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As filed with the Securities and Exchange Commission on May 1, 1996
File No. 33-74176
File No. 811-8202
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 4
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5
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NORWEST SELECT FUNDS
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 363-3301
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David I. Goldstein, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
William Goodwin, Esq.
Dechert, Price & Rhoads
477 Madison Avenue, New York, New York 10022-5891
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It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485, paragraph (b)
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on [ ] pursuant to Rule 485, paragraph (b)
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60 days after filing pursuant to Rule 485, paragraph (a)(i)
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on [ ] pursuant to Rule 485, paragraph (a)(i)
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75 days after filing pursuant to Rule 485, paragraph (a)(ii)
- ----- on [ ] pursuant to Rule 485, paragraph (a)(ii)
- ----- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. A Rule 24f-2
Notice for the fiscal year ended December 31, 1995 of the Registrant's various
portfolios was filed with the Commission on February 28, 1996.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
PART A
Form N-1A
Item No. Location in Prospectus (Caption)
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Item 1. Cover Page Cover Page
Item 2. Synopsis The Trust
Item 3. Condensed Financial
Information Financial Highlights
Item 4. General Description
of Registrant: The Trust; Investment Objectives,
Policies, and Risk Considerations;
Other Information
Item 5. Management of
the Fund The Trust; Management of the Funds
Item 5A. Management's Discussion of
Fund Performance Not Applicable
Item 6. Capital Stock and
Other Securities Investment Objectives, Policies,
and Risk Considerations; Dividends,
Distributions and Tax Matters;
Other Information
Item 7. Purchase of Securities Being
Offered Purchases and Redemptions of
Shares; Other Information;
Management of the Funds
Item 8. Redemption or Repurchase
of Shares Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
PART B
Form N-1A Location in Statement of
Item No. Additional Information (Caption)
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information
and History Management; Other Information
Item 13. Investment Objectives and
Policies Investment Policies; Investment
Limitations
Item 14. Management of the Registrant Management
Item 15. Control Persons and Principal
Holders of Securities Other Information
Item 16. Investment Advisory and Other
Services Management; Other Information
Item 17. Brokerage Allocation and
Other Practices Portfolio Transactions
Item 18. Capital Stock and Other
Securities The Trust
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Other Information - Determination
of Net Asset Value; Additional
Purchase and Redemption Information
Item 20. Tax Status Other Information - Taxation
Item 21. Underwriters Management
Item 22. Calculation of Performance Data Performance Data
Item 23. Financial Statements Financial Statements
<PAGE>
NORWEST SELECT FUNDS
INTERMEDIATE BOND FUND
INCOME EQUITY FUND
VALUGROWTH-SM- STOCK FUND
SMALL COMPANY STOCK FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
(207) 879-1900
PROSPECTUS
MAY 1, 1996
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This Prospectus offers shares (the "Shares") of Intermediate Bond Fund, Income
Equity Fund, ValuGrowth Stock Fund and Small Company Stock Fund (each a "Fund"
and collectively the "Funds"), each a portfolio of Norwest Select Funds, an
open-end management investment company (the "Trust").
INTERMEDIATE BOND FUND seeks stable current income and competitive total return
over an interest rate cycle by investing in a portfolio of investment grade,
intermediate maturity fixed income securities.
INCOME EQUITY FUND seeks capital appreciation consistent with that of the
overall equity securities markets and above-average dividend income by investing
primarily in the common stock of large, income-producing domestic companies.
VALUGROWTH STOCK FUND seeks capital appreciation by investing in a diversified
portfolio of common stock and securities convertible into common stock that may
be rated or unrated.
SMALL COMPANY STOCK FUND seeks capital appreciation by investing primarily in
the common stock of small and medium size domestic companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index.
Shares of the Trust currently are sold only to separate accounts ("Separate
Accounts") of certain insurance companies (the "Insurance Companies") to serve
as the investment medium for variable life insurance policies and variable
annuity contracts (collectively the "Contracts") issued by the Insurance
Companies. The Funds that are offered by this Prospectus serve as underlying
investment vehicles for amounts invested in the Contracts. The Separate
Accounts invest in Shares of one or more of the Funds in accordance with
allocation instructions received from owners of the Contracts. These
allocations are described further in the Prospectus for the Separate Account.
It is possible that at some later date that Shares of the Trust will be offered
to other persons consistent with the use of the Trust as an investment vehicle
for variable insurance products or to qualified pension or retirement plans.
<PAGE>
This Prospectus sets forth concisely the information concerning the Trust and
each Fund that a prospective investor should know before investing. Investors
should read this Prospectus and retain it for future reference. The Trust has
filed with the Securities and Exchange Commission ("SEC") a Statement of
Additional Information (the "SAI") dated May 1, 1996 and as supplemented from
time to time, which contains more detailed information about the Trust and the
Funds and is incorporated into this Prospectus by reference. The SAI is
available without charge by contacting the Trust at the telephone number listed
above. Investors should read this Prospectus and retain it for future
reference.
NORWEST SELECT FUNDS IS A FAMILY OF OPEN-END INVESTMENT COMPANIES COMMONLY KNOWN
AS MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE NOT INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT
AGENCY. THE SHARES ALSO ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY NORWEST BANK MINNESOTA, N.A. OR ANY OTHER BANK OR BANK
AFFILIATE.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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.
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<PAGE>
TABLE OF CONTENTS
The Trust. . . . . . . . . . . . . . . . Dividends, Distributions, and
Financial Highlights . . . . . . . . . . Tax Matters . . . . . . . . . . .
Investment Objectives, Policies, and Other Information . . . . . . . . .
and Risk Considerations. . . . . . . .
Management of the Funds. . . . . . . . . Appendix A: Investments,
Purchases and Redemptions Investment Strategies, and
of Shares. . . . . . . . . . . . . . . Risk Considerations . . . . . . A-1
THE TRUST
The Trust is an open-end management investment company which was organized as a
Delaware business trust on December 7, 1993. This Prospectus relates to four
separate portfolios of the Trust: Intermediate Bond Fund, Income Equity Fund,
ValuGrowth Stock Fund and Small Company Stock Fund. Each Fund has its own
distinct investment objective and policies. See "Investment Objectives,
Policies, and Risk Considerations." The Trust serves as the investment medium
for the Contracts offered by the Insurance Companies. Shares of the Trust
currently are not offered directly to, and may not be purchased directly by,
members of the public but in the future may be offered to qualified pension or
retirement plans. Shares are currently available for sale only to Separate
Accounts established by the Insurance Companies for the purpose of issuing
Contracts. See "Purchases and Redemption of Shares." Consequently, the terms
"shareholder" and "shareholders" in this Prospectus refer to the Insurance
Companies.
The investment adviser to each Fund (the "Adviser") is Norwest Investment
Management, a part of Norwest Bank Minnesota, N.A. ("Norwest"). Crestone
Capital Management, Inc. ("Crestone" and collectively with the Adviser, the
"Advisers"), an investment advisory subsidiary of Norwest, serves as investment
subadviser to Small Company Stock Fund.
The value of certain benefits under the Contracts will vary with the investment
performance of the Funds. Prospective purchasers should carefully consider the
information about the Trust and the Funds presented in this Prospectus prior to
purchasing a Contract.
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<PAGE>
FINANCIAL HIGHLIGHTS
The following information represents selected data for a single outstanding
Share of Intermediate Bond Fund, ValuGrowth Stock Fund and Small Company Stock
Fund for the periods shown. Information for the year ended December 31, 1995
and for the period from June 1, 1994 (commencement of operations) through
December 31, 1994 was audited by KPMG Peat Marwick LLP, independent auditors.
The Funds' financial statements for the fiscal year ended December 31, 1995 and
independent auditors' report thereon are contained in the Annual Report of the
Funds and are incorporated by reference into the SAI. Further information about
each Fund's performance is contained in the Annual Report, which may be obtained
from the Trust without charge. No financial information is presented herein for
Income Equity Fund because, as of the date hereof, that Fund had not yet
commenced operations.
<TABLE>
<CAPTION>
INTERMEDIATE VALUGROWTH SMALL COMPANY
BOND FUND STOCK FUND STOCK FUND
Year Ended Period Ended Year Ended Period Ended Period Ended
December 31 December 31 December 31 December 31 December 31
1995 1994(a) 1995 1994(a) 1995(a)
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<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 9.95 $ 10.00 $ 9.81 $ 10.00 $ 10.00
Net Investment Income 0.33 0.33 0.07 0.07 0.06
Net Realized and Unrealized
Gain/(Loss) on Securities 1.36 (0.38) 2.30 (0.26) 1.54
Distributions From Net Investment Income (0.66) - (0.14) - (0.06)
Distributions From Net Realized Gains - - - - (0.33)
------- ------ ------- ------ -------
Ending Net Asset Value per Share $ 10.98 $ 9.95 $ 12.04 $ 9.81 $ 11.21
------- ------ ------- ------ -------
------- ------ ------- ------ -------
Ratios to Average Net Assets:
Expenses(b) 0.60% 0.60%(c) 0.80% 0.80%(c) 0.80%(c)
Net Investment Income 6.33% 6.45%(c) 1.24% 1.67%(c) 1.02%(c)
Total Return 17.08% (0.50%) 24.15% (1.90%) 15.95%
Portfolio Turnover Rate 54.04% 52.61% 25.44% 16.77% 51.16%
Net Assets at the End of
Year/Period (000's Omitted) $3,090 $1,255 $4,793 $1,910 $2,027
(a) Intermediate Bond Fund and ValuGrowth Stock Fund commenced operations on June 1, 1994. Small Company Stock Fund commenced
operations on May 1, 1995.
(b) During the periods various fees and expenses were waived and reimbursed, respectively. Had such waivers and reimbursements not
occurred, the ratio of expenses to average net assets would have been:
4.67% 9.31%(c) 3.81% 8.00%(c) 5.38%(c)
(c) Annualized.
</TABLE>
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<PAGE>
INVESTMENT OBJECTIVES, POLICIES, AND RISK CONSIDERATIONS
Each Fund has a stated investment objective which it pursues through separate
investment policies. The differences in objectives and policies among the Funds
can be expected to affect the return of each Fund and the degree of market and
financial risk to which each Fund is subject. For a further description of each
Fund's investments, investment techniques, and additional risk considerations
associated with those investments and techniques, see "Appendix A - Investments,
Investment Strategies, and Risk Considerations" (the "Appendix") and the SAI.
INVESTMENT OBJECTIVES
Each Fund's investment objective may not be changed without the approval of a
majority of the Fund's shareholders. There can be no assurance that any Fund
will achieve its investment objective.
INTERMEDIATE BOND FUND'S investment objective is to provide stable current
income and competitive total return over an interest rate cycle.
INCOME EQUITY FUND'S investment objective is to provide capital appreciation.
VALUGROWTH STOCK FUND'S investment objective is to provide capital appreciation.
SMALL COMPANY STOCK FUND'S investment objective is to provide capital
appreciation.
INVESTMENT POLICIES
INTERMEDIATE BOND FUND
Intermediate Bond Fund seeks to attain its investment objective by investing
primarily in a diversified portfolio of government and corporate securities of
intermediate maturity in an evenly balanced maturity structure. The Fund
emphasizes the use of intermediate maturity securities to lessen interest rate
risk, while employing low-risk yield enhancement techniques to add to the
Fund's return over a complete economic or interest rate cycle (generally four to
six years). Under normal market conditions, the Fund will invest substantially
all of its assets, and at least 65% of its net assets, in fixed-income
securities. For a general description of fixed income securities, see
"Additional Investment Policies - Fixed Income Securities and Their
Characteristics." The fixed-income securities in which the Fund invests may
include, but are not limited to, U.S. Government Securities, corporate debt
securities, convertible debt securities, taxable municipal securities, mortgage-
backed and asset-backed securities, and short-term investments such as
certificates of deposit, commercial paper and money market funds.
Under normal circumstances, the Fund will invest between 25% and 100% of its
assets in U.S. Government Securities and between 0% and 75% of its assets in
corporate and other debt
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<PAGE>
securities, subject to the diversification requirements of section 817(h) of the
Internal Revenue Code of 1986 (the "Code"). See "Additional Investment
Policies - Investment Limitations - Diversification."
The Fund will purchase securities other than U.S. Government Securities that are
rated, at the time of purchase, within the four highest long-term rating
categories assigned by a nationally recognized statistical rating organization
such as Moody's Investors Service, Standard & Poor's or Fitch Investors
Services, L.P., or which are unrated and determined by the Adviser to be of
comparable quality. For a description of these ratings, see "Additional
Investment Policies - Rating Matters" and the SAI.
The fixed-income securities purchased by the Fund will have various maturities.
The Fund will invest in debt obligations with maturities (or average life in the
case of mortgage-backed, asset-backed and similar securities) ranging from
short-term (including overnight) to 15 years, and it is anticipated that the
Fund's portfolio of securities will have an average dollar-weighted maturity of
between 3 and 10 years.
The securities in which the Fund invests include mortgage-backed and other
asset-backed securities, although the Fund will limit its investment in these
securities to not more than 50% of the Fund's total assets. The Fund may enter
into "dollar roll" transactions, and may purchase "zero-coupon" securities. The
Fund will limit its investment in "zero coupon" securities, except those issued
through the U.S. Treasury's STRIPS program, to not more than 10% of the Fund's
total assets. The Fund may also invest in securities that are restricted as to
disposition under the Federal securities laws (sometimes referred to as "private
placements" or "restricted securities"). The Fund may make short sales and may
purchase securities on margin (borrow money in order to purchase securities),
which are considered speculative investment techniques. See "Short Sales" and
"Investments Involving Leverage" in the Appendix. The Fund also may enter into
repurchase agreements (aside from investing for temporary defensive purposes),
may lend its portfolio securities and may purchase portfolio securities on a
when-issued or forward commitment basis.
The corporate debt securities in which the Fund invests may include U.S. dollar
denominated debt of foreign corporate issuers. The Fund also from time-to-time
may purchase securities issued by the governments of foreign countries or by
those countries' political subdivisions, agencies or instrumentalities, as well
as by supranational organizations such as the International Bank for
Reconstruction and Development. Investments in foreign issuers will not exceed
25% of the Fund's total assets. For a further discussion of risks associated
with investment in foreign issuers, see "Foreign Securities" in the Appendix.
In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and collars. The Fund may also engage in certain
strategies involving options (both exchange-traded and over-the-counter) to
attempt to enhance the Fund's return and may attempt to reduce the overall risk
of its investments ("hedge") by using options and futures contracts. The Fund's
ability to use these strategies may be limited by market considerations,
regulatory limits and tax
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<PAGE>
considerations. The Fund may write covered call and put options, buy put and
call options, buy and sell interest rate futures contracts, and buy options and
write covered options on those futures contracts. An option is covered if, so
long as the Fund is obligated under the option, it owns an offsetting position
in the underlying security or futures contract or maintains a segregated account
of liquid, high-grade debt instruments with a value at all times sufficient to
cover the Fund's obligations under the option.
INCOME EQUITY FUND
Income Equity Fund seeks to attain its investment objective by investing
primarily in the common stock of large domestic companies that the Adviser
perceives to have above-average return potential based on current market
valuations. Primary emphasis is placed on investing in securities of companies
with above-average dividend income. In selecting securities for the Fund, the
Adviser uses various valuation measures, including above-average dividend yields
and below industry average price to earnings, price to book and price to sales
ratios. The Fund considers large companies to be those whose market
capitalization is at least $600 million at the time of the Fund's purchase.
Market capitalization refers to the total market value of a company's
outstanding shares of common stock. The Fund intends under normal conditions to
invest substantially all of its assets, and at least 65% of its total assets, in
common stock.
The Fund may invest in preferred stock and securities convertible into common
stock and may purchase American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and other similar securities of foreign issuers.
See "Convertible Securities," "Foreign Securities" and "ADRs and EDRs" in the
Appendix. The Fund also may purchase warrants and options with respect to
equity securities. Under normal circumstances, the Fund will invest less than
5% of its total assets in warrants and options.
VALUGROWTH STOCK FUND
ValuGrowth Stock Fund seeks to attain its investment objective by investing
principally in medium and large capitalization companies (greater than $500
million market capitalization) that, in the view of the Adviser, possess above-
average growth characteristics and attractive valuations. Market capitalization
refers to the total market value of a company's outstanding shares of common
stock, calculated by multiplying the market value of the company's shares by the
total number of shares outstanding. The Fund intends under normal market
conditions to invest substantially all of its assets, and at least 65% of its
net assets, in common stock.
The Fund seeks to identify and invest in companies whose earnings and dividends
the Adviser believes will grow faster than inflation and the economy in general,
and whose growth the Adviser believes has not yet been fully reflected in the
market price of the companies' shares. In seeking these investments, the
Adviser relies primarily on a company-by-company analysis (rather than a broader
analysis of industry or economic sector trends) and considers such matters as
the quality of a company's management, the existence of a leading or dominant
position in a major product line or market, the soundness of the company's
financial position, and the maintenance of a relatively high rate of return on
invested capital and shareholders' equity. Once
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<PAGE>
companies are identified as possible investments, the Adviser applies a number
of valuation measures to determine the relative attractiveness of each company
and selects the companies whose shares are most attractively priced.
The Fund also may invest in selected companies the Adviser regards as "special
situations." Special situation companies often have the potential for
significant future earnings growth but have not performed well in the recent
past. These situations may include management turnarounds, corporate or asset
restructuring, or significantly undervalued assets. Such investments are the
exception, not the rule, and must satisfy the Adviser's valuation parameters.
The Fund may invest in securities convertible into common stock, including
convertible debt and convertible preferred stock. The Fund also may invest up
to 20% of its assets in foreign issuers and in sponsored and unsponsored
American Depository Receipts ("ADRs"). See "Foreign Securities" and "ADRs and
EDRs" in the Appendix. The Fund may purchase warrants and options with respect
to equity securities. Under normal circumstances, the Fund will invest less
than 5% of its total assets in warrants and options. The Fund also may enter
into repurchase agreements (aside from investing for temporary defensive
purposes) and may lend its portfolio securities.
SMALL COMPANY STOCK FUND
Small Company Stock Fund seeks to attain its investment objective by investing
primarily in the common stock of small and medium size domestic companies which
have a market capitalization well below that of the average company in the
Standard & Poor's 500 Composite Stock Price Index. Small and medium companies
are those whose market capitalization is less than $1 billion at the time of the
Fund's purchase, although it is anticipated that investments primarily will be
in companies with capitalization of less than $750 million. Market
capitalization refers to the total market value of a company's outstanding
shares of common stock, calculated by multiplying the market value of the
company's shares by the total number of shares outstanding.
In selecting securities for the Fund, the Advisers seek securities with
significant price appreciation potential, and attempt to identify companies that
show above-average growth, as compared to long-term overall market growth. The
companies in which the Fund invests may be in a relatively early stage of
development or may produce goods and services which have favorable prospects for
growth due to increasing demand or developing markets. Frequently, such
companies have a small management group and single product or product line
expertise that, in the view of the Advisers, may result in an enhanced
entrepreneurial spirit and greater focus which may allow the firms to be
successful. The Advisers believe that such companies may develop into
significant business enterprises and that an investment in such companies offers
a greater opportunity for capital appreciation than an investment in larger more
established entities. Small companies frequently retain a large part of their
earnings for research, development and investment in capital assets, however, so
that the prospects for immediate dividend income are limited.
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<PAGE>
The securities in which the Fund invests may be listed on a securities exchange
or traded in the over-the-counter securities market, and may be included in the
National Association of Securities Dealers Automated Quotation (NASDAQ) National
Market System. Equity securities owned by the Fund that are traded in the over-
the-counter market or on a regional securities exchange may not be traded every
day or in the volume typical of securities trading on a national securities
exchange. As a result, disposition by the Fund of a portfolio security, to meet
redemption requests by shareholders or otherwise, may require the Fund to sell
these securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over a lengthy period
of time.
The Fund may invest up to 20% of its assets in foreign issuers and in sponsored
and unsponsored American Depository Receipts ("ADRs"). See "Foreign Securities"
and "ADRs and EDRs" in the Appendix. The Fund also may enter into repurchase
agreements (aside from investing for temporary defensive purposes) and may lend
its portfolio securities.
The Fund may invest in debt securities that are rated, at the time of purchase,
within the three highest long-term categories assigned by a nationally
recognized statistical rating organization such as Moody's Investors Service,
Standard & Poor's or Fitch Investors Services, L.P., or which are unrated and
determined by the Adviser to be of comparable quality. See "Additional
Investment Policies - Fixed Income Securities and Their Characteristics" and "-
Rating Matters." The Fund intends, however, under normal market conditions to
invest at least 65% of its net assets in common stock.
ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS. Investments in smaller
companies generally involve greater risks than investments in larger companies
due to the small size of the issuer and the fact that the issuer may have
limited product lines, less access to financial markets and less management
depth. In addition, many of the securities of these firms trade less frequently
and in lower volumes than securities issued by larger firms. The result is that
the short-term price volatility of those small company securities is greater
than the price volatility of the securities of larger, more established
companies that are widely held. The securities of small companies may also be
more sensitive to market changes generally than the securities of large
companies.
ADDITIONAL INVESTMENT POLICIES
All investment policies of a Fund that are designated as fundamental, and each
Fund's investment objective, may not be changed without the approval of the
holders of a majority of that Fund's outstanding voting securities. A majority
of a Fund's outstanding voting securities means the lesser of 67% of the shares
of the Fund present or represented at a shareholders meeting at which the
holders of more than 50% of the shares are present or represented, or more than
50% of the outstanding shares of a Fund. Except as otherwise indicated,
investment policies of the Funds are not fundamental and may be changed by the
Trust's Board of Trustees (the "Board") without shareholder approval.
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<PAGE>
INVESTMENT LIMITATIONS
The Funds have adopted the investment limitations listed below, each of which is
a nonfundamental policy of the Funds except as noted. Other investment
limitations, including additional provisions with respect to the limitations
listed below, are described in the SAI.
DIVERSIFICATION. As a fundamental policy, each Fund is "diversified" as defined
in the Investment Company Act of 1940 (the "1940 Act"). Accordingly, each Fund
may not, with respect to 75% of its assets, purchase a security other than a
U.S. Government Security if, as a result, more than 5% of the Fund's total
assets would be invested in the securities of a single issuer or the Fund would
own more than 10% of the outstanding voting securities of any single issuer. As
nonfundamental policies, except with respect to investment in U.S. Government
Securities, no more than 5% of a Fund's total assets (10% with respect to
ValuGrowth Stock Fund) will be invested in the securities of any single issuer
and no Fund will own more than 10% (5% with respect to Intermediate Bond Fund)
of the voting securities of any one issuer.
Purchases of securities for each of the Funds also will be limited in accordance
with the diversification requirements established by section 817(h) of the Code.
To comply with regulations under section 817(h), each Fund is required to
diversify its investments so that on the last day of each quarter of a calendar
year no more than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. In calculating these percentages, securities of a
given issuer generally are treated as one investment, and each U.S. Government
agency and instrumentality is treated as a separate issuer. Any security
issued, guaranteed, or insured (to the extent so guaranteed or insured) by the
United States or an agency or instrumentality of the United States is treated by
the Fund as a security issued by the U.S. Government, agency or instrumentality,
whichever is applicable.
Compliance with the diversification rules under section 817(h) of the Code will
generally limit the ability of the Funds, and particularly Intermediate Bond
Fund, to invest greater than 55% of total assets in direct obligations of the
U.S. Treasury (or any other issuer) or to invest primarily in securities issued
by a single agency or instrumentality of the U.S. Government. Failure to comply
with these diversification requirements may result in immediate taxation to the
Contract owners of all returns credited to Contracts.
CONCENTRATION. Each Fund is prohibited from concentrating its assets in the
securities of issuers in any industry. As a fundamental policy, each Fund may
not purchase securities if, immediately after the purchase, more than 25% of the
value of the Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in the same industry; provided,
however, that there is no limit on investments in U.S. Government Securities,
foreign government securities or repurchase agreements covering U.S. Government
Securities.
ILLIQUID SECURITIES. Each of the Funds limits its purchase of illiquid
securities. No Fund may acquire securities or invest in repurchase agreements
with respect to any securities if, as a result,
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<PAGE>
more than 15% of the Fund's net assets taken at current value would be invested
in securities which are not readily marketable, including securities that are
illiquid by virtue of legal or contractual restrictions on the sale of such
securities.
BORROWING AND LENDING. As a fundamental policy, each Fund may borrow money for
temporary or emergency purposes, including the meeting of redemption requests,
but not in excess of 33 1/3% of the value of the Fund's assets as computed
immediately after the borrowing. Borrowing for other than temporary or
emergency purposes or meeting redemption requests is limited to 5% of the value
of each Fund's total assets. Where a Fund establishes a segregated account to
limit the amount of leveraging of the Fund with respect to certain investment
techniques, the Fund does not treat those techniques as involving borrowings.
See "Investments Involving Leverage" in the Appendix. As a fundamental policy,
no Fund may make any loans except for loans of portfolio securities, through the
use of repurchase agreements, and through the purchase of debt securities that
are otherwise permitted investments for the Fund. No Fund will lend portfolio
securities in excess of 33 1/3% of the value of the Fund's total assets.
MARGIN AND SHORT SALES. Each Fund may purchase securities on margin and make
short sales of securities. As a borrowing, the Fund's purchase of securities on
margin is subject to the limitations on and risks involved with borrowing.
Although permitted to do so, the Funds have no current intention of employing
either of these investment techniques in any material amount. The Funds may,
however, enter into short sales against the box. See "Short Sales" in the
Appendix.
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS
Although each Fund (other than ValuGrowth Stock Fund) may invest only in
investment-grade fixed income securities, an investment in a Fund is subject to
risk even if all fixed income securities in the Fund's portfolio are paid in
full at maturity. All fixed income securities, including U.S. Government
Securities, can change in value when there is a change in interest rates, the
issuer's actual or perceived creditworthiness, or the issuer's ability to meet
its obligations.
The market value of the interest-bearing debt securities held by the Funds will
be affected by changes in interest rates. There is normally an inverse
relationship between the market value of securities sensitive to prevailing
interest rates and actual changes in interest rates. In other words, a decrease
in interest rates produces an increase in market value, while an increase in
interest rates produces a decrease in market value. Moreover, the longer the
remaining maturity of a security, the greater will be the effect of interest
rate changes on the market value of that security. Changes in the ability of an
issuer to make payments of interest and principal and in the market's perception
of an issuer's creditworthiness will also affect the market value of the debt
securities of that issuer. The possibility exists that the ability of any
issuer to pay, when due, the principal of and interest on its debt securities
may be materially impaired.
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RATING MATTERS
The Funds' investments are subject to "credit risk" relating to the financial
condition of the issuers of the securities that each Fund holds. To limit
credit risk, each Fund (other than ValuGrowth Stock Fund) may only purchase
securities that are rated in the four highest long-term rating categories
assigned by a nationally recognized statistical rating organization ("NRSRO").
In addition, Small Company Stock Fund may only purchase securities that are
rated in the three highest long-term rating categories assigned by an NRSRO.
For example, the four highest rating categories for corporate bonds are Aaa, Aa,
A and Baa in the case of Moody's Investors Service ("Moody's") and AAA, AA, A
and BBB in the case of Standard & Poor's ("S&P") and Fitch Investors Services,
L.P. ("Fitch"). Fixed income securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa have speculative characteristics. Short-term debt,
including commercial paper, rated in the two highest categories of an NRSRO -
Prime-1 and Prime-2 in the case of Moody's, A and B in the case of S&P and F-1+
and F-1 in the case of Fitch - have the strongest ability for timely debt
repayment. A description of the rating categories of various NRSROs is
contained in the SAI.
The Funds also may purchase unrated securities if the Adviser determines the
security to be of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not be as actively traded as rated securities.
Each Fund may retain a security whose rating has been lowered below the Fund's
lowest permissible rating category (or that are unrated and determined by the
Adviser to be of comparable quality to securities whose rating has been lowered
below the Fund's lowest permissible rating category) if the Adviser determines
that retaining the security is in the best interests of the Fund. Because a
downgrade often results in a reduction in the market price of the security, sale
of a downgraded security may result in a loss.
VARIABLE AND FLOATING RATE SECURITIES
The securities in which the Funds invest (including mortgage-related securities)
may have variable or floating rates of interest. These securities pay interest
at rates that are adjusted periodically according to a specified formula,
usually with reference to some interest rate index or market interest rate (the
"underlying index"). The interest paid on these securities is a function
primarily of the underlying index upon which the interest rate adjustments are
based. Such adjustments minimize changes in the market value of the obligation
and, accordingly, enhance the ability of the Fund to maintain a stable net asset
value. Similar to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes in market interest
rates or changes in the issuer's creditworthiness. The rate of interest on
securities purchased by a Fund may be tied to Treasury or other government
securities or indices on those securities as well as any other rate of interest
or index. Certain variable rate securities (including mortgage-related
securities) pay interest at a rate that varies inversely to prevailing short-
term interest rates (sometimes referred to as inverse floaters). For instance,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. During times when short-term interest rates are
relatively low as compared to long-term interest rates a Fund may attempt to
enhance its yield by purchasing inverse floaters. Certain inverse
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floaters may have an interest rate reset mechanism that multiplies the effects
of changes in the underlying index. This form of leverage may have the effect
of increasing the volatility of the security's market value while increasing the
security's, and thus the Fund's, yield. Total Return Bond Fund limits its
investment in variable and floating rate securities to 5% of its assets.
There may not be an active secondary market for certain floating or variable
rate instruments (particularly inverse floaters and similar instruments) which
could make it difficult for a Fund to dispose of the instrument during periods
that the Fund is not entitled to exercise any demand rights (such as puts) it
may have. A Fund could, for this or other reasons, suffer a loss with respect
to an instrument. The Adviser monitors the liquidity of each Fund's investment
in variable and floating rate instruments, but there can be no guarantee that an
active secondary market will exist.
TEMPORARY DEFENSIVE POSITION
When business or financial conditions warrant, each Fund may assume a temporary
defensive position and invest all or any portion of its assets in cash or in
cash equivalents, including (i) short-term U.S. Government Securities, (ii)
prime quality short-term instruments of U.S. depository institutions, (iii)
prime quality commercial paper, (iv) repurchase agreements covering any of the
securities in which the Fund may invest directly and (v) to the extent permitted
by the 1940 Act, shares of money market mutual funds. Prime quality instruments
are those rated in the two highest rating categories assigned by an NRSRO.
During periods when and to the extent that a Fund has assumed a temporary
defensive position, it may not be pursuing its investment objective. The Funds
may also invest in these securities or hold cash pending investment in other
securities.
MANAGEMENT OF THE FUNDS
The business of the Trust is managed under the direction of the Board. The
Board formulates the general policies of the Funds and generally meets quarterly
to review the results of the Funds, monitor investment activities and practices
and discuss other matters affecting the Funds and the Trust. The SAI contains
general background information about the trustees and officers of the Trust.
INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT
The Adviser serves as investment adviser of each Fund pursuant to investment
advisory agreements between Norwest and the Trust. Subject to the general
supervision of the Board, the Adviser makes investment decisions for each Fund
and continuously reviews, supervises and administers each Fund's investment
program. The Adviser is a part of Norwest, which is a subsidiary of Norwest
Corporation, a multi-bank holding company incorporated under the laws of
Delaware in 1929. As of December 31, 1995, Norwest Corporation was the 11th
largest bank
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holding company in the United States in terms of assets. Norwest became a
subsidiary of Norwest Corporation in 1929 and, as of December 31, 1995, the
Adviser managed or provided investment advice with respect to assets totaling
approximately $23 billion.
For its services under its investment advisory agreements, the Adviser receives
from the Trust, with respect to each Fund, an advisory fee based on the average
daily net assets of the respective Fund at the following annual rates:
Intermediate Bond Fund, 0.60%; Income Equity Fund, 0.80%; ValuGrowth Stock Fund,
0.80%; and Small Company Stock Fund, 0.80%. Advisory fees are accrued daily and
paid monthly.
CRESTONE CAPITAL MANAGEMENT, INC.
To assist Norwest in carrying out its obligations under the investment advisory
agreement with respect to Small Company Stock Fund, Norwest has entered into an
investment subadvisory agreement among the Trust, Norwest and Crestone.
Crestone, which is located at 7720 East Belleview Avenue, Suite 220, Englewood
Colorado 80111, is a subsidiary of Norwest and is registered with the SEC as an
investment adviser. Crestone provides investment advice regarding companies
with small capitalization to various clients, including institutional investors.
As of December 31, 1995, Crestone managed assets with a value of approximately
$300 million.
Pursuant to the investment subadvisory agreement, Crestone makes investment
decisions for Small Company Stock Fund and continuously reviews, supervises and
administers the Fund's investment program with respect to that portion, if any,
of the Fund's portfolio that Norwest believes should be invested using Crestone
as investment subadviser. Currently, Crestone manages the entire portfolio of
the Fund and has since the Fund's inception. The Adviser supervises the
performance of Crestone, including Crestone's adherence to the Fund's investment
objective and policies and pays Crestone a fee for its investment subadvisory
services.
PORTFOLIO MANAGERS
Many persons on the advisory staff of each of the Adviser and Crestone
contribute to the investment advisory services provided to each Fund, as
applicable. The following persons, however, are primarily responsible for the
day to day management of the Funds' investment portfolios and have been since
inception of the Funds:
INTERMEDIATE BOND FUND - Ms. Marjorie H. Grace. Ms. Grace has been a
Vice President of Norwest since 1992, has served as a portfolio
manager for the Fund since January 1996; a portfolio manager for other
funds at Norwest since 1992; an Institutional Salesperson with Norwest
Investment Services, Inc. from 1991-1992; a portfolio manager with
United Bank of Colorado from 1989-1991; and Vice President and
portfolio manager with Colombia Savings and Loan from 1987-1989.
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INCOME EQUITY FUND - Mr. David L. Roberts. Mr. Roberts, a Senior Vice
President of Norwest since 1991, has been associated with Norwest for
22 years in various investment related capacities.
VALUGROWTH STOCK FUND - Mr. David S. Lunt, CFA. Mr. Lunt has been a
Vice President of Norwest or its affiliates since 1992. Prior
thereto, Mr. Lunt served as a security analyst and portfolio manager
for First Tier Bank.
SMALL COMPANY STOCK FUND - Mr. Kirk McCown, CFA. Mr. McCown is the founder,
President and a Director of Crestone, which was incorporated in 1990. Prior to
1990, Mr. McCown was Senior Vice President of Reich & Tang, L.P.
MANAGEMENT AND DISTRIBUTION SERVICES
Subject to the supervision of the Board, Forum Financial Services, Inc.
("Forum") supervises the overall management of the Trust (other than portfolio
management), including the Trust's receipt of services for which the Trust is
obligated to pay, and provides the Trust with general office facilities pursuant
to a management agreement with the Trust. Forum provides persons satisfactory
to the Board to serve as officers of the Trust. As of the date of this
Prospectus, Forum acted as manager and distributor of registered investment
companies and collective investment funds with assets of approximately $15.5
billion. Forum, whose principal business address is Two Portland Square,
Portland, Maine, is a registered broker-dealer and investment adviser and is a
member of the National Association of Securities Dealers, Inc.
For its management services and facilities, Forum receives, with respect to each
Fund, a fee at an annual rate of 0.20% of the average daily net assets of the
Fund. These fees are accrued daily and paid monthly. Pursuant to a separate
distribution agreement with the Trust, Forum acts as the agent of the Trust in
connection with the offering of Shares of the Funds. Forum receives no payments
for its services pursuant to its distribution agreement. In addition, none of
the Funds has adopted a distribution plan and, accordingly, no Fund currently
incurs Rule 12b-1 fees.
SHAREHOLDER SERVICES AND CUSTODY
Norwest serves as transfer agent and dividend disbursing agent for the Trust (in
this capacity, the "Transfer Agent"). The Transfer Agent maintains an account
for each shareholder of the Trust, performs other transfer agency and
shareholder service functions, and acts as dividend disbursing agent for the
Trust. Norwest also serves as the Trust's custodian and may appoint certain
subcustodians to custody the foreign securities and other assets held in foreign
countries of those Funds that invest in foreign securities. For these
services, Norwest is compensated at an aggregate annual rate of up to 0.10% of
each Fund's average daily net assets.
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EXPENSES OF THE FUNDS
Each Fund is obligated to pay for all of its expenses. These expenses include:
interest charges; taxes; brokerage fees and commissions; insurance premiums;
applicable fees and expenses under the Trust's contracts with the Advisers,
Forum, the Transfer Agent and any custodian; fees of pricing, interest,
dividend, credit and other reporting services; costs of membership in trade
associations; auditing, legal and compliance expenses; costs of preparing and
printing the Trust's prospectuses, statements of additional information, proxy
materials, and shareholder reports and delivering them to existing Contract
owners; compensation of certain of the Trust's trustees, officers and employees
and other personnel performing services for the Trust; and registration fees and
related expenses.
Each Fund's expenses comprise Trust expenses attributable to the Fund, which are
allocated to the Fund, and expenses not attributable to the Fund, which are
allocated among the Fund and all other portfolios of the Trust in proportion to
their average net assets. The Advisers, Forum and the Transfer Agent may each
elect to waive all or a portion of their fees for any or all Funds. Any such
waivers will have the effect of increasing a Fund's yield and total return for
the period during which the waiver was in effect. No fee waivers may be
recouped at a later date. Neither the fees payable to the Adviser, Forum or the
Transfer Agent, nor the expenses of the Funds, are fixed or specified under the
terms of the Contracts. Subject to any necessary approvals, these fees may be
increased or decreased. For this or other reasons, each Fund's expenses may
increase or decrease from year to year.
PURCHASES AND REDEMPTIONS OF SHARES
The Trust currently offers its Shares only to Insurance Companies. It is
possible at some later date that Shares of the Trust may be offered to other
persons consistent with the use of the Trust as an investment vehicle for
variable insurance products or to qualified pension or retirement plans.
Shares of the Funds currently are sold to Separate Accounts of Fortis Benefits
Insurance Company ("Fortis") to fund variable annuity contracts. In the future,
Shares may be sold to Separate Accounts of Fortis to fund variable life
insurance policies and to other Insurance Companies that are not affiliated with
Fortis. The Trust currently does not foresee any disadvantages to Contract
owners arising from offering of the Trust's shares to separate accounts of other
Insurance Companies or to Separate Accounts funding both variable life insurance
policies and variable annuity contracts. It is possible however, that the
interests of owners of various Contracts participating in the Trust might at
some time be in conflict. The Board and the Insurance Companies whose Separate
Accounts invest in the Trust, in accordance with any procedures that may be
agreed to by the Trust and the Insurance Companies, will monitor events in order
to identify any material irreconcilable conflicts between the interests of all
Contract owners participating in Separate Accounts utilizing the Trust, and to
determine what action, if any, should be taken in response thereto. Material
irreconcilable conflicts could result from, for example, (1) changes in state
insurance laws, (2) changes in Federal income and other tax laws,
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(3) changes in the investment management of any of the Funds, or (4) differences
in voting instructions given by Contract owners. Actions taken in response to a
material irreconcilable conflict could include the sale of Trust Shares by one
or more of the Separate Accounts investing in the Trust, which could have
adverse consequences to other shareholders. In addition, the Board, consistent
with the terms under which the Insurance Companies participate in the Trust, may
refuse to sell Shares of any Fund to any Separate Account or may suspend or
terminate the offering of Shares of any Fund, if such action is required by law
or regulatory authority or is in the best interests of the shareholders of the
Fund. The costs of resolving any such material irreconcilable conflicts will
not be borne by Contract owners.
Shares of each Fund may be purchased or redeemed by shareholders on each day
when the Trust values its assets. Such purchases and redemptions for the
Separate Accounts are effected at the net asset value per share for each Fund
determined as of that same date. Shares of a Fund are sold and redeemed at
their respective net asset values (without a sales charge) next computed after
instructions from a Contract owner are received by an Insurance Company whose
Separate Account invests in the Trust. Other procedures concerning the purchase
and redemption of shares will be determined by agreement between the
shareholders and the Trust or its Transfer Agent.
Normally, redemption proceeds are paid to a Fund's record shareholder
immediately following, but in no event later than seven days following,
acceptance of a redemption order. The right of redemption may not be suspended
nor the payment dates postponed for more than seven days except when the New
York Stock Exchange is closed (or when trading thereon is restricted) for any
reason other than its customary weekend or holiday closings or under any
emergency or other circumstances as determined by the SEC. Proceeds of
redemptions normally are paid in cash. However, payments may be made wholly or
partially in portfolio securities if the Board determines that payment in cash
would be detrimental to the best interests of the Fund. The Trust may at its
option effect a redemption in portfolio securities if the particular shareholder
is redeeming more than $250,000 or 1% of the Fund's total net assets, whichever
is less, during any 90-day period.
Contract owners do not deal directly with the Trust with respect to the purchase
or redemption of Shares, and should refer to the Prospectus for their Separate
Account for information on allocation of premiums and on transfers of account
value among divisions of the pertinent Insurance Company Separate Accounts that
invest in each Fund.
