a majority of the outstanding voting securities (as defined in the
Investment Company Act of 1940) of the Fund. However, except for the fundamental
investment limitations set forth below, the investment policies and limitations
described in this Statement of Additional Information are not fundamental and
may be changed by the Trustees without shareholder approval. THE FOLLOWING ARE
THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY;
PROVIDED THAT NOTHING IN THE FOLLOWING INVESTMENT RESTRICTIONS WILL PREVENT THE
FUND FROM INVESTING ALL OR PART OF THE FUND'S ASSETS IN AN OPEN-END MANAGEMENT
INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AS THE FUND, PROVIDED SUCH
INVESTMENT IS APPROVED BY THE TRUSTEES. THE FUND MAY NOT
(1) with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than obligations issued or guaranteed by the government of
the United States or any of its agencies or instrumentalities or the securities
of other investment companies if otherwise permitted) if, as a result thereof,
(a) more than 5% of the Fund's total assets would be invested in the securities
of such issuer or (b) the Fund would hold more than 10% of the voting securities
of such issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money except that the Fund may borrow money from banks in an
amount not exceeding 33-1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings);
(4) underwrite securities issued by others (except to the extent that the
Fund may be deemed to be an underwriter within the meaning of the Securities Act
of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, 25% or more of the Fund's total assets would be invested in the
securities of companies whose principal business activities are in the same
industry;
<PAGE>
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities); or
(8) lend any security or make any other loan if as a result more than
33-1/3% of its total assets would be lent to other parties but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The Fund does not currently intend to sell securities short unless it
owns or has the right to obtain securities equivalent in kind and amount to the
securities sold short and provided that transactions in futures contracts and
options are not deemed to constitute selling securities short.
(ii) The Fund does not currently intend to purchase securities on margin
except that the Fund may obtain such short-term credits as are necessary for the
clearance of transactions and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
(iii) The Fund may borrow money only from a bank. The Fund will not
purchase any security while borrowings representing more than 5% of its total
assets are outstanding.
(iv) The Fund does not currently intend to purchase any security if as a
result more than 15% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are valued
including repurchase agreements with remaining maturities in excess of seven
days or securities without readily available market quotes.
(v) The Fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation.
(vi) The Fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the Fund's net assets. Included in
that amount, but not to exceed 2% of the Fund's net assets, may be warrants that
are not listed on the New York Stock Exchange or the American Stock Exchange.
Warrants acquired by the Fund in units or attached to securities are not subject
to these restrictions.
<PAGE>
(vii) The Fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(viii) The Fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of the Manager or the Subadviser who individually own more than 1/2 of
1% of the securities of such issuer, together own more than 5% of such issuer's
securities.
For the Fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" herein. For
the Fund's limitations on short sales, see the section entitled "Short Sales"
herein.
MONEY MARKET INSTRUMENTS. When investing in U.S. money market instruments,
the Fund will limit its purchases, denominated in U.S. dollars, to the following
securities.
* U.S. Government Securities and Securities of its Agencies and
Instrumentalities - obligations issued or guaranteed as to principal
or interest by the United States or its agencies (such as the Export
Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities
(such as the Federal Home Loan Bank, Federal Intermediate Credit Banks
and Federal Land Bank), including Treasury bills, notes and bonds.
* Bank Obligations and Instruments Secured Thereby - obligations
including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of $1,000,000,000
or more, instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if the
foreign branch fails to make payment for any reason. The Fund may also
invest in obligations (including certificates of deposit and bankers
acceptances) of domestic branches of foreign banks having assets of
$1,000,000,000 or more if the domestic branch is subject to the same
regulation as United States banks. The Fund will not invest at time of
purchase more than 25% of its assets in obligations of banks nor will
the Fund invest more than 10% of its assets in time deposits.
* High quality Commercial Paper - The Fund may invest in commercial
paper rated no lower than A-2 by Standard & Poor's Corporation or
Prime-2 by Moody's Investors Services Inc. or if not rated issued by a
company having an outstanding debt issue rated at least A by Standard
& Poor's or Moody's.
<PAGE>
* Private Placement Commercial Paper - Private placement commercial
paper consists of unregistered securities which are traded in public
markets to qualified institutional investors such as the Fund. The
Fund's risk is that the universe of potential buyers for the
securities should the Fund desire to liquidate a position is limited
to qualified dealers and institutions and therefore such securities
could have the effect of being illiquid.
* High Grade Corporate Obligations - obligations rated at least A by
Standard & Poor's or Moody's. See rating information below.
* Repurchase Agreements -- See Repurchase Agreements below.
The Subadviser exercises due care in the selection of money market
instruments. However, there is a risk that the issuers of the securities may not
be able to meet their obligations to pay interest or principal when due. There
is also a risk that some of the Fund's securities might have to be liquidated
prior to maturity at a price less than original amortized cost or value face
amount or maturity value to meet larger than expected redemptions. Any of these
risks if encountered could cause a reduction in net income or in the net asset
value of the Fund.
RATINGS
1. Moody's Investors Services Inc.'s Corporate Bond Rating:
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 edge." 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 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 or
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 sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length or time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
<PAGE>
2. Standard and Poor s Corporation's Corporate Bond Rating:
AAA- Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates and hence provide the maximum safety on all counts.
AA - Bonds rated AA also qualify as high grade obligations and in the
majority of instances differ from AAA issues only in small degree. Here too
prices move with the long-term money market.
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the adverse
effect of changes in economic and trade conditions. Interest and principal are
regarded as safe. They predominantly reflect money rates in their market
behavior but to some extent also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated A or better. The issuer has access
to at least two additional channels of borrowing. Basic earnings and cash flow
have an upward trend. Typically the issuer's industry is well established and
the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1 A-2 or
A-3.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
<PAGE>
4. Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.
Repurchase Agreements - See Repurchase Agreements below.
Certificates of Deposit - are certificates issued against funds deposited
in a bank are for a definite period of time earn a specified or variable rate of
return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed accepted when
a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations in
order to finance longer term credit needs.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, the Subadviser
determines the liquidity of the Fund's investments and through reports from the
Subadviser, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments the Subadviser may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days, over-the-counter options, and
non-government stripped fixed-rate mortgage-backed securities. Also, the
Subadviser may determine some restricted securities government-stripped
fixed-rate mortgage-backed securities loans and other direct debt instruments
and swap agreements to be illiquid. However, with respect to over-the-counter
options the Fund writes, all or a portion of the value of the underlying
instrument may be illiquid depending on the assets held to cover the option and
the nature and terms of any agreement the Fund may have to close out the option
before expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by the Board of Trustees. If
through a change in values, net assets or other circumstances, the Fund were in
a position where more than 15% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
<PAGE>
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions pursuant to an exemption from registration under the Securities Act
of 1933 or in a registered public offering. Where registration is required, the
Fund may be obligated to pay all or part of the registration expense and a
considerable period may elapse between the time it decides to seek registration
and the time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to seek registration of the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund purchases a
security and simultaneously commits to resell that security to the seller at an
agreed upon price on an agreed upon date within a number of days from the date
of purchase. The resale price reflects the purchase price plus an agreed upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and marked to
market daily) of the underlying security. The Fund may engage in repurchase
agreements with respect to any security in which it is authorized to invest.
While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delays and costs to the Fund in
connection with bankruptcy proceedings), it is the Fund's current policy to
limit repurchase agreement transactions to parties whose creditworthiness has
been reviewed and found satisfactory by the Subadviser.
SECURITIES LENDING. The Fund may lend securities to parties such as
broker-dealers or institutional investors.
Securities lending allows the Fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be made
only to parties deemed by the Subadviser to be of good standing. Furthermore,
they will only be made if in the Subadviser's judgment the consideration to be
earned from such loans would justify the risk.
The Subadviser understands that it is the current view of the SEC Staff
that the Fund may engage in loan transactions only under the following
conditions: (1) the Fund must receive 100% collateral in the form of cash or
cash equivalents (e.g. U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the Fund must be able to terminate the loan
at any time; (4) the Fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest
or other distributions on the securities loaned and to any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) the Board of Trustees must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower.
<PAGE>
Cash received through loan transactions may be invested in any security in
which the Fund is authorized to invest. Investing this cash subjects that
investment as well as the security loaned to market forces (i.e. capital
appreciation or depreciation).
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies and of dividends and interest
from such securities can change significantly when foreign currencies strengthen
or weaken relative to the U.S. dollar. Foreign securities markets generally have
less trading volume and less liquidity than U.S. markets, and prices on some
foreign markets can be highly volatile.
Many foreign countries lack uniform accounting and disclosure standards
comparable to those applicable to U.S. companies, and it may be more difficult
to obtain reliable information regarding an issuer's financial condition and
operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, are generally higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Subadviser will be able
to anticipate or counter these potential events.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
<PAGE>
The Fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid than
foreign securities of the same class that are not subject to such restrictions.
American Depository Receipts and European Depository Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
corporation held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The Fund may hold foreign currency deposits
from time to time and may convert dollars and foreign currencies in the foreign
exchange markets. Currency conversion involves dealer spreads and other costs
although commissions usually are not charged. Currencies may be exchanged on a
spot (i.e., cash) basis, or by entering into forward contracts to purchase or
sell foreign currencies at a future date and price. Forward contracts generally
are traded in an interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The parties to a forward
contract may agree to offset or terminate the contract before its maturity or
may hold the contract to maturity and complete the contemplated currency
exchange.
The Fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Fund.
In connection with purchases and sales of securities denominated in foreign
currencies, the Fund may enter into currency forward contracts to fix a definite
price for the purchase or sale in advance of the trade's settlement date. This
technique is sometimes referred to as a settlement hedge or transaction hedge.
The Subadviser expects to enter into settlement hedges in the normal course
of managing the Fund's foreign investments. The Fund could also enter into
forward contracts to purchase or sell a foreign currency in anticipation of
future purchases or sales of securities denominated in foreign currency even if
the specific investments have not yet been selected by the Subadviser.
The Fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example, if
the Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge sometimes referred
to as a "position hedge," would tend to offset both positive and negative
currency fluctuations but would not offset changes in security values caused by
other factors. The Fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling - for example, by
<PAGE>
entering into a forward contract to sell Deutschemarks or European Currency
Units in return for U.S. dollars. This type of hedge sometimes referred to as a
"proxy hedge," could offer advantages in terms of cost, yield, or efficiency,
but generally would not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
cash and appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC, guidelines the Fund will
segregate assets to cover currency forward contracts, if any, whose purpose is
essentially speculative. The Fund will not segregate assets to cover forward
contracts entered into for hedging purposes including settlement hedges position
hedges and proxy hedges.
Successful use of forward currency contracts will depend on the
Subadviser's skill in analyzing and predicting currency values. Forward
contracts may substantially change the Fund's investment exposure to changes in
currency exchange rates and could result in losses to the Fund if currencies do
not perform as the Subadviser anticipates. For example, if a currency's value
rose at a time when the Subadviser had hedged the Fund by selling that currency
in exchange for dollars, the Fund would be unable to participate in the
currency's appreciation. If the Subadviser hedges currency exposure through
proxy hedges, the Fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in tandem.
Similarly, if the Subadviser increases the Fund's exposure to a foreign currency
and that currency's value declines, the Fund will realize a loss. There is no
assurance that the Subadviser's use of forward currency contracts will be
advantageous to the Fund or that it will hedge at an appropriate time. The
policies described in this section are non-fundamental policies of the Fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Fund will not: (a)
sell futures contracts, purchase put options or write call options if, as a
result, more than 50% of the Fund's total assets would be hedged with futures
and options under normal conditions; (b) purchase futures contracts or write put
options if, as a result, the Fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would exceed 25%
of its total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the Fund would exceed 5%
of the Fund's total assets. These limitations do not apply to options attached
to or acquired or traded together with their underlying securities, and do not
apply to securities that incorporate features similar to options. The above
limitations on the Fund's investments in futures contracts and options and the
Fund's policies regarding futures contracts and options discussed elsewhere in
this Statement of Additional Information may be changed as regulatory agencies
permit.
FUTURES CONTRACTS. When the Fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When the
Fund sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take place
is fixed when the Fund enters into the contract.
<PAGE>
Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities prices, such as the Standard & Poor's 500 Composite Stock Price
Index (S&P 500). Futures can be held until their delivery dates or can be closed
out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the Fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When the Fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will tend to
offset both positive and negative market price changes much as if the underlying
instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the contract
is held until the delivery date. However both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant (FCM), when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value.
If the value of either party's position declines, that party will be
required to make additional "variation margin" payments to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive all
or a portion of this amount. Initial and variation margin payments do not
constitute purchasing securities on margin for purposes of the Fund's investment
limitations. In the event of the bankruptcy of an FCM that holds margin on
behalf of the Fund, the Fund may be entitled to return of margin owed to it only
in proportion to the amount received by the FCM's other customers, potentially
resulting in losses to the Fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Fund pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indices
of securities prices and futures contracts. The Fund may terminate its position
in a put option it has purchased by allowing it to expire or by exercising the
option. If the option is allowed to expire, the Fund will lose the entire
premium it paid. If the Fund exercises the option, it completes the sale of the
underlying instrument at the strike price. The Fund may also terminate a put
option position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
<PAGE>
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option s strike
price.
A call buyer typically attempts to participate in potential price increases
of the underlying instrument with risk limited to the cost of the option if
security prices fall. At the same time, the buyer can expect to suffer a loss if
security prices do not rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return for
receipt of the premium the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract, the Fund will be
required to make margin payments to an FCM as described above for futures
contracts. The Fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for a put option the Fund has
written, however, the Fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes and must continue
to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This loss
should be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline.
Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. The Fund may purchase and write options in combination
with each other or in combination with futures or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, the
Fund may purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
<PAGE>
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the Fund's current or
anticipated investments exactly. The Fund may invest in options and futures
contracts based on securities with different issuers, maturities or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts.
The Fund may purchase or sell options and futures contracts with a greater
or lesser value than the securities it wishes to hedge or intends to purchase in
order to attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in all cases.
If price changes in the Fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract at
any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying instrument's
current price. In addition, exchanges may establish daily price fluctuation
limits for options and futures contracts, and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for the Fund to enter into new positions or close
out existing positions. If the secondary market for a contract is not liquid
because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the Fund to
continue to hold a position until delivery or expiration regardless of changes
in its value. As a result, the Fund's access to other assets held to cover its
options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and strike
price, the terms of over-the-counter options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the Fund greater flexibility to
tailor an option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing organization
of the exchanges where they are traded.
<PAGE>
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that they
are traded on exchanges (and have margin requirements) and are standardized as
to contract size and delivery date. Most currency futures contracts call for
payment or delivery in U.S. dollars. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The purchaser of a
currency call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The Fund may
purchase and sell currency futures and may purchase and write currency options
to increase or decrease its exposure to different foreign currencies. The Fund
may also purchase and write currency options in conjunction with each other or
with currency futures or forward contracts. Currency futures and options values
can be expected to correlate with exchange rates, but may not reflect other
factors that affect the value of the Fund's investments. A currency hedge, for
example, should protect a Yen-denominated security from a decline in the Yen,
but will not protect the Fund against a price decline resulting from
deterioration in the issuer's creditworthiness. Because the value of the Fund's
foreign-denominated investments changes in response to many factors other than
exchange rates, it may not be possible to match the amount of currency options
and futures to the value of the Fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require, will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures or option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
SHORT SALES. The Fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if the Subadviser
anticipates a decline in the price of the stock underlying a convertible
security the Fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value of the
convertible security. The Fund currently intends to hedge no more than 15% of
its total assets with short sales on equity securities underlying its
convertible security holdings under normal circumstances.
When the Fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. The Fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales.
<PAGE>
PORTFOLIO TURNOVER. The Fund has no fixed policy with respect to portfolio
turnover; however, as a result of the Fund's investment policies, the Subadviser
expects the annual portfolio turnover rate will be 200% or less. The portfolio
turnover rate is calculated by dividing the lesser of sales or purchases of
portfolio securities by the average monthly value of the Fund's securities,
excluding securities having a maturity at the date of purchase of one year or
less. High portfolio turnover may involve correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by the
Fund.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the Fund by the Subadviser pursuant to authority contained in the
investment advisory agreement and investment subadvisory agreement. The
Subadviser is also responsible for the placement of transaction orders for
accounts for which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, the Subadviser considers various relevant factors, including, but not
limited to, the size and type of the transaction; the nature and character of
the markets for the security to be purchased or sold; the execution efficiency,
settlement capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and arrangements for payment of Fund
expenses.
The Fund's brokerage transactions involving securities of companies
headquartered in countries other than the United States will be conducted
primarily on the markets and principal exchanges of such countries. Foreign
markets are generally not as developed as those located in the United States,
which may result in higher transaction costs, delayed settlement and less
liquidity for trades effected in foreign markets. Transactions on foreign
exchanges are usually subject to fixed commissions that generally are higher
than negotiated commissions on U.S. transactions. There is generally less
government supervision and regulation of exchanges and brokers in foreign
countries than in the United States.
The Fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the Fund or other accounts over which the
Subadviser or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of investing
in purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). The
selection of such broker-dealers generally is made by the Subadviser (to the
extent possible consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by the Subadviser's investment
staff based upon the quality of research and execution services provided.
<PAGE>
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to the Subadviser in rendering investment
management services to the Fund or the Subadviser's other clients, and
conversely, such research provided by broker-dealers who have executed
transaction orders on behalf of other Subadviser clients may be useful to the
Subadviser in carrying out its obligations to the Fund. The receipt of such
research is not expected to reduce the Subadviser's normal independent research
activities; however, it enables the Subadviser to avoid the additional expenses
that could be incurred if the Subadviser tried to develop comparable information
through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the Fund
to pay such higher commissions, the Subadviser must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage and
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or the Subadviser's overall responsibilities to the
Fund and its other clients. In reaching this determination, the Subadviser will
not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should be
related to those services.
The Subadviser is authorized to use research services provided by and to
place portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the Fund or shares of other Flex-Partners'
funds or Flex-funds' funds to the extent permitted by law.
The Subadviser may allocate brokerage transactions to broker-dealers who
have entered into arrangements with the Subadviser under which the broker-dealer
allocates a portion of the commissions paid by the Fund toward payment of the
Fund's expenses, such as transfer agent fees of Mutual Funds Service Co. or
custodian fees. The transaction quality must, however, be comparable to those of
other qualified broker-dealers.
The Trustees periodically review the Subadviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund and review the commissions paid by the Fund over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Fund.
From time to time, the Trustees will review whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
The Fund seeks to recapture soliciting broker-dealer fees on the tender of
portfolio securities, but at present no other recapture arrangements are in
effect. The Trustees intend to continue to review whether recapture
opportunities are available and are legally permissible and, if so, to determine
in the exercise of their business judgment, whether it would be advisable for
the Fund to seek such recapture.
<PAGE>
Although the Trustees and officers of the Trust are substantially the same
as those of other portfolios managed by the Manager, investment decisions for
the Fund are made independently from those of other portfolios managed by the
Manager or accounts managed by affiliates of the Manager. It sometimes happens
that the same security is held in the portfolio of more than one of these funds
or accounts. Simultaneous transactions are inevitable when several portfolios
are managed by the same investment adviser, particularly when the same security
is suitable for the investment objective of more than one portfolio.
When two or more portfolios are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the portfolios involved to be
equitable to each portfolio. In some cases this system could have a detrimental
effect on the price or value of the security as far as the Fund is concerned. In
other cases, however, the ability of the Fund to participate in volume
transactions will produce better executions and prices for the Fund. It is the
current opinion of the Trustees that the desirability of retaining the Manager
as investment adviser to the Fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
The Fund may effect transactions in its portfolio securities on securities
exchanges on a non-exclusive basis through Adviser Dealer Services, Inc., the
distributor of the Fund's shares and an affiliate of the Manager (the
"Distributor"), in its capacity as a broker-dealer.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Equity securities for which the primary
market is the U.S. are valued at last sale price or, if no sale has occurred, at
the closing bid price. Equity securities for which the primary market is outside
the U.S. are valued using the official closing price or the last sale price in
the principal market where they are traded. If the last sale price (on the local
exchange) is unavailable, the last evaluated quote or last bid price is normally
used. Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value. Fixed
income securities are valued primarily by a pricing service that uses direct
exchange quotes and a vendor security valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques.
This twofold approach is believed to more accurately reflect fair value
because it takes into account appropriate factors such as institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon quoted, exchange, or over-the-counter prices.
Securities and other assets for which there is no readily available market
are valued in good faith by the Board of Trustees. The procedures set forth
above need not be used to determine the value of the securities owned by the
Fund if, in the opinion of the Board of Trustees, some other method (e.g.,
closing over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
<PAGE>
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments, and
repurchase agreements, is substantially completed each day at the close of the
New York Stock Exchange (NYSE).
The values of any such securities held by the Fund are determined as of
such time for the purpose of computing the Fund's net asset value. Foreign
security prices are furnished by independent brokers or quotation services which
express the value of securities in their local currency. The Manager gathers all
exchange rates daily at the close of the NYSE using the last quoted price on the
local currency and then translates the value of foreign securities from their
local currency into U.S. dollars. Any changes in the value of forward contracts
due to exchange rate fluctuations and days to maturity are included in the
calculation of net asset value. If an extraordinary event that is expected to
materially affect the value of a portfolio security occurs after the close of an
exchange on which that security is traded, then the security will be valued as
determined in good faith by the Board of Trustees.
PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied by the Fund in advertising is historical and is not
intended to indicate future returns. The Fund's share price and total returns
fluctuate in response to market conditions and other factors, and the value of
Fund shares when redeemed may be more or less than their original cost.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the Fund's net asset value over
the period. Average annual returns will be calculated by determining the growth
or decline in value of a hypothetical historical investment in the Fund over a
stated period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. While average annual returns are a convenient
means of comparing investment alternatives, investors should realize that the
Fund's performance is not constant over time but changes from year to year and
that average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund.
In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments or series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before-tax or after-tax basis. Total
returns yields and other performance information may be quoted numerically, or
in a table graph, or similar illustration.
<PAGE>
Total return is computed by finding the average annual compounded rates of
return over the length of the base periods that would equate the initial amount
invested to the ending redeemable value according to the following formula:
P(1+T)(to the nth power) = ERV
P = initial investment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the end of the base period
NET ASSET VALUE. Charts and graphs using the Fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted net asset value includes any distributions paid by the
Fund and reflects all elements of its return. Unless otherwise indicated, the
Fund's adjusted net asset values are not adjusted for sales charges, if any.
MOVING AVERAGES. The Fund may illustrate performance using moving averages.
A long-term moving average is the average of each week's adjusted closing net
asset value for a specified period. A short-term moving average is the average
of each day's adjusted closing net asset value for a specified period. Moving
Average Activity Indicators combine adjusted closing net asset values from the
last business day of each week with moving averages for a specified period to
produce indicators showing when a net asset value has crossed, stayed above, or
stayed below its moving average.
HISTORICAL FUND RESULTS. The Fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as mutual
fund rankings prepared by Lipper Analytical Services, Inc. (Lipper), an
independent service Located in Summit, New Jersey that monitors the performance
of mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and total return is prepared without regard
to tax consequences. In addition to the mutual fund rankings, the Fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, the Fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals. For
example, the Fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of
Flex-Partners or Flex-funds funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
<PAGE>
In advertising materials, the Trust may reference or discuss its products
and services, which may include: other Flex-Partners or Flex-funds funds;
retirement investing; the effects of periodic investment plans and dollar cost
averaging; saving for college; and charitable giving. In addition, the Fund may
quote financial or business publications and periodicals, including model
portfolios or allocations, as they relate to Fund management, investment
philosophy, and investment techniques. The Fund may also reprint, and use as
advertising and sales literature, articles from Reflexions, a quarterly magazine
provided free of charge to Flex-Partners and Flex-funds shareholders.
VOLATILITY. The Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the Fund's
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. All measures of volatility and correlation are calculated using averages of
historical data.
MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the Fund's
percentage change in price movements over that period.
The Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
The Fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually would have an after-tax value of $1,949
after ten years, assuming tax was deducted from the return each year at a 31%
rate. An equivalent tax-deferred investment would have an after-tax value of
$2,100 after ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
Unmanaged indexes that the Fund may use include the following:
MORGAN STANLEY CAPITAL INTERNATIONAL -- SELECT EMERGING MARKETS INDEX -- is
an unpublished index which includes common stocks of companies located in the
countries 12 emerging markets.
MORGAN STANLEY CAPITAL INTERNATIONAL -- EAFE (FREE) INDEX -- is an
arithmetic, market value-weighted average of the performance of over 1,000
securities listed on the stock exchanges of countries in Europe, Australia and
the Far East.
MSCI EMF INDEX -- an arithmetic, market value-weighted average of the
performance of securities listed on the stock exchanges of twenty-two developing
countries.
<PAGE>
MSCI EAFE + SELECT EMF INDEX -- an arithmetic, market value-weighted
average of the performance of securities listed on the stock markets of Europe,
Australia, the Far East and fourteen developing countries.
FT - ACTUARIES WORLD INDEX -- includes approximately 2,400 securities from
24 countries including the U.S.
FT - ACTUARIES EURO-PACIFIC INDEX -- a subset of the FT Actuaries World
Index, which excludes companies in the U.S., Canada, Mexico and South Africa.
SALOMON-RUSSELL PRIMARY MARKET INDEX -- consists of the approximately 700
largest stocks within 23 countries.
SALOMON-RUSSELL EXTENDED MARKET INDEX -- consists of approximately 1,000
medium and small capitalization stocks from 23 countries.
SALOMON-RUSSELL BROAD MARKET INDEX -- consists of all of the stocks within
the Primary Market Index and the Extended Market Index.
RUSSELL UNIVERSE OF NON-U.S. EQUITY PORTFOLIOS -- a universe of separate
accounts and pooled funds available to U.S. investors, which invest in
international equities.
RUSSELL UNIVERSE OF WORLD EQUITY PORTFOLIOS -- a universe of
equity-oriented global portfolios.
LIPPER INTERNATIONAL UNIVERSE -- a universe of mutual funds that invest in
international equities.
LIPPER DIVERSIFIED INTERNATIONAL UNIVERSE -- a universe of mutual funds
that invest in international equities from more than one country.
LIPPER INTERNATIONAL AVERAGE -- the average return of the portfolios
included in the Lipper International Universe.
LIPPER DIVERSIFIED INTERNATIONAL AVERAGE -- the average return of the
portfolios included in the Lipper Diversified International Universe.
STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX -- is a well
diversified list of 500 companies representing the U.S. stock market.
WILSHIRE 5000 EQUITY INDEX -- consists of more than 6,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
WILSHIRE 4500 EQUITY INDEX -- consists of all stocks in the Wilshire 5000
except for the 500 stocks in the Standard and Poor's 500 Index.
<PAGE>
SALOMON BROTHERS HIGH-GRADE CORPORATE BOND INDEX -- consists of publicly
issued, non-convertible corporate bonds rated Aa or Aaa. It is a value-weighted,
total return index, including approximately 800 issues with maturities of 12
years or greater.
BARING EMERGING MARKETS INDEX -- a diversified index of approximately 250
relatively liquid stocks from 13 emerging market countries.
SALOMON BROTHERS BROAD INVESTMENT-GRADE BOND -- is a market-weighted index
that contains approximately 4,700 individually priced investment-grade corporate
bonds rated BBB or better, U.S. Treasury and agency issues and mortgage
pass-through securities.
SHEARSON LEHMAN LONG-TERM TREASURY BOND -- is composed of all bonds covered
by the Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.
NASDAQ INDUSTRIAL INDEX -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only and does
not include income.
COMPOSITE INDEX -- 65% Standard & Poor's 500 Index and 35% Lehman Long-Term
Corporate AA or Better Bond Index.
COMPOSITE INDEX -- 65% Lehman Long-Term Corporate AA or Better Bond Index
and a 35% weighting in a blended equity composite (75% Standard & Poor's/BARRA
Value Index and 25% Standard & Poor's Utilities Index).
LEHMAN LONG-TERM CORPORATE AA OR BETTER BOND INDEX -- consists of all
publicly issued, fixed rate, nonconvertible investment grade,
dollar-denominated, SEC-registered corporate debt rated AA or AAA.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Fund is open for business and its net asset value per share (NAV) is
calculated each day the NYSE is open for trading. The NYSE has designated the
following holiday closings: New Year's Day, Washington's Birthday (observed),
Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day,
Thanksgiving Day, and Christmas Day (observed). The NYSE may modify its holiday
schedule at any time.
The Fund's net asset value is determined as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent that
portfolio securities are traded in other markets on days when the NYSE is
closed, the Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in securities
or other property, valued for this purpose as they are valued in computing the
Fund's NAV. Shareholders receiving securities or other property on redemption
may realize a gain or loss for tax purposes, and will incur any costs of sale,
as well as the associated inconveniences.
<PAGE>
Shareholders of the Fund will be able to exchange their shares for Class A
shares of any mutual fund that is a series of The Flex-Partners (each a
"Flex-Partners Fund"), and shares of The Flex-funds Money Market Fund. No fee or
sales load will be imposed upon the exchange. Shareholders of The Flex-funds
Money Market Fund who acquired such shares upon exchange of shares of the Fund
may use the exchange privilege only to acquire shares of the Fund or Class A
shares of a Flex-Partners Fund.
Additional details about the exchange privilege and prospectuses for each
of the Flex-Partners Funds and The Flex-funds Money Market Fund are available
from the Fund's Transfer Agent. The exchange privilege may be modified
terminated or suspended on 60 days' notice, and any fund, including the Fund, or
the Distributor, has the right to reject any exchange application relating to
such fund's shares. The 60-day notification requirement may be waived if (i) the
only effect of a modification would be to reduce or eliminate an administrative
fee, redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the Fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares because
it is unable to invest amounts effectively in accordance with its investment
objective and policies.
In the Prospectus, the Fund has notified shareholders that it reserves the
right at any time, without prior notice to refuse exchange purchases by any
person or group if, in the Subadviser's judgment, the Fund would be unable to
invest effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases shares of the Fund concurrently
with Class A shares of other series of the Trust, the purchases may be combined
to take advantage of the reduced sales charges applicable to larger purchases.
See the table of breakpoints under "How to Buy Shares - Cumulative Quantity
Discount" in the Prospectus.
An eligible group of related Fund investors includes any combination of the
following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or
group that holds 25% or more of the outstanding voting securities
of a corporation will be deemed to control the corporation, and a
partnership will be deemed to be controlled by each of its
general partners);
<PAGE>
(e) a trust created by the individual, the beneficiaries of which are
the individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by an
individual.
The Combined Purchase and Cumulative Purchase Privilege does not apply to
individual participants in retirement and group plans described below under
"Flex-Partners Retirement Plans."
RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of shares of the
Fund and Class A shares of other Flex-Partners Funds to determine the reduced
sales charge. The value of existing holdings for purposes of determining the
reduced sales charge is calculated using the maximum offering price (net asset
value plus maximum sales charge) as of the previous business day. See "How Net
Asset Value is Determined" in the Prospectus. The Transfer Agent must be
notified at the time of purchase that the investor is entitled to a reduced
sales charge. The reduced sales charges will be granted subject to confirmation
of the investor's holdings. Rights of accumulation are not available to
individual participants in the retirement and group plans described below under
"Flex-Partners Retirement Plans."
LETTERS OF INTENT. Reduced sales charges are also available to investors
(or an eligible group of related investors) who enter into a written Letter of
Intent providing for the purchase, within a thirteen-month period, of shares of
the Fund and Class A shares of other Flex-Partners Funds. All shares of the Fund
and Class A shares of other Flex-Partners Funds which were previously purchased
and are still owned are also included in determining the applicable reduction.
The Transfer Agent must be notified at the time of purchase that the investor is
entitled to a reduced sales charge. The reduced sales charges will be granted
subject to confirmation of the investor's holdings. Letters of Intent are not
available to individual participants in retirement and group plans described
below under "Flex-Partners Retirement Plans."
A Letter of Intent permits a purchase to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Shares totaling 5% of the dollar amount of the Letter of Intent will
be held by the Transfer Agent in escrow in the name of the purchaser. The
effective date of a Letter of Intent may be back-dated up to 90 days, in order
that any investments made during this 90-day period, valued at the purchaser's
cost, can be applied to the fulfillment of the Letter of Intent goal.
<PAGE>
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the purchaser is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Transfer Agent or, if not paid, the Transfer Agent will
liquidate sufficient escrowed shares to obtain such difference. If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the thirteen-month period. Investors electing to
purchase shares of the Fund pursuant to a Letter of Intent should carefully read
such Letter of Intent.
AUTOMATIC ACCOUNT BUILDER. An investor may arrange to have a fixed amount
of $100 or more automatically invested in shares of the Fund monthly by
authorizing his or her bank account to be debited to invest specified dollar
amounts in shares of the Fund. The investor's bank must be a member of the
Automatic Clearing House System.
Further information about these programs and an application form can be
obtained from the Fund's Transfer Agent.
SYSTEMATIC WITHDRAWAL PROGRAM. A systematic withdrawal plan is available
for shareholders having shares of the Fund with a minimum value of $10,000,
based upon the offering price. The plan provides for monthly, quarterly or
annual checks in any amount, but not less than $100 (which amount is not
necessarily recommended).
Dividends and/or distributions on shares held under this plan are invested
in additional full and fractional shares at net asset value. See "Shareholder
Investment Account - Automatic Reinvestment of Dividends and/or Distributions"
above. The Transfer Agent acts as agent for the shareholder in redeeming
sufficient full and fractional shares to provide the amount of the periodic
withdrawal payment. The plan may be terminated at any time.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the applicable sales charges to the purchase of shares.
Each shareholder should consult his or her own tax adviser with regard to the
tax consequences of the plan, particularly if used in connection with a
retirement plan.
<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, the Subadviser may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested until you
provide Mutual Funds Service Co. with alternate instructions.
DIVIDENDS. A portion of the Fund's dividends derived from certain U.S.
government obligations may be exempt from state and local taxation. Gains
(losses) attributable to foreign currency fluctuations are generally taxable as
ordinary income and therefore will increase (decrease) dividend distributions.
The Fund will send each shareholder a notice in January describing the tax
status of dividends and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the Fund on
the sale of securities by the Fund and distributed to shareholders of the Fund
are federally taxable as long-term capital gains regardless of the length of
time shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the Fund and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a long-term
loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends not as capital gains. Distributions from short-term
capital gains do not qualify for the dividends-received deduction.
TAX STATUS OF THE FUND. The Fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be liable
for federal tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company and avoid being subject to
federal income or excise taxes at the Fund level, the Fund intends to distribute
substantially all of its net investment income and net realized capital gains
within each calendar year as well as on a fiscal year basis. The Fund intends to
comply with other tax rules applicable to regulated investment companies,
including a requirement that capital gains from the sale of securities held less
than three months constitute less than 30% of the Fund's gross income for each
fiscal year. Gains from futures contracts and options are included in this 30%
calculation, which may limit the Fund's investments in such instruments.
The Fund is treated as a separate entity from the other funds of The
Flex-Partners Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Fund and its shareholders, and no
attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on
Fund distributions. Investors should consult their tax advisers to determine
whether the Fund is suitable to their particular tax situation.
<PAGE>
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser and
manager for, and has an Investment Advisory Contract with, the Fund.
Pursuant to the Investment Advisory Contract with the Fund, the Manager,
subject to the supervision of the Fund's Board of Trustees and in conformity
with the stated objective and policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, the Manager is obligated to keep certain books and records of the
Fund. The Manager also administers the Fund's corporate affairs, and in
connection therewith, furnishes the Fund with office facilities, together with
those ordinary clerical and bookkeeping services which are not being furnished
by State Street Bank and Trust Company, the Fund's custodian and Mutual Funds
Service Co., the Fund's transfer and disbursing agent. The management services
of the Manager are not exclusive under the terms of the Investment Advisory
Agreement and the Manager is free to, and does, render management services to
others.
The Investment Advisory Contract for the Fund was separately approved by a
vote of a majority of the Trustees, including a majority of those Trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of the Trust. The Investment Advisory Contract is to remain in force so long as
renewal thereof is specifically approved at least annually by a majority of the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewal.
The Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and may be terminated without
penalty at any time upon 60 days' prior written notice by Majority Vote of the
Fund, by the Trustees of the Trust, or by the Manager.
Costs, expenses and liabilities of the Trust attributable to a particular
fund are allocated to that fund. Costs, expenses and liabilities which are not
readily attributable to a particular fund are allocated among all of the Trust's
funds. Thus, each fund pays its proportionate share of: the fees of the Trust's
independent auditors, legal counsel, custodian, transfer agent and accountants;
insurance premiums; the fees and expenses of Trustees who do not receive
compensation from R. Meeder & Associates or Commercial Union Investment
Management, Limited; association dues; the cost of printing and mailing
confirmations, prospectuses, proxies, proxy statements, notices and reports to
existing shareholders; state registration fees; distribution expenses within the
percentage limitations of the distribution and service plan, including the cost
of printing and mailing of prospectuses and other materials incident to
soliciting new accounts; and other miscellaneous expenses.
<PAGE>
Expenses of the Fund also include all fees under its Accounting and
Administrative Service Agreement; expenses of meetings of shareholders and
Trustees; the advisory fees payable to the Manager under the Investment Advisory
Contract and other miscellaneous expenses.
The Manager earns an annual fee, payable in monthly installments, at the
rate of 1% of the average net assets of the Fund.
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1, 1974
and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio 43017.
The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"),
which is controlled by Robert S. Meeder, Sr. through the ownership of voting
common stock. The Manager's officers and directors, and the principal offices
are as set forth as follows: Robert S. Meeder, Sr., Chairman and Sole Director;
Robert S. Meeder, Jr., President; Philip A. Voelker, Senior Vice President and
Chief Operating Officer; Donald F. Meeder, Vice President and Secretary; Sherrie
L. Acock, Vice President; Robert D. Baker, Vice President; Wesley F. Hoag, Vice
President and General Counsel; Steven T. McCabe, Vice President; and Thomas G.