Shares of the Funds are continuously sold and redeemed at a price equal to their
net asset value at 4:00 p.m., Eastern Time, on all weekdays except New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas ("Fund Business Day") without charge. The Trust
determines the net asset value per Share of each Fund on each Fund Business Day
by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities) by the number of Shares
outstanding at the time the determination is made.
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Securities for which market quotations are readily available are valued at
current market value, or, in the absence of readily available market quotations,
at fair value as determined by the Board. Current market value of securities
may be provided by independent pricing services of the type commonly used in the
investment company industry. Debt securities may be valued at prices supplied
by pricing services based on broker or dealer supplied valuations or matrix
pricing, a method of valuing securities by reference to the value of other
securities with similar characteristics, such as rating, interest rate and
maturity, without regard to sale or bid prices, when this pricing method is
believed to accurately reflect the fair market value of these securities.
DIVIDENDS, DISTRIBUTIONS, AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends of net investment income are declared and paid annually by the Funds.
Each Fund's net capital gain, if any, is distributed at least annually. All
dividends and distributions of each Fund are automatically reinvested in
additional Shares of the Fund at the Fund's net asset value as of the payment
date for the dividend unless the shareholder elects to have all dividends and
distributions paid in cash.
TAX MATTERS
Each Fund is treated as a separate corporation for Federal income tax purposes
and intends to qualify for each fiscal year as a "regulated investment company"
under the Code, as amended. In addition, each Fund intends to distribute all of
its net investment income and capital gain each year. Accordingly, the Funds do
not expect to be liable for Federal income or excise taxes on their net
investment income and capital gain.
Future regulations or rulings addressing the circumstances in which a Contract
owner's control of the investments of a Separate Account may cause the Contract
owner, rather than the Insurance Company, to be treated as the owner of the
assets held by the Separate Account. If the Contract owner is considered the
owner of the securities underlying the Separate Account, income and gains
produced by those securities would be included currently in the Contract owner's
gross income. It is not known what standard would be set forth in any
regulations or rulings. Any standard may apply only prospectively, although
retroactive application is possible.
In the event that rules or regulations are adopted, there can be no assurance
that the Funds will be able to operate as currently described herein, or that
the Trust will not have to change any Fund's investment objective or investment
policies. While each Fund's investment objective is fundamental and may be
changed only by a vote of a majority of the Fund's outstanding shares, the Board
has reserved the right in its sole discretion to modify the investment policies
and investment limitations of each Fund that are not fundamental policies as
they deem necessary or appropriate to minimize the risk of any such prospective
rules and regulations from causing the Contract owners to be considered the
owners of the shares of the Funds.
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OTHER INFORMATION
FUND PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield or total
return. Both types are based on historical results and are not intended to
indicate future performance. The Funds' advertisements may reference ratings
and rankings among similar funds by independent evaluators such as Morningstar,
Inc. and Lipper Analytical Services, Inc. In addition, the performance of a
Fund may be compared to recognized indices of market performance. The
comparative material found in the Funds' advertisements, sales literature or
reports to shareholders may contain performance ratings. This material is not
to be considered representative or indicative of future performance.
YIELD
A Fund's yield is a way of showing the rate of income earned by the Fund as a
percentage of the Fund's Share price. Yield is calculated by dividing the net
investment income of the Fund for the stated period by the average number of
Shares entitled to receive dividends and expressing the result as an annualized
percentage rate based on the Fund's Share price at the end of the period. Each
Fund may also quote a compounded annualized yield which assumes the reinvestment
of dividends and distributions paid by the Fund, and therefore will be somewhat
higher than the annualized yield for the same period.
TOTAL RETURN
Total Return refers to the average annual compounded rates of return over some
representative period that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment,
after giving effect to the reinvestment of all dividends and distributions and
expenses of the Fund during the period. Because average annual returns tend to
smooth out variations in a Fund's returns, shareholders should recognize that
they are not the same as actual year-by-year results.
VARIABLE CONTRACT CHARGES
Performance figures of the Funds will not reflect charges made pursuant to the
terms of the Contracts funded by Separate Accounts that invest in the Fund's
Shares. Fund performance information may be presented in conjunction with
performance information relating to the Contracts. Purchasers of Contracts
issued by Insurance Companies should therefore recognize that the yield and
total return on the Separate Account assets relating to their Contract which is
invested in Shares of any of the Funds would be lower than the yield and total
return of the Fund for the same period.
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BANKING LAW MATTERS
Federal banking laws and regulations generally permit a bank or bank affiliate
to act as investment adviser, transfer agent, or custodian to an investment
company. Forum believes that the Adviser and any other bank or bank affiliate
that may perform these or similar services may perform the services described in
this Prospectus for the Trust and its shareholders without violating applicable
Federal banking laws or regulations.
Federal or state statutes or regulations and judicial or administrative
decisions or interpretations relating to the activities of banks and their
affiliates, however, could prevent a bank or bank affiliate from continuing to
perform all or a part of the activities contemplated by this Prospectus. In
this event, changes in the operation of the Trust might occur. It is not
expected that shareholders would suffer any material adverse financial
consequences as a result of any of these occurrences.
PORTFOLIO TRANSACTIONS
Each of the Advisers places orders for the purchase and sale of assets it
manages with brokers and dealers selected by and in the discretion of the
Adviser. The Advisers seek "best execution" of portfolio transactions, but a
Fund may pay higher than the lowest available commission rates when an Adviser
believes it is reasonable to do so in light of the value of the brokerage and
research services provided by the broker effecting the transaction.
Subject to the Funds' policy of obtaining the best price consistent with quality
of execution of transactions, the Advisers may employ Norwest Investment
Services, Inc. and any other broker-dealer affiliates of the Adviser
(collectively "Affiliated Brokers") to effect brokerage transactions for the
Funds. A Fund's payment of commissions to an Affiliated Broker is subject to
procedures adopted by the Board to ensure that the commissions will not exceed
the usual and customary broker's commissions charged by unaffiliated brokers.
No specific portion of a Fund's brokerage will be directed to Affiliated Brokers
and in no event will a broker affiliated with the Adviser directing the
transaction receive brokerage transactions in recognition of research services
provided to the Adviser.
The Adviser, and with respect to Small Company Sock Fund, Crestone, anticipate
that the annual turnover rate in each Fund will be less than 100%. An annual
turnover rate of 100% would occur if all of the securities in a Fund were
replaced once in a period of one year. With respect to Income Equity Fund,
ValuGrowth Stock Fund and Small Company Stock Fund, a higher portfolio turnover
rate may result in increased brokerage costs to the Fund.
SHAREHOLDER VOTING AND OTHER RIGHTS
Each Share of a Fund has equal dividend, distribution, liquidation and voting
rights, and fractional Shares have those rights proportionately. Delaware law
does not require a registered investment company to hold annual meetings of
shareholders, and it is anticipated that
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shareholder meetings will be held only when specifically required by Federal or
Delaware law. Shareholders have available certain procedures for the removal of
Trustees.
Shareholders of the Trust are given certain voting rights. Each Share of each
Fund will be given one vote, unless a different allocation of voting rights is
required under applicable law for an open-end investment company that is an
investment medium for variable insurance products. Shareholders of the Funds
will vote Shares in the Separate Accounts as required by law and interpretations
thereof, as may be amended or changed from time to time. Under current law and
interpretations thereof, an Insurance Company is generally required to request
voting instructions from Contract owners and to vote Shares in the Separate
Account in proportion with the voting instructions received. Under certain
circumstances, however, an Insurance Company may disregard voting instructions
received from Contract owners. Contract owner voting rights are described in
the Prospectus for the Contracts.
There are no conversion or preemptive rights in connection with Shares of the
Trust. All Shares when issued in accordance with the terms of their offering
will be fully paid and nonassessable by the Trust. Shares are redeemable at net
asset value. Upon redeeming Shares of the Fund, a record shareholder will
receive the portion of the Fund's net assets represented by the redeemed Shares.
As of May 1, 1996, Shares of the Funds were sold only to Separate Accounts of
Fortis. As of that date, Fortis owned substantially all of the outstanding
shares of Intermediate Bond Fund, ValuGrowth Stock Fund and Small Company Stock
Fund. Prior to the offering of Income Equity Fund's Shares, Forum will be that
Fund's sole shareholder and, therefore, a controlling person of that Fund.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR
TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
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APPENDIX A - INVESTMENTS, INVESTMENT STRATEGIES,
AND RISK CONSIDERATIONS
This Appendix describes in detail the investments, investment strategies and
risk considerations set forth in the Prospectus under the heading "Investment
Objectives, Policies, and Risk Considerations." The Funds that may utilize the
particular investment or investment strategy are identified parenthetically.
COMMON STOCK AND PREFERRED STOCK (INCOME EQUITY FUND, VALUGROWTH STOCK FUND AND
SMALL COMPANY STOCK FUND). Common stockholders are the owners of the company
issuing the stock and, accordingly, vote on various corporate governance matters
such as mergers. They are not creditors of the company, but rather, upon
liquidation of the company are entitled to their pro rata share of the company's
assets after creditors (including fixed income security holders) and, if
applicable, preferred stockholders are paid. Preferred stock is a class of
stock having a preference over common stock as to dividends and, in the
alternative, as to the recovery of investment. A preferred stockholder is a
shareholder in the company and not a creditor of the company as is a holder of
the company's fixed income securities. In addition, holders of preferred stock
have certain preferred voting rights in various corporate matters. Dividends
paid to common and preferred stockholders are distributions of the earnings of
the company and not interest payments, which are expenses of the company.
Equity securities owned by a Fund may be traded in the over-the-counter market
or on a regional securities exchange and may not be traded every day or in the
volume typical of securities traded on a national securities exchange. As a
result, disposition by the Fund of a portfolio security to meet redemptions by
shareholders or otherwise may require the Fund to sell these securities at a
discount from market prices, to sell during periods when disposition is not
desirable, or to make many small sales over a lengthy period of time. The
market value of common and preferred stock is often based upon investor
perceptions and not necessarily the book value or other objective measure of a
company's worth. The Funds may invest in warrants, which are options to
purchase an equity security from the issuer at a specified price (usually for a
premium over the applicable market value of the underlying equity security at
the time of the warrant's issuance) and usually during a specified period of
time.
CONVERTIBLE SECURITIES (ALL FUNDS). Convertible securities, including
convertible debt and convertible preferred stock, are fixed income securities
which may be converted at a stated price within a specific amount of time into a
specified number of shares of common stock. These securities are usually senior
to common stock in a corporation's capital structure, but usually are
subordinated to non-convertible debt securities. In general, the value of a
convertible security is the higher of its investment value (its value as a fixed
income security) and its conversion value (the value of the underlying shares of
common stock if the security is converted). The investment value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. The conversion value of a
convertible security is influenced by the value of the underlying common stock.
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Small Company Stock Fund and Intermediate Bond Fund may invest only in
convertible debt in one of the three highest rating categories assigned by an
NRSRO. ValuGrowth Stock Fund may invest in convertible debt of any grade. The
rating categories for convertible debt range from Aaa to C, in the case of
Moody's Investors Service ("Moody's"), and from AAA to D, in the case of
Standard & Poor's ("S&P"), and for preferred stock range from aaa to c, in the
case of Moody's, and from AAA to D, in the case of S&P. Securities in the
lowest rating categories are characterized by Moody's as having extremely poor
prospects of ever attaining any real investment standing and by S&P as being in
default, in the case of debt, and non-paying with debt in default, in the case
of preferred stock. Unrated securities may not be as actively traded as rated
securities. For a further description of the ratings used by Moody's, S&P and
certain other NRSROs, see Appendix A in the SAI.
FOREIGN SECURITIES (ALL FUNDS). Investment in the securities of foreign issuers
may involve risks in addition to those normally associated with investments in
the securities of U.S. issuers. All foreign investments are subject to risks of
foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital and changes in foreign
governmental attitudes towards private investment possibly leading to
nationalization, increased taxation or confiscation of a Fund's assets.
Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to a
Fund's shareholders; commission rates payable on foreign transactions are
generally higher than in the United States; foreign accounting, auditing and
financial reporting standards differ from those in the United States and,
accordingly less information about foreign companies may be available than is
generally available about issuers of comparable securities in the United States;
and foreign securities may trade less frequently and with lower volume and may
exhibit greater price volatility than United States securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by a Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the United States, many of which may be difficult if not impossible to predict.
Income from foreign securities will be received and realized in foreign
currencies, and a Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar occurring after a Fund's income has been earned and
computed in U.S. dollars may require the Fund to liquidate portfolio securities
to acquire sufficient U.S. dollars to make a distribution. Similarly, if the
exchange rate declines between the time a Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the Fund may be required to liquidate
additional foreign securities to purchase the U.S. dollars required to meet such
expenses.
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ADRS AND EDRS (INCOME EQUITY FUND, VALUGROWTH STOCK FUND AND SMALL COMPANY STOCK
FUND). A Fund may invest in sponsored and unsponsored American Depository
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depository of an unsponsored ADR may be under no
obligation to distribute shareholder communications received from the foreign
issuer or to pass through voting rights. Income Equity Fund also may invest in
European Depository Receipts ("EDRs"), receipts issued by a European financial
institution evidencing an arrangement similar to that of ADRs, and in other
similar instruments representing securities of foreign companies. EDRs, in
bearer form, are designed for use in European securities markets.
SHORT-TERM CORPORATE DEBT SECURITIES (ALL FUNDS). As described under "Temporary
Defensive Position" in the Prospectus, the Funds may invest in commercial paper,
which consists of unsecured promissory notes issued by corporations. The Funds
also may invest in commercial paper for other than temporary or defensive
purposes. Commercial paper is issued by companies to finance their affiliates'
current obligations. The corporate debt securities in which these Funds may
invest include short-term corporate bonds and notes. The Funds also may
purchase variable and floating rate demand notes of corporations, which are
unsecured obligations redeemable upon not more than 30 days' notice. These
obligations include master demand notes that permit investment of fluctuating
amounts at varying rates of interest pursuant to direct arrangement with the
issuer of the instrument. Although a Fund generally would not be able to resell
a master demand note to a third party, a Fund is able to demand payment from the
issuer at any time. The Adviser continuously monitors the financial condition
of the issuer to determine the issuer's likely ability to make payment on
demand. The issuer of these obligations often has the right, after a given
period, to prepay the outstanding principal amount of the obligations upon a
specified number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these obligations.
To the extent a demand note does not have a seven day or shorter demand feature
and there is no readily available market for the obligation, it is treated as an
illiquid security.
FINANCIAL INSTITUTION OBLIGATIONS (ALL FUNDS). The Funds may invest in
obligations of financial institutions, including negotiable certificates of
deposit, bankers' acceptances and time deposits of U.S. banks (including savings
banks and savings associations), foreign branches of U.S. banks, foreign banks
and their non-U.S. branches (Eurodollars), U.S. branches and agencies of foreign
banks (Yankee dollars), and wholly-owned banking-related subsidiaries of foreign
banks.
U.S. GOVERNMENT SECURITIES (ALL FUNDS). As used in this Prospectus, the term
U.S. Government Securities means obligations issued or guaranteed as to
principal and interest by the United States Government, its agencies or
instrumentalities. The U.S. Government Securities in which a Fund may invest
include U.S. Treasury Securities and obligations issued or guaranteed by U.S.
Government agencies and instrumentalities and backed by the full faith and
credit of the
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U.S. Government, such as those guaranteed by the Small Business Administration
or issued by the Government National Mortgage Association. In addition, the
U.S. Government Securities in which the Funds may invest include securities
supported primarily or solely by the creditworthiness of the issuer, such as
securities of the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation and the Tennessee Valley Authority. There is no guarantee
that the U.S. Government will support securities not backed by its full faith
and credit. Accordingly, although these securities have historically involved
little risk of loss of principal if held to maturity, they may involve more risk
than securities backed by the U.S. Government's full faith and credit.
ZERO COUPON SECURITIES (INTERMEDIATE BOND FUND). Intermediate Bond Fund may
invest in separately traded principal and interest components of securities
issued or guaranteed by the U.S. Treasury. These components are traded
independently under the Treasury's Separate Trading of Registered Interest and
Principal of Securities ("STRIPS") program or as Coupons Under Book Entry
Safekeeping ("CUBES"). The Fund also may invest in other types of related zero
coupon securities. Zero coupon securities are sold at original issue discount
and pay no interest to holders prior to maturity, but a Fund holding a zero-
coupon security must include a portion of the original issue discount of the
security as income. Because of this, zero coupon securities may be subject to
greater fluctuation of market value than the other securities in which the Fund
may invest. The Fund distributes all of its net investment income, and may have
to sell portfolio securities to distribute imputed income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
ILLIQUID SECURITIES AND RESTRICTED SECURITIES (ALL FUNDS). No Fund may invest
more than 15% of its net assets in illiquid securities. Illiquid securities are
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements not entitling
the holder to payment within seven days and restricted securities. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities, and, to the extent it may invest in restricted securities, a Fund
might also have to register those securities in order to dispose of them,
resulting in expense and delay. A Fund might not be able to dispose of
restricted or other securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions. There can be no assurance
that a liquid market will exist for any security at any particular time.
A domestic institutional market has developed for certain securities that are
not registered under the Securities Act of 1933 (the "1933 Act"), including
repurchase agreements and foreign securities. Institutional investors depend on
an efficient institutional market in which the unregistered security can be
readily resold or on the issuer's ability to honor a demand for repayment of the
unregistered security. A security's contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of the security. If such securities are eligible for purchase by
institutional buyers in accordance with Rule 144A under the 1933 Act, the
investment advisers may determine that such securities are not illiquid
securities under guidelines adopted by the Board. These guidelines take into
account trading activity in the securities and the availability of reliable
pricing information, among other factors.
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If there is a lack of trading interest in a particular Rule 144A security, a
Fund's holdings of that security may be illiquid.
BORROWING (ALL FUNDS). Each Fund may borrow money for temporary or emergency
purposes, including the meeting of redemption requests, in amounts up to 33 1/3%
of the Fund's net assets. Borrowing involves special risk considerations.
Interest costs on borrowings may fluctuate with changing market rates of
interest and may partially offset or exceed the return earned on borrowed funds
(or on the assets that were retained rather than sold to meet the needs for
which funds were borrowed). Under adverse market conditions, a Fund might have
to sell portfolio securities to meet interest or principal payments at a time
when investment considerations would not favor such sales. No Fund, other than
Intermediate Bond Fund, may purchase securities for investment while any
borrowing equaling 5% or more of the Fund's total assets is outstanding or
borrow for purposes other than meeting redemptions in an amount exceeding 5% of
the value of the Fund's total assets. A Fund's use of borrowed proceeds to make
investments would subject the Fund to the risks of leveraging. Reverse
repurchase agreements, short sales not against the box, and other similar
investments that involve a form of leverage have characteristics similar to
borrowings but are not considered borrowings if the Fund maintains a segregated
account, as described below; the use of these techniques in connection with a
segregated account may result in a Fund's assets being 100% leveraged. See
"Investments Involving Leverage" below.
INVESTMENTS INVOLVING LEVERAGE (ALL FUNDS). Utilization of leveraging involves
special risks and may involve speculative investment techniques. The Funds may
borrow for investment purposes, lend their securities, enter into reverse
repurchase agreements, and purchase securities on a when issued or forward
commitment basis. In addition, the Funds may may purchase securities on margin
and sell securities short (other than against the box) and Intermediate Bond
Fund may engage in dollar roll transactions. Each of these transactions
involves the use of "leverage" when cash made available to the Fund through the
investment technique is used to make additional portfolio investments. In
addition, the use of swap and related agreements may involve leverage. The
Funds use these investment techniques only when the Adviser believes that the
leveraging and the returns available to the Fund from investing the cash will
provide shareholders a potentially higher return.
Leverage exists when a Fund achieves the right to a return on a capital base
that exceeds the investment the Fund has made. Leverage creates the risk of
magnified capital losses which occur when losses affect an asset base, enlarged
by borrowings or the creation of liabilities, that exceeds the equity base of
the Fund. The risks of leverage include a higher volatility of the net asset
value of the Fund's shares and the relatively greater effect on the net asset
value of the shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash.