Roediger, Vice President. Messrs. Robert S. Meeder, Sr., Robert S. Meeder, Jr.
and Philip A. Voelker are Trustees and officers of the Trust. Each of Mr. Donald
F. Meeder, Wesley F. Hoag and Steven T. McCabe is an officer of the Trust.
INVESTMENT SUBADVISER
Commercial Union Investment Management, Limited, St. Helen's, 1 Undershaft,
London, England EC3P 3DQ, serves as the Fund's Subadviser. Commercial Union plc
controls the Subadviser through the ownership of voting common stock. The
Investment Subadvisory Agreement provides that the Subadviser shall furnish
investment advisory services in connection with the management of the Fund. In
connection therewith, the Subadviser is obligated to keep certain books and
records of the Fund. The Manager continues to have responsibility for all
investment advisory services pursuant to the Investment Advisory Agreement and
supervises the Subadviser's performance of such services. Under the Investment
Subadvisory Agreement, the Manager, not the Fund, pays the Subadviser a fee,
computed daily and payable monthly, in an amount equal to 100% of the investment
advisory fees received by the Manager under its investment advisory contract
with the Fund with regard to the first $10 million of average net assets of the
Fund, 30% of such advisory fees received by the Manager with regard to the next
$10 million of average net assets of the Fund and 65% of such advisory fees
received by the Manager with regard to average net assets of the Fund greater
than $20 million.
<PAGE>
The Investment Subadvisory Agreement provides that the Subadviser will not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of portfolio
transactions for the Fund, except a loss resulting from misfeasance, bad faith,
gross negligence or reckless disregard of duty. The Investment Subadvisory
Agreement provides that it will terminate automatically if assigned, and that it
may be terminated without penalty by the Manager, the Subadviser, the Trustees
or by the vote of a majority of the outstanding voting securities of the Fund
upon not less than 60 days' written notice. The Investment Subadvisory Agreement
will continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the 1940 Act. The Investment Subadvisory Agreement
was approved by the Trustees, including all of the Trustees who are not parties
to the contract or "interested persons" of any such party, and by the
shareholders of the Fund.
THE DISTRIBUTOR
Adviser Dealer Services, Inc. (the "Distributor"), 6000 Memorial Drive,
Dublin, Ohio 43017, an affiliate of the Manager, acts as the distributor of the
shares of the Fund.
Pursuant to a plan of distribution (the "Plan") adopted by the Fund under
Rule 12b-1 under the 1940 Act and an underwriting agreement (the "Underwriting
Agreement"), the Distributor incurs the expenses of distributing the Fund's
shares. See "Distribution Plan" in the Prospectus.
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 the Plan or in any agreement related to the Plan
(the Rule 12b-1 Trustees), at a meeting called for the purpose of voting on the
Plan, adopted a plan of distribution for the shares of the Fund.
The Plan continues in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Trustees,
including a majority vote of the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on such continuance. The Plan may be
terminated at any time, without penalty, by the vote of a majority of the
Trustees who are not interested persons or by the vote of the holders of a
majority of the outstanding shares of the Fund. The Plan may not be amended to
increase materially the amounts to be spent for the services described therein
without approval by the shareholders of the Fund, and all material amendments
are required to be approved by the Board of Trustees in the manner described
above. The Fund will not be contractually obligated to pay expenses incurred
under the Plan if it is terminated or not continued.
Pursuant to the Plan, the Board of Trustees will review at least quarterly
a written report of the distribution expenses incurred on behalf of the shares
of the Fund by the Distributor. The report includes an itemization of the
distribution expenses and the purposes of such expenditures. In addition, as
long as the Plan remains in effect, the selection and nomination of Trustees who
are not interested persons of the Fund shall be committed to the Trustees who
are not interested persons of the Fund.
<PAGE>
Pursuant to the Underwriting Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act and the Investment Company Act of 1940. The
Underwriting Agreement was approved by the Board of Trustees, including a
majority of the Rule 12b-1 Trustees.
TRUSTEES AND OFFICERS
The Trust is managed by its trustees and officers. Their names, positions
and principal occupations during the past five years are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Except as otherwise shown, all persons
named as Trustees also serve in similar capacities for all other mutual funds
advised by the Manager, including The Flex-funds and the corresponding
portfolios of The Flex-Partners and The Flex-funds (collectively, the "Fund
Complex"). Unless otherwise noted, the business address of each Trustee and
officer is 6000 Memorial Drive, Dublin, Ohio 43017, which is also the address of
the Manager. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with the Fund
Complex, the Manager, the Subadviser or other subadvisers are indicated by an
asterisk (*).
POSITION PRINCIPAL
NAME, ADDRESS AND AGE HELD OCCUPATION
ROBERT S. MEEDER, SR.*+, 68 Trustee/ Chairman, R. Meeder &
President Associates, Inc., an
investment adviser.
MILTON S. BARTHOLOMEW, 68 Trustee Retired; formerly a practicing
1424 Clubview Boulevard, S attorney in Columbus Ohio;
Worthington, OH 43235 member of each fund and each
Portfolio's Audit Committee.
ROGER D. BLACKWELL, 56 Trustee Professor of Marketing and
Blackwell Associates, Inc. Consumer Behavior, The
3380 Tremont Road Ohio State University;
Columbus, OH 43221 President of Blackwell
Associates, Inc., a
strategic consulting firm.
JOHN M. EMERY, 76 Trustee Retired; formerly Vice
2390 McCoy Road President & Treasurer of
Columbus, OH 43220 Columbus & Southern Ohio
Electric Co.; member of each
fund and each Portfolio's
Audit Committee.
RICHARD A. FARR, 78 Trustee President of R&R Supply Co.
3250 W. Henderson Rd and Farrair Concepts, Inc.,
Columbus, OH 43220 two companies
involved in engineering,
consulting & sales of
heating & air conditioning
equipment.
<PAGE>
WILLIAM L. GURNER*, 50 Trustee President, Sector Capital
Sector Capital Management, Inc. Management, an investment
5350 Poplar Avenue, Suite 490 adviser (since January 1995);
Memphis, TN 38119 Manager of Trust
Investments of Federal
Express Corporation
(1987-1994).
RUSSEL G. MEANS, 71 Trustee Retired; formerly Chairman of
5711 Barry Trace Employee Benefit Management
Dublin, OH 43017 Corporation, consultants and
administrators of
self-funded health and
retirement plans.
ROBERT S. MEEDER, JR.*+, 36 Trustee and President of R. Meeder &
Vice President Associates, Inc.
LOWELL G. MILLER*, 48 Trustee President, Miller/Howard
Miller/Howard Investments, Inc. Investments, Inc., an
141 Upper Byrdcliffe Road investment adviser whose
P. O. Box 549 clients include the Growth
Woodstock, NY 12498 Stock Portfolio and the
Utilities Stock Portfolio.
WALTER L. OGLE, 58 Trustee Executive Vice President of
Interstate North Parkway Aon Consulting, an
Suite 1630 employee benefits consulting
Atlanta, GA 30339 group.
PHILIP A. VOELKER*+, 43 Trustee and Senior Vice President and
Vice President Chief Operating Officer of
R. Meeder & Associates, Inc.
JAMES B CRAVER*, 53 Assistant Practicing Attorney; Special
42 Miller Hill Road Secretary Counsel to Flex-Partners,
Box 811 Flex-funds and their
Dover, MA 02030 Portfolios; Senior
Vice President of Signature
Financial Group, Inc.
(January 1991 to August 1995).
STEVEN T. MCCABE*+, 32 Assistant Vice President, R. Meeder &
Treasurer Associates, Inc., and Vice
President of Mutual Funds
Service Co.
DONALD F. MEEDER*+, 58 Secretary/ Vice President of R. Meeder
Treasurer & Associates, Inc., and
President of Mutual Funds
Service Company.
WESLEY F. HOAG*+, 40 Vice President Vice President and General
Counsel of R. Meeder &
Associates, Inc. (since July
1993); Attorney, Porter,
Wright, Morris & Arthur, a law
firm (October 1984 to June
1993).
<PAGE>
*"Interested Person" of the Trust (as defined in the Investment Company Act of
1940), The Flex-funds, and each Portfolio.
+P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
Robert S. Meeder, Sr. is Robert S. Meeder, Jr.'s father and Donald F.
Meeder's uncle.
The following table shows the compensation paid by the Fund Complex as a
whole to the Trustees of the Trust and the Fund Complex during the fiscal year
ended December 31, 1996.
COMPENSATION TABLE
Pension or
Retirement Total
Benefits Compensation
Accrued as Estimated from
Part of Annual Registrant and
Trustee Portfolio or Benefits Upon Fund Complex
Fund Expense Retirement Paid to Trustee
------------ ---------- ---------------
Robert S. Meeder, Sr. None None None
Milton S. Bartholomew None None $7,550
John M. Emery None None $7,550
Richard A. Farr None None $6,750
William F. Gurner None None $5,250
Russel G. Means None None $6,750
Lowell G. Miller None None None
Robert S. Meeder, Jr. None None None
Walter L. Ogle None None $6,000
Philip A. Voelker None None None
Roger A. Blackwell None None $5,250
Neither the Trust nor any other member of the Fund Complex pays any pension
or retirement benefits to any Trustee or officer or maintains any plan for such
purpose.
Each Trustee who is not an "interested person" is paid a meeting fee of
$250 per meeting for each of the five Portfolios. In addition, each such Trustee
earns an annual fee, payable quarterly, based on the average net assets in each
Portfolio based on the following schedule: Money Market Portfolio, 0.0005% of
the amount of average net assets between $500 million and $1 billion; 0.00025%
of the amount of average net assets exceeding $1 billion. For the other four
Portfolios, each Trustee is paid a fee of 0.00375% of the amount of each
Portfolio's average net assets exceeding $15 million.
Messers Bartholomew and Emery comprise the Audit Committee for each of The
Flex-Partners and The Flex-funds Trusts, and each Portfolio. Each is paid $500
for each meeting of the Audit Committee attended regardless of the number of
Audit Committees on which he serves. All other officers and Trustees serve
without compensation from the Trust.
The Trustees and officers of the Trust own, in the aggregate, less than 1%
of the Fund's total outstanding shares.
<PAGE>
FLEX-PARTNERS RETIREMENT PLANS
The Trust offers retirement plans which are described in the Prospectus.
Minimum purchase requirements for retirement plan accounts are subject to the
same requirements as regular accounts, except for an IRA, which has a $500
minimum purchase requirement. Information concerning contribution limitations
for IRA accounts are described below.
Individual Retirement Accounts (IRA):
Limitation on Deductible Contributions - Under prior law an individual with
earned income, not yet 70-1/2 years of age, was allowed a deductible IRA
contribution limited to the lesser of earned income or $2,000. Effective for
years beginning after December 31, 1986, applicable law limits the deductibility
of IRA contributions where the taxpayer is a participant in an
employer-sponsored retirement plan and had adjusted gross income (AGI) in excess
of $40,000 (joint) and $25,000 (single). For every dollar that AGI exceeds these
limits, the maximum deduction is reduced by twenty cents. Thus, a joint filer
with AGI greater than $50,000 who is covered by an employer sponsored plan will
not be able to make a deductible IRA contribution. The deductible limits for
individuals not covered by an employer-sponsored plan were not changed.
Nondeductible Contributions - Individuals who may not make a deductible
contribution due to the limits noted above, may continue to make nondeductible
contributions subject to the prior $2,000 limitation. The earnings on such
contributions will still accumulate on a tax deferred basis. Individuals will be
required to report such contributions on their tax returns.
Rollover Contributions - Individuals who receive certain lump-sum
distributions from employer-sponsored retirement plans may make roll-over
contributions to an IRA and by doing so defer taxes on the distribution and
shelter any investment earnings.
A Spousal IRA is also available.
CONTRACTS WITH COMPANIES AFFILIATED WITH THE MANAGER
Mutual Funds Service Co. provides accounting, stock transfer, dividend
disbursing, and shareholder services to the Fund. The minimum annual fee for
accounting services for the Fund is $30,000. Subject to the applicable minimum
fee, the Fund's annual fee, payable monthly, is computed at the rate of 0.03% of
the first $100 million, 0.02% of the next $150 million, and 0.01% in excess of
$250 million of the Fund's average net assets. Subject to a $4,000 annual
minimum fee, the Fund will incur an annual fee of the greater of $15 per
shareholder account or 0.10% of the Fund's average net assets, payable monthly,
for stock transfer and dividend disbursing services. Mutual Funds Service Co.
also serves as Administrator to the Fund pursuant to an Administration Services
Agreement. Services provided to the Fund include coordinating and monitoring any
third party services to the Fund; providing the necessary personnel to perform
administrative functions for the Fund; assisting in the preparation, filing and
distribution of proxy materials, periodic reports to Trustees and shareholders,
registration statements and other necessary documents. The Fund incurs an annual
administrative fee, payable monthly, of .05% of the Fund's average net assets,
subject to a minimum annual fee of $30,000. These fees are reviewable annually
by the Trustees of the Trust.
<PAGE>
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The assets of the Trust received for the issue or sale
of the shares of the Fund and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially allocated to
the Fund and constitute the underlying assets of the Fund. The underlying assets
of the Fund are segregated on the books of account, and are to be charged with
the liabilities with respect to the Fund and with a share of the general
expenses of the Trust. Expenses with respect to the Trust are to be allocated in
proportion to the asset value of the respective funds except where allocations
of direct expense can otherwise be fairly made. The officers of the Trust,
subject to the general supervision of the Board of Trustees, have the power to
determine which expenses are allocable to a given fund, or which are general or
allocable to all of the funds. In the event of the dissolution or liquidation of
the Trust, shareholders of each fund are entitled to receive as a class the
underlying assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of Trust
provides that the Trust shall not have any claim against shareholders except for
the payment of the purchase price of shares and requires that each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees
include a provision limiting the obligations created thereby to the Trust and
its assets.
The Declaration of Trust provides for indemnification out of each fund's
property of any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that each Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Fund and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations. The Manager believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declaration of Trust protects Trustees against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
<PAGE>
VOTING RIGHTS. The Fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each share you own. The
shares have no preemptive or conversion rights; the voting and dividend rights
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth under
the heading "Shareholder and Trustee Liability" above. Shareholders representing
10% or more of the Trust or the Fund may, as set forth in the Declaration of
Trust, call meetings of the Trust or the Fund for any purpose related to the
Trust or Fund, as the case may be, including, in the case of a meeting of the
entire Trust, the purpose of voting on removal of one or more Trustees. The
Trust or any Fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the Trust or the
Fund, as determined by the current value of each shareholder's investment in the
Fund or Trust. If not so terminated, the Trust and the Fund will continue
indefinitely.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of the assets of the Fund. The
custodian is responsible for the safekeeping of the Fund's assets and the
appointment of subcustodian banks and clearing agencies. The custodian takes no
part in determining the investment policies of the Fund or in deciding which
securities are purchased or sold by the Fund. The Fund may, however, invest in
obligations of the custodian and may purchase or sell securities from or to the
custodian.
AUDITOR. KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio
43215, serves as the Trust's independent accountant. KPMG audits financial
statements for the Fund Complex and provides other audit, tax, and related
services.
FINANCIAL STATEMENTS
Not applicable.
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial Statements included in Part A
Not Applicable
Financial Statements included in Part B
Not Applicable
(b) EXHIBITS - INTERNATIONAL EQUITY FUND:
1. Declaration of Trust (effective June 22, 1992) --
filed as an exhibit to Registrant's initial
Registration Statement on Form N-1A filed with the
Commission on June 25, 1992, which exhibit is
incorporated herein by reference.
2. By-laws of the Trust -- filed as an exhibit to
Registrant's initial Registration Statement on Form
N-1A filed with the Commission on June 25, 1992,
which exhibit is incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5. (i) Investment Advisory Agreement between The Flex-
Partners and R. Meeder & Associates, Inc. is filed
herewith.
(ii) Investment Subadvisory Agreement between R.
Meeder & Associates, Inc. and Commercial Union
Investment Management, Limited is filed herewith.
<PAGE>
6. Underwriting Agreement between the Trust and Adviser
Dealer Services, Inc. and specimen dealer agreement
between Adviser Dealer Services, Inc. and dealers are
filed herewith.
7. Not Applicable.
8. Custodian Agreement between the Registrant and State
Street Bank and Trust Company is filed herewith
9. Administration and Accounting Services Agreements
between the Fund and Mutual Funds Service Co. are
filed herewith.
10. Opinion and Consent of Counsel -- filed as an
exhibit to Registrant's initial Registration
Statement on Form N-1A filed with the Commission on
June 25, 1992, which exhibit is incorporated herein
by reference.
11. Not Applicable.
12. Not Applicable.
13. Investment Representation Letter of Initial
Shareholder filed as an exhibit to Registrant's
Eighth Post-Effective Amendment to the Registration
Statement on Form N-1A filed with the Commission on
April 29, 1995, which exhibit is incorporated herein
by reference.
14. Model Plans and related documents to be used in the
establishment of retirement plans in conjunction
with shares of the Registrant will be filed by
amendment.
15. 12b-1 and Service Plan for the International Equity
Fund dated February 8, 1997 is filed herewith.
16. Not Applicable.
17. Not Applicable.
18. Not Applicable.
19. Powers of Attorney of Trustees of Registrant --
previously filed as an exhibit to Registrant's
Fourteenth Post-Effective Amendment to the
Registration Statement on Form N-1A filed with the
Commission on or about April 30, 1997, which exhibit
is incorporated herein by reference.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
Item 26. NUMBER OF HOLDERS OF SECURITIES AT _________________, 1997.
Title of Number of
CLASS FUND RECORD HOLDERS
----- ---- --------------
Shares of International Equity Fund --
Beneficial
Interest
Item 27. INDEMNIFICATION
Reference is made to Section 5.3 of the Declaration of Trust
filed as an exhibit to the Registrant's initial Registration
Statement on Form N-1A filed with the Commission on June 25,
1992. As provided therein, the Fund is required to indemnify
its officers and trustees against claims and liability
arising in connection with the affairs of the Fund, except
liability arising from breach of trust, bad faith, willful
misfeasance, gross negligence or reckless disregard of
duties. The Fund is obligated to undertake the defense of
any action brought against any officer, trustee or
shareholder, and to pay the expenses thereof if he acted in
good faith and in a manner he reasonably believed to in or
not opposed to the best interest of the Fund, and with
respect to any criminal action had no reasonable cause to
believe his conduct was unlawful. Other conditions are
applicable to the right of indemnification as set forth in
the Declaration of Trust. In applying these provisions, the
Fund will comply with the provisions of Investment Company
Act.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not Applicable.
<PAGE>
Item 29. Principal Underwriters.
(a) Not applicable.
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
---------------- ----------- ----------
Charles A. Donabedian Director Nominee Director
200 Technecenter Drive
Milford, OH 45150
Robert S. Meeder, Sr.* Director Trustee,
President
Robert S. Meeder, Jr.* Director Trustee,
Vice President
Philip A. Voelker* Director Trustee,
Vice President
Roy E. Rogers* President, None
Treasurer
Joseph A. Zarr* Vice President None
Donald F. Meeder* Secretary Secretary,
Treasurer
James B. Craver Asst. Secretary, Assistant
P. O. Box 811 Asst. Treasurer Secretary
Dover, MA 02030-0811
*6000 Memorial Drive, Dublin, OH 43017
(c) Not applicable.
5
<PAGE>
Item 30. Location of Accounts and Records.
Registrant's Declaration of Trust, By-laws, and Minutes of
Trustees' and Shareholders' Meetings, and contracts and like
documents are in the physical possession of Mutual Funds Service
Co., or R. Meeder & Associates, Inc., at 6000 Memorial Drive,
Dublin, Ohio 43017. Certain custodial records are in the custody
of State Street Bank and Trust Company, the Fund's custodian, at
225 Franklin Street, Boston, Massachusetts 02110. All other
records are kept in the custody of R. Meeder & Associates, Inc.
and Mutual Funds Service Co., 6000 Memorial Drive, Dublin, OH
43017.
Item 31. Management Services.
None.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) If the information called for by Item 5A of this
Registration Statement is contained in the latest annual
report to shareholders, Registrant undertakes to furnish
each person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of
one or more directors, if requested to do so by the holders
of at least 10% of the Registrant's outstanding shares, and
will assist communications among shareholders as set forth
within Section 16(c) of the 1940 Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dublin, and the State of Ohio on the
18th day of June, 1997.
THE FLEX-PARTNERS
BY:/s/ Donald F. Meeder
----------------------------
Donald F. Meeder
Secretary/Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
6/18/97 /s/ Donald F. Meeder
---------------- -------------------------------------
Date Signed Donald F. Meeder, Secretary/Treasurer
Pursuant to Powers of Attorney
for Robert S. Meeder, Sr., Milton S. Bartholomew,
Roger D. Blackwell, John M. Emery, Richard A. Farr,
William Gurner, Russell G. Means, Robert S. Meeder, Jr.,
Lowell G. Miller, Walter L. Ogle and Philip A. Voelker
Trustees of The Flex-Partners
6/18/97 /s/ Donald F. Meeder
---------------- -------------------------------------
Date Signed Donald F. Meeder
Executed by Donald F. Meeder
Pursuant to Powers of Attorney
EXHIBIT 5(i)
INVESTMENT ADVISORY AGREEMENT
Between
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
and
R. MEEDER & ASSOCIATES, INC.
This Agreement is made the 8th day of February, 1997, by and between the
INTERNATIONAL EQUITY FUND (the "Fund"), a separate investment series of The
Flex-Partners (the "Trust"), a business trust organized and existing under the
laws of the State of Massachusetts, and R. MEEDER & ASSOCIATES, INC., a
corporation organized and existing under the laws of the State of Ohio (the
"Adviser").
W I T N E S S E T H :
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended; and
WHEREAS, the Adviser is engaged principally in the business of rendering
investment supervisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to render investment and
supervisory services to the Fund in the manner and on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereto agree as follows:
I
INVESTMENT RESPONSIBILITY
(1) In providing the services and assuming the obligations set forth
herein, the Adviser may, at its expense, employ one or more subadvisers.
References herein to the Adviser shall include any subadviser employed by the
Adviser. Any agreement between the Adviser and a subadviser shall be subject to
the renewal, termination and amendment provisions of section V hereof.
<PAGE>
The Trust hereby retains the Adviser to supervise and assist in the
management of the assets for the Fund and to furnish the Fund with a continuous
program for the investment of the Fund's assets, including:
a. Recommendations as to specific securities to be purchased for or
eliminated from the Fund's portfolio, and
b. Recommendations as to the portion of the Fund's assets that should be
held uninvested.
(2) Notwithstanding the generality of the foregoing, the Adviser may
itself, and at its own expense, contract for such supplementary advisory and
research services as it deems necessary or desirable to fulfill its obligations
under paragraph (1) above, provided that any such contract shall have been
approved by the Trust and its shareholders to the extent, and in the manner,
required by the Investment Company Act of 1940, as amended.
(3) The Adviser shall furnish to the Trust the services of one or more
persons who shall be authorized by the Trust to place orders for the purchase
and sale of securities for the account of the Fund. Acting through a person so
authorized by the Trust, the Adviser shall place such orders for the Fund.
(4) Notwithstanding the generality of paragraph (3) above, and subject to
the provisions of paragraphs (5) and (6) below, the Adviser shall endeavor to
secure for the Fund the best possible price and execution of every purchase and
sale for the account of the Fund. In seeking such best price and execution the
Adviser shall use its own judgment as to the implementation of its own
investment recommendations, including the Adviser's judgment as to the time when
an order should be placed, the number of securities to be bought or sold in any
one trade that is a part of any particular recommendation, and the market in
which an order should be placed.
(5) The Adviser shall use its own judgment in determining the
broker-dealers who shall be employed to execute orders for the purchase or sale
of securities for the Fund, in order to:
a. Secure best price and execution on purchases and sales for the Fund;
and
b. Secure supplemental research and statistical data for use in making
its recommendations to the Fund.
(6) The Adviser shall use its discretion as to when, and in which market,
the Fund's transactions shall be executed, in order to secure for the Fund the
benefits of best price and execution, and supplemental research and statistical
data. The use of such discretion shall be subject to review by the Trustees of
the Trust at any time and form time to time. The Trust, acting by its Trustees,
may withdraw said discretion at any time, and may direct the execution of
portfolio transactions for the Fund in any lawful manner different from that
provided for herein. Until a decision is made to withdraw or limit the
discretion herein granted, the Adviser shall not be liable for any loss suffered
by the Fund through the exercise by the Adviser of that discretion unless the
Adviser shall be guilty of gross negligence or willful misconduct.
<PAGE>
II
ADMINISTRATIVE RESPONSIBILITY
During the continuance of this Agreement, Adviser shall provide the Fund
with a continuous program of general administration including:
a. Office space, equipment, supplies and utility services as shall be
required to conduct Fund business;
b. The provision and supervision of all persons performing the executive,
administrative, and clerical functions necessary for the conduct of
the Fund's business except as set forth in g., below;
c. The supervision of accounting, and of records and record-keeping for
the Fund;
d. The preparation and distribution of mandatory reports to Fund
shareholders and regulatory bodies;
e. The supervision of the daily net asset value of the Fund;
f. The preparation and distribution on behalf of the Fund of notices of
shareholders and Trustee meetings, agendas, proxies, and proxy
statements; and
g. Other facilities, services, and activities necessary for the conduct
of the Fund's business, except for services by the Fund's Custodian,
Registrar, Transfer Agent, Accounting Services Agent, Dividend
Disbursing Agent, Auditors, and Legal Counsel.
III
ALLOCATION OF EXPENSES
The Adviser shall pay the Fund's pro rata share of the cost and expenses of
the following services, facilities and activities: necessary office space,
equipment, supplies, utility services and all other ordinary office expenses;
the salaries and other compensation of the Trust's trustees, officers and
employees who are affiliated persons of the Adviser; and fees for supplementary
advisory and research services performed for the Adviser. The Fund shall pay all
other expenses incurred in the organization and operation of the Fund and the
continuous offering of the Fund's shares, including, but not limited to, the
following:
<PAGE>
a. The Fund's pro rata share of the fees and expenses of counsel in
connection with the organization of the Fund.
b. The regular fees or special charges of any Custodian, Transfer Agent,
Registrar, Accounting Services Agent or Dividend Disbursing Agent
allocable to the Fund.
c. The Fund's pro rata share of the compensation or fees of the Trust's
auditors and legal counsel, and compensation and costs relating to
legal or administrative proceedings or to litigation.
d. Income, franchise, stock transfer and other taxes attributable to the
Fund.
e. Initial or renewal fees payable to governmental agencies in connection
with the filing of reports, notices, registration statements, and
other material required to be filed in connection with the Fund's
business.
f. The Fund's pro rata share of any insurance or bond premiums.
g. The Fund's pro rata share of association dues or assessments.
h. Brokerage fees or commissions on all Fund portfolio transactions.
i. The Fund's pro rata share of interest on borrowed funds or otherwise.
j. Any extraordinary expenses attributable directly to the Fund.
IV
COMPENSATION
The Fund shall pay the Adviser a fee, based on the value of the net assets
of the Fund determined in accordance with the Trust's Declaration of Trust, and
computed as follows:
(a) The annual advisory fee (the "Fee") shall be equal to the sum of 1.00%
of the Fund's average daily net assets.
(b) The Fee due the Adviser as set forth above will be accrued daily and
shall be paid to the Adviser in pro rata monthly installments due and
payable on the first business day of each calendar month.
<PAGE>
V
DURATION AND TERMINATION
(1) The term of this Agreement shall begin on the date first written above
and, unless sooner terminated as hereinafter provided, this Agreement shall
remain in effect for a period of two years. Thereafter this Agreement shall
continue in effect from year to year, subject to the termination provisions and
all other terms and conditions hereof; if: (a) such continuation shall be
specifically approved at least annually by vote of the holders of a majority of
the outstanding voting securities of the Fund or by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party; and (b) the Adviser shall not have notified the Fund,
in writing, at least 60 days prior to the expiration of any term, that it does
not desire such continuation. The Adviser shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment hereof.
(2) This Agreement may not be amended, transferred, sold or in any manner
hypothecated or pledged, without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
(3) This Agreement may be terminated by either party hereto, without the
payment of any penalty, upon 60 days' notice in writing to the other party,
provided, that in the case of termination by the Trust such action shall have
been authorized by resolution of the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund.
VI
MISCELLANEOUS
(1) The Adviser shall not deal with the Fund as broker or dealer but the
Adviser may enter orders for the purchase or sale of the Fund's securities
through a company or companies that are under common control with the Adviser,
provided such company acts as broker and charges a commission that does not
exceed the usual and customary broker's commission if the sale is effected on a
securities exchange, or, 1 per centum of the purchase or sale price of such
securities if the sale is otherwise effected. In connection with the purchase or
sale of portfolio securities for the account of the Fund, neither the Adviser
nor any officer or director of the Adviser shall act as a principal.
(2) Except as expressly prohibited in this Agreement, nothing herein shall
in any way limit or restrict the Adviser, or any officers, shareholders or
employees of Adviser, from buying selling or trading in any security for its or
their own account. Neither the Adviser nor any Officer or Director thereof shall
take a short position in any interests of the Fund or otherwise purchase such
interests for any purpose other than that of investment. However, the Adviser
may act as underwriter or distributor provided it does so pursuant to a written
contract approved in the manner specified in the Investment Company Act of 1940,
as amended.
<PAGE>
(3) The Adviser may act as investment adviser to, and provide management
services for, other investment companies, and may engage in businesses that are
unrelated to investment companies, without limitation, provided the performance
of such services and the transaction of such businesses does not impair the
Adviser's performance of this Agreement.
(4) The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates (including, but not limited to, loss sustained by reason
of the adoption or implementation of any investment policy or the purchase, sale
or retention of any security), except for loss resulting from willful
misfeasance, bad faith or gross negligence of the Adviser in the performance of
its duties or from reckless disregard by the Adviser of its obligations and
duties under this Agreement.
(5) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Investment Company Act of 1940, as amended, shall be resolved by
reference to such term or provision of the Act and to interpretations thereof,
if any, by the United States courts or, in the absence of any controlling
decision of any such court, by rules, regulations or orders of the Securities
and Exchange Commission validly issued pursuant to said Act. Specifically, the
terms "vote by a majority of the outstanding voting securities", "annually",
"interested person", "assignment", and "affiliated person", as used herein,
shall have the meanings assigned to them by the Investment Company Act of 1940,
as amended. In addition, where the effect of a requirement of the Investment
Company Act of 1940, as amended, reflected in any provision of this contract is
relaxed by a rule, regulation or order of the Securities and Exchange
Commission, whether of special or of general application, such provision shall
be deemed to incorporate the effect of such rule, regulation or order.
(6) The Trust will provide the Adviser with all information concerning the
investment policies and restrictions of the Fund as the Adviser may from time to
time request or which the Trust deems necessary. In the event of any change in
the investment policies or restrictions of the Fund, the Trust will promptly
provide Adviser with all information concerning such change including, but not
limited to, copies of all documents filed by the Trust with the Securities and
Exchange Commission.
(7) The Trustees, officers, employees and agents of the Trust shall not be
personally bound by or liable hereunder, nor shall resort be had to their
private property for the satisfaction of any obligation or claim hereunder.
<PAGE>
(8) Except to the extent the provisions of this Agreement are governed by
federal law, they shall be governed by the law of Ohio, without reference to its
choice of law rules.
(9) This Agreement represents the entire agreement between the parties
hereto.
(10) This Agreement may be executed in two or more counterparts, each of
which shall be considered an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
Attest: /s/ Donald F. Meeder By: /s/ Philip A. Voelker
------------------------ --------------------------
Secretary Vice President
R. MEEDER & ASSOCIATES, INC.
Attest: /s/ Donald F. Meeder By: /s/ Wesley F. Hoag
------------------------ ---------------------------
Secretary Vice President and General Counsel
<PAGE>
EXHIBIT 5(ii)
INVESTMENT SUBADVISORY AGREEMENT
This Investment Subadvisory Agreement is made the ____th day of
_____________, 1997 by and between R. Meeder & Associates, Inc., an Ohio
corporation (the "Adviser"), and Commercial Union Investment Management,
Limited, a United Kingdom corporation (the "Subadviser").
RECITALS
A. The Flex-Partners, a business trust organized and existing under the
laws of the State of Massachusetts, is an open-end management investment company
(the "Trust"), one of whose series is designated the International Equity Fund
(the "Fund").
B. The Trust is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").
C. The Adviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended.
D. The Adviser has been retained by the Fund to provide investment advisory
services to the Fund.
E. The Adviser desires to retain the Subadviser to furnish it with
portfolio management services in connection with the Adviser's investment
advisory activities on behalf of the Fund, and the Subadviser is willing to
furnish such services to the Adviser, in the manner and on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants of the parties herein, the parties agree as follows:
I
INVESTMENT RESPONSIBILITY
In accordance with and subject to the Investment Advisory Agreement between
the Fund and the Adviser, attached hereto as Exhibit A (the "Advisory
Agreement"), the Adviser hereby appoints the Subadviser to perform the portfolio
management services described herein for the investment and reinvestment of the
Fund's assets, subject to the control and direction of the Adviser and the
Trust's Board of Trustees, for the period and on the terms hereinafter set
forth. The Subadviser shall provide the Adviser with such investment advice and
supervision as the latter may from time to time consider necessary or
appropriate for the proper supervision of the Fund's investment assets. The
<PAGE>
Subadviser shall furnish continuously an investment program and shall determine
from time to time what securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held uninvested, subject always to
the restrictions of the Trust's Declaration of Trust and By-Laws, as each may be
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the 1940 Act and to the Fund's then-current prospectus and
statement of additional information. The Adviser shall provide the Subadviser
with all information concerning the investment policies and restrictions of the
Fund as the Subadviser may from time to time request or which the Trust deems
necessary. In the event of any change in the investment policies or restrictions
of the Fund, the Adviser will promptly provide Subadviser with all information
concerning such change including, but not limited to, copies of all documents
regarding the Fund filed by the Trust with the Securities and Exchange
Commission. In particular, the Subadviser shall (i) continuously review,
supervise and administer the investment program of the Fund; (ii) shall monitor
regularly the relevant securities for the Fund (all such designated securities
to be as defined from time to time in the Fund's current prospectus and
statement of additional information) to determine if adjustments are warranted
and, if so, to make such adjustments on a periodic basis; (iii) shall determine,
in the Subadviser's discretion, the securities to be purchased or sold or
exchanged in order to keep the Fund in balance with its designated investment
strategy; (iv) shall determine, in the Subadviser's discretion, whether to
exercise warrants or other rights with respect to the Fund's securities; (v)
shall determine, in the Subadviser's discretion, whether the merit of an
investment has been substantially impaired by extraordinary events or financial
conditions, thereby warranting the removal of such securities from the Fund;
(vi) shall provide the Fund with records concerning the Subadviser's activities
which the Fund is required to maintain by law; and (vii) shall render regular
reports to the Trust's officers and Trustees concerning the Subadviser's
discharge of the foregoing responsibilities. The Subadviser shall also make
recommendations as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Fund's securities shall
be exercised. The Subadviser shall take, on behalf of the Fund, all actions
which it deems necessary to implement the investment policies determined as
provided above, and in particular to place all orders for the purchase or sale
of portfolio securities for the Fund's account with brokers or dealers selected
by it, and to that end the Subadviser is authorized as the agent of the Fund to
give instructions to the custodian of the Fund as to deliveries of securities
and payments of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such orders, the
Subadviser is directed to seek for the Fund, in its best judgment, prompt
execution in an effective manner at the most favorable price. Subject to this
requirement of seeking the most favorable price, securities may be bought from
or sold to broker-dealers who have furnished statistical, research and other
information or services to the Subadviser or the Fund, subject to any applicable
laws, rules and regulations.
<PAGE>
II
ALLOCATION OF EXPENSES
The Subadviser shall furnish at its own expense all necessary services,
facilities and personnel in connection with its responsibilities under Section I
above. It is understood that the Fund will pay all of its own expenses
including, without limitation, its share of compensation and out-of-pocket
expenses of Trustees of the Trust not "affiliated" with the Subadviser or the
Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors and legal counsel; expenses of preparing reports to
governmental officers and commissions; expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance premiums;
fees and expenses of the custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of litigation and other extraordinary or non-recurring events and
expenses relating to the issuance, registration and qualification of interests
of the Fund.
III
COMPENSATION
For the services to be rendered by the Subadviser hereunder, the Adviser
shall pay to the Subadviser an annual investment subadvisory fee, computed and
paid monthly, in an amount equal to 100% of the investment advisory fees
received by the Adviser under the Advisory Agreement with regard to the first
$10 million of average net assets of the Fund, 30% of such advisory fees
received by the Adviser with regard to the next $10 million of average net
assets of the Fund and 65% of such advisory fees received by the Adviser with
regard to average net assets of the Fund greater than $20 million.
IV
COVENANTS OF THE SUBADVISER
The Subadviser agrees that it will not deal with itself, or with the
Board of Trustees of the Trust or the Adviser in making purchases or sales of
securities or other property for the account of the Fund, and except as
permitted by the 1940 Act, will not take a long or short position in the
interests of the Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
prospectus and statement of additional information of the Fund relative to the
Subadviser, Adviser and the Trust's Trustees and officers. The Adviser will
provide the Subadviser with the names of all related parties of the Board of
Trustees of the Trust or the Adviser with whom the Subadviser may not deal. In
the event of any change in these related parties, the Adviser will promptly
notify the Subadviser.
<PAGE>
V
LIMITATION OF LIABILITY OF THE SUBADVISER
The Subadviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates (including, but not limited to, loss sustained by reason
of the adoption or implementation of any investment policy or the purchase, sale
or retention of any security, in accordance with the then current prospectus and
statement of additional information of the Fund). As used in this Section V, the
term "Subadviser" shall include Directors, officers and employees of the
Subadviser as well as that corporation itself.
VI
ACTIVITIES OF THE SUBADVISER
The services of the Subadviser to the Adviser are not to be deemed to be
exclusive, the Subadviser being free to render investment advisory and/or other
services to others. It is understood that Trustees, officers and employees of
the Trust and holders of interests of the Fund are or may be or may become
interested in the Subadviser, as Directors, officers, employees, shareholders or
otherwise and that Directors, officers and employees of the Subadviser are or
may become similarly interested in the Trust.
VII
DURATION AND TERMINATION
A. This Agreement shall become effective as of the day and year first above
written and shall govern the relations between the parties hereto thereafter,
and, except as otherwise provided below, shall remain in effect for a period of
two years.