REPURCHASE AGREEMENTS, SECURITIES LENDING, REVERSE REPURCHASE AGREEMENTS, WHEN-
ISSUED SECURITIES AND FORWARD COMMITMENTS (ALL FUNDS) AND DOLLAR ROLL
TRANSACTIONS (INTERMEDIATE BOND FUND). The Funds' use of repurchase agreements,
securities lending, reverse repurchase agreements and
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forward commitments (including dollar roll transactions) entails certain risks
not associated with direct investments in securities. For instance, in the
event that bankruptcy or similar proceedings were commenced against a
counterparty while these transactions remained open or a counterparty defaulted
on its obligations, the Fund might suffer a loss. Failure by the other party to
deliver a security purchased by the Fund may result in a missed opportunity to
make an alternative investment. The Adviser monitors the creditworthiness of
counterparties to these transactions and intends to enter into these
transactions only when it believes that the counterparties present minimal
credit risks and the income to be earned from the transaction justifies the
attendant risks. Counterparty insolvency risk with respect to repurchase
agreements is reduced by favorable insolvency laws that allow a Fund, among
other things, to liquidate the collateral held in the event of the bankruptcy of
the counterparty. Those laws do not apply to securities lending and,
accordingly, securities lending involves more risk than do repurchase
agreements. As a result of entering into forward commitments and reverse
repurchase agreements, as well as lending its securities, a Fund may be exposed
to greater potential fluctuations in the value of its assets and net asset value
per share.
SECURITIES LENDING. Each Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions. Securities loans must be
callable at any time and will be continuously secured by cash or U.S.
Government Securities with a market value, determined daily, at least equal to
the value of the Fund's securities loaned, including accrued interest. A Fund
receives interest in respect of securities loans from the borrower or from
investing cash collateral. A Fund may pay fees to arrange the loans, as well as
administrative or custodial fees. Voting rights on the securities loaned may
pass with the lending. The Funds will call any security loans in order to vote
if a material issue affecting the investment is to be voted upon. No Fund will
lend portfolio securities in excess of 33 1/3% of the value of the Fund's total
assets.
REPURCHASE AGREEMENTS. Each Fund may from time to time enter into repurchase
agreements, transactions in which the Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price of a repurchase agreement reflects a market rate of interest that
is not related to the coupon rate or maturity of the purchased security. The
Trust's custodian maintains possession of the collateral underlying a repurchase
agreement, which has a market value, determined daily, at least equal to the
repurchase price, and which consists of the types of securities in which the
Fund may invest directly.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements, transactions in which the Fund sells a security and simultaneously
commits to repurchase that security from the buyer at an agreed upon price on an
agreed upon future date. The resale price in a reverse repurchase agreement
reflects a market rate of interest that is not related to the coupon rate or
maturity of the sold security. For certain demand agreements, there is no
agreed upon repurchase date and interest payments are calculated daily, often
based upon the prevailing overnight repurchase rate. Because certain of the
incidents of ownership of the security are retained by the Fund, reverse
repurchase agreements may be viewed as a form of borrowing by the Fund from the
buyer, collateralized by the security sold by the Fund. A Fund will use the
proceeds of reverse repurchase agreements to fund redemptions or to make
investments which in
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most cases either mature or have a demand feature to resell to the issuer on a
date not later than the expiration of the agreement. Interest costs on the
money received in a reverse repurchase agreement may exceed the return received
on the investments made by the Fund with those monies. Any significant
commitment of a Fund's assets to the reverse repurchase agreements will tend to
increase the volatility of the Fund's net asset value per share.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. Each Fund may purchase fixed
income securities on a "when-issued" or "forward commitment" basis. When these
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within three months after the transaction. During the period between a
commitment and settlement, no payment is made for the securities purchased and
no interest on the security accrues to the purchaser. At the time a Fund makes
a commitment to purchase securities in this manner, the Fund immediately assumes
the risk of ownership, including price fluctuation. Failure by the other party
to deliver a security purchased by a Fund may result in a loss or a missed
opportunity to make an alternative investment.
The use of when-issued transactions and forward commitments enables a Fund to
hedge against anticipated changes in interest rates and prices. If the Adviser
were to forecast incorrectly the direction of interest rate movements, however,
a Fund might be required to complete these transactions when the value of the
security is lower than the price paid by the Fund. Except for dollar roll
transactions, a Fund will not purchase securities on a when-issued or forward
commitment basis if, as a result, more than 15% of the value of the Fund's total
assets would be committed to such transactions.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Funds purchase securities on a when-issued and forward
commitment basis only with the intention of actually receiving the securities.
When-issued securities may include bonds purchased on a "when, as and if issued"
basis under which the issuance of the securities depends upon the occurrence of
a subsequent event. Commitment of a Fund's assets to the purchase of securities
on a when-issued or forward commitment basis will tend to increase the
volatility of the Fund's net asset value per share.
DOLLAR ROLL TRANSACTIONS. Intermediate Bond Fund may enter into dollar roll
transactions, which involve the sale by the Fund of U.S. Treasury securities,
GNMA certificates and other fixed income securities together with a commitment
to purchase similar, but not identical, securities at a later date from the same
party. During the roll period, no payment is made for the securities purchased
and no interest or principal payments on the security accrues to the purchaser,
but the Fund assumes the risk of ownership. The Fund is compensated for
entering into dollar roll transactions by the difference between the current
sales price and the forward price for the future purchase, as well as by the
interest earned on the cash proceeds of the initial sale. Like other when-
issued securities or firm commitment agreements, dollar roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which a Fund is committed to purchase similar
securities. In the event the buyer of securities under a dollar roll
transaction becomes insolvent, the Fund's use of the proceeds of the
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transaction may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. The Fund currently treats dollar roll transactions, whether or not
"covered" by a segregated account, as a borrowing, and therefore subject to the
restriction that the Fund may not borrow in excess of 33 1/3% of the Fund's net
assets. The Fund will engage in dollar roll transactions only with the intent
of acquiring securities for their portfolios.
SWAP AGREEMENTS (INTERMEDIATE BOND FUND). To manage its exposure to different
types of investments, Intermediate Bond Fund may enter into interest rate,
currency and mortgage (or other asset) swap agreements and may purchase and sell
interest rate "caps," "floors" and "collars." In a typical interest rate swap
agreement, one party agrees to make regular payments equal to a floating
interest rate on a specified amount (the "notional principal amount") in return
for payments equal to a fixed interest rate on the same amount for a specified
period. If a swap agreement provides for payment in different currencies, the
parties may also agree to exchange the notional principal amount. Mortgage swap
agreements are similar to interest rate swap agreements, except that the
notional principal amount is tied to a reference pool of mortgages.
In a cap or floor, one party agrees, usually in return for a fee, to make
payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed upon level; the purchaser of an interest rate
floor has the right to receive payments to the extent a specified interest rate
falls below an agreed upon level. A collar entitles the purchaser to receive
payments to the extent a specified interest rate falls outside an agreed upon
range.
Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on a Fund's performance.
Swap agreements involve risks depending upon the counterparty's creditworthiness
and ability to perform as well as a Fund's ability to terminate its swap
agreements or reduce its exposure through offsetting transactions. The Adviser
monitors the creditworthiness of counterparties to these transactions and
intends to enter into these transactions only when they believe the
counterparties present minimal credit risks and the income expected to be earned
from the transaction justifies the attendant risks.
SHORT SALES (ALL FUNDS). The Funds may make short sales of securities they own
or have the right to acquire at no added cost through conversion or exchange of
other securities they own (referred to as short sales "against the box").
Intermediate Bond Fund may make short sales of securities which it does not own
or have the right to acquire. A short sale that is not made "against the box"
is a transaction in which a Fund sells a security it does not own in
anticipation of a decline in the market price for the security. When a Fund
makes a short sale, the proceeds it receives are retained by the broker until
the Fund replaces the borrowed security. In order to deliver the security to
the buyer, a Fund must arrange through a broker to borrow the security and, in
so doing, the Fund becomes obligated to replace the security borrowed at its
market price at the time of replacement, whatever that price may be.
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MORTGAGE-BACKED SECURITIES (INTERMEDIATE BOND FUND). Mortgage-backed securities
represent an interest in a pool of mortgages originated by lenders such as
commercial banks, savings associations and mortgage bankers and brokers.
Mortgage-backed securities may be issued by governmental or government-related
entities or by non-governmental entities such as special purpose trusts created
by banks, savings associations, private mortgage insurance companies or mortgage
bankers.
Interests in mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, a partial payment of principal. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their mortgage loans, net of any fees paid to the issuer or
guarantor of the securities or a mortgage loan servicer. Additional payments to
holders of these securities are caused by prepayments resulting from the sale or
foreclosure of the underlying property or refinancing of the underlying loans.
UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a mortgage pool but may vary among
mortgage pools. For example, in addition to fixed-rate, fixed-term mortgages,
the Fund may purchase interests in pools of variable rate mortgages, growing
equity mortgages, graduated payment mortgages and other types of mortgages.
Mortgage servicers impose qualification standards for local lending institutions
which originate mortgages for the pools as well as credit standards and
underwriting criteria for individual mortgages included in the pools. In
addition, many mortgages included in pools are insured through private mortgage
insurance companies.
LIQUIDITY AND MARKETABILITY. The market for mortgage-backed securities has
expanded considerably in recent years. The size of the primary issuance market
and active participation in the secondary market by securities dealers and many
types of investors make government and government-related pass-through mortgage
pools highly liquid. The recently introduced private conventional pools of
mortgages (which are pooled by commercial banks, savings and loan institutions
and others, and have no relationship with government and government-related
entities) have also achieved broad market acceptance and consequently an active
secondary market has emerged. However, the market for private conventional
mortgage pools is smaller and less liquid than the market for government and
government-related mortgage pools.
AVERAGE LIFE AND PREPAYMENTS. The average life of pass-through pools varies
with the maturities of the underlying mortgage instruments. In addition, a
mortgage pool's terms may be shortened by unscheduled or early payments of
principal and interest on the underlying mortgages. Prepayments with respect to
securities during times of declining interest rates will tend to lower the
return of a Fund and may even result in losses to a Fund if the securities were
acquired at a premium. The occurrence of mortgage prepayments is affected by
various factors
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including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual mortgage pools vary widely, it is not possible
to accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with
other maturities or different characteristics will have varying assumptions for
average life. The assumed average life of pools of mortgages having terms of
less than 30 years is less than 12 years, but typically not less than 5 years.
YIELD CALCULATIONS. Yields on mortgage-backed securities are typically quoted
by dealers based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgages. Conversely, in periods of rising rates the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
mortgage pool. Actual prepayment experience may cause the yield to differ from
the assumed average life yield. Reinvestment of prepayments may occur at higher
or lower interest rates than the original investment, thus affecting the yield
of a Fund.
GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government
guarantor of mortgage-backed securities is the Government National Mortgage
Association ("GNMA"), a wholly-owned United States Government corporation within
the Department of Housing and Urban Development. GNMA is authorized to
guarantee, with the full faith and credit of the United States Government, the
timely payment of principal and interest on securities issued by institutions
approved by GNMA and backed by pools of Federal Housing Administration-insured
or Veterans Administration-guaranteed mortgages.
The Federal National Mortgage Association ("FNMA") is a government-sponsored
corporation owned entirely by private stockholders that is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
and pools residential mortgages from a list of approved seller-servicers. The
Federal Home Loan Mortgage Corporation ("FHLMC") is a corporate instrumentality
of the United States Government that was created by Congress in 1970 for the
purpose of increasing the availability of mortgage credit for residential
housing. Its stock is owned by the twelve Federal Home Loan Banks. FHLMC
issues Participation Certificates, which represent interests in mortgages from
FHLMC's portfolio. FNMA and FHLMC each guarantee the payment of principal and
interest on the securities they issue. Those securities, however, are not
backed by the full faith and credit of the United States Government.
PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. Mortgage-backed securities offered
by private issuers include pass-through securities comprised of pools of
conventional mortgage loans; mortgage-backed bonds which are considered to be
debt obligations of the institution issuing the bonds and which are
collateralized by mortgage loans; and privately-issued collateralized mortgage
obligations.
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Mortgage-backed securities issued by non-governmental issuers may offer a higher
rate of interest than securities issued by government issuers because of the
absence of direct or indirect government guarantees of payment. Many non-
governmental issuers or servicers of mortgage-backed securities, however,
guarantee timely payment of interest and principal on such securities. Timely
payment of interest and principal may also be supported by various forms of
insurance, including individual loan, title, pool and hazard policies. There
can be no assurance that the private issuers or insurers will be able to meet
their obligations under the relevant guarantees and insurance policies.
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate mortgage-backed
securities ("ARMS") are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. Also, most adjustable
rate securities (or the underlying mortgages) are subject to caps or floors.
"Caps" limit the maximum amount by which the interest rate paid by the borrower
may change at each reset date or over the life of the loan and, accordingly,
fluctuation in interest rates above these levels could cause such mortgage
securities to "cap out" and to behave more like long-term, fixed-rate debt
securities.
ARMS may have less risk of a decline in value during periods of rapidly rising
rates, but they may also have less potential for capital appreciation than other
debt securities of comparable maturities due to the periodic adjustment of the
interest rate on the underlying mortgages and due to the likelihood of increased
prepayments of mortgages as interest rates decline. Furthermore, during periods
of declining interest rates, income to a Fund will decrease as the coupon rate
resets along with the decline in interest rates. During periods of rising
interest rates, changes in the coupon rates of the mortgages underlying a Fund's
ARMS may lag behind changes in market interest rates. This may result in a
slightly lower value until the interest rate resets to market rates. Thus,
investors could suffer some principal loss if they sold Fund shares before the
interest rates on the underlying mortgages are adjusted to reflect current
market rates. During periods of extreme fluctuations in interest rates, the
Fund's net asset value will fluctuate as well. In addition, since ARMS in the
Fund's portfolio will generally have "Caps" that limit the maximum amount by
which the interest rate paid by the borrower may change at each reset date or
over the life of the loan, fluctuation in interest rates above these levels
could cause such mortgage securities to "cap out" and to behave more like long-
term, fixed-rate debt securities.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized Mortgage Obligations
("CMOs") are multi-class bonds backed by a pool of mortgage pass-through
securities or mortgage loans. CMOs are sometimes known as real estate mortgage
investment conduits ("Remics"). CMOs are collateralized by mortgages or
mortgage pass-through securities issued by GNMA, FHLMC or FNMA or by pools of
conventional mortgages ("Mortgage Assets"). CMOs are debt obligations that are
collateralized by Mortgage Assets. CMOs may be privately issued or U.S.
Government Securities. Payments of principal and interest on the Mortgage
Assets are passed through to the
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holders of the CMOs on the same schedule as they are received, although, certain
classes (often referred to as tranches) of CMOs have priority over other classes
with respect to the receipt of principal payments. "Multi-class mortgage pass-
through securities" are interests in trusts that hold Mortgage Assets and that
have multiple classes similar to those of CMOs. Unless the context indicates
otherwise, references to CMOs include multi-class mortgage pass-through
securities. Payments of principal of and interest on the underlying Mortgage
Assets (and in the case of CMOs any reinvestment income thereon) provide the
funds to pay debt service on the CMOs or to make scheduled distributions on the
multi-class mortgage pass-through securities. Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. Planned amortization class mortgage-based
securities ("PAC Bonds") are a form of parallel pay CMO. PAC Bonds are designed
to provide relatively predictable payments of principal provided that, among
other things, the actual prepayment experience on the underlying mortgage loans
falls within a contemplated range. If the actual prepayment experience on the
underlying mortgage loans is at a rate faster or slower than the contemplated
range, or if deviations from other assumptions occur, principal payments on a
PAC Bond may be greater or smaller than predicted. The magnitude of the
contemplated range varies from one PAC Bond to another; a narrower range
increases the risk that prepayments will be greater or smaller than
contemplated. CMOs may have complicated structures and generally involve more
risks than simpler forms of mortgage-backed securities.
The final tranche of a CMO may be structured as an accrual bond (sometimes
referred to as a Z-tranche). Holders of accrual bonds receive no cash payments
for an extended period of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is a credit for
periodic interest payments that increase the face amount of the security at a
compounded rate, but are not actually paid to the bond holder. After all
previous tranches are retired, accrual bond holders start receiving cash
payments that include both principal and continuing interest. The market value
of accrual bonds can fluctuate widely and their average life depends on the
other aspects of the CMO offering. Interest on accrual bonds is taxable when
accrued even though the holders receive no accrual payment. The Funds
distribute all of their net investment income, and may have to sell portfolio
securities to distribute imputed income, which may occur at a time when the
Adviser would not have chosen to sell such securities and which may result in a
taxable gain or loss.
STRIPPED MORTGAGE-BACKED SECURITIES (INTERMEDIATE BOND FUND). Stripped
mortgage-backed securities ("SMBS") are classes of mortgage-backed securities
that receive different proportions of the interest and principal distributions
from the underlying Mortgage Assets. They may be may be privately issued or
U.S. Government Securities. In the most extreme case, one class will be
entitled to receive all or a portion of the interest but none of the principal
from the Mortgage Assets (the interest-only or "IO" class) and one class will be
entitled to receive all or a portion of the principal, but none of the interest
(the "PO" class). Currently, no Fund may purchase IOs or POs.
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ASSET-BACKED SECURITIES (INTERMEDIATE BOND FUND). Asset-backed securities
represent direct or indirect participations in, or are secured by and payable
from, assets other than mortgage-backed assets such as motor vehicle installment
sales contracts, installment loan contracts, leases of various types of real and
personal property and receivables from revolving credit (credit card)
agreements. Intermediate Bond Fund may not invest more than 10% of its net
assets in asset-backed securities that are backed by a particular type of
credit, for instance, credit card receivables. Asset-backed securities,
including adjustable rate asset-backed securities, have yield characteristics
similar to those of mortgage-backed securities and, accordingly, are subject to
many of the same risks.
Assets are securitized through the use of trusts and special purpose
corporations that issue securities which are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution. Asset-
backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-backed
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-backed securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
OPTIONS (ALL FUNDS), FUTURES CONTRACTS (INTERMEDIATE BOND FUND) AND OPTIONS ON
FUTURES CONTRACTS (INTERMEDIATE BOND FUND). The Funds may seek to enhance their
return through purchasing exchange-traded and over-the-counter options on equity
or fixed income securities or indices. Intermediate Bond Fund also may write
(sell) options that are covered. An option is covered if, so long as the Fund
is obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains cash, U.S. Government Securities or
other liquid, high-grade debt securities in a segregated account with a value at
all times sufficient to cover the Fund's obligation under the option. In
addition, Intermediate Bond Fund may attempt to hedge against a decline in the
value of securities owned by it or an increase in the price of securities which
it plans to purchase through the use of those options and the purchase and sale
of interest rate futures contracts and options on those futures contracts.
RISK CONSIDERATIONS. A Fund's use of options and futures contracts would
subject the Fund to certain investment risks and transaction costs to which it
might not otherwise be subject. These risks include: (1) dependence on the
Adviser's ability to predict movements in the prices of individual securities
and fluctuations in the general securities markets; (2) imperfect correlations
between movements in the prices of options or futures contracts and movements in
the price of the securities hedged or used for cover which may cause a given
hedge not to achieve its objective; (3) the fact that the skills and techniques
needed to trade these instruments are different from those needed to select the
other securities in which the Fund invests; (4) lack of assurance that a liquid
secondary market will exist for any particular instrument at any particular
time, which, among other things, may limit a Fund's ability to control losses by
closing its
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<PAGE>
positions; (5) the possible need to defer closing out of certain options,
futures contracts and related options to avoid adverse tax consequences; and (6)
the potential for unlimited loss when investing in futures contracts or writing
options for which an offsetting position is not held..
Other risks include the inability of Intermediate Bond Fund, as the writer of
covered call options, to benefit from any appreciation of the underlying
securities above the exercise price and the possible loss of the entire premium
paid for options purchased by the Fund. In addition, the futures exchanges may
limit the amount of fluctuation permitted in certain futures contract prices
during a single trading day. The Fund may be forced, therefore, to liquidate or
close out a futures contract position at a disadvantageous price.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures position or that a counterparty in an over-the-
counter option transaction will be able to perform its obligations.
Accordingly, Intermediate Bond Fund intends to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, but there is no assurance that a liquid secondary market will exist for
any particular contract at any particular time. In addition, the Fund intends
that substantially all of its options contracts will be exchange traded. There
are a limited number of options on interest rate futures contracts and exchange
traded options contracts on fixed income securities. Accordingly, hedging
transactions involving these instruments may entail "cross-hedging." As an
example, the Fund may wish to hedge existing holdings of mortgage-backed
securities, but no listed options may exist on those securities. In that event,
the Adviser may attempt to hedge the Fund's securities by the use of options
with respect to similar fixed income securities. The Fund may use various
futures contracts that are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active
secondary market in those contracts will develop or continue to exist.
LIMITATIONS. No Fund may purchase any call or put option thereon if the
premiums associated with all such options held by the Fund would exceed 5% of
the Fund's total assets as of the date the option is purchased. No Fund may
sell a put option if the exercise value of all put options written by the Fund
would exceed 50% of the Fund's total assets or sell a call option if the
exercise value of all call options written by the Fund would exceed the value of
the Fund's assets held by the Fund. In addition, the current market value of
all open futures positions held by a Fund will not exceed 50% of its total
assets.