B. This Agreement may be terminated immediately by the Adviser, by the
Trustees of the Trust or by the "vote of a majority of the outstanding voting
securities" of the Fund upon the occurrence of any of the following events:
(1) the continuance of this Agreement after such two-year term is not
"specifically approved at least annually" (a) by the vote of a
majority of the Trustees who are not "interested persons" of the
Fund or of the Subadviser or the Adviser at a meeting
specifically called for the purpose of voting on such approval,
and (b) by the Board of Trustees of the Trust or by "vote of a
majority of the outstanding voting securities" of the Fund.
However, if the shareholders of the Fund fail to approve this
Agreement as provided herein, the Subadviser may continue to
serve hereunder in the manner and to the extent permitted by the
1940 Act and rules thereunder;
<PAGE>
(2) a material breach of this Agreement by the Subadviser;
(3) the falsity in any material respect of any warranty,
representation or statement made by or on behalf of the
Subadviser in connection with this Agreement;
(4) there is an "assignment" of this Agreement;
(5) the Subadviser fails to achieve and maintain the performance
standard to be mutually agreed upon and specified in writing by
the Adviser and the Subadviser as specified in Section VIII
hereof; or
(6) the Advisory Agreement is terminated or not renewed.
C. This Agreement may be terminated at any time by the Adviser, by the
Trustees of the Trust or by the "vote of a majority of the outstanding voting
securities" of the Fund, upon at least 60 days written notice to the Subadviser.
D. This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Fund and by
vote of a majority of the Board of Trustees of the Trust who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
E. The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission thereunder.
F. This Agreement may be terminated at any time by the Subadviser, without
the payment of any penalty, upon at least 60 days written notice to the Adviser.
G. This Agreement may be terminated immediately by the Subadviser upon the
occurrence of any of the following:
(i) a material breach of this agreement by the Adviser; or
(ii) the falsity in any material respect of any warranty,
representation or statement made by or on behalf of the Adviser
in connection with this Agreement.
<PAGE>
VIII
PERFORMANCE
The Adviser and the Subadviser shall negotiate in good faith and use their
best efforts to agree on a performance standard against which the Subadviser's
investment performance shall be measured. The performance standard to be agreed
upon by the Adviser and the Subadviser shall be specified in writing and shall
be attached hereto and incorporated by reference herein as Exhibit B.
IX
MISCELLANEOUS
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 adopted under the 1940 Act which are
prepared or maintained by the Subadviser on behalf of the Fund are the property
of the Fund and will be surrendered promptly to the Fund on request.
The holders of the record interests, Trustees, officers, employees and
agents of the Trust shall not be personally bound by or liable hereunder, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.
Except to the extent the provisions of this Agreement are governed by
federal law, they shall be governed by the law of Ohio without reference to its
choice of law rules.
This Agreement represents the entire agreement between the parties hereto
with respect to the subject matter hereof.
This Agreement may be executed in two or more counterparts, each of which
shall be considered an original.
If there are any conflicts between the provisions of this Agreement and the
provisions of the 1940 Act or the regulations promulgated thereunder, the
provisions of the 1940 Act and such regulations shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
R. MEEDER & ASSOCIATES, INC.
By:_____________________________
Its:____________________________
COMMERCIAL UNION INVESTMENT
MANAGEMENT, LIMITED
By:______________________________
Its:_____________________________
EXHIBIT 6
UNDERWRITING AGREEMENT
This Agreement made as of this 8th day of February, 1997, by and between
The Flex-Partners, a Massachusetts business trust (the "Trust"), and Adviser
Dealer Services, Inc., an Ohio corporation ("Underwriter").
WHEREAS, the Trust is authorized to issue shares in separate series
representing interests in separate portfolios of securities and other assets;
and
WHEREAS, one such series of shares represent interests in the International
Equity Fund (the "Fund"); and
WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission (the "Commission") and a member of the National Association
of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of the Fund
(the "Shares");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. APPOINTMENT. The Fund hereby appoints Underwriter as its
exclusive agent for the distribution of the Shares, and Underwriter
hereby accepts such appointment under the terms of this Agreement.
Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of its Shares whenever, in its sole
discretion, it deems such action to be desirable.
2. SALE AND REPURCHASE OF SHARES.
(a) Underwriter will have the right, as agent for the Fund, to
enter into dealer agreements with responsible investment dealers, and
to sell Shares to such investment dealers against orders therefor at
the public offering price (as defined in paragraph 2(d) hereof) less a
discount determined by Underwriter, which discount shall not exceed
the amount of the sales charge stated in the Fund's then current
Prospectus (as defined in paragraph 5(a) hereof) and statement of
additional information. At the request of the Fund (which request
shall not be more frequent than quarterly), Underwriter shall furnish
a list of broker-dealers with whom Underwriter has entered into a
dealer agreement. The Fund shall have the right to delete from such
list any broker-dealer from whom the Fund chooses not to accept sales
orders. Upon receipt of an order to purchase Shares from a dealer with
whom Underwriter has a dealer agreement, Underwriter will promptly
cause such order to be filled by the Fund. Underwriter shall have no
obligation to accept monies or Shares, or establish customer accounts.
All sales of Shares shall be conducted strictly through other
registered broker/dealers with Underwriter acting in the role of
wholesaler. The right granted to the Underwriter to sell Shares to
such investment dealers against orders therefor shall not apply to
Shares issued in the event that an investment company (whether a
regulated or private investment company or a personal holding company)
is merged with and into or consolidated with the Fund or in the event
that the Fund acquires by purchase or otherwise, all or substantially
all of the assets or the outstanding shares of any such company. Such
right shall also not apply to Shares issued by the Fund as a dividend
or stock split.
<PAGE>
(b) Underwriter will also have the right, as agent for the Fund,
to sell Shares to the public against orders therefor at the public
offering price (as defined in paragraph 2(d) hereof).
(c) Underwriter will also have the right, as agent for the Fund,
to sell Shares at their net asset value to such persons as may be
approved by the Board of Trustees of the Trust and provided in the
Prospectus, all such sales to comply with the provisions of the Act,
the rules and regulations of the Commission promulgated thereunder and
all other federal and state securities laws, rules and regulations.
(d) The public offering price shall be the net asset value of
Shares then in effect, plus any applicable sales charge determined in
the manner set forth in the Prospectus or as permitted by the Act and
the rules and regulations of the Commission promulgated thereunder. In
no event shall any applicable sales charge exceed the maximum sales
charge permitted by the rules and regulations of the NASD.
(e) The net asset value of the Shares shall be determined in the
manner provided in the Prospectus, and when determined shall be
applicable to transactions as provided for in the Prospectus. The net
asset value of the Shares shall be calculated by the Fund or by
another entity on behalf of the Fund. Underwriter shall have no duty
to inquire into or liability for the accuracy of the net asset value
per Share as calculated pursuant to paragraph (d) above.
(f) The Fund shall receive the applicable net asset value of
their Shares promptly, but in no event later than the third (3rd)
business day following the date on which Underwriter shall have
received an order for the purchase of Shares. Underwriter shall have
the right to retain the sales charge less any applicable dealer
discount.
(g) Upon receipt of purchase instructions, Underwriter will
transmit such instructions to the Fund or its transfer agent for
registration of the Shares purchased. Sales of the Shares of the Fund
shall be deemed to be made when and where accepted by the Funds'
transfer agent.
(h) If Underwriter is not registered as a broker-dealer in any
state or an exemption for sales of Shares by Underwriter in such state
is not otherwise available, the Fund shall not be permitted to sell
Shares in the state until Underwriter is so registered or such
exemption is available.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting
as underwriter or distributor for any other person, firm or
corporation (including other investment companies) or in any way limit
or restrict Underwriter or such affiliated person from buying, selling
or trading any securities for its or their own account or for the
accounts of others for whom it or they may be acting; provided,
however, that Underwriter expressly agrees that it will undertake no
activities which will, in its judgment, adversely affect the
performance of its obligations to the Fund under this Agreement.
(j) Underwriter may repurchase Shares at such prices and upon
such terms and conditions as shall be specified in the Prospectus.
3. SALES OF SHARES. Underwriter does not agree to sell any specific
number of Shares. Underwriter, as agent for the Fund, undertakes to
sell Shares on a best efforts basis only against orders therefor.
2
<PAGE>
4. RULES OF NASD, ETC.
(a) Underwriter will conform in all material respects to the
Rules of Fair Practice of the NASD and the securities laws of any
jurisdiction in which it sells any Shares.
(b) Underwriter will require each dealer with whom Underwriter
has a dealer agreement to conform to the applicable provisions of the
Prospectus, with respect to the public offering price of the Shares,
and Underwriter shall not withhold the placing of purchase orders so
as to make a profit thereby.
(c) Underwriter agrees to obtain the prior written approval of
the Fund (which approval shall not be unreasonably withheld or
delayed) with regard to, and file and clear with the proper
authorities copies of, any agreements, plans or other materials it
intends to use in connection with any sales of Shares. Copies of such
materials and evidence of filing with the proper authorities shall be
furnished to the Fund. To the extent the Fund has created any such
sales materials, the Fund shall not use such materials until
Underwriter has approved of such materials and filed them with the
proper authorities.
(d) Underwriter shall not make, or authorize any registered
representative, broker or dealer to make, in connection with any sales
or solicitation of a sale of the Shares, any representations
concerning the Shares except those contained in the Prospectus
covering the Shares and in sales materials approved by the Underwriter
and the Fund as information supplemental to such Prospectus. Copies
of the Prospectus will be supplied by the Fund to Underwriter in
reasonable quantities upon request.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND. The Fund represents
and warrants to, and agrees with Underwriter that:
(a) A registration statement on Form N-1A with respect to its
Shares has been prepared and filed by the Fund with the Commission
under and in all material respects in conformity with the requirements
of the Securities Act of 1933, as amended (the "33 Act"), and the Act
and the Rules and Regulations (as defined hereinbelow); such
registration statement is currently effective. As used in this
Agreement, the term "Registration Statement" means such registration
statement, including all exhibits thereto, as amended from time to
time; and the term "Prospectus" means the prospectus and statement of
additional information, as amended from time to time, constituting a
part of the Registration Statement, in the form filed with the
Commission.
(b) Neither the Commission nor any state has issued any order
preventing or suspending the use of any Prospectus, and each
Prospectus complies in all material respects with the requirements of
the 33 Act and Act (together the "Acts") and the rules and regulations
(the "Rules and Regulations") promulgated by the Commission under the
Acts and the Securities Exchange Act of 1934 as amended (the "34
Act"), and does not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
Registration Statement and the Prospectus and any amendments or
supplements thereto contain all statements which are required to be
stated therein in accordance with the Acts and the Rules and
Regulations and comply in all material respects with the requirements
of the Acts and the Rules and Regulations; and neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Fund is a series fund of a business trust which is
validly existing and in good standing under the laws of the
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<PAGE>
Commonwealth of Massachusetts with full power and authority to own its
properties and conduct its business as now conducted; and its Shares
have been duly authorized and when issued will be validly issued,
fully paid and nonassessable.
(d) The Shares conform in all material respects to the
description thereof contained in the Prospectus.
(e) The Fund has full legal right, power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to be
sold by it to Underwriter as provided herein, and this Agreement has
been duly authorized, executed and delivered by the Fund as required
by the Act.
(f) The Fund is not in violation of the Trust's Declaration of
Trust or By-laws or in default under any agreement, indenture or
instrument, the effect of which violation or default would be material
to the Fund. No consent, approval, authorization or order of any court
or governmental agency or body or securities exchange is required for
the consummation of the transactions contemplated by this Agreement
except such as have been obtained and such as may be required under
the Acts and the Rules and Regulations and such as may be required
under state securities laws or Blue Sky Laws in connection with the
purchase and distribution of the Shares by Underwriter. The
consummation by the Fund of the transactions contemplated by this
Agreement will not conflict with, result in the creation or imposition
of any lien, charge or encumbrance upon the assets of the Fund
pursuant to the terms of, result in a breach or violation by the Fund
of any of the terms or provisions of, or constitute a default by the
Fund under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which the Fund is a party or
to which it or its property is subject, the Declaration of Trust or
By-laws of the Trust, any statute, or any judgment, decree, order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Fund or any of its property.
(g) The financial statements and the related notes included in
the Registration Statement and Prospectus present fairly the financial
position, results of operations and changes in financial position of
the Fund at the dates and for the periods to which they relate and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated
therein.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, the Fund has not
incurred any material liabilities or obligations, direct or
contingent, or entered into any material transaction, whether or not
in the ordinary course of business, and there has not been any
material change in the capital stock, or any material adverse change,
in the business, condition (financial or other), key personnel,
properties, results of operations or assets of the Fund except in each
case as disclosed in or contemplated by the Prospectus.
(i) There is not pending, or to the knowledge of the Fund,
contemplated or threatened, any action, suit, proceeding, inquiry or
investigation, to which the Fund is a party, or to which the property
of the Fund is subject, before or brought by any court or governmental
agency or body, or any arbitrator, which, if determined adversely to
the Fund might result in any material adverse change in the business,
condition (financial or other), net asset value or results of
operations, or materially adversely affect the properties or assets of
the Fund.
(j) The Fund is not in violation of any law, ordinance,
governmental rule or regulation or court decree to which it may be
subject or has not failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of its
property or to the conduct of its business, which violation or failure
to obtain is likely to have any material adverse effect on the
condition (financial or other), properties, prospective results of
operations or net asset value of the Fund.
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<PAGE>
(k) There are no contracts or other documents required to be
described in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement by the Acts or by the Rules
and Regulations which have not been described or filed as required.
(l) The Fund has timely filed all necessary federal income tax
returns and all necessary state and foreign income, excise, state and
franchise tax returns, has paid all taxes shown as due thereon and has
made adequate reserves for future tax liabilities, and, except as
described in the Prospectus, there is no tax deficiency that has been
asserted against the Fund that would materially and adversely affect
the business of the Fund.
(m) The Fund maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific
authorizations, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability of
assets, (C) access to assets is permitted only in accordance with
management's general or specific authorization, and (D) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
6. COVENANTS OF THE FUND. The Fund covenants and agrees with
Underwriter that:
(a) The Fund will cause any subsequent amendments to the
Registration Statement to become effective as promptly as practicable
and will not file any amendment to the Registration Statement or any
supplement to the Prospectus of which Underwriter shall not previously
have been furnished with a copy a reasonable time prior to the
proposed filing. Except as otherwise provided in Section 1 hereof, the
Fund will maintain an effective Registration Statement as required by
the Acts at all times during the term of this Agreement. Except as
otherwise provided in Section 1 hereof, the Fund will comply so far as
it is able with all requirements imposed upon it by the Acts and the
Rules and Regulations to the extent necessary to permit the
continuance of sales of the Shares in accordance with the provisions
hereof and of the Prospectus and the Fund will prepare and file with
the Commission any amendments to the Registration Statement or
supplements to the Prospectus which it deems necessary or advisable in
connection with the distribution of the Shares by Underwriter, and
will use its best efforts to cause the same to become effective as
promptly as practicable.
(b) The Fund will advise Underwriter promptly after it receives
notice or obtains knowledge thereof, of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the
Prospectus, or of the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, or of the institution or
threatening of any proceeding for any such purpose, or of any request
made by the Commission for amending the Registration Statement, for
supplementing the Prospectus or for additional information, and the
Fund will use its best efforts to prevent the issuance of any such
order and, if any such order is issued to obtain the lifting thereof
as promptly as practicable.
(c) The Fund will arrange for the qualification of the Shares for
offering and sale under the securities or Blue Sky laws of such
jurisdictions in which the Shares will be sold.
(d) The Fund will furnish to Underwriter copies of the
Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available, and in such
quantities as Underwriter may reasonably request.
(e) The Fund will furnish to its shareholders semi-annual and
annual reports including such information and within the time
requirements prescribed by the Act.
5
<PAGE>
(f) If sales of the Fund's Shares are facilitated through the use
of a clearing agency (e.g., National Securities Clearing Corporation),
the Fund shall direct its transfer agent to settle all clearing agency
transactions promptly according to the rules and regulations of such
clearing agency.
7. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER.
The Underwriter represents and warrants to, and agrees with the Fund,
that:
(a) Underwriter has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Ohio, with all requisite corporate power and authority to conduct
its business and to perform its obligations contemplated herein.
(b) This Agreement has been duly and validly authorized, executed
and delivered by Underwriter and constitutes Underwriter's valid,
binding and enforceable agreement.
(c) Underwriter's execution and delivery of this Agreement, and
the performance of Underwriter's obligations hereunder, will not
result in a violation of, be in conflict with or constitute a default
under any agreement or instrument to which Underwriter is a party or
by which Underwriter or Underwriter's properties are bound, or any
judgment, decree, order, statute, rule or regulation applicable to
Underwriter.
(d) The information supplied by Underwriter for inclusion in the
Prospectus and Registration Statement relating to Underwriter is
complete and correct and does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein not misleading.
(e) Underwriter is (i) a broker-dealer duly registered pursuant
to the provisions of the 34 Act, (ii) a member in good standing of the
NASD, and (iii) duly registered as a broker-dealer under the
applicable laws and regulations of each state in which Underwriter
will offer and sell the Shares, except such states in which
Underwriter is exempt from registration or such registration is not
otherwise required. Underwriter will maintain its registration in good
standing, or its exemption from such registration, throughout the term
of this Agreement and Underwriter will comply with all statutes and
other requirements applicable to Underwriter with respect to
Underwriter's brokerage activities within those jurisdictions.
Underwriter, its affiliates, officers and directors have not taken or
failed to take any act, and are not subject to any order or
proceeding, that would prevent the registration of the Shares with any
state securities commission, or which will result in the issuance of
any stop order on the sale of the Shares.
(f) Underwriter is a member of National Securities Clearing
Corporation and has been assigned a fund distributor clearing number
by Fund/Serv.
8. COVENANTS OF THE UNDERWRITER.
The Underwriter covenants and agrees with the Fund that:
(a) In offering and selling the Shares, Underwriter will comply
with all applicable requirements of the Acts, the 34 Act and the Rules
and Regulations.
(b) Subject to valid exemption(s) from the requirement to
register as a broker-dealer under any of the Blue Sky Laws,
Underwriter will comply with all applicable requirements of the Blue
Sky Laws applicable to Underwriter as a broker-dealer. Underwriter
will not offer or sell any of the Shares in any jurisdiction prior to
6
<PAGE>
receiving instructions (oral or written) from the Fund that offers
may be made in such jurisdiction.
(c) Underwriter will abide by, and take reasonable precautions to
insure compliance with, all provisions contained in the Prospectus and
this Agreement regulating the terms and manner of conducting the
offering of the Shares. Underwriter will not use any offering or
selling material other than materials furnished or approved in writing
by the Fund. Neither Underwriter nor any of its agents will give any
information or make any representation with respect to the Fund other
than the information or representations contained in the Prospectus or
any sales literature authorized by the Fund for use in connection
with the offering of the Shares, or such other information as is
specifically authorized by the Fund.
(d) In offering and selling the Shares, Underwriter will comply
in all material respects with all applicable rules of the NASD,
including Sections 8, 24, and 36 of Article III of the Rules of Fair
Practice.
(e) Neither Underwriter nor any of its directors or officers (nor
any other person serving in a similar capacity):
(i) Has been convicted within ten years of date hereof of
any crime or offense involving the purchase or sale of any
security, involving the making of a false statement to the
Commission, or arising out of such person's conduct as an
underwriter, broker, dealer, municipal securities dealer or
investment advisor.