OPTIONS ON SECURITIES. A call option is a contract pursuant to which the
purchaser of the call option, in return for a premium paid, has the right to buy
the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the
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market price, the historical price volatility of the underlying security or
index, the option period, supply and demand and interest rates.
OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
securities. Thus, upon exercise of a stock index options, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.
INDEX FUTURES CONTRACTS. Bond index futures contracts are bilateral agreements
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the bond
index value at the close of trading of the contract and the price at which the
futures contract is originally struck. No physical delivery of the securities
comprising the index is made. As is the case with other futures contracts,
index futures contracts usually are closed out prior to the expiration date of
the contract.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar to stock
options except that an option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.
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NORWEST SELECT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
This Statement of Additional Information ("SAI") supplements the Prospectuses
dated May 1, 1996 offering shares (the "Shares") of Intermediate Bond Fund,
Income Equity Fund, ValuGrowth-SM- Stock Fund and Small Company Stock Fund (each
a "Fund" and collectively the "Funds"). Each Fund is a separate portfolio of
Norwest Select Funds, a registered open-end, management investment company (the
"Trust").
TABLE OF CONTENTS
Page
----
1. The Trust. . . . . . . . . . . . . . . . . . . . . . .
2. Investment Policies. . . . . . . . . . . . . . . . . .
3. Investment Limitations . . . . . . . . . . . . . . . .
4. Performance Data . . . . . . . . . . . . . . . . . . .
5. Management . . . . . . . . . . . . . . . . . . . . . .
6. Other Information. . . . . . . . . . . . . . . . . . .
Appendix A - Description of Securities Ratings. . . . . . .
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED BY AN INVESTOR WITHOUT CHARGE BY
CONTACTING THE COMPANY'S DISTRIBUTOR, FORUM FINANCIAL SERVICES, INC., TWO
PORTLAND SQUARE, PORTLAND, MAINE 04101.
<PAGE>
1. THE TRUST
The Trust was organized as a Delaware business trust on December 7, 1993. The
Trust is a series company that currently consists of four separate portfolios,
Intermediate Bond Fund, Income Equity Fund, ValuGrowth Stock Fund and Small
Company Stock Fund.
Shares of the Trust currently are sold only to separate accounts ("Separate
Accounts") of insurance companies ("Insurance Companies") to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by the Insurance Companies (collectively the "Contracts").
The Funds serve as underlying investment vehicles for amounts invested in the
Contracts.
The Separate Accounts, which will be the owners of the Shares, will invest in
the Shares in accordance with instructions received from the owners of the
Contracts. Contract owners should consider that the investment experience of
the Fund or Funds they select will affect the value of and the benefits provided
under their Contract. The Prospectus for the Contracts (which are not issued by
the Trust) describes the relationship between increases or decreases in the net
asset value of Shares (and any distributions on the Shares) and the benefits
provided under a Contract.
2. INVESTMENT POLICIES
The following discussion is intended to supplement the disclosure in the
Prospectus concerning the Funds' investments, investment techniques and
strategies and the risks associated therewith. No Fund may make any investment
or employ any investment technique or strategy not referenced in the Prospectus
as relating to that Fund. For example, while the SAI describes "swap"
transactions below, only those Funds whose investment policies, as described in
the Prospectus, allow the Fund to invest in swap transactions may do so.
DEFINITIONS
As used in this SAI, the following terms shall have the meanings listed:
"Adviser" shall mean Norwest Investment Management, a part of Norwest Bank
Minnesota, N.A. and investment adviser to each Fund.
"Advisers" shall mean, collectively, the Adviser and Crestone Capital
Management, Inc.
"Board" shall mean the Board of Trustees of the Trust.
"Crestone" shall mean Crestone Capital Management, Inc., investment adviser
to Small Company Stock Fund.
"Moody's" shall mean Moody's Investors Service, a nationally recognized
statistical rating organization.
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"Norwest" shall mean Norwest Bank Minnesota, N.A.
"NRSRO" shall mean a nationally recognized statistical rating organization.
"SEC" shall mean the United States Securities and Exchange Commission.
"S&P" shall mean Standard & Poor's, a nationally recognized statistical
rating organization.
"U.S. Government Securities" shall mean obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
RATINGS AS INVESTMENT CRITERIA
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Funds
may use these ratings to determine whether to purchase, sell or hold a security.
However, ratings are general and are not absolute standards of quality.
Consequently, securities with the same maturity, interest rate and rating may
have different market prices. If an issue of securities ceases to be rated or
if its rating is reduced after it is purchased by a Fund, the Adviser (or
Crestone, in the case of Small Company Stock Fund) will determine whether the
Fund should continue to hold the obligation. Credit ratings attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, NRSROs may fail to make timely changes in
credit ratings. An issuer's current financial condition may be better or worse
than a rating indicates.
CONVERTIBLE SECURITIES
A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the
holder to receive interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed, converted
or exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common stocks
of the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable nonconvertible securities. Although no securities investment is
without some risk, investment in convertible securities generally entails less
risk than investment in the issuer's common stock. However, the extent to which
such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security.
Convertible
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securities have unique investment characteristics in that they generally (1)
have higher yields than common stocks, but lower yields than comparable non-
convertible securities, (2) are less subject to fluctuation in value than the
underlying stocks since they have fixed income characteristics and (3) provide
the potential for capital appreciation if the market price of the underlying
common stock increases.
The value of a convertible security is a function of its "investment value"
(determined by a comparison of its yield with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value, and,
generally, the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition,
a convertible security generally will sell at a premium over its conversion
value determined by the extent to which investors place value on the right to
acquire the underlying common stock while holding a fixed income security.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by a Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
WARRANTS
Warrants, which are options to purchase an equity security at a specified price
(usually representing a premium over the applicable market value of the
underlying equity security at the time of the warrant's issuance) and usually
during a specified period of time. Unlike convertible securities and preferred
stocks, warrants do not pay a fixed dividend. Investments in warrants involve
certain risks, including the possible lack of a liquid market for the resale of
the warrants, potential price fluctuations as a result of speculation or other
factors and failure of the price of the underlying security to reach a level at
which the warrant prudently can be exercised (in which case the warrant may
expire without being exercised, resulting in the loss of the Fund's entire
investment therein). To the extent a Fund may invest in warrants, no Fund may
invest in warrants if (i) more than 5% of the value of the Fund's net assets
will be invested in warrants (valued at the lower of cost or market) or (ii)
more than 2% of the value of the Fund's net assets would be invested in warrants
which are not listed on the New York Stock Exchange or the American Stock
Exchange. For purpose of the preceding limitation, warrants acquired by a Fund
in units or attached to securities are deemed to have no value.
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ZERO COUPON U.S. GOVERNMENT SECURITIES
In addition to the investments in Zero Coupon U.S. Government Securities
described in the Prospectus, the Funds may invest in other types of related zero
coupon securities. For instance, a number of banks and brokerage firms separate
the principal and interest portions of U.S. Treasury securities and sell them
separately in the form of receipts or certificates representing undivided
interests in these instruments. These instruments are generally held by a bank
in a custodial or trust account on behalf of the owners of the securities and
are known by various names, including Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury
Securities ("CATS").
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
TYPES OF CREDIT ENHANCEMENT
To lessen the effect of failures by obligors on mortgage assets to make
payments, mortgage-backed securities may contain elements of credit enhancement.
Credit enhancement falls into two categories: (1) liquidity protection; and (2)
protection against losses resulting after default by an obligor on the
underlying assets and collection of all amounts recoverable directly from the
obligor and through liquidation of the collateral. Liquidity protection refers
to the provisions of advances, generally by the entity administering the pool of
assets (usually the bank, savings association or mortgage banker that
transferred the underlying loans to the issuer of the security), to ensure that
the receipt of payments on the underlying pool occurs in a timely fashion.
Protection against losses resulting after default and liquidation ensures
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. A Fund will not pay any additional fees for such credit
enhancement, although the existence of credit enhancement may increase the price
of security.
Examples of credit enhancement arising out of the structure of the transaction
include (i) "senior-subordinated securities" (multiple class securities with one
or more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class), (ii) creation
of "spread accounts" or "reserve funds" (where cash or investments, sometimes
funded from a portion of the payments on the underlying assets are held in
reserve against future losses) and (iii) "over-collateralization" (where the
scheduled payments on, or the principal amount of, the underlying assets exceeds
that required to make payment of the securities and pay any servicing or other
fees). The degree of credit enhancement provided for each issue generally is
based on historical information regarding the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that covered by
credit enhancement protection could adversely affect the return on an investment
in such a security.
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OTHER MORTGAGE-RELATED SECURITIES
The Resolution Trust Corporation ("RTC"), which was organized by the U.S.
Government in connection with the savings and loan crisis, holds assets of
failed savings associations as either a conservator or receiver for such
associations, or it acquires such assets in its corporate capacity. These
assets include, among other things, single family and multi-family mortgage
loans, as well as commercial mortgage loans. In order to dispose of such assets
in an orderly manner, RTC has established a vehicle registered with the SEC
through which it sells mortgage-backed securities. RTC mortgage-backed
securities represent pro rata interests in pools of mortgage loans that RTC
holds or has acquired, as described above, and are supported by one or more of
the types of private credit enhancements used by private mortgage lenders.
It is anticipated that in the future the Federal Deposit Insurance Corporation
(which also holds mortgage loans as a conservator or receiver of insolvent banks
or in its corporate capacity) or other governmental agencies or
instrumentalities may establish vehicles for the issuance of mortgage-backed
securities that are similar in structure and in types of credit enhancements to
RTC securities.
ASSET-BACKED SECURITIES
A Fund may invest in asset-backed securities, which have structural
characteristics similar to mortgage-backed securities but have underlying assets
that are not mortgage loans or interests in mortgage loans. Asset-backed
securities are securities that represent direct or indirect participations in,
or are secured by and payable from, assets such as motor vehicle installment
sales contracts, installment loan contracts, leases of various types of real and
personal property and receivables from revolving credit (credit card)
agreements. Such assets are securitized through the use of trusts and special
purpose corporations.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. Payments of principal and
interest may be guaranteed up to certain amounts and for a certain time period
by a letter of credit issued by a financial institution.
Asset-backed securities present certain risks that are not presented by
mortgage-backed debt securities or other securities in which a Fund may invest.
Primarily, these securities do not always have the benefit of a security
interest in comparable collateral. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and Federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on the credit cards, thereby reducing the balance
due. Automobile receivables generally are secured by automobiles. Most issuers
of automobile receivables permit the loan servicers to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the asset-backed securities. In addition,
because of the large number of vehicles involved in a typical issuance and the
technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a proper security interest in the underlying
automobiles. Therefore, there is the possibility that recoveries on repossessed
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collateral may not, in some cases, be available to support payments on these
securities. Because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of the market cycle has not been tested.
INTEREST RATE PROTECTION TRANSACTIONS
A Fund may enter into interest rate protection transactions, including interest
rate swaps, caps, collars and floors. Interest rate swap transactions involve
an agreement between two parties to exchange interest payment streams that are
based, for example, on variable and fixed rates that are calculated on the basis
of a specified amount of principal (the "notional principal amount") for a
specified period of time. Interest rate cap and floor transactions involve an
agreement between two parties in which the first party agrees to make payments
to the counterparty when a designated market interest rate goes above (in the
case of a cap) or below (in the case of a floor) a designated level on
predetermined dates or during a specified time period. Interest rate collar
transactions involve an agreement between two parties in which the payments are
made when a designated market interest rate either goes above a designated
ceiling or goes below a designated floor on predetermined dates or during a
specified time period.
A Fund expects to enter into interest rate protection transactions to preserve a
return or spread on a particular investment or portion of its portfolio or to
protect against any increase in the price of securities it anticipates
purchasing at a later date. The Funds intend to use these transactions as a
hedge and not as a speculative investment.
A Fund may enter into interest rate protection transactions on an asset-based
basis, depending on whether it is hedging its assets or its liabilities, and
will usually enter into interest rate swaps on a net basis, i.e., the two
payment streams are netted out, with the Fund receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these interest
rate protection transactions are entered into for good faith hedging purposes,
and inasmuch as segregated accounts will be established with respect to such
transactions, the Funds believe such obligations do not constitute senior
securities. The net amount of the excess, if any, of a Fund's obligations over
its entitlements with respect to each interest rate swap will be accrued on a
daily basis and an amount of cash, U.S. Government Securities or other liquid
high grade debt obligations having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account by a custodian
that satisfies the requirements of the 1940 Act. The Funds also will establish
and maintain such segregated accounts with respect to its total obligations
under any interest rate swaps that are not entered into on a net basis and with
respect to any interest rate caps, collars and floors that are written by the
Funds.
A Fund will enter into interest rate protection transactions only with financial
institutions believed by the Advisers to present minimal credit risks. If there
is a default by the other party to such a transaction, the Fund will have to
rely on its contractual remedies (which may be limited by bankruptcy, insolvency
or similar laws) pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap
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documentation. Caps, collars and floors are more recent innovations for which
documentation is less standardized and, accordingly, they are less liquid than
swaps.
FUTURES AND OPTIONS
A Fund may engage in certain options strategies in order to enhance the Fund's
income and may engage in certain options and futures strategies to attempt to
hedge the Fund's portfolio. The instruments in which the Funds may invest
include (i) options on fixed income securities, fixed income securities indices
and foreign currencies, (ii) interest rate and foreign currency futures
contracts ("futures contracts"), and (iii) options on futures contracts. Use of
these instruments is subject to regulation by SEC, the several options and
futures exchanges upon which options and futures are traded, and the Commodities
Futures Trading Commission ("CFTC").
The various strategies referred to herein and in the Prospectus are intended to
illustrate the type of strategies that are available to, and may be used by, the
Advisers in managing a Fund's portfolio. No assurance can be given, however,
that any strategies will succeed.
The Funds will not use leverage in their option income and hedging strategies.
In the case of transactions entered into as a hedge, a Fund will hold
securities, currencies or other options or futures positions whose values are
expected to offset ("cover") its obligations thereunder. A Fund will not enter
into a hedging strategy that exposes the Fund to an obligation to another party
unless it owns either (1) an offsetting ("covered") position or (2) cash, U.S.
Government Securities or other liquid, high-grade debt securities with a value
sufficient at all times to cover its potential obligations. When required by
applicable regulatory guidelines, the Fund will set aside cash, U.S. Government
Securities or other liquid, high-grade debt securities in a segregated account
with its custodian in the prescribed amount. Any assets used for cover or held
in a segregated account cannot be sold or closed out while the hedging or option
income strategy is outstanding, unless they are replaced with similar assets.
As a result, there is a possibility that the use of cover or segregation
involving a large percentage of a Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
OPTIONS STRATEGIES
A Fund may purchase put and call options written by others and write (sell) put
and call options covering specified securities, stock index-related amounts or
currencies. A put option (sometimes called a "standby commitment") gives the
buyer of the option, upon payment of a premium, the right to deliver a specified
amount of a security or currency to the writer of the option on or before a
fixed date at a predetermined price. A call option (sometimes called a "reverse
standby commitment") gives the purchaser of the option, upon payment of a
premium, the right to call upon the writer to deliver a specified amount of a
security or currency on or before a fixed date, at a predetermined price. The
predetermined prices may be higher or lower than the market value of the
underlying currency or security. A Fund may buy or sell both exchange-traded
and over-the-counter ("OTC") options. A Fund will purchase or write an option
only if that option is traded on a recognized U.S. options exchange or if the
Advisers believe that
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a liquid secondary market for the option exists. When a Fund purchases an OTC
option, it relies on the dealer from which it has purchased the OTC option to
make or take delivery of the securities or currency underlying the option.
Failure by the dealer to do so would result in the loss of the premium paid by
the Fund as well as the loss of the expected benefit of the transaction. OTC
options and the securities underlying these options currently are treated as
illiquid securities by the Funds.
Upon selling an option, a Fund receives a premium from the purchaser of the
option. Upon purchasing an option the Fund pays a premium to the seller of the
option. The amount of premium received or paid by the Fund is based upon
certain factors, including the market price of the underlying securities index,
the relationship of the exercise price to the market price, the historical price
volatility of the underlying securities index, the option period, supply and
demand and interest rates.
A Fund may purchase call options on debt securities that an Adviser intends to
include in the Fund's portfolio in order to fix the cost of a future purchase.
Call options may also be purchased as a means of participating in an anticipated
price increase of a security on a more limited risk basis than would be possible
if the security itself were purchased. In the event of a decline in the price
of the underlying security, use of this strategy would serve to limit the
potential loss to the Fund to the option premium paid; conversely, if the market
price of the underlying security increases above the exercise price and the Fund
either sells or exercises the option, any profit eventually realized will be
reduced by the premium paid. A Fund may similarly purchase put options in order
to hedge against a decline in market value of securities held in its portfolio.
The put enables the Fund to sell the underlying security at the predetermined
exercise price; thus the potential for loss to the Fund is limited to the option
premium paid. If the market price of the underlying security is lower than the
exercise price of the put, any profit the Fund realizes on the sale of the
security would be reduced by the premium paid for the put option less any amount
for which the put may be sold.
The Adviser may write call options when it believes that the market value of the
underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection against a decrease in the market price of a security, in an amount
equal to the call premium received less any transaction costs.
A Fund may purchase and write put and call options on fixed income security
indices in much the same manner as the options discussed above, except that
index options may serve as a hedge against overall fluctuations in the fixed
income securities markets (or market sectors) or as a means of participating in
an anticipated price increase in those markets. The effectiveness of hedging
techniques using index options will depend on the extent to which price
movements in the index selected correlate with price movements of the securities
which are being hedged. Index options are settled exclusively in cash.
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SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING
A Fund may effectively terminate its right or obligation under an option
contract by entering into a closing transaction. For instance, if a Fund wished
to terminate its potential obligation to sell securities or currencies under a
call option it had written, a call option of the same type would be purchased by
the Fund. Closing transactions essentially permit the Fund to realize profits
or limit losses on its options positions prior to the exercise or expiration of
the option. In addition:
(1) The successful use of options depends upon the Advisers' ability to
forecast the direction of price fluctuations in the underlying securities or
currency markets, or in the case of an index option, fluctuations in the market
sector represented by the index.
(2) Options normally have expiration dates of up to nine months. Options that
expire unexercised have no value. Unless an option purchased by a Fund is
exercised or unless a closing transaction is effected with respect to that
position, a loss will be realized in the amount of the premium paid.
(3) A position in an exchange-listed option may be closed out only on an
exchange which provides a market for identical options. Most exchange-listed
options relate to equity securities. Exchange markets for options on foreign
currencies are relatively new and the ability to establish and close out
positions on the exchanges is subject to the maintenance of a liquid secondary
market. Closing transactions may be effected with respect to options traded in
the OTC markets (currently the primary markets for options on foreign
currencies) only by negotiating directly with the other party to the option
contract or in a secondary market for the option if such market exists. There
is no assurance that a liquid secondary market will exist for any particular
option at any specific time. If it is not possible to effect a closing
transaction, a Fund would have to exercise the option which it purchased in
order to realize any profit. The inability to effect a closing transaction on
an option written by a Fund may result in material losses to the Fund.
(4) A Fund's activities in the options markets may result in a higher portfolio
turnover rate and additional brokerage costs.
FUTURES STRATEGIES
A futures contract is a bilateral agreement wherein one party agrees to accept,
and the other party agrees to make, delivery of cash, an underlying debt
security or the currency as called for in the contract at a specified future
date and at a specified price. For futures contracts with respect to an
interest rate or securities index, delivery is of an amount of cash equal to a
specified dollar amount times the difference between the index value at the time
of the contract and the close of trading of the contract.
A Fund may sell interest rate futures contracts in order to continue to receive
the income from a fixed income security, while endeavoring to avoid part of or
all of a decline in the market value of that security which would accompany an
increase in interest rates.
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A Fund may purchase call options on a futures contract as a means of obtaining
temporary exposure to market appreciation at limited risk. This strategy is
analogous to the purchase of a call option on an individual security, in that it
can be used as a temporary substitute for a position in the security itself.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS TRADING
No price is paid upon entering into futures contracts; rather, a Fund is
required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash or U.S. Government Securities generally
equal to 5% or less of the contract value. This amount is known as initial
margin. Subsequent payments, called variation margin, to and from the broker
are made on a daily basis as the value of the futures position varies. When
writing a call on a futures contract, variation margin must be deposited in
accordance with applicable exchange rules. The initial margin in futures
transactions is in the nature of a performance bond or good-faith deposit on the
contract that is returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied.