(ii) Is subject to any order, judgment or decree of any
court of competent jurisdiction temporarily or preliminarily
enjoining or restraining, or is subject to any order, judgment or
decree of any court of competent jurisdiction, entered into
within five years prior to the date hereof, permanently enjoining
or restraining such person from engaging in or continuing any
conduct or practice in connection with the purchase or sale of
any security, involving the making of a false filing with the
Commission, or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer or
investment advisor;
(iii) Is subject to an order of the Commission entered
pursuant to section 15(b), 15B(a), or 15B(c) of the 34 Act; or is
subject to an order of the Commission entered pursuant to section
203(e) or (f) of the Investment Advisers Act of 1940;
(iv) Is suspended or expelled from membership in, or
suspended or barred from association with a member of, an
exchange registered as a national securities exchange pursuant to
section 6 of the 34 Act, an association registered as a national
securities association under section 15A of the 34 Act, or a
Canadian securities exchange or association for any act or
omission constituting conduct inconsistent with just and
equitable principles of trade;
(v) Is subject to a United States Postal Service false
representation order entered within five years of the date
hereof; or is subject to a restraining order or preliminary
injunction entered under section 3007 of title 39, United States
Code, with respect to any conduct alleged to constitute postal
fraud;
(vi) Has been or has been named as an underwriter of any
securities covered by any registration statement which is the
subject of any pending proceeding or examination under section 8
of the 33 Act, or is the subject of any refusal order or stop
order entered thereunder within five years prior to the date
hereof;
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<PAGE>
(vii) Has been or has been named as an underwriter of any
securities covered by any filing which is subject to any pending
proceeding under Rule 261 or any similar Rule adopted under
section 3(b) of the 33 Act, or to an order entered thereunder
within five years prior to the date hereof; and
(viii) Has taken or failed to take any other act, or is
subject to any other order or proceeding, that would make
unavailable any registration or qualification requirements of the
Acts, the 34 Act, the Rules and Regulations or the Blue Sky Laws.
(f) Underwriter shall maintain its membership with National
Securities Clearing Corporation in good standing throughout the term
of this Agreement and Underwriter shall comply with all articles,
bylaws, rules and other requirements applicable to Underwriter's
activities with National Securities Clearing Corporation and
Fund/Serv. Underwriter shall promptly submit a letter to National
Securities Clearing Corporation on behalf of the Funds for an
additional member agreement for mutual fund settlement.
(g) Neither Underwriter nor any of its directors, officers,
employees, or members of an advisory board is (i) ineligible, by
reason of subsection (a) of Section 9 of the Act to serve or act in
such capacities or (ii) subject to an order of the Commission entered
pursuant to subsections (b) or (f) of Section 9 of the Act.
9. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of
Underwriter hereunder shall be subject, in its discretion, to the
accuracy of the representations and warranties of the Fund herein and
to the performance by the Fund of its covenants and agreements
hereunder.
10. CONDITIONS OF THE FUND'S OBLIGATIONS. The obligations of the Fund
hereunder shall be subject, in their discretion, to the accuracy of
the representations and warranties of Underwriter herein and to the
performance by Underwriter of its covenants and agreements hereunder.
11. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless the
Underwriter, each person, if any, who controls Underwriter and the
directors, officers and employees of Underwriter (each, including any
such controlling person, is referred to herein as a "related person")
within the meaning of the Acts or Section 20 of the 34 Act, from and
against any losses, claims, damages, fines and liabilities, joint or
several, to which Underwriter or a related person may become subject
under the Acts or otherwise insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any
material fact contained (A) in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or (B) in any Blue
Sky Application or other document executed by the Fund specifically
for that purpose or based upon written information furnished by the
Fund filed in any state or other jurisdiction in order to qualify any
or all of the Shares under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue
Sky Application"), (ii) the omission or alleged omission to state in
the Registration Statement, the Prospectus, any amendment or
supplement thereof, any Blue Sky Application, or any sales material, a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse Underwriter and
each related person for any legal or other expenses reasonably
incurred by Underwriter or such related person in connection with
investigating or defending any such loss, claim, damage, liability or
action, or (iii) the failure of the Fund's transfer agent to remit
appropriate amounts to or properly settle with any clearing agency
(e.g., National Securities Clearing Corporation) in accordance with
such agency's rules and regulations; provided, however, that the Fund
8
<PAGE>
will not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, or any sales material, the Prospectus or any amendment or
supplement thereto, or any Blue Sky Application, in reliance upon and
in conformity with written information furnished to the Fund by
Underwriter expressly for use therein. This indemnity shall not apply
to any loss, claim, liability or action resulting from willful
misfeasance, bad faith or gross negligence on the part of Underwriter
or a related person. This indemnity agreement will be in addition to
any liability which the Fund may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Trust, the Fund, the trustees and officers of the Fund and Trust,
and any person who controls the Fund or Trust within the meaning of
the 33 Act from and against any losses, claims, damages or liabilities
to which the Trust, the Fund or any such trustee, officer or
controlling person may become subject, under the Acts or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement made by the Underwriter (A) in
the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or (B) in any Blue Sky Application, or (ii) the
omission or the alleged omission to state therein made by Underwriter
of a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Fund or
the Trust by the Underwriter expressly for use therein; Underwriter
will reimburse any legal or other expenses reasonably incurred by the
Fund or the Trust or any such trustee, officer or controlling person
in connection with investigating or defending any such loss, claim,
damage, liability or action. This indemnity agreement will be in
addition to any liability which the Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to paragraphs (a) or (b) of
this Section 11, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing (but the omission so to notify the
indemnifying party will not relieve it from any other liability which
it may have to any indemnified party), and the indemnifying party,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate (including
the indemnifying party) in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential
conflicts of interest between them, in which case the fees and
disbursements of such counsel related to such proceeding shall be paid
by the indemnifying party. It is understood that the indemnifying
party shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for (a) the reasonable
fees and expenses of more than one separate firm (in addition to any
local counsel) for Underwriter and all persons, if any, who control
Underwriter within the meaning of either the Acts or Section 20 of the
34 Act, and (b) the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for the Fund, the
Trust or their trustees or officers. It is further understood that all
such fees and expenses shall be reimbursed as they are incurred. In
the case of any such separate firm for Underwriter and such control
persons of Underwriter, such firm shall be designated in writing by
9
<PAGE>
Underwriter. In the case of any such separate firm for the Fund and
Trust, and such trustees or officers of the Trust or the Fund, such
firm shall be designated in writing by the Trust or the Fund. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or
judgment.
(d) The Fund and the Underwriter each agree to notify the other
promptly of the commencement of any litigation or proceeding against
it in connection with the issuance and sale of any of the Shares.
12. RECORDS TO BE SUPPLIED BY THE FUND. The Fund shall furnish to
Underwriter copies of all information, financial statements and other
papers which Underwriter may reasonably request for use in connection
with the distribution of its Shares, and this shall include, but shall
not be limited to, one certified copy, upon request by Underwriter, of
all financial statements prepared for the Fund by independent public
accountants.
13. EXPENSES.
(a) Except as otherwise provided herein, the Fund will bear all
costs and expenses incurred under this Agreement including but not
limited to:
(i) Preparation, setting in type, and printing of sufficient
copies of prospectuses and statements of additional information
for distribution to existing shareholders.
(ii) Preparation, printing and distribution of reports and
other communications to existing shareholders.
(iii) Registration of its Shares under the Acts.
(iv) Qualification of its Shares for sale in the various
States.
(v) Qualification of the Fund as a dealer or broker under
the laws of any jurisdiction as well as qualification of the Fund
to do business in any jurisdiction, if such qualification is
necessary for the purpose of selling the Shares.
(vi) Maintaining facilities for the issue and transfer of
the Shares.
(vii) Supplying information, prices and other data to be
furnished by the Fund under this Agreement.
(viii) Any original issue taxes or transfer taxes applicable
to the sale of delivery of the Shares or certificates therefor.
(b) Except as otherwise agreed to by the parties or as otherwise
provided herein, Underwriter will pay all other expenses (other than
expenses which one or more dealers may bear pursuant to any agreement
with Underwriter) incident to the sale and distribution of the Shares
sold hereunder.
14. DISTRIBUTION PLANS. The Fund has adopted a distribution plan with
respect to the sale of its shares pursuant to Rule 12b-1 under the Act
(the "Plan") which provides that the Fund may incur expenses to
finance any activity which is primarily intended to result in the sale
of Shares. Such activities may include, but are not limited to,
advertising, salaries and other expenses of Underwriter relating to
selling efforts, seminars, printing of prospectuses, statements of
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<PAGE>
additional information and reports for other than existing
shareholders, preparation and distribution of advertising material and
sales literature, and supplemental payments to dealers. Underwriter
shall be paid by the Fund pursuant to the Plan with respect to the
sale of shares a fee not to exceed 0.25% per annum of its average
daily net assets as may be determined by the Trust's Board of Trustees
from time to time for expenses incurred by Underwriter in connection
with this Agreement.
15. LIABILITY OF UNDERWRITER.
(a) Underwriter, its directors, officers, employees, shareholders
and agents shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund 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 Underwriter in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Underwriter, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund
(other than services or business in connection with Underwriter's
duties hereunder), to be rendering such services to or acting solely
for the Fund and not as a director, officer, employee, shareholder or
agent, or one under the control or direction of Underwriter even
though paid by it.
16. TERMINATION OF THIS AGREEMENT.
(a) This Agreement may be terminated, with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
members of the Board of Trustees of the Trust who are not interested
persons of the Fund and who have no direct or indirect financial
interest in the preparation of the Plan or in any agreement relating
to the Plan or by vote of a majority of the outstanding voting
securities of the Fund on not more than ninety (90) days' written
notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
(b) The Underwriter may terminate this Agreement by giving the
Fund written notice of its intention to terminate this Agreement at
the expiration of ninety (90) days from the date of delivery of such
written notice of intention to the Fund.
17. EFFECTIVE PERIOD OF THIS AGREEMENT.
The provisions of paragraph 11 hereof shall survive the
termination of this Agreement. The remaining provisions of this
Agreement shall be effective on the date first above written and shall
remain in full force and effect for a period of two (2) years
thereafter (unless terminated as set forth in Paragraph 16), and from
year to year thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees
of the Trust or by a vote of the majority of the outstanding voting
securities of the Fund and (ii) by a majority of the Trustees of the
Trust who are not parties to this Agreement or interested persons of
any such party by vote cast in person at a meeting called for the
purpose of voting on such approval.
18. REPORTS.
Underwriter shall prepare reports for the Board of Trustees of
the Trust on a quarterly basis showing such information as from time
to time shall be reasonably requested by such Board and necessary for
an informed determination as to whether this Agreement shall continue.
The Underwriter shall provide a written report, on a quarterly basis,
of the amounts expended, the purposes for which such expenditures were
made and any other information reasonably requested by the Board of
Trustees of the Trust to enable it to fulfill its responsibilities
under paragraph (d) of Rule 12b-1 under the Act and to make findings
required by paragraph (e) of Rule 12b-1.
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<PAGE>
19. SEVERABILITY.
In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
20. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio, without reference to its choice of law rules.
21. NOTICES.
Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand, or sent by
certified mail, return receipt requested, to the following addresses:
If to the Trust or the Fund:
The Flex-Partners
6000 Memorial Drive
Dublin, OH 43017
Attention: President
If to the Underwriter:
Adviser Dealer Services, Inc.
6000 Memorial Drive
Dublin, OH 43017
Attention: President
or such other address as either party may from time to time designate
in writing to the other, and shall be deemed given as of the date of
the delivery or mailing.
22. ARBITRATION.
Any dispute, controversy or claim arising out of or in connection
with this Agreement will be settled by binding arbitration in
accordance with the applicable rules for expedited review of (and by
an independent arbitrator selected by) the American Arbitration
Association, and the decision of such arbitrator, including any award
of attorneys' fees and costs, may be entered into any court with
jurisdiction.
23. ATTORNEYS' FEES.
If any legal action or any arbitration or other proceeding is
brought to enforce the provisions of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection
with any of the provisions of this Agreement, the successful or
prevailing party or parties, whether such party or parties have
instituted the action, shall be entitled to recover reasonable
attorneys' fees and other costs incurred in such action or proceeding,
in addition to any other relief to which the Fund, the Trust or
Underwriter may be entitled.
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24. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and shall be binding
upon and inure to the benefit of the parties hereto and their
respective legal representatives, heirs, distributees, successors and
permitted assigns.
25. AMENDMENTS.
This Agreement may not be amended except by a writing signed by
all of the parties hereto.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this
Agreement to be signed in duplicate, as of the day and year first above written.
ATTEST: TRUST:
THE FLEX-PARTNERS
/s/ Mark D. Maxwell BY: /s/ Wesley F. Hoag
- ----------------------- ------------------------
Mark D. Maxwell Wesley F. Hoag
/s/ Ruth Kirkpatrick ITS: Vice President
- -----------------------
Ruth Kirkpatrick
ATTEST: UNDERWRITER:
ADVISER DEALER SERVICES, INC.
/s/ Mark D. Maxwell BY: /s/ Joseph A. Zarr
- ----------------------- ------------------------
Mark D. Maxwell Joseph A. Zarr
/s/ Ruth Kirkpatrick ITS: Vice President
- -----------------------
Ruth Kirkpatrick
13
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EXHIBIT 6
ADVISER DEALER SERVICES, INC.
6000 MEMORIAL DRIVE
DUBLIN, OHIO 43017
800-325-3539
614-766-7000
DEALER'S AGREEMENT
Adviser Dealer Services, Inc. ("Underwriter") invites you, as a selected
dealer, to participate as principal in the distribution of shares (the "Shares")
of the mutual funds set forth on Schedule A to this Agreement (the "Funds"), of
which it is the exclusive underwriter. Underwriter agrees to sell to you,
subject to any limitations imposed by the Funds, Shares issued by the Funds and
to promptly confirm each sale to you. All sales will be made according to the
following terms:
1. All offerings of any of the Shares by you must be made at the public
offering prices, and shall be subject to the conditions of offering, set forth
in the then current Prospectus and Statement of Additional Information of the
Funds and to the terms and conditions herein set forth, and you agree to comply
with all requirements applicable to you of all applicable laws, including
federal and state securities laws, the rules and regulations of the Securities
and Exchange Commission, and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD"), including Section 24 of
the Rules of Fair Practice of the NASD. You will not offer the Shares for sale
in any state or other jurisdiction where they are not qualified for sale under
the Blue Sky Laws and regulations of such state or jurisdiction, or where you
are not qualified to act as a dealer. Upon application to Underwriter,
Underwriter will inform you as to the states or other jurisdictions in which
Underwriter believes the Shares may legally be sold.
2. (a) You will receive a discount from the public offering price
("concession") on all Shares purchased by you from Underwriter as
indicated on Schedule A, as it may be amended by Underwriter from time
to time.
(b) In all transactions in open accounts in which you are designated
as Dealer of Record, you will receive the concessions as set forth on
Schedule A. You hereby authorize Underwriter to act as your agent in
connection with all transactions in open accounts in which you are
designated as Dealer of Record. All designations as Dealer of Record,
and all authorizations of Underwriter to act as your Agent pursuant
thereto, shall cease upon the termination of this Agreement or upon
the investor's instructions to transfer his open account to another
Dealer of Record. No dealer concessions will be allowed on purchases
generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares, Underwriter reserves
the privilege of revising the discounts specified on Schedule A at any
time by written notice.
<PAGE>
3. Concessions will be paid to you at the address of your principal office,
as indicated below in your acceptance of this Agreement.
4. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by Underwriter in its
sole discretion. The Underwriter reserves the right, in its discretion, without
notice, to suspend sales or withdraw the offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received by their
transfer agent within three (3) business days after the acceptance of your order
or such shorter time as may be required by law. With respect to all Shares
ordered by you for which payment has not been received, you hereby assign and
pledge to Underwriter all of your right, title and interest in such Shares to
secure payment therefor. You appoint Underwriter as your agent to execute and
deliver all documents necessary to effectuate any of the transactions described
in this paragraph. If such payment is not received within the required time
period, Underwriter reserves the right, without notice, and at its option,
forthwith (a) to cancel the sale, (b) to sell the Shares ordered by you back to
the Funds, or (c) to assign your payment obligation, accompanied by all pledged
Shares, to any person. You agree that Underwriter may hold you responsible for
any loss, including loss of profit, suffered by the Funds, its transfer agent or
Underwriter, resulting from your failure to make payment within the required
time period.
7. No person is authorized to make any representations concerning Shares of
the Funds except those contained in the current applicable Prospectus and
Statement of Additional Information and in sales literature issued and furnished
by Underwriter supplemental to such Prospectus. Underwriter will furnish
additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
8. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your agent to execute
the purchase transactions of Shares in accordance with the terms and provisions
of any account, program, plan or service established or used by your customers
and to confirm each purchase to your customers on your behalf, and you guarantee
the legal capacity of your customers purchasing such Shares and any co-owners of
such Shares.
10. You will (a) maintain all records required by law relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Funds, promptly make such records available to Underwriter or to the
Funds as are requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Funds, to enable the parties hereto and the Funds to identify all accounts
opened and maintained by your customers.
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11. Underwriter has adopted compliance standards, attached hereto as
Schedule B, as to when particular classes of Shares may appropriately be sold to
particular investors. You agree that all persons associated with you will
conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and, at all times
during the term of this Agreement, will be, a member in good standing of the
NASD and agrees to abide by all its Rules of Fair Practice including, but not
limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not
purchase any Shares from Underwriter other than for investment, except
for the purpose of covering purchase orders already received.
(b) All conditional orders received by Underwriter must be at a
specified definite price.
(c) If any Shares purchased by you are repurchased by the Funds (or by
Underwriter for the account of the Funds) or are tendered for
redemption within seven business days after confirmation of the
original sale of such Shares (1) you agree to forthwith refund to
Underwriter the full concession allowed to you on the original sale,
such refund to be paid by Underwriter to the Funds, and (2)
Underwriter shall forthwith pay to the Funds that part of the discount
retained by Underwriter 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 repurchase or redemption request is made.
(d) Neither Underwriter, as exclusive underwriter for the Funds, nor
you as principal, shall purchase any Shares from a record holder at a
price lower than the net asset value then quoted by, or for, the
Funds. Nothing in this subparagraph shall prevent you from selling
Shares for the account of a record holder to Underwriter or the Funds
at the net asset value currently quoted by, or for, the Funds and
charging the investor a fair commission for handling the transaction.
(e) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset
value by the same pursuant to the terms of the Prospectus of the
applicable Fund is for investment purposes only and not for purposes
of resale. Shares so purchased may be resold only to the Fund which
issued them.
13. You agree that you will indemnify Underwriter, the Funds, the Funds'
transfer agent, the Funds' investment adviser, and the Funds' custodian and hold
such persons harmless from any claims or assertions relating to the lawfulness
of your company's participation in this Agreement and the transactions
contemplated hereby or relating to any activities of any persons or entities
affiliated with your company which are performed in connection with the
discharge of your responsibilities under this Agreement. If any such claims are
asserted, the indemnified parties shall have the right to engage in their own
defense, including the selection and engagement of legal counsel of their
choosing, and all costs of such defense shall be borne by you.