Holders and writers of futures and options on futures contracts can enter into
offsetting closing transactions, similar to closing transactions on options, by
selling or purchasing, respectively, a futures contract or related option with
the same terms as the position held or written. Positions in futures contracts
may be closed only on an exchange or board of trade providing a market for such
futures contracts.
Under certain circumstances, futures exchanges may establish daily limits in the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. Prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions. In such event, it may not be possible for a Fund to close a
position, and in the event of adverse price movements, the Fund would have to
make daily cash payments of variation margin. In addition:
(1) Successful use by a Fund of futures contracts and related options will
depend upon the Advisers' ability to predict movements in the direction of the
overall securities and currency markets, which requires different skills and
techniques than predicting changes in the prices of individual securities.
(2) Futures contracts relate not to the current level of the underlying
instrument but to the anticipated levels at some point in the future; thus, for
example, trading of stock index futures may not reflect the trading of the
securities which are used to formulate an index or even actual fluctuations in
the relevant index itself. As a result, the price of futures contracts may not
correlate perfectly with movement in the price of the hedged securities or
currencies due to price distortions in the futures market or otherwise. There
may be several reasons unrelated to the value of the underlying securities or
currencies which cause this situation to occur. As a result, a
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correct forecast of general market trends still may not result in successful
hedging through the use of futures contracts over the short term.
(3) There is no assurance that a liquid secondary market will exist for any
particular contract at any particular time. In such event, it may not be
possible to close a position, and in the event of adverse price movements, the
Fund will continue to be required to make daily cash payments of variation
margin.
(4) Like other options, options on futures contracts have a limited life. A
Fund will not trade options on futures contracts on any exchange or board of
trade unless and until, in the Adviser's opinion, the market for such options
has developed sufficiently that the risks in connection with options on futures
transactions are not greater than the risks in connection with futures
transactions.
(5) Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs is all that is at risk.
Sellers of options on futures contracts, however, must post an initial margin
and are subject to additional margin calls which could be substantial in the
event of adverse price movements.
(6) A Fund's activities in the futures markets may result in a higher portfolio
turnover rate and additional transaction costs in the form of added brokerage
commissions.
REVERSE REPURCHASE AGREEMENTS
Generally, a reverse repurchase agreement enables a Fund to recover for the term
of the reverse repurchase agreement all or most of the cash invested in the
portfolio securities sold and to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if the interest
cost to the Fund of the reverse repurchase transaction is less than the cost of
obtaining the cash otherwise. In addition, interest costs on the money received
in a reverse repurchase agreement may exceed the return received on the
investments made by a Fund with those monies. The use of reverse repurchase
agreement proceeds to make investments may be considered to be a speculative
investment technique.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Funds may purchase securities on a when-issued or delayed delivery basis.
In those cases, the purchase price and the interest rate payable on the
securities are fixed on the transaction date and delivery and payment may take
place a month or more after the date of the transaction. At the time a Fund
makes the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction as a purchase and thereafter reflect
the value each day of such securities in determining its net asset value.
A Fund will make commitments for such when-issued transactions only when it has
the intention of actually acquiring the securities. To facilitate such
acquisitions, the Fund will maintain with its custodian a separate account with
portfolio securities in an amount at least equal to such
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commitments. On delivery dates for such transactions, the Fund will meet its
obligations from maturities, sales of the securities held in the separate
account or from other available sources of cash. If a Fund chooses to dispose
of the right to acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation, incur a gain
or loss due to market fluctuation.
SHORT SALES
The Funds may make short sales of securities they own or have the right to
acquire at no added cost through conversion or exchange of other securities they
own (referred to as short sales "against the box"). Intermediate Bond Fund may
make short sales of securities which it does not own or have the right to
acquire. A short sale that is not made "against the box" is a transaction in
which a Fund sells a security it does not own in anticipation of a decline in
the market price for the security. Short sales that are not made "against the
box" create opportunities to increase the Fund's return but, at the same time,
involve special risk considerations and may be considered a speculative
technique. Since the Fund in effect profits from a decline in the price of the
securities sold short without the need to invest the full purchase price of the
securities on the date of the short sale, the Fund's net asset value per share,
will tend to increase more when the securities it has sold short decrease in
value, and to decrease more when the securities it has sold short increase in
value, than would otherwise be the case if it had not engaged in such short
sales. Short sales theoretically involve unlimited loss potential, as the
market price of securities sold short may continuously increase, although a Fund
may mitigate such losses by replacing the securities sold short before the
market price has increased significantly. Under adverse market conditions a
Fund might have difficulty purchasing securities to meet its short sale delivery
obligations, and might have to sell portfolio securities to raise the capital
necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor those sales.
If the Fund makes a short sale "against the box," the Fund will not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Adviser believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security convertible into or exchangeable for such security. In
such case, any future losses in the Fund's long position would be reduced by an
offsetting future gain in the short position.
A Fund will only enter into short sales "against the box" when an equivalent
amount of the securities sold is segregated at the Fund's custodian. A Fund's
ability to enter into short sales transactions is limited by certain tax
requirements.
BORROWING AND LEVERAGE
Borrowing for investment purposes, lending securities, entering into reverse
repurchase agreements, purchasing when-issued and delayed delivery securities,
selling securities short, and
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engaging in dollar roll transactions involve the use of "leverage" when cash
made available to a Fund is used to make portfolio invesments. So long as a
Fund is able to realize a net return on its investment portfolio that is higher
than interest expense incurred, if any, leverage will result in higher current
net investment income being realized by the Fund than if the Fund were not
leveraged. On the other hand, interest rates change from time to time, as does
their relationship to each other, depending upon such factors as supply and
demand, monetary and tax policies and investor expectations. Changes in such
factors could cause the relationship between the cost of leveraging and the
yield to change so that rates involved in the leveraging arrangement may
substantially increase relative to the yield on the obligations in which the
proceeds of the leveraging have been invested. To the extent that the interest
expense involved in leveraging approaches the net return on the Fund's
investment portfolio, the benefit of leveraging will be reduced, and, if the
interest expense on borrowings were to exceed the net return to shareholders,
the Fund's use of leverage would result in a lower rate of return than if the
Fund were not leveraged. Similarly, the effect of leverage in a declining
market could be a greater decrease in net asset value per share than if the Fund
were not leveraged. In an extreme case, if the Fund's current investment income
were not sufficient to meet the interest expense of leveraging, it could be
necessary for the Fund to liquidate certain of its investments at an
inappropriate time. The use of leverage may be considered speculative.
In order to limit the risks involved in various transactions involving leverage,
the Trust's custodian will set aside and maintain in a segregated account cash,
U.S. Government Securities and other liquid, high-grade debt securities in
accordance with SEC guidelines. The account's value, which is marked to market
daily, will be at least equal to the Fund's commitments under these
transactions. The Fund's commitments include (i) the Fund's obligations to
repurchase securities under a reverse repurchase agreement, settle when-issued
and forward commitment transactions and make payments under a cap or floor and
(ii) the greater of the market value of securities sold short or the value of
the securities at the time of the short sale (reduced by any margin deposit).
The net amount of the excess, if any, of a Fund's obligations over its
entitlements with respect to each interest rate swap will be calculated on a
daily basis and an amount at least equal to the accrued excess will be
maintained in the segregated account. If the Fund enters into an interest rate
swap on other than a net basis, the Fund will maintain the full amount accrued
on a daily basis of the Fund's obligations with respect to the swap in the
segregated account. The use of a segregated account in connection with
leveraged transactions may result in a Fund's portfolio being 100% leveraged.
DOMESTIC AND FOREIGN BANK OBLIGATIONS
A Fund may invest in fixed-time deposits or certificates of deposit, which are
payable at their stated maturity date and bear a fixed rate of interest and
generally may be withdrawn on demand by the Fund, but may be subject to early
withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation and could reduce the Fund's yield.
Although fixed-time deposits do not in all cases have a secondary market, there
are no contractual restrictions on the Fund's right to transfer a beneficial
interest in the deposits to third parties. Deposits subject to early withdrawal
penalties or that mature in more than seven days are treated as illiquid
securities if there is no readily available market for the securities.
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Bankers' acceptances are negotiable obligations of a bank to pay a draft which
has been drawn by a customer and are usually backed by goods in international
trade. A Fund's investments in the obligations of foreign banks and their
branches, agencies or subsidiaries may be obligations of the parent, of the
issuing branch, agency or subsidiary, or both. Investments in foreign bank
obligations are limited to banks and branches located in countries which the
Adviser believes do not present undue risk. Investments that a Fund may make in
securities of foreign branches of domestic banks and domestic and foreign
branches of foreign banks may involve certain risks, including future political
and economic developments, the possible imposition of foreign withholding taxes
on interest income payable on such securities, the possible seizure or
nationalization of foreign deposits, differences from domestic banks in
applicable accounting, auditing and financial reporting standards, and the
possible establishment of exchange controls or other foreign governmental laws
or restrictions applicable to the payment of certificates of deposit or time
deposits which might affect adversely the payment of principal and interest on
such securities held by a Fund.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in illiquid securities. The
term "illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities and
includes, among other things, purchased OTC options and repurchase agreements
maturing in more than seven days.
The Board has the ultimate responsibility for determining whether specific
securities are liquid or illiquid. The Board has delegated the function of
making day-to-day determinations of liquidity to the Advisers, pursuant to
guidelines approved by the Board. The Advisers take into account a number of
factors in reaching liquidity decisions, including but not limited to: (1) the
frequency of trades and quotations for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
buyers; (3) the willingness of dealers to undertake to make a market in the
security; and (4) the nature of the marketplace trades, including the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer. The Advisers monitors the liquidity of the
securities in each Fund's portfolio and reports periodically on such decisions
to the Board.
TEMPORARY DEFENSIVE POSITION
When a Fund assumes a temporary defensive position, it may invest in (i) short-
term U.S. Government Securities, (ii) certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of commercial banks doing
business in the United States that, at the time of investment, have total assets
in excess of one billion dollars and are insured by the Federal Deposit
Insurance Corporation, (iii) commercial paper of prime quality rated Prime-2 or
higher by Moody's or A-2 or higher by S&P or, if not rated, determined by an
Adviser to be of comparable quality, (iv) repurchase agreements covering any of
the securities in which the Fund may invest directly and (v) money market mutual
funds.
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The Funds may invest in the securities of other investment companies within the
limits prescribed by the 1940 Act. Under normal circumstances, each Fund
intends to invest less than 5% of the value of its net assets in the securities
of other investment companies. In addition to the Fund's expenses (including
the various fees), as a shareholder in another investment company, a Fund would
bear its pro rata portion of the other investment company's expenses (including
fees).
3. INVESTMENT LIMITATIONS
Except as required by the 1940 Act, if any percentage restriction on investment
or utilization of assets is adhered to at the time an investment is made, a
later change in percentage resulting from a change in the market values of a
Fund's assets or purchases and redemptions of Shares will not be considered a
violation of the limitation.
FUNDAMENTAL LIMITATIONS
Each Fund has adopted the following investment limitations which are fundamental
policies of the Fund and cannot be changed without the affirmative vote of a
majority of the Fund's outstanding voting securities (as defined in the
Prospectus).
(1) DIVERSIFICATION: With respect to 75% of its assets, the Fund may not
purchase a security other than a U.S. Government Security if, as a result,
more than 5% of the Fund's total assets would be invested in the securities
of a single issuer or the Fund would own more than 10% of the outstanding
voting securities of any single issuer; provided, however, that each Fund
may invest all or a portion of its assets in another diversified, open-end
management investment company with substantially the same investment
objective, policies and restrictions as the Fund.
(2) CONCENTRATION: The Fund may not purchase securities if, immediately
after the purchase, more than 25% of the value of the Fund's total assets
would be invested in the securities of issuers conducting their principal
business activities in the same industry; provided, however that there is
no limit on investments in U.S. Government Securities, repurchase
agreements covering U.S. Government Securities, foreign government
securities, mortgage-backed or housing-related securities, municipal
securities, and issuers domiciled in a single country; that financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance and diversified
finance); that utility companies are classified according to their services
(for example, gas, gas transmission, electric and gas, electric and
telephone); and that each Fund may invest all of a portion of its assets in
another diversified, open-end management investment company with
substantially the same investment objective, policies and restrictions as
the Fund.
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(3) BORROWING: Each Fund may borrow money for temporary or emergency
purposes, including the meeting of redemption requests; but not in excess
of 33 1/3% of the value of the Fund's total assets (as computed immediately
after the borrowing).
(4) ISSUANCE OF SENIOR SECURITIES: The Fund may not issue senior
securities except to the extent permitted by the 1940 Act.
(5) UNDERWRITING ACTIVITIES: The Fund may not underwrite securities of
other issuers, except to the extent that the Fund may be considered to be
acting as an underwriter in connection with the disposition of portfolio
securities.
(6) MAKING LOANS: The Fund may not make loans, except the Fund may enter
into repurchase agreements, purchase debt securities that are otherwise
permitted investments and lend portfolio securities.
(7) PURCHASES AND SALES OF COMMODITIES: The Fund may not purchase or sell
physical commodities or contracts, options or options on contracts to
purchase or sell physical commodities, provided that currencies and
currency-related contracts and contracts on indices are not deemed to be
physical commodities.
(8) PURCHASES AND SALES OF REAL ESTATE: The Fund may not purchase or sell
real estate or any interest therein, except that the Fund may invest in
debt obligations secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein.
NONFUNDAMENTAL LIMITATIONS
Each Fund has adopted the following investment limitations which are not
fundamental policies of the Fund and may be changed by the Board.
(1) BORROWING: Borrowings for other than temporary or emergency purposes
or meeting redemption requests may not exceed an amount equal to 5% of the
Fund's net assets.
(2) DIVERSIFICATION: Purchases of securities for the Fund also will be
limited in accordance with the diversification requirements for insurance
products established by section 817(h) of the Internal Revenue Code of
1986.
(3) ILLIQUID SECURITIES: Each Fund may not acquire securities or invest
in repurchase agreements with respect to any securities if, as a result,
more than (i) 15% of the Fund's net assets (taken at current value) would
be invested in repurchase agreements not entitling the holder to payment of
principal within seven days and in securities which are not readily
marketable, including securities that are not readily marketable by virtue
of restrictions on the sale of such securities to the public without
registration under the
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Securities Act of 1933 ("Restricted Securities") or (ii) 10% of the Fund's
total assets would be invested in Restricted Securities.
(4) OTHER INVESTMENT COMPANIES: No Fund may invest in securities of
another investment company, except to the extent permitted by the 1940 Act.
(5) UNSEASONED ISSUERS: The Fund may not invest in securities (other than
fully-collateralized debt obligations and eligible mortgage-backed and
asset-backed securities) issued by companies that have conducted continuous
operations for less than three years, including the operations of
predecessors, unless guaranteed as to principal and interest by an issuer
in whose securities the Fund could invest, if, as a result, more than 5% of
the value of the Fund's total assets would be so invested; provided, that
the Fund may invest all of a portion of its assets in another diversified,
open-end management investment company with substantially the same
investment objective, policies and restrictions as the Fund.
(6) PLEDGING: The Fund may not pledge, mortgage, hypothecate or encumber
any of its assets except to secure permitted borrowings.
(7) INVESTMENTS BY OFFICERS AND TRUSTEES: The Fund may not invest in or
hold securities of any issuer if, to the Trust's knowledge, officers and
trustees of the Trust or the Adviser or Crestone, individually owning
beneficially more than one-half of 1% of the securities of the issuer, in
the aggregate own more than 5% of the issuer's securities.
(8) OIL, GAS, AND MINERAL INVESTMENTS AND REAL ESTATE: The Fund may not
invest in interests in oil, gas, or other mineral leases of interests in
other mineral exploration or development programs, and the Fund may not
invest in real estate limited partnerships.
(9) SECURITIES WITH VOTING RIGHTS: Intermediate Bond Fund may not purchase
securities having voting rights at the time of purchase, except securities
of other investment companies.
4. PERFORMANCE DATA
The Funds may quote performance in various ways. These quotations may from time
to time be used in advertisements, shareholder reports or other communications
to shareholders. All performance information supplied by the Funds in
advertising is historical and is not intended to indicate future returns. Each
Fund's net asset value fluctuates in response to market conditions and other
factors, and the value of the Fund's Shares when redeemed may be worth more or
less than their original cost. Each Fund's yield and total return (as well as
any other performance measurement) fluctuates in response to market conditions
and other factors.
In performance advertising each Fund may compare any of its performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper Analytical Services, Inc.,
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IBC/Donoghue, Inc. or other companies which track the investment performance of
investment companies ("Fund Tracking Companies"). Each Fund may also compare
any of its performance information with the performance of recognized stock,
bond and other indices, including but not limited to Standard & Poor's 500
Composite Stock Index, Russell 2000 Index, Morgan Stanley - Europe, Australian
and Far East Index, Lehman Brothers Intermediate Government Index, Lehman
Brothers Intermediate Government/Corporate Index, Salomon Brothers Bond Index,
Shearson Lehman Bond Index, the Dow Jones Industrial Average, U.S. Treasury
bonds, bills or notes and changes in the Consumer Price Index as published by
the U.S. Department of Commerce. The Funds may refer to general market
performances over past time periods such as those published by Ibbotson
Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook").
In addition, the Funds may refer in such materials to mutual fund performance
rankings and other data published by Fund Tracking Companies. Performance
advertising may also refer to discussions of the Funds and comparative mutual
fund data and ratings reported in independent periodicals, such as newspapers
and financial magazines.
Performance figures for a Fund do not include fees and charges of the Separate
Accounts or Contracts. A Fund will not advertise its performance unless such
advertisement is accompanied by information reflecting the performance of the
applicable Separate Account.
YIELD CALCULATIONS
Income calculated for the purpose of determining the Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that a Fund's yield for any given
period is not an indication or representation by the Fund of future yields or
rates of return on the Fund's Shares. The yields of each Fund are not fixed or
guaranteed, and an investment in a Fund is not insured or guaranteed.
Accordingly, yield information may not necessarily be used to compare Shares of
a Fund with investment alternatives which, like money market instruments or bank
accounts, may provide a fixed rate of interest. Also, it may not be appropriate
to compare a Fund's yield information directly to similar information regarding
investment alternatives which are insured or guaranteed.
Yields for a Fund used in advertising are computed by dividing the Fund's
interest income for a given 30 day or one-month period, net of expenses, by the
average number of Shares entitled to receive distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. In general, interest income is reduced
with respect to bonds purchased at a premium over their par value by subtracting
a portion of the premium from income on a daily basis, and is increased with
respect to bonds purchased at a discount by adding a portion of the discount to
daily income. Capital gain and loss generally are excluded from these
calculations.
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TOTAL RETURN CALCULATIONS
Each of the Funds may advertise total return. Total returns quoted in
advertising reflect all aspects of a Fund's return, including the effect of
reinvesting dividends and capital gain distributions and any change in the
Fund's net asset value per share over the period. Average annual returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a 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 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 Funds.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over a given period
according to the following formula:
P(1+T) to the nth power = ERV
Where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value.
ERV is the value, at the end of the applicable period, of a hypothetical $1,000
payment made at the beginning of the applicable period.
In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gain and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns, yields and other performance information may be quoted
numerically or in a table, graph or similar illustration.
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Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return.
The other definitions are the same as in average annual total return above.
The average annual total return of each class of each Fund for the periods ended
December 31, 1995 was as follows. The actual dates of the commencement of each
Fund's operations is listed in the Fund's financial statements.
One Year Five Years Since Inception
-------- ---------- ---------------
Intermediate Bond Fund 17.08% N/A 10.12%
ValuGrowth Stock Fund 24.15% N/A 13.26%
Small Company Stock Fund N/A N/A 15.95%
5. MANAGEMENT
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Funds is indicated by an asterisk.
John Y. Keffer and David R. Keffer are brothers.
John Y. Keffer, Chairman and President.*
President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Financial Corp. (a registered transfer agent), Forum
Advisors, Inc. (a registered investment adviser). Mr. Keffer is a
Director, Trustee and officer of various registered investment companies
for which Forum Financial Services, Inc. serves as manager, administrator
and/or distributor. His address is Two Portland Square, Portland, Maine
04101.
Robert C. Brown, Trustee.*
Director, Federal Farm Credit Banks Funding Corporation and Farm Credit
System Financial Assistance Corp. Prior thereto, he was Manager of the
Capital Markets Group,
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Norwest Corporation (a multi-bank holding company and parent of Norwest)
until 1991. His address is 1431 Landings Place, Sarasota, Florida 34231.
Donald H. Burkhardt, Trustee.
Principal, The Burkhardt Law Firm. His address is 777 South Steele Street,
Denver, Colorado 80209.
James C. Harris, Trustee.