<PAGE>
14. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated as to any Fund
at any time without penalty by the vote of a majority of the members of the
Board of Trustees of the terminating Fund who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's Distribution
Expense Plan or any agreement relating to such Plan, including this Agreement,
or by a vote of a majority of the outstanding voting securities of the
terminating Fund on ten days' written notice.
15. All communications to Underwriter shall be sent to Adviser Dealer
Services, Inc., 6000 Memorial Drive, Dublin, Ohio 43017, or at such other
address as Underwriter may designate in writing. Any notice to you shall be duly
given if mailed or transmitted by facsimile with original to follow by mail to
you at the address of your principal office, as indicated below in your
acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you relating to the
offer and sale of the Shares, and relating to any other matter discussed herein.
17. This Agreement shall be binding (i) upon placing your first order with
Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter in
Dublin, Ohio of a counterpart of this Agreement duly accepted and signed by you,
whichever shall occur first. This Agreement shall be construed in accordance
with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of Dealer, hereby
warrants and represents that he is duly authorized to so execute this Agreement
on behalf of Dealer.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return one copy of this Agreement to the Underwriter.
ACCEPTED BY DEALER ADVISER DEALER SERVICES, INC.
By: By:
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Authorized Signature, Position
- ------------------------------------- ----------------------------------
Type or Print Name Date
Dealer Name:
Address:
Address:
Phone:
- ------------------------------------
Date
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SCHEDULE A
COMMISSION SCHEDULE
INTERNATIONAL EQUITY FUND
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Dollar amount of Purchase Total Dealer
(At Offering Price) Sales Concession
Charge*
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- ------------------------------- --------------------- ----------------------
Up to $100,000 4.00% 3.50%
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$100,001 to $249,999 3.50% 3.00%
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$250,000 to $499,999 3.00% 2.50%
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- ------------------------------- --------------------- ----------------------
$500,000 to $999,999 2.50% 2.00%
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$1,000,000 or more None None
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Payment to broker/dealer, paid quarterly, based on assets of each registered
representative as follows:
- ----------------------------- ----------------- ----------- -----------
Dollar amount Shareholder 12b-1 Total
in Fund Servicing Fee
- ----------------------------- ----------------- ----------- -----------
- ----------------------------- ----------------- ----------- -----------
Under $3,000,000 25bp 5bp 30bp
$3,000,001 up to $5,000,000 25bp 10bp 35bp
Over $5,000,001 25bp 15bp 40bp
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Brokers may invest for their own account at NAV.
CUSTODIAN CONTRACT
Between
THE FLEX-PARTNERS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
PAGE
1. Employment of Custodioan and Property to be Held by It............... 1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States................... 2
2.1 Holding Securities............................................. 2
2.2 Delivery of Securities......................................... 2
2.3 Registration of Securities..................................... 4
2.4 Bank Accounts.................................................. 4
2.5 Availability of Federal Funds.................................. 5
2.6 Collection of Income........................................... 5
2.7 Payment of Fund Monies......................................... 5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased........................................... 6
2.9 Appointment of Agents.......................................... 7
2.10 Deposit of Fund Assets in U.S. Securities System............... 7
2.11 Fund Assets Held in the Custodian's Direct
Paper System................................................... 8
2.12 Segregated Account............................................. 9
2.13 Ownership Certificates for Tax Purposes........................ 9
2.14 Proxies........................................................ 10
2.15 Communications Relating to Portfolio Securities................ 10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States............................ 10
3.1 Appointment of Foreign Sub-Custodians.......................... 10
3.2 Assets to be Held.............................................. 10
3.3 Foreign Securities Systems..................................... 11
3.4 Holding Securities............................................. 11
3.5 Agreements with Foreign Banking Institutions................... 11
3.6 Access of Independent Accountatns of the Fund.................. 11
3.7 Reports by Custodian........................................... 11
3.8 Transactions in Foreign Custody Account........................ 12
3.9 Liability of Foreign Sub-Custodians............................ 12
3.10 Liability of Custodian......................................... 12
3.11 Reimbursement for Advances..................................... 12
3.12 Monitoring Responsibilities.................................... 13
3.13 Branches of U.S. Banks......................................... 13
3.14 Tax Law........................................................ 14
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund................................................. 14
5. Proper Instructions................................................... 14
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6. Actions Permitted Without Express Authority........................... 15
7. Evidence of Authority................................................. 15
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income..................... 15
9. Records .............................................................. 16
10. Opinion of Fund's Independent Accountants............................. 16
11. Reports to Fund by Independent Public Accountants..................... 16
12. Compensation of Custodian............................................. 16
13. Responsibility of Custodian........................................... 17
14. Effective Period, Termination and Amendment........................... 18
15. Successor Custodian................................................... 19
16. Interpretive and Additional Provisions................................ 19
17. Additional Funds...................................................... 20
18. Massachusetts Law to Apply............................................ 20
19. Prior Contracts....................................................... 20
20. Reproduction of Documents............................................. 20
21. Shareholder Communications Election................................... 20
<PAGE>
CUSTODIAN CONTRACT
This Contract between The Flex-Partners, a Massachusetts business trust
having its principal place of business at 6000 Memorial Drive, Dublin, Ohio
43017, hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in the International
Equity Fund series (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 17, being herein referred to as the "Portfolio(s) ");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury (each, a U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the
Custodian (the "Direct Paper System") pursuant to Section 2.1 1.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor:
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
<PAGE>
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, but only against receipt of
amounts borrowed;
<PAGE>
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
<PAGE>
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account established and used in accordance
with Rule l7f-3 under the Investment Company Act of 1940. Funds held
by the Custodian for a Portfolio may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.
<PAGE>
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2(10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options
on futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper fonn for transfer;
(b) in the case of a purchase effected through a U.S. Securities
System, in accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5:
<PAGE>
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary' specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
<PAGE>
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon (i) receipt of advice
from the U.S. Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Portfolio. Copies of all
advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and
be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
<PAGE>
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the U.S. Securities System; at the election
of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
<PAGE>
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably reguest from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment
<PAGE>
Company Act Release No. 10666, or any subseguent release or releases
of the Securities and Exchange Commission relating to the maintenance
of segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such proxies, all
proxy soliciting materials and all notices relating to such
securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of domestic
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to
the Portfolio all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the Portfolio shall
notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
<PAGE>
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the
Portfolio's securities and other assets maintained outside the United
States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign
securities transactions. The Custodian shall identify on its books as
belonging to the Fund, the foreign securities of the Fund held by each
foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall
be maintained in a clearing agency which acts as a securities
depository or in a book-entry system for the central handling of
securities located outside the United States (each a "Foreign
Securities System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof (Foreign Securities Systems and U.S. Securities Systems
are collectively referred to herein as the "Securities Systems").
Where possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are
maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to the Fund and (ii)
the Custodian shall require that securities and other non-cash
property so held by the foreign sub-custodian be held separately from
any assets of the foreign sub-custodian or of others.
<PAGE>
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
each Portfolio will be freely transferable without the payment of
money or value other than for custody or administration; (c) adequate
records will be maintained identifying the assets as belonging to each
applicable Portfolio; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians.
<PAGE>
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same
extent as set forth in Section 2.3 of this Contract, and the Fund
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London Ltd., the Custodian
shall not be relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.
<PAGE>
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is not)fied by such
foreign sub-custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
<PAGE>
3.14 TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
not)fication to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed
or initialled by one or more person or persons as the Board of Trustees shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
<PAGE>
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three - party agreement which requires a segregated asset account in
accordance with Section 2. 12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund 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 Custodian of written notice to the contrary.
<PAGE>
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31 a- 1 and 3
la-2 thereunder. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
<PAGE>
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of aufficient scope and in aufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
<PAGE>
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liablefor the payment of
money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. EFFECTIVE PERIOD. TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
<PAGE>
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the of fice of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
<PAGE>
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the International Equity Fund with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
<PAGE>
20. REPRODUCTION OF DOCUMENTS
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
21. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES[ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO[ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the _____ day of________, 1997.
ATTEST THE FLEX-PARTNERS
_______________________________ By_________________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
_______________________________ By_________________________________
Executive Vice President
<PAGE>
SCHEDULE A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of The Flex-Partners
for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
_____________________________
Fund's Authorized Officer
Date:________________________
EXHIBIT 9
ADMINISTRATION AGREEMENT
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
This Agreement dated as of the 8th day of February, 1997, made by and
between The Flex-Partners (the "Trust"), a business trust operating as an
open-end investment company, duly organized and existing under the laws of the
Commonwealth of Massachusetts, and Mutual Funds Service Co. ("Agent"), a
corporation organized and existing under the laws of the State of Ohio.
W I T N E S S E T H
WHEREAS, Agent has agreed to act as Transfer, Dividend Disbursing and
Redemption Agent for the Trust's series, International Equity Fund (the "Fund");
and
WHEREAS, pursuant to a separate agreement (the "Custodian Agreement"),
State Street Bank and Trust Company (the "Bank") performs the duties of
Custodian of the securities and cash of the Trust;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. The Trust hereby appoints Agent as its Transfer, Redemption and
Dividend Disbursing Agent for the Trust's series, the International Equity Fund,
and Agent accepts such appointments and agrees to act in such capacities upon
the terms set forth in this Agreement.
TRANSFER AGENCY
SECTION 2. Agent will maintain registry records in the usual form in which
it will note the issuance, transfer and redemption of Shares and the issuance
and transfer of Share Certificates. Agent is also authorized to maintain an
account entitled Unissued Certificate Account in which it will record the Shares
and fractions of Shares issued and outstanding from time to time for which
issuance of Share Certificates was not requested. The Trust shall provide to the
Agent reports for each Fund of Fund Share purchases, redemptions and total
Shares outstanding on the next business day after each net asset valuation.
Agent is authorized to keep records for each Fund in which it will note the
names and registered addresses of Shareholders, and the number of Shares and
fractions from time to time owned by then for which no Share Certificates are
outstanding.
<PAGE>
SECTION 3. Agent will issue Share Certificates for Shares of each Fund,
only upon receipt of a written request from a Shareholder. In all other cases,
the Trust authorizes Agent to dispense with the issuance and countersignature of
Share Certificates whenever Shares are purchased. In such case Agent, as
Transfer Agent, shall merely note on its stock registry records the issuance of
the Shares and fractions, if any; shall credit the Unissued Certificate Account
with the Shares and fractions issued; and shall credit the proper number of
Shares and fractions to the respective Shareholders. Likewise, whenever Agent
has occasion to surrender for redemption Shares and fractions to the respective
Shareholders, it shall be unnecessary to issue Share Certificates for redemption
purposes. The Trust authorizes Agent in such cases to process the transactions
by appropriate entries in its stock transfer records, and debiting of the
unissued Certificate Account and the record of issued Shares outstanding.
SECTION 4. Agent in its capacity as Transfer Agent will, in addition to the
duties and functions above-mentioned, perform the usual duties and functions of
a stock Transfer Agent for a corporation. It will countersign for issuance or
reissuance Share Certificates representing original issue or reissued treasury
Shares as directed by the written instructions of the Trust, and will transfer
Share Certificates registered in the name of Shareholders from one Shareholder
to another in the usual manner. Agent may rely conclusively and act without
further investigation upon any list, instruction, certification, authorization,
Share Certificate or other instrument or paper believed by it in good faith to
be genuine and unaltered, and to have been signed, countersigned, or executed by
a duly authorized person or persons, or upon the instructions of any officer of
the Trust, or upon the advice of counsel for the Trust or for Agent. Agent may
record any transfer of Share Certificates which is believed by it in good faith
to have been duly authorized or may refuse to record any transfer of Share
Certificates if in good faith Agent deems such refusal necessary in order to
avoid any liability to any person.
SECTION 5. In case of any request or demand for the inspection of the Share
records of the Trust, Agent as Transfer Agent, shall endeavor to notify the
Trust and to secure instructions as to permitting or refusing such inspection.
However, Agent may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so.
ISSUANCE OF SHARES
SECTION 6. Prior to the daily determination of net asset value in
accordance with the Trust's prospectus, Agent shall process all purchase orders
received for each Fund since the last determination of each Fund's net asset
value.
Immediately after 4:00 p.m., Columbus time, on each day that the Trust and
Agent are open for business or on any other day on which there is sufficient
degree of trading in the Trust's portfolio securities that the current net asset
value of a Fund's Shares might be materially affected, Agent shall obtain from
the Trust a quotation (on which it may conclusively rely) of the net asset value
per Share determined as of 4:00 p.m., Columbus time, on that day. Agent shall
proceed to calculate for each Fund the amount available for investment in Shares
at the quoted net asset value, the number of Shares and fractional Shares to be
purchased and the net asset value to be deposited with the Bank. Agent, as agent
for the Shareholders, shall place a purchase order daily with the Trust for the
proper number of Shares and fractional Shares to be purchased for each Fund and
confirm such number to the trust in writing.
<PAGE>
SECTION 7. Agent having made the calculations provided for in Section 6,
shall thereupon for each Fund pay over the net asset value of Shares purchased
to the Bank. The payment shall then be deposited in an account maintained under
the Custodian Agreement. The proper number of Shares and fractional Shares for
each Fund shall then be issued daily and credited by Agent to the Unissued
Certificate Account. The Shares and fractional Shares purchased for each
Shareholder will be credited by Agent to his separate account. Agent shall mail
to each Shareholder a confirmation of each purchase, with copies to the Trust if
balance, the new Share balance, the Shares held under a Plan (if any), the
Shares for which Stock Certificates are outstanding (if any), the amount
invested and the price paid for the newly purchased Shares.
REDEMPTIONS
SECTION 8. Agent shall, for each Fund, prior to the daily determination of
net asset value in accordance with the Trust's prospectus, process all requests
from Shareholders to redeem Shares and determine the number of Shares required
to be redeemed to make monthly payments, automatic payment or the like.
Thereupon, Agent shall advise the Fund of the total number of Shares available
for redemption and the number of Shares and fractional Shares requested to be
redeemed. The Fund shall then quote to Agent the applicable net asset value,
whereupon Agent shall furnish the Fund with an appropriate confirmation of the
redemption and process the redemption by filing with the Bank an appropriate
statement and making the proper distribution and application of the redemption
proceeds in accordance with the Trust's prospectus. The stock registry books
recording outstanding Shares, the Unissued Certificate Account and the
individual account of the Shareholder shall be properly debited.
In lieu of carrying out the redemption procedures hereinabove provided for
in this Section 8, Agent may, at the request of the Fund, sell Shares to the
Fund as repurchases from Shareholders, provided that in each such case the sale
price shall be not less than the applicable redemption price. In such case the
redemption procedures shall be appropriately modified.
SECTION 9. The proceeds of redemption shall be remitted by Agent in
accordance with the Trust's prospectus as follows:
(a) By check mailed to Shareholder at his registered address. The request
and stock certificates, if any, for Shares being redeemed, must have the owner's
signature guaranteed by a domestic commercial bank or trust company or a member
firm of a national securities exchange.
<PAGE>
(b) By wire to a designated bank or broker upon telephone request, without
signature guarantee, if such redemption procedure has been elected by the
Shareholder on the Account Application. Any change in the designated bank or
broker account will be accepted by Agent only if made in writing by the
Shareholder with signature guaranteed as required by paragraph (a) of this
Section 9.
(c) By check payable to the Shareholder of record and mailed to his
registered address designated in the Account Application in the case of a
telephone redemption.
DIVIDENDS
SECTION 10. It is mutually understood by the parties that the Fund intends
to declare dividends to Shareholders, and that all dividends are to be
automatically reinvested in additional Shares or remitted in accordance with the
Trust's currently effective prospectus. The Agent shall compute the dividends
per Share payable with respect to the account of each Shareholder and the number
of additional Shares and fractional Shares to be issued with respect to such
dividends. The Agent shall notify the Fund of the total number of additional
Shares and fractional shares which have been issued. The Agent shall maintain
records as to the additional shares and fractional Shares issued with respect to
the account of each Shareholder.
In the event that the Trust changes a dividend policy for a Fund or orders
the distribution of any long-term gains with respect to a Fund, the Trust shall
notify the Agent of such resolution of its Trustees declaring a dividend or
other distribution, the amount payable per Share, the record date for
determining Shareholders entitled to payment, the net asset value to be used for
reinvestments of dividends and the payment date. The Agent shall, on the
designated payment date, calculate the amount to be reinvested in Shares and
fractional Shares for each Shareholder.
GENERAL PROVISIONS
SECTION 11. Agent shall maintain records (which may be part of the stock
transfer records) in connection with the issuance and redemption of Shares, the
disbursement of dividends and dividend reinvestments, in which will be noted and
transactions effected for each Shareholder and the number of Shares and
fractional Shares owned by each for which no Share Certificates are outstanding.
SECTION 12. Agent agrees to make available upon request and to preserve for
the periods prescribed in Rule 31a-2 under the Investment Company Act of 1940
any records relating to services provided under this Agreement which are
required to be maintained by Rule 31a-1 under said Act.
<PAGE>
SECTION 13. In addition to service as Transfer Agent and Dividend
Disbursing Agent as above set forth, Agent will perform other services for the
Trust as agreed from time to time, including but not limited to, preparation of
and mailing Federal Tax Information Forms, mailing semi-annual reports of the
Trust, preparation of lists of Shareholders, and mailing notices of
Shareholders' meetings, proxies and proxy statements.
SECTION 14. Except as set forth in Section 6, nothing contained in this
Agreement is intended to or shall require Agent in any capacity hereunder, to
perform any functions or duties on any holiday, day of special observance or any
other day on which Agent or the New York Stock Exchange is closed. Functions or
duties normally scheduled to be performed on such days shall be performed on,
and as of, the next business day on which both the New York Stock Exchange and
Agent are open.
SECTION 15. Agent shall not be personally liable for any taxes,
assessments, or governmental charges which may be levied or assessed on any
basis whatsoever, excepting only for taxes assessed against it in its corporate
capacity arising out of its compensation hereunder.
SECTION 16. (a) Except as set forth below in this Section 16, the Trust
shall indemnify Agent and save it harmless from and against all actions, suits
and claims, whether groundless or otherwise, arising directly or indirectly out
of or in connection with its performance under this Agreement and from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities incurred by Agent in connection with any such action,
suit, or claim. Agent shall not be under any obligation to prosecute or to
defend any action, suit or claim arising out of or in connection with its
performance under this Agreement, which, in the opinion of its counsel, may
involve it in expense or liability, and the Trust shall, so often as reasonably
requested, furnish Agent with satisfactory indemnity against such expense or
liability, and upon request of Agent the Trust shall assume the entire defense
of any action, suit, or claim subject to the foregoing indemnity; provided,
however, that Agent shall give the Trust notice and reasonable opportunity to
defend any such action, suit, or claim, in the name of the Trust or Agent or
both.
Without limiting the foregoing:
(i) Agent may rely upon the advice of the Trust, or of counsel, who
may be counsel for the Trust or counsel for Agent, and upon statements of
accountants, brokers and other persons believed by it in good faith to be
expert in the matters upon which they are consulted and for any actions
taken in good faith upon such statements, Agent shall not be liable.
(ii) Agent shall not be liable for any action taken in good faith
reliance upon any written or oral instruction or certified copy of any
resolution of the Board of Trustees of the Trust, and Agent may rely upon
the genuineness of any such document or copy thereof believed in good faith
by Agent to have been validly executed.