President and sole Director of James C. Harris & Co., Inc. (a financial
consulting firm). Mr. Harris is also a liquidating Trustee and former
Director of First Midwest Corporation, a small business investment company.
His address is 6950 France Avenue South, Minneapolis, Minnesota 55435.
Richard M. Leach, Trustee.
Chief Executive Officer, Tee Box Company (a golf equipment manufacturer),
since January 1994 and President of Richard M. Leach Associates (a
financial consulting firm) since 1992. Prior thereto, Mr. Leach was Senior
Adviser of Taylor Investments (a registered investment adviser), a Director
of Mountainview Broadcasting (a radio station) and Managing Director,
Digital Techniques, Inc. (an interactive video design and manufacturing
company). His address is P.O. Box 1888, New London, New Hampshire 03257.
Timothy J. Penny, Trustee
Senior Counselor to the public relations firm Himle-Horner since 1994.
Prior thereto Mr. Penny was the Representative to the United States
Congress from Minnesota's First Congressional District. His address is 500
North State Street, Waseca, Minnesota 56095.
Donald C. Willeke, Trustee
Principal of the law firm of Willeke & Daniels. His address is 201
Ridgewood Avenue, Minneapolis, Minnesota 55403.
Michael D. Martins, Vice President and Treasurer
Fund Accounting Manager, Forum Financial Corp., with which he has been
associated since 1995. Prior thereto, Mr. Martins was at the audit firm of
Deloitte & Touche LLP. Mr. Martins is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.
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David I. Goldstein, Vice President and Secretary.
Counsel, Forum Financial Services, Inc., with which he has been associated
since 1991. Prior thereto, Mr. Goldstein was associated with the law firm
of Kirkpatrick & Lockhart. Mr. Goldstein is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.
David R. Keffer, Vice President, Assistant Secretary and Assistant Treasurer.
Chief Financial Officer, Forum Financial Services, Inc. Mr. Keffer is also
an officer of various registered investment companies for which Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
Sara M. Clark, Vice President and Assistant Treasurer.
Managing Director, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark was
Controller of Wright Express Corporation (a national credit card company)
and for six years prior thereto was employed at Deloitte & Touche LLP as an
accountant. Ms. Clark is also an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
Thomas G. Sheehan, Vice President and Assistant Secretary.
Counsel, Forum Financial Services, Inc., with which he has been associated
since 1993. Prior thereto, Mr. Sheehan was Special Counsel to the Division
of Investment Management of the SEC. Mr. Sheehan is also an officer of
various registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor. His address is
Two Portland Square, Portland, Maine 04101.
Renee A. Walker, Assistant Secretary.
Fund Administrator, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, Ms. Walker was an administrator at
Longwood Partners (the manager of a hedge fund partnership) for a year.
After graduating from college, from 1991 to 1993 Ms. Walker was a sales
representative assistant at PaineWebber Incorporated (a broker-dealer).
Her address is Two Portland Square, Portland, Maine 04101.
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Christopher J. Kelley, Assistant Secretary.
Assistant Counsel, Forum Financial Services, Inc., with which he has been
associated since 1994. Prior thereto and subsequent to attending law
school, Mr. Kelley was employed at Putnam Investments in legal and
compliance capacities. His address is Two Portland Square, Portland, Maine
04101.
TRUSTEE COMPENSATION
Each Trustee of the Trust is paid a quarterly retainer fee of $4,000 for the
Trustee's service to the Trust and to Norwest Advantage Funds, a separate
registered open-end management investment company for which each Trustee serves
as trustee. In addition, each Trustee is paid $3,000 for each Board meeting
attended (whether in person or by electronic communication) and is paid $1,000
for each Committee meeting attended on a date when a Board meeting is not held.
Trustees are also reimbursed for travel and related expenses incurred in
attending meetings of the Board. Mr. Keffer received no compensation for his
services as Trustee for the past year and no officer of the Trust is compensated
by the Trust. In addition, Mr. Keffer currently is not compensated or
reimbursed for his expenses in serving as Trustee.
Mr. Burkhardt, Chairman of the Trust's and Norwest Advantage Funds' audit
committees, receives additional compensation of $1,000 from the Trust and $5,000
from Norwest Advantage Funds for his services as Chairman. Mr. Penny was
appointed a Trustee in January 1996 and, accordingly, was not paid any
compensation during the Trust's last fiscal year.
The following table provides the aggregate compensation paid to the Trustees of
the Trust by the Trust and Norwest Advantage Funds, combined. Information is
presented for the year ended October 31, 1995, the fiscal year end of certain
portfolios of Norwest Advantage Funds.
Total Compensation From
Total Compensation the Trust and Norwest
from the Trust Advantage Funds
-------------- ---------------
Mr. Brown $2,613 $26,177
Mr. Burkhardt $3,114 $33,023
Mr. Harris $2,610 $25,177
Mr. Leach $2,611 $25,177
Mr. Willeke $0 $14,000
Neither the Trust or Norwest Advantage Funds has adopted any from of retirement
plan covering Trustees or officers.
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INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT
The Adviser is required to furnish at its expense all services, facilities and
personnel necessary in connection with managing each Fund's investments and
effecting portfolio transactions for each Fund. Under its advisory agreements,
Norwest may delegate its responsibilities to any investment subadviser approved
by the Board and the shareholders of the respective Fund with respect to all or
a portion of the assets of the Fund.
The investment advisory agreement between each Fund and Norwest will continue in
effect only if such continuance is specifically approved at least annually by
the Board or by vote of the shareholders of the Fund, and in either case by a
majority of the Trustees who are not parties to the investment advisory
agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the investment advisory agreement.
The investment advisory agreement with respect to a Fund is terminable without
penalty by the Fund with respect to that Fund on 60 days' written notice when
authorized either by vote of the Fund's shareholders or by a vote of a majority
of the Board, or by the Adviser on not more than 60 days' nor less than 30 days'
written notice, and will automatically terminate in the event of its assignment.
The investment advisory agreements also provide that, with respect to each Fund,
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any act or omission in the performance of its or their
duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's or their duties or by reason of
reckless disregard of its or their obligations and duties under the agreement.
The investment advisory agreements provide that the Adviser may render service
to others.
The advisory fees are accrued daily and paid monthly. Norwest, in its sole
discretion, may waive all or any portion of its advisory fee with respect to
each Fund. The following table shows the dollar amount of fees payable under
the investment advisory agreements between Norwest and the Trust with respect to
each Fund, the amount of each fee that was waived by Norwest, if any, and the
actual fee received by Norwest. The data is for the past three fiscal years or
shorter period if the Fund has been in operation for a shorter period. As of
December 31, 1995, Income Equity Fund had not commenced operations.
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Advisory Advisory Advisory
Fee Fee Fee
Payable Waived Retained
------- ------ --------
Intermediate Bond Fund
Year Ended December 31, 1995 $12,501 $12,501 $0
Period Ended December 31, 1994 $3,852 $3,852 $0
ValuGrowth Stock Fund
Year Ended December 31, 1995 $24,138 $24,138 $0
Period Ended December 31, 1994 $6,307 $6,307 $0
Small Company Stock Fund
Period Ended December 31, 1995 $7,663 $7,663 $0
SUBADVISER - SMALL COMPANY STOCK FUND
To assist the Adviser in carrying out its obligations under the investment
advisory agreement with respect to the Small Company Stock Fund, the Adviser has
entered into an investment subadvisory agreement with Crestone, 7720 East
Belleview Avenue, Suite 220, Englewood, Colorado 80111. Crestone is registered
with the SEC as an investment adviser and is a non-wholly owned subsidiary of
Norwest. Pursuant to the investment subadvisory agreement, Crestone makes
investment decisions for the Fund and continuously reviews, supervises and
administers the Fund's investment program with respect to that portion, if any,
of the Fund's portfolio that the Adviser believes should be invested using
Crestone as a subadviser. Currently, Crestone manages the entire portfolio of
the Fund and has since the Fund's inception. The Adviser supervises the
performance of Crestone, including its adherence to the Portfolio's investment
objective and policies and pays Crestone a fee for its investment management
services. For its services under the, the Adviser pays Crestone a fee based on
the Fund's average daily net assets at an annual rate of 0.40% on the first $30
million; 0.30% on the next $30 million; 0.20% on the next $40 million and 0.15%
on all sums in excess of $100 million.
Crestone has conducted investment management services since its organization in
1990. As of December 31, 1995, Crestone provided investment management services
to over 40 clients and managed approximately $300 million in assets.
ADMINISTRATION AND DISTRIBUTION
Forum Financial Services, Inc. ("Forum") supervises the overall management of
the Trust (which includes, among other responsibilities, negotiation of
contracts and fees with, and monitoring of performance and billing of, the
Trust's transfer agent and custodian and arranging for maintenance of books and
records of the Trust) and provides the Trust with general office facilities
pursuant to a management agreement.
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The management agreement will continue in effect only if such continuance is
specifically approved at least annually by the Board or by the shareholders and,
in either case, by a majority of the Trustees who are not parties to the
management agreement or interested persons of any such party.
The management agreement terminates automatically if it is assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days' nor less than 30 days'
written notice. The management agreement also provides that, with respect to
each Fund, neither Forum nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance of its
or their duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of Forum's or their duties or by reason of
reckless disregard of its or their obligations and duties under the management
agreement.
Forum is also the Trust's distributor and acts as the agent of the Trust in
connection with the offering of Shares of each Fund on a "best efforts" basis
pursuant to a distribution agreement.
Management fees are accrued daily and paid monthly. Forum, in its sole
discretion, may waive all or any portion of its management fee with respect to
each Fund. The following table shows the dollar amount of fees payable under
the management agreement between Forum and the Trust with respect to each Fund,
the amount of fee that was waived by Forum, if any, and the actual fee received
by Forum. The data is for the past three fiscal years or shorter period if the
Fund has been in operation for a shorter period. As of December 31, 1995,
Income Equity Fund had not commenced operations.
Management Management Management
Fee Payable Fee Waived Fee Retained
----------- ---------- ------------
Intermediate Bond Fund
Year Ended December 31, 1995 $4,167 $4,167 $0
Period Ended December 31, 1994 $1,284 $1,284 $0
ValuGrowth Stock Fund
Year Ended December 31, 1995 $6,035 $6,035 $0
Period Ended December 31, 1994 $1,577 $1,577 $0
Small Company Stock Fund
Period Ended December 31, 1995 $1,916 $1,916 $0
TRANSFER AGENT AND CUSTODIAN
Norwest serves as transfer agent and dividend disbursing agent for the Trust (in
this capacity, the "Transfer Agent"). The Transfer Agent maintains an account
for each shareholder of the Trust performs other transfer agency and shareholder
service functions, and acts as dividend disbursing agent for the Trust. Norwest
also serves as the Trust's custodian for the Trust (in this capacity
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"Custodian") and may appoint certain subcustodians to act as custodian for the
foreign securities and other assets held in foreign countries of those Funds
that invest in foreign securities. The Custodian's responsibilities include
safeguarding and controlling the Trust's cash and securities, determining income
and collecting interest on Fund investments.
Pursuant to rules adopted under the 1940 Act, each Fund may maintain its foreign
securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board following a consideration of a number of factors, including
(but not limited to) the reliability and financial stability of the institution;
the ability of the institution to perform capably custodial services for the
Fund; the reputation of the institution in its national market; the political
and economic stability of the country in which the institution is located; and
further risks of potential nationalization or expropriation of Fund assets. The
custodian employs qualified foreign subcustodians to provide custody of the
Funds' foreign assets in accordance with applicable regulations.
For its services as Transfer Agent, Norwest is compensated at an annual rate of
0.05% of each Fund's average daily net assets. For its services as Custodian,
Norwest is paid an account adminstration fee plus securities holding and
transaction fees which, collectively, may not exceed an annual rate of 0.05% of
each Fund's average daily net assets. The transfer agency agreement and
custodian agreement between the Trust and Norwest each will continue in effect
only if such continuance is specifically approved at least annually by the Board
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the respective agreements or interested
persons of any such party, at a meeting called for the purpose of voting on the
respective agreements.
Transfer agent fees are accrued daily and paid monthly. Norwest, in its sole
discretion, may waive all or any portion of its transfer agent fee with respect
to each Fund. The following table shows the dollar amount of transfer agent
fees payable to Norwest, the amount of the fee that was waived by Norwest, if
any, and the actual fee received by Norwest. The data is for the past three
fiscal years or shorter period if the Fund has been in operation for a shorter
period. As of December 31, 1995, Income Equity Fund had not commenced
operations.
Transfer Agent Transfer Agent Transfer Agent
Fee Payable Fee Waived Fee Retained
----------- --------- ------------
Intermediate Bond Fund
Year Ended December 31, 1995 $1,667 $1,667 $0
Period Ended December 31, 1994 $514 $514 $0
ValuGrowth Stock Fund
Year Ended December 31, 1995 $2,414 $2,414 $0
Period Ended December 31, 1994 $631 $631 $0
Small Company Stock Fund
Period Ended December 31, 1995 $766 $766 $0
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PORTFOLIO ACCOUNTING
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for each Fund pursuant to a fund accounting agreement with
the Trust. The fund accounting agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board or by a vote
of the shareholders of the Trust and in either case by a majority of the
Trustees who are not parties to the fund accounting agreement or interested
persons of any such party, at a meeting called for the purpose of voting on the
fund accounting agreement.
Under its agreement, FFC prepares and maintains books and records of each Fund
on behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of each Fund and dividends and capital
gain distributions and prepares periodic reports to shareholders and the SEC.
For its services, FFC receives from the Trust with respect to each Fund a fee of
$36,000 per year. In addition, FFC is paid an additional $12,000 per year with
respect to Funds with more than 25% of their total assets invested in asset-
backed securities, that have more than 100 security positions or that have a
monthly portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not liable to the Trust for any action or inaction in
the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by a duly authorized officer of the Trust. This indemnification does not
apply to FFC's actions or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.
The fund accounting agreement became effective in December 1994. Prior thereto,
Norwest served as each Fund's fund accountant pursuant to an agreement with the
Trust identical in all material respects to the fund accounting agreement.
The following table shows the dollar amount of fund accounting fees payable with
respect to each Fund, the amount of fee that was waived, if any, and the actual
fee received. The data is for the past three fiscal years or shorter period if
the Fund has been in operation for a shorter period. As of December 31, 1995,
Income Equity Fund had not commenced operations.
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Accounting Accounting Accounting
Fee Payable Fee Waived Fee Retained
----------- ---------- ------------
Intermediate Bond Fund
Year Ended December 31, 1995 $38,000 $8,000 $30,000
Period Ended December 31, 1994 $22,000 $22,000 $0
ValuGrowth Stock Fund
Year Ended December 31, 1995 $38,000 $8,000 $30,000
Period Ended December 31, 1994 $21,000 $21,000 $0
Small Company Stock Fund
Period Ended December 31, 1995 $25,000 $5,000 $20,000
6. OTHER INFORMATION
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each Fund are sold on a continuous basis.
The Trust may redeem Shares involuntarily, from time to time, to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for Shares purchased by the shareholder or to collect any charge
relating to transactions effected for the benefit of a shareholder which is
applicable to the Shares as provided in the Prospectus.
Proceeds of redemptions normally are paid in cash. However, payments may be
made wholly or partially in portfolio securities if the Board determines that
payment in cash would be detrimental to the best interests of the Fund and its
shareholders. If payment for Shares redeemed is made wholly or partially in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting securities to cash.
DETERMINATION OF NET ASSET VALUE
Securities owned by a Fund for which market quotations are readily available are
valued at current market value. The Funds value their securities as follows. A
security listed or traded on an exchange is valued at its last sale price (prior
to the time as of which assets are valued) on the exchange where it is
principally traded. Lacking any such sales on the day of valuation, the
security is valued at the mean of the last bid and asked prices. All other
securities for which OTC market quotations are readily available generally are
valued at the mean of the current bid and asked prices. When market quotations
are not readily available, securities are valued at fair value as determined in
good faith by the Board. Debt securities may be valued on the basis of
valuations furnished by pricing services which utilize electronic data
processing techniques to determine valuations for normal institutional-size
trading units of debt securities, without regard to sale or bid prices, when
such valuations are believed to more accurately reflect the fair market
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value of such securities. All assets and liabilities of a Fund denominated in
foreign currencies are converted into United States dollars at the mean of the
bid and asked prices of such currencies against the United States dollar last
quoted by a major bank.
Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005 (1/2 of 1%) or
less or shareholder transactions are otherwise insubstantially affected, further
action is not required.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds will be made independently from those for any
other client account or investment company that is or may in the future become
managed by an Adviser or its affiliates. Investment decisions are the product
of many factors including basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as is possible,
averaged as to price and allocated between such clients in a manner which, in
the respective Adviser's opinion, is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients. In addition, when purchases or sales of the
same security for a Fund and other client accounts managed by an Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
Purchases and sales of fixed income portfolio securities are generally effected
as principal transactions. These securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities.
There usually are no brokerage commissions paid for such purchases. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and ask prices. In the case of
securities traded in the foreign and domestic OTC markets, there is generally no
stated commission, but the price usually includes an undisclosed commission or
markup. In underwritten offerings, the price includes a disclosed fixed
commission or discount.
Purchases and sales of equity securities on exchanges are generally effected
through brokers who charge commissions except in the OTC markets. Allocations
of transactions to brokers and dealers and the frequency of transactions are
determined by the Advisers in their best judgment and in a manner deemed to be
in the best interest of shareholders rather than by any formula.
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The primary consideration is prompt execution of orders in an effective manner
and at the most favorable price available to a Fund. In transactions on stock
exchanges in the United States, these commissions are negotiated, whereas on
foreign stock exchanges these commissions are generally fixed. Where
transactions are executed in the OTC market, a Fund will seek to deal with the
primary market makers; but when necessary in order to obtain best execution, it
will utilize the services of others. In all cases the Funds will attempt to
negotiate best execution.
A Fund may not always pay the lowest commission or spread available. Rather, in
determining the amount of commission, including certain dealer spreads, paid in
connection with securities transactions, the Advisers take into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Advisers may also take into account
payments made by brokers effecting transactions for a Fund (i) to the Fund or
(ii) to other persons on behalf of the Fund for services provided to it for
which it would be obligated to pay.
In addition, the Advisers may give consideration to research services furnished
by brokers to the Advisers for their use and may cause a Fund to pay these
brokers a higher amount of commission than may be charged by other brokers.
Such research and analysis may be used by the Advisers in connection with
services to clients other than the Funds, and an Adviser's fees are not reduced
by reason of the Adviser's receipt of the research services.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to the obligation to seek the most
favorable price and execution available and such other policies as the Board may
determine, the Advisers may consider sales of Shares of the Funds as a factor in
the selection of broker-dealers to execute portfolio transactions for the Funds.
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board has authorized the Advisers to employ affiliates to
effect securities transactions of the Funds, provided certain other conditions
are satisfied. Payment of brokerage commissions to an affiliate of the Adviser
for effecting such transactions is subject to Section 17(e) of the 1940 Act,
which requires, among other things, that commissions for transactions on
securities exchanges paid by a registered investment company to a broker which
is an affiliated person of such investment company, or an affiliated person of
another person so affiliated, not exceed the usual and customary brokers'
commissions for such transactions. It is the Funds' policy that commissions
paid to Norwest Investment Management, Inc. and other affiliates of the Adviser
will, in the judgment of the Advisers, be (i) at least as favorable as
commissions contemporaneously charged by the affiliate on comparable
transactions for its most favored unaffiliated customers and (ii) at least as
favorable as those which would be charged on comparable transactions by other
qualified brokers having comparable execution capability. The Board, including
a majority of the non-interested Trustees, has adopted procedures to ensure that
commissions paid to affiliates of the Adviser by the Funds satisfy the foregoing
standards.
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The following table shows the dollar amount of brokerage commssions paid by each
Fund. The data is for the past three fiscal years or shorter period if the Fund
has been in operation for a shorter period. As of December 31, 1995, Income
Equity Fund had not commenced operations.
Brokerage
Commissions
-----------
Intermediate Bond Fund
Year Ended December 31, 1995 $0
Period Ended December 31, 1994 $0
ValuGrowth Stock Fund
Year Ended December 31, 1995 $8,751
Period Ended December 31, 1994 $8,004
Small Company Stock Fund
Year Ended December 31, 1995 $2,115
TAXATION
Each Fund intends to qualify annually and to elect to be treated as a regulated
investment company under the Internal Revenue Code of 1986 (the "Code").