<PAGE>
(iii) Agent may rely and shall be protected in acting upon any
signature, instruction, request, letter of transmittal, certificate,
opinion of counsel, statement, instrument, report, notice, consent, order,
or other paper or document believed by it to be genuine and to have been
signed or presented by the purchaser, Trust or other proper party or
parties.
(b) Notwithstanding the provisions of Paragraph (a), it is intended that
insofar as Agent may in the future be liable for the consequences of any
payments upon forged instruments or of oversights, errors or omissions by Agent,
such liability shall be borne by Agent's insurance carriers. In the event of any
loss occurring which is attributable to any payment upon a forged instrument,
oversight, error or omission by Agent, Agent shall use its best efforts to have
its insurance carriers bear the loss.
SECTION 17. Agent is authorized, upon receipt of specific written
instructions from the Trust, to make payment upon redemption of Shares without a
signature guarantee. The Trust hereby agrees to indemnify and hold Agent, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands, losses whatsoever arising out of
or in connection with a payment by Agent upon redemption of Shares without a
signature guarantee and upon the request of Agent the Trust shall assume the
entire defense of any action, suit or claims subject to the foregoing indemnity.
Agent shall notify the Trust of any such action, suit or claim with 30 days
after receipt by Agent of notice thereof.
SECTION 18. The Trust shall promptly cause to be turned over to Agent all
records, files, and other materials necessary or appropriate for proper
performance of the functions assumed by Agent under this Agreement.
SECTION 19. The Trust shall file with Agent a certified copy of each
resolution of its Board of Trustees authorizing the execution of written
instructions or the transmittal of oral instructions.
SECTION 20. This Agreement may be amended from time to time by a
supplemental agreement executed by the Trust and the Agent.
SECTION 21. Either the Trust or Agent may give 30 days' written notice to
the other of the termination of this Agreement, such termination to take effect
at the time specified in the notice.
SECTION 22. Any notice or other communication required by or permitted to
be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid, to the
respective parties as follows:
<PAGE>
IF TO THE FUND:
The Flex-Partners
International Equity Fund
6000 Memorial Drive
Dublin, OH 43017
IF TO AGENT:
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
SECTION 23. The Trust represents and warrants to Agent that the execution
and delivery of this Administration Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Trustees of the
Trust.
SECTION 24. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 25. 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 Agent or by Agent without the written consent of the Trust,
authorized or approved by a resolution of its Trustees.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year first above written.
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
By: /s/ Wesley F. Hoag
--------------------------------
MUTUAL FUNDS SERVICE CO.
By: /s/ Donald F. Meeder
--------------------------------
<PAGE>
MUTUAL FUNDS SERVICE COMPANY
FEE SCHEDULE FOR STOCK TRANSFER, DIVIDEND
DISPURSING AND SHAREHOLDER SUPPORT SERVICES
CURRENT FEE SCHEDULE
A. STOCK TRANSFER AND DIVIDEND DISBURSING AND SHAREHOLDER SUPPORT SERVICES
THE GREATER OF
MINIMUM ANNUAL FEE - $4,000 for each Fund or each Class of Shares (payable
monthly based upon an annual per account fee as follows):
$15 per shareholder account on each Fund or each Class of Shares except the
Money Market and Institutional Funds
OR
BASIS POINT FEE (Based on average annual net assets - payable monthly)
10 Basis Points on Equity Funds (The Highlands Growth, Muirfield, Total
Return Utilities, Utilty Growth Class A, Utility Growth Class C, Tactical
Asset Allocation Class A, Tactical Asset Allocation Class C, Core Equity,
and International Equity)
6 Basis Points on Daily Accrual Funds (Bond, Money Market, and
Institutional)
B. In addition, all out-of-pocket expenses shall be separately charged.
<PAGE>
ACCOUNTING SERVICES AGREEMENT
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
THIS AGREEMENT, dated the 8th day of February, 1997, made by and between
THE FLEX-PARTNERS (the "Trust"), a mutual fund organized as a business trust
under the laws of the Commonwealth of Massachusetts and operating as an open-end
investment company comprised of its fifth series, which has been designated the
INTERNATIONAL EQUITY FUND (the "Fund"), and MUTUAL FUNDS SERVICE CO. ("Agent"),
a corporation duly organized and existing in the State of Ohio;
WITNESSETH THAT:
WHEREAS, the Trust desires to appoint the Agent as its Accounting Services
Agent for the Funds to perform certain accounting and record keeping functions
required of a duly registered investment company; to file certain financial
reports; to maintain and preserve certain books, accounts, and records as the
basis for such reports; and to perform certain daily functions in connection
with such accounts and records;
WHEREAS, the Agent is willing to perform such functions upon the terms and
conditions herein set forth; and
WHEREAS, pursuant to a separate Agreement, the Agent will perform the
duties of administrator, transfer agent, and dividend disbursing agent for the
Funds,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
Section 1. The Trust shall turn over to the Agent all of the accounts and
records previously maintained for each Fund by or for the Trust. The Agent shall
be entitled to rely exclusively on the completeness and correctness of the
accounts and records turned over to it by the Trust, and the Trust shall
indemnify and hold the Agent harmless of and for any and all expenses, damages,
claims, suits, liabilities, actions, demands, and losses whatsoever arising out
of or in connection with any errors, omission, inaccuracy, or other deficiency
of such accounts and records or in the failure of the Trust to provide any
portion of such or to provide any information needed by the Agent knowledgeably
to perform its functions hereunder.
Section 2. The Agent shall examine and review each Fund's existing
accounts, records, and other documents, and systems in order to determine or
recommend how such accounts, records, and other documents, and systems shall be
maintained.
<PAGE>
Section 3. Upon receipt of necessary information and appropriate
instructions from the Trust, the Agent shall maintain and keep current the
following books, accounts, records, journals, or other records of original
entry, relating to the business of each Fund, and necessary or advisable for
compliance with applicable regulations, including Rules 31(a)-1 and 31(a)-2, of
the Investment Company Act of 1940, as amended, and as may be mutually agreed to
between the Trust and the Agent:
(a) Cash Receipts
(b) Cash Disbursements
(c) Dividend Record
(d) Purchase and Sales of Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledger
(g) Broker Ledger
(h) General Ledger
(i) Daily Expense Accruals
(j) Daily Interest Accruals
(k) Securities and Monies borrowed or loaned and collateral
therefor
(l) Trial Balances
Unless appropriate information necessary to perform the above functions is
furnished to the Agent in a timely manner, the Agent shall incur no liability to
the Trust or any other person.
It shall be the responsibility of the Trust to furnish the Agent with the
declaration, record, and payment dates and amounts of any dividends or income
and any other special actions required concerning the Securities of each Fund.
The Agent shall maintain all accounts and records above mentioned as
required by regulation and as agreed upon between the Trust and the Agent.
Section 4. Upon receipt by the Agent of written or oral instructions, the
Agent shall make proper accounting entries in accordance therewith. The Trust
shall direct that each broker-dealer, or other person through whom a transaction
has occurred, shall send a confirmation thereof to the Agent. The Agent shall
verify this confirmation against the written or oral instructions when received
from the Trust and forward the confirmation to the Custodian. The Agent shall
promptly notify the Trust of any discrepancy between the confirmation and the
Trust's written instructions when received from the Trust but shall incur no
responsibility or liability for such discrepancy. The Trust shall cause any
necessary corrections to be made and shall advise the Agent and the Custodian
accordingly.
Section 5. The Agent shall calculate each Fund's net asset value in
accordance with the Trust's currently effective prospectus, once daily.
<PAGE>
The Agent shall prepare and maintain a daily evaluation of Securities for
which market quotations are available by the Agent's use of Bloomberg Financial
Markets and ILX Quotation Services; all other Securities shall be evaluated in
accordance with the Trust's written instructions, and the Agent shall have no
responsibility or liability for the accuracy of the information supplied by the
Trust or upon the written instructions.
The Trust assumes all responsibility for computation of "amortized cost",
valuation of securities, and all valuations not ascertainable solely by
mechanical procedures.
Section 6. At the end of each month, the Agent shall obtain from the
Custodian a monthly statement of cash and portfolio transactions, which shall be
reconciled with the Agent's accounts and records maintained for each Fund. The
Agent shall report any discrepancies to the Custodian, and report any
unreconciled items to the Trust.
Section 7. The Agent shall supply daily and periodic reports to the Trust,
as required by law or regulation, and as requested by the Trust and agreed upon
by the Agent.
Section 8. The Trust shall report and confirm to the Transfer Agent all
Share purchases and redemptions of which it is aware. The Agent shall obtain
from the Transfer Agent daily reports of Share purchases, redemptions, and total
shares outstanding.
The Agent shall reconcile outstanding Shares with the Transfer Agent
periodically and certify at least monthly to the Trust the reconciled Share
balance outstanding.
Section 9. The accounts and records of the Funds maintained by the Agent
shall be the property of the Trust, and shall be made available to the Trust,
within a reasonable period of time, upon demand. The Agent shall assist the
Trust's independent auditors, or upon approval of the Trust, or upon demand, any
regulatory body, in any requested review of a Fund's accounts and records but
shall be reimbursed for all expenses and employee time invested in any such
review outside of routine and normal periodic review. Upon receipt from the
Trust of the necessary information, the Agent shall supply the necessary data
for the Trust's completion of any necessary tax returns, questionnaires,
periodic reports to Shareholders of the Funds, and such other reports and
information requests as the Trust and the Agent shall agree upon from time to
time.
Section 10. The Agent and the Trust may from time to time adopt uniform or
standing procedures, and the Agent may conclusively assume that any procedure
approved by the Trust, or directed by the Trust, does not conflict with or
violate any requirements of its prospectus, Declaration of Trust, By-Laws, or
any rule or regulation of any regulatory body or governmental agency. The Trust
shall be responsible to notify the Agent of any changes in regulations or rules
which might necessitate changes in the Agent's procedures.
<PAGE>
Section 11. The Agent may rely upon the advice of the Trust and upon
statements of the Trust's accountants and other persons believed by it in good
faith to be expert in matters upon which they are consulted, and the Agent shall
not be liable for any actions taken in good faith upon such statements.
Section 12. The Agent shall not be liable for any action taken in good
faith reliance upon any authorized oral instructions, any written instructions,
any certified copy of any resolution of the Trustees of the Trust or any other
document reasonably believed by the Agent to be genuine and to have been
executed or signed by the proper person or persons. The Trust will send written
instructions to cover oral instructions, and the Agent will compare the
information against the oral instructions previously furnished. The Agent will
inform the Trust immediately of any noted discrepancy or will request, if no
written instruction is received in a reasonable time, that the Trust forward
same to Agent.
The Agent shall note be held to have notice of any change of authority of
any officer, employee, or agent of the Trust until receipt of notification
thereof by the Trust.
In addition to indemnification expressly provided elsewhere in this
Agreement, the Trust shall indemnify and hold harmless the Agent from all claims
and liabilities (including reasonable expenses for legal counsel) incurred by or
assessed against the Agent in connection with the performance of this Agreement,
except such as may arise from the Agent's own negligent action, omission, or
willful misconduct; provided, however, that before confessing any claim against
it, the Agent shall give the Trust reasonable opportunity to defend against such
claim in the name of the Trust, the Fund or the Agent or any of them.
Section 13. The Shareholders, Trustees, officers, employees and agents of
the Trust shall not be personally bound by or liable hereunder, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
hereunder as provided for in the Declaration of Trust.
Section 14. The Trust agrees to pay the Agent compensation for its services
and to reimburse it for expenses, as set forth in a Schedule attached hereto, or
as shall be set forth in amendments to such Schedule approved by the Trust and
the Agent.
Section 15. Nothing contained in this Agreement is intended to or shall
require the Agent, in any capacity hereunder, to perform any functions or duties
on any holiday or other day of special observance on which the New York Stock
Exchange is closed. Functions or duties normally scheduled to be performed on
such days shall be performed on, and as of, the next business day on which both
the New York Stock Exchange and the Agent are open.
Section 16. This Agreement may be terminated by either party upon 60 days'
prior written notice.
<PAGE>
Section 17. Any notice or other communication required by or permitted to
be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid, to the
respective parties as follows:
If to the Trust:
The Flex-Partners
International Equity Fund
Attention: Robert S. Meeder, President
c/o R. Meeder & Associates, Inc.
6000 Memorial Drive
Box 7177
Dublin, OH 43017
If to the Agent:
Mutual Funds Service Co.
6000 Memorial Drive
Box 7177
Dublin, OH 43017
Section 18. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 19. This Agreement 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 Agent,
or by the Agent without the written consent of the Trust, authorized or approved
by a resolution of its Trustees.
Section 20. This Agreement shall be governed by the laws of the State of
Ohio.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
THE FLEX-PARTNERS
INTERNATIONAL EQUITY FUND
By: /s/ Wesley F. Hoag
- ----------------------------
MUTUAL FUNDS SERVICE CO.
By: /s/ Donald F. Meeder
- ----------------------------
<PAGE>
MUTUAL FUNDS SERVICE CO.
FEE SCHEDULE FOR ACCOUNTING SERVICES
INTERNATIONAL EQUITY FUND
A. MINIMUM ANNUAL FEE - $30,000 (Based upon average net assets - payable
monthly)
BASIS POINT FEE
3 Basis Points on first $100 million of assets
2 Basis Points on next $150 million of assets
1 Basis Point on assets over $250 million
B. In addition, all out-of-pocket expenses shall be separately charged, shall
include but not be limited to: printed forms, postage, overnight mail, and
telephone expense.
EXHIBIT 15
DISTRIBUTION AND SERVICE PLAN
OF
INTERNATIONAL EQUITY FUND
DISTRIBUTION AND SERVICE PLAN, dated as of February 8, 1997, of The
Flex-Partners, a Massachusetts business trust ("Trust").
WITNESSETH:
WHEREAS, the Trust has been organized to operate as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"); and
WHEREAS, the Trust intends to distribute Shares of The International Equity
(the "Fund") in accordance with Rule 12b-1 under the 1940 Act ("Rule 12b-1"),
and desires to adopt this Distribution and Service Plan (the "Plan") as a plan
of distribution pursuant to such Rule;
WHEREAS, the Trust desires to engage Adviser Dealer Services, Inc., an Ohio
corporation (along with any successor underwriter, the "Underwriter"), to
provide (or cause to be provided) certain distribution and shareholder services
for the Trust;
WHEREAS, the Trust desires to enter into a distribution agreement (in such
form as may from time to time be approved by the Board of Trustees of the Trust
in the manner specified in Rule 12b-1 (the "Distribution Agreement")) with the
Underwriter, whereby the Underwriter will provide facilities and personnel and
render services to the Trust in connection with the offering and distribution of
the Shares of the Fund; and
WHEREAS, the Board of Trustees, in considering whether the Fund should
adopt and implement this Plan, has evaluated such information as it deemed
necessary to an informed determination as to whether this Plan should be adopted
and implemented and has considered such pertinent factors as it deemed necessary
to form the basis for a decision to use assets of the Fund for such purposes,
and has determined that there is a reasonable likelihood that the adoption and
implementation of this Plan will benefit the Fund and its shareholders.
NOW, THEREFORE, the Board of Trustees hereby adopts this Plan for the Fund
as a plan of distribution in accordance with Rule 12b-1, on the following terms
and conditions:
<PAGE>
1. As specified in the Underwriting Agreement, the Trust will reimburse the
Underwriter for costs and expenses incurred in connection with the distribution
and marketing of Shares of the Fund. Such distribution costs could include,
without limitation, advertising expenses and the expenses of printing (excluding
typesetting) and distributing prospectuses and reports used for sales purposes,
expenses of preparing and printing sales literature; expenses of sales employees
or agents of the Underwriter, including salary, commissions, travel and related
expenses, payments to broker-dealers, banks or other financial institutions
("Dealers") for services in connection with the distribution of shares,
including service fees and trail or maintenance commissions calculated with
reference to the average daily net asset value of shares held by shareholders
who have a brokerage or other service relationship with the Dealer or
institution receiving such fees; and other distribution-related expenses whether
or not specifically required to be made by the Underwriter pursuant to the
Underwriting Agreement.
2. The Trust may pay the Underwriter distribution fees from the Fund not to
exceed on an annual basis 0.25% of the average daily net assets of the Fund for
its then-current fiscal year as reimbursement for costs and expenses incurred in
connection with the distribution and sales of Shares of the Fund. To the extent
such expenses exceed the stated limit, the Underwriter will bear such expenses.
3. The Trust may also pay the Underwriter service fees from the Fund not to
exceed on an annual basis 0.25% of the average daily net assets of the Fund for
its then-current fiscal year in connection with providing (or causing to be
provided) personal services and shareholder account maintenance services.
4. The Trust shall pay or cause to be paid all fees and expenses of any
independent auditor, legal counsel, administrator, sponsor, transfer agent,
custodian, registrar or dividend disbursing agent of the Trust; expenses of
distributing and redeeming Shares and (other than the service fees covered by
the Plan) servicing shareholder accounts; expenses of preparing, printing and
mailing prospectuses, shareholder reports, notices, proxy statements and reports
to governmental officers and commissions and to shareholders of the Trust;
insurance premiums; expenses of calculating the net asset value of Shares;
expenses of shareholder meetings; and expenses relating to the issuance,
registration and qualification of Shares.
5. Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the responsibility for
and control of the conduct of the affairs of the Trust.
<PAGE>
6. This Plan shall become effective upon (a) approval by a vote of at least
a "majority of the outstanding voting securities" of the Fund, and (b) approval
by a vote of the Board of Trustees of the Fund and a vote of 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 the Plan or in any agreement
related to the Plan (the "Qualified Trustees"), such votes to be cast in person
at a meeting called for the purpose of voting on this Plan.
7. This Plan shall continue in effect indefinitely; provided, however, that
such continuance is subject to annual approval by a vote of the Board of
Trustees of the Fund and a majority of the Qualified Trustees, such votes to be
cast in person at a meeting called for the purpose of voting on continuance of
this Plan. If such annual approval is not obtained, this Plan shall expire on
the date which is fifteen months after the date of the last approval.
8. This Plan may be amended at any time by the Board of Trustees, provided,
that (a) any amendment to increase materially the amount that may be expended
from the assets of the Fund for the services described herein shall be effective
only upon approval by a vote of a "majority of the outstanding voting
securities" of the Fund, and (b) any material amendment of this Plan shall be
effective only upon approval by a vote of the Board of Trustees, and a majority
of the Qualified Trustees, such votes to be cast in person at a meeting called
for the purpose of voting on such amendment. This Plan may be terminated at any
time with respect to the Fund by a vote of a majority of the Qualified Trustees
or by a vote of a "majority of the outstanding voting securities" of the Fund.
9. The Fund and the Underwriter each shall provide the Board of Trustees,
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts expended under this Plan and the purposes for which such
expenditures were made.
10. While this Plan is in effect, the selection and nomination of Trustees
who are not "interested persons" of the Trust shall be committed to the
discretion of the Trustees who are not "interested persons" of the Trust.
11. For the purposes of this Plan, the terms "interested persons" and
"majority of the outstanding voting securities" are used as defined in the 1940
Act.
12. The Trust shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 9 hereof (collectively,
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made, and each such Record shall be kept in an easily
accessible place for the first two years of said record-keeping.
13. This Plan shall be construed in accordance with the laws of
Massachusetts and the applicable provisions of the 1940 Act.
14. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Plan shall not be
affected thereby.