To qualify as a regulated investment company, each Fund generally must, among
other things: (i) derive in each taxable year at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of investing in such stock,
securities or currencies; (ii) derive in each taxable year less than 30% of its
gross income from the sale or other disposition of certain assets held less than
three months including stocks, securities, and certain foreign currencies,
futures, options, forward and similar contracts; (iii) diversify its holdings so
that, at the end of each quarter of the taxable year, (a) at least 50% of the
market value of the Fund's assets is represented by cash, U.S. Government
Securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the purpose
of this calculation to an amount not greater than 5% of the value of the Fund's
total assets and 10% of the outstanding voting securities of such issuer, and
(b) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government Securities or the
securities of other regulated investment companies); and (iv) distribute at
least 90% of its investment company taxable income (which includes, among other
items, dividends, interest, and net short-term capital gains in excess of any
net long-term capital losses) each taxable year. In addition, each Fund must
satisfy another tax diversification test at the end of each calendar quarter
pursuant to Code section 817(h). This latter test is described in the
Prospectus.
As a regulated investment company, a Fund generally will not be subject to
Federal income tax on its investment company taxable income and net capital
gains (any net long-term capital gains
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in excess of the sum of net short-term capital losses and capital loss
carryovers from prior years), if any, that it distributes to shareholders. Each
Fund intends to distribute to its shareholders, at least annually, substantially
all of its investment company taxable income and any net capital gains. In
addition, amounts not distributed by a Fund on a timely basis in accordance with
a calendar year distribution requirement may be subject to a nondeductible 4%
excise tax. To avoid the tax, a Fund must distribute (or be deemed to have
distributed) during each calendar year, (i) at least 98% of its ordinary income
(not taking into account any capital gains or losses) for the calendar year,
(ii) at least 98% of its capital gains in excess of its capital losses for the
twelve month period ending on October 31 for the calendar year (adjusted for
certain ordinary losses), and (iii) all ordinary income and capital gains for
previous years that were not distributed during such years. Each Fund intends
to make its distributions in accordance with the calendar year distribution
requirement. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by a Fund during October, November, or December
of that year to shareholders of record on a date in such a month and paid by the
Fund during January of the following calendar year. Such distributions will be
taxable to shareholders for the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
If a Fund invests in shares of a foreign investment company, the Fund may be
subject to U.S. Federal income tax on a portion of an "excess distribution"
from, or the gain from the sale of part or all of the shares in such company.
In addition, an interest charge may be imposed with respect to deferred taxes
arising from such distribution or gains.
Certain investments by a Fund, including investments in zero coupon debt
instruments, may cause the Fund to recognize income in a period in which no
corresponding cash or other payment is received. Such amounts will nonetheless
generally be required to be distributed in the period in which recognized.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time that Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain futures contracts, forward contracts, and options, gains
or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
Certain listed options and regulated futures contracts are considered "section
1256 contracts" for Federal income tax purposes. Section 1256 contracts held by
a Fund at the end of each taxable year will be "marked to market" and treated
for Federal income tax purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by a Fund on section
1256 contracts generally will be considered 60% long-term and 40% short-term
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capital gain or loss. Each Fund can elect to exempt its section 1256 contracts
which are part of a "mixed straddle" (as described below) from the application
of section 1256.
With respect to OTC put and call options, gain or loss realized by a Fund upon
the lapse or sale of such options held by such Fund will be either long-term or
short-term capital gain or loss depending upon the Fund's holding period with
respect to such option. However, gain or loss realized upon the lapse or
closing out of such options that are written by a Fund will be treated as short-
term capital gain or loss. In general, if a Fund exercises an option, or an
option that a Fund has written is exercised, gain or loss on the option will not
be separately recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property underlying the
option.
Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by such Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle." In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to the extent that a
Fund has unrealized gains with respect to the other position in such straddle;
(ii) a Fund's holding period in straddle positions be suspended while the
straddle exists (possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized with respect
to certain straddle positions which are part of a mixed straddle and which are
non-section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as long-
term capital losses; and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. Various elections
are available to a Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by a Fund all of the
offsetting positions of which consist of section 1256 contracts.
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital gain
in excess of net realized long-term capital losses) are treated as ordinary
income for tax purposes in the hands of a shareholder. Net capital gain (the
excess of net long-term capital gain over net short-term capital losses) will,
to the extent distributed, be treated as long term capital gain in the hands of
a shareholder regardless of the length of time a shareholder may have held the
Shares.
The 30% limitation and the diversification requirements applicable to a Fund's
assets may limit the extent to which a Fund will be able to engage in
transactions in options, futures contracts, forward contracts and swap
contracts.
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AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110, independent auditors,
acts as auditors for the Trust and has since the Trust commenced operations.
OWNERSHIP OF FUND SHARES
Prior to the public issuance of Shares of Income Equity Fund, due to its initial
investment, Forum will own all outstanding Shares of the Fund and, accordingly,
may be deemed to be a controlling person of the Fund. Upon investment in that
Fund by public shareholders, Forum will not be a controlling person of the Fund.
As of May 1, 1996, the Trustees and officers of the Trust in the aggregate owned
less than 1% of the outstanding Shares of each Fund.
Fortis Benefits Insurance Co., P.O. Box 64271, St. Paul, MN 55164 ("Fortis")
owned of record Shares of the Funds in the amounts and percentages listed:
FUND SHARE BALANCE % OF FUND
Intermediate Bond Fund 329,448.414 98.94%
ValuGrowth Stock Fund 490,021.049 99.31%
Small Company Stock Fund 227,503.171 100.00%
As of March 31, 1996, Fortis owned of record 99.34% of the outstanding Shares of
the Trust.
ADDITIONAL INFORMATION ABOUT THE TRUST
Currently, the Trust is divided into four separate series. The Trust has
received an order from the SEC permitting the issuance and sale of separate
classes of shares representing interests in each of the Trust's existing Funds,
but to date, no separate classes of any Fund exist.
The Trust's shareholders are not personally liable for the obligations of the
Trust under Delaware law. The Delaware Business Trust Act (the "Delaware Act")
provides that a shareholder of a Delaware business trust shall be entitled to
the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust shareholder liability exists in many other states,
including Texas. As a result, to the extent that the Trust or a shareholder is
subject to the jurisdiction of courts in those states, the courts may not apply
Delaware law, and may thereby subject the Trust's shareholders to liability. To
guard against this risk, the Trust Instrument of the Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation and instrument entered into by
the Trust or its Trustees, and provides for indemnification out of Trust
property of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss beyond his
investment because of shareholder liability is limited to circumstances in which
(1) a court
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refuses to apply Delaware law, (2) no contractual limitation of liability is in
effect, and (3) the Trust itself is unable to meet its obligations. In light of
Delaware law, the nature of the Trust's business, and the nature of its assets,
the Board believes that the risk of personal liability to a Trust shareholder is
extremely remote.
FINANCIAL STATEMENTS
The financial statements of each Fund as of and for the period ended December
31, 1995 (which include statements of assets and liabilities, statements of
operations, statements of changes in net assets, notes to financial statements,
financial highlights, schedules of investments and the auditors' report thereon)
are included in the Annual Report to Shareholders of the Trust and are
incorporated herein by reference.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the Securities Act of
1933 and the 1940 Act with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of the
SEC. The registration statement, including the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract of other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MUNICIPAL AND CORPORATE BONDS
MOODY'S. The two highest ratings of Moody's Investors Service ("Moody's") for
municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by
Moody's 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.
Bonds rated Aa are judged to be of high quality by all standards. Together with
the Aaa group, they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities. The generic rating Aa
may be modified by the addition of the numerals 1, 2 or 3. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of such rating category.
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.
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments of or maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
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Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
S&P. The two highest ratings of Moody's for municipal and corporate bonds are
Aaa and Aa. The two highest ratings of Standard & Poor's ("S&P") for municipal
and corporate bonds are AAA and AA. Bonds rated AAA have the highest rating
assigned by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to
pay interest and repay principal and differ from the highest rated issues only
in small degree. The AA through CCC ratings may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within that rating
category.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher-rated
categories.
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. They normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead to
weakened capacity to pay.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Bonds are rated D when the issue is in payment default, or the
obligor has filed for bankruptcy.
FITCH. The two highest ratings of Fitch Investors Service, LP ("Fitch") for
municipal and corporate bonds are AAA and AA. Bonds rated AAA are judged by
Fitch to be investment grade and of the highest credit quality. The obligor has
an exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated AA are
considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Plus (+) and minus (-) signs are used
with a rating symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in the AAA
category.
Bonds rated A are considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
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Bonds rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
Bonds rated B are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
Bonds rated CCC have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
Bonds rated CC are minimally protected. Default in payment of interest and/or
principal seems probable over time.
Bonds rated C are in imminent default in payment of interest or principal.
Bonds rated DDD, DD and D are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery. Plus and minus are not used in the DDD, DD
or D category.
SHORT TERM MUNICIPAL LOANS
MOODY'S. Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
A rating of MIG-1/VMIG-1 denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing. Loans bearing the MIG-2/VMIG-
2 designation are of high quality. Margins of protection are ample although not
so large as in the MIG-1/VMIG-1 group. A rating of MIG 3/VMIG 3 denotes
favorable quality. All security elements are accounted for but there is lacking
the undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be less
well established. A rating of MIG 4/VMIG 4 denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
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S&P. S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those issues rated SP-
1 which are determined to possess overwhelming safety characteristics will be
given a plus (+) designation. Issues rated SP-2 have satisfactory capacity to
pay principal and interest. Issues rated SP-3 have speculative capacity to pay
principal and interest.
FITCH. Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
Short-term issues rated F-1+ are regarded as having the strongest degree of
assurance for timely payment. Issues assigned a rating of F-1 reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
Issues assigned a rating of F-2 have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1.
OTHER MUNICIPAL SECURITIES AND COMMERCIAL PAPER
MOODY'S. Moody's two highest ratings for short-term debt, including commercial
paper, are Prime-1 and Prime-2, both are judged investment grade, to indicate
the relative repayment ability of rated issuers.
Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
S&P. S&P's two highest commercial paper ratings are A and B. Issues assigned
an A rating are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to indicate
the relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming
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or very strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation. The capacity for
timely payment on issues with an A-2 designation is strong. However, the
relative degree of safety is not as high as for issues designated A-1. A-3
issues have a satisfactory capacity for timely payment. They are, however,
somewhat more vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations. Issues rated B are regarded as
having only an adequate capacity for timely payment. However, such capacity may
be damaged by changing conditions or short-term adversities.
FITCH. The Fitch ratings for commercial paper are discussed above under "Short
Term Municipal Loans".
PREFERRED STOCK
MOODY'S. Moody's rates preferred stock issues as follows:
An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
An issue rated baa is considered to be a medium-grade preferred stock, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue rated b generally lacks the characteristics of a desirable investment.
Assurance of dividend payments and maintenance of other terms of the issue over
any long period of time may be small.
An issue rated caa is likely to be in arrears on dividend payments. This rating
designation does not purport to indicate the future status of payments.
An issue rated ca is speculative in a high degree and is likely to be in arrears
on dividends with little likelihood of eventual payments.
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An issue rated c is in the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating classification:
the modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
S&P. S&P rates preferred stock issues as follows:
A rating of AAA is the highest rating that may be assigned by S&P to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations.
A preferred stock issue rated AA also qualifies as a high-quality fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.
Preferred stock rated BB, B and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments, but that is currently paying.
A preferred stock rated C is a non-paying issue.
A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.
NR indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.
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FITCH. Preferred stocks assigned an AAA rating are the highest quality. Strong
asset protection, conservative balance sheet ratios, and positive indications of
continued protection of preferred dividend requirements are prerequisites for an
AAA rating.
Preferred or preference issues assigned an AA rating are very high quality.
Maintenance of asset protection and dividend paying ability appears assured but
not quite to the extent of the AAA classification.
Preferred or preference issues assigned an A rating are good quality. Asset
protection and coverages of preferred dividends are considered adequate and are
expected to be maintained.
Preferred or preference issues assigned a BBB rating are reasonably safe but
lack the protections of the A to AAA categories. Current results should be
watched for possible signs of deterioration.
Preferred or preference issues assigned a BB rating are considered speculative.
The margin of protection is slim or subject to wide fluctuations. The longer-
term financial capacities of the enterprises cannot be predicted with assurance.
Issues assigned a B rating are considered highly speculative. While earnings
should normally cover dividends, directors may reduce or omit payment due to
unfavorable developments, inability to finance, or wide fluctuations in
earnings.
Issues assigned a CCC rating are extremely speculative and should be assessed on
their prospects in a possible reorganization. Dividend payments may be in
arrears with the status of the current dividend uncertain.
Dividends are not currently being paid and may be in arrears on an issue
assigned a CC rating. The outlook for future payments cannot be assured.
Dividends are not currently being paid and may be in arrears on an issue
assigned a C rating. Prospects for future payments are remote.
An issue is assigned a D rating if the issuer is in default on its debt
obligations and has filed for reorganization or liquidation under the bankruptcy
law.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, CCC, CC, C, and D categories.
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Included in the Prospectus (Part A):
Financial Highlights.
With respect to Income Equity Fund, none.
Included in the Statement of Additional Information (Part B):
With respect to Intermediate Bond Fund, ValuGrowth Stock Fund and
Small Company Stock Fund: Schedules of Investments; Statements of
Assets and Liabilities; Statements of Operations; Statements of
Changes in Net Assets; Financial Highlights; Notes to Financial
Statements and the independent auditors' report thereon.
With respect to Income Equity Fund, none.
(b) EXHIBITS.
(1) Copy of Trust Instrument of the Registrant (filed herewith).
(2) Copy of By-Laws of the Registrant (filed herewith).
(3) Not Applicable.
(4) Form of Certificate for shares of beneficial interest of the Registrant
(filed herewith).
(5) (a) Form of Investment Advisory Agreement between Registrant and Norwest
Bank Minnesota, N.A. (filed herewith).
(b) Form of Investment Subadvisory Agreement among Registrant, Norwest
Bank Minnesota, N.A. and Crestone Capital Management, Inc. relating to
Small Company Stock Fund (filed herewith).
(6) Form of Distribution Agreement between Registrant and Forum Financial
Services, Inc. (filed herewith).
(7) Not Applicable.
<PAGE>
(8) Form of Custodian Agreement between Registrant and Norwest Bank Minnesota,
N.A. (filed herewith).
(9) (a) Form of Management Agreement between Registrant and Forum Financial
Services, Inc. (filed herewith).
(b) Form of Transfer Agency Agreement between Registrant and Norwest Bank
Minnesota, N.A. (filed herewith).
(c) Form of Fund Accounting Agreement between Registrant and Norwest Bank
Minnesota, N.A. (filed herewith).
(d) Form of Fund Accounting Agreement between Registrant and Forum
Financial Corp. (filed herewith).
(10) Opinion of Seward & Kissel (filed herewith).
(11) Consent of Independent Auditors (filed herewith).
(12) Not applicable.
(13) Investment representation letter of initial purchaser of shares of
beneficial interest of the Registrant (filed herewith).
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
Other Exhibits:
Power of Attorney, Donald H. Burkhardt, Trustee of the Trust (filed
herewith).
Power of Attorney, James C. Harris, Trustee of the Trust (filed herewith).
Power of Attorney, Richard M. Leach, Trustee of the Trust (filed herewith).
Power of Attorney, Robert C. Brown, Trustee of the Trust (filed herewith).
Power of Attorney, Donald C. Willeke, Trustee of the Trust (filed
herewith).
Power of Attorney, Timothy J. Penny, Trustee of the Trust (filed herewith).
Power of Attorney, John Y. Keffer, Trustee of the Trust (filed herewith).
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<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF MARCH 31, 1996.
Title or Class of Shares
of Beneficial Interest Number of Record Holders
- ------------------------ ------------------------
Intermediate Bond Fund 2
Income Equity Fund N/A
ValuGrowth Stock Fund 2
Small Company Stock Fund 1
ITEM 27. INDEMNIFICATION.
The general effect of Section 10.02 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the fullest
extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable to
the Registrant or its shareholders by reason of willful malfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. To the extent that the description above is in any way inconsistent
with the provisions of Section 10.02 of Registrant's Trust Instrument,
contained in this registration statement as Exhibit 1, the provisions of Section
10.2 shall govern.
The Registrant's Investment Advisory Agreement and Distribution Agreement
provide that Registrant's investment advisers and principal underwriter are
protected against liability to the extent permitted by Section 17(i) of the
Investment Company Act of 1940. Similar provisions are contained in the
Management Agreement and Transfer Agency and Fund Accounting Agreement.
Registrants principal underwriter is also provided with indemnification against
various liabilities and expenses under Section 2(f) of the Distribution
Agreement between the Registrant and the principal underwriter; provided,
however, that in no event shall the indemnification provision be construed as to
protect the principal underwriter against any liability to Registrant or its
security holders to which the principal underwriter would otherwise be subject
by reason of willful malfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under Section 2 of the Distribution Agreement.
Registrant's Transfer Agent and certain related individuals are also provided
with indemnification against various liabilities and expenses under Section 21
of the Transfer Agency Agreement between the Registrant and the Transfer Agent;
provided, however, that in no event shall the transfer agent or such persons be
indemnified against any liability or expense that
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<PAGE>
is a direct result of willful malfeasance, bad faith, or gross negligence by the
Transfer Agent or such persons. Registrant's Custodian and certain related
individuals are also provided with indemnification against various liabilities
and expenses under Section 18 of the Custodian Agreement between the Registrant
and the Custodian; provided, however, that in no event shall the transfer agent
or such persons be indemnified against any liability or expense that is a direct
result of willful malfeasance, bad faith, or gross negligence by the transfer
agent or such persons. Registrant's Fund Accountant and certain related
individuals are also provided with indemnification against various liabilities
and expenses under Section 4 of the Fund Accounting Agreement between the
Registrant and the Fund Accountant; provided, however, that in no event shall
the transfer agent or such persons be indemnified against any liability or
expense that is a direct result of willful malfeasance, bad faith, or gross
negligence by the Fund Accountant or such persons.
To the extent that the description above is inconsistent with the provisions of
Section 9 of the Investment Advisory Agreement, Section 2, of the Distribution
Agreement, Section 8 of the Management Agreement, Section 21 of the Transfer
Agency Agreement, Section 18 of the Custodian Agreement, and Section 4 of the
Fund Accounting Agreement, the contractual provisions shall govern.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
NORWEST INVESTMENT MANAGEMENT
The following are the directors and principal executive officers of Norwest Bank
Minnesota, N.A., including their business connections which are of a substantial
nature. The address of Norwest Corporation, the parent of Norwest Bank
Minnesota, N.A., is Norwest Center, Sixth Street and Marquette Avenue,
Minneapolis, MN 55479. Unless otherwise indicated below, the principal business
address of any company with which the directors and principal executive officers
are connected is also Sixth Street and Marquette Avenue, Minneapolis, MN 55479.
A. Rodney Boren, Jr., Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Boren is also a Director of
Norwest Trust Company, New York, New York and Norwest Foundation.
James R. Campbell, Director, President and Chief Executive Officer, has
held this position for the last two years. Mr. Campbell is also Executive
Vice President of
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<PAGE>
Norwest Corporation, Director and Chairman of Norwest Investment Advisors,
Inc., and a Director of Flore Properties, Inc., Centennial Investment
Corporation and Peregrine Capital Management, Inc., which is located at
LaSalle Plaza, 800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota
55402-2056. Mr. Campbell is also a Director of a number of non-profit
organizations located in Minneapolis, Minnesota. Within the last two years
Mr. Campbell was a Director of Norwest Insurance, Inc. and Norwest
Equipment Finance, Inc.
Michael A. Graf, Controller and Cashier, also serves as Senior Vice
President and Controller of Norwest Corporation.
P. Jay Kiedrowski, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates since August 1987. Mr. Kiedrowski is also a Director and
Chairman of the Board of Norwest Investment Management, Inc. and President
of Norwest Investment Management, a part of Norwest.
Scott A. Kisting, Director and Executive Vice President, is also a Director
of Norwest Insurance, Inc., IntraWest Insurance Company and Fidelity
National Life Insurance Company.
Edgar M. Morsman, Jr., Executive Vice President and Chief Lending Officer,
has served in various capacities as an employee of Norwest Bank Minnesota,
N.A. and/or its affiliates during the last two years. Mr. Morsman is also
a Director of Centennial Investment Corporation, First Interstate Equipment
Finance, Inc., Flore Properties, Inc., Norwest Credit, Inc., Norwest
Business Credit, Inc., R.D. Leasing, Inc. and Norwest Equipment Finance,
Inc., which is located at 733 Marquette Avenue, Suite 300, Minneapolis, MN
55479-2048.
Dharani P. Narayana, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Narayana is also a Director and
Chairman of Norwest Bank International, Director and Secretary of Norwest
Investments Limited, a Director of Norwest Bank International, Colorado, a
Director and Vice President of Norwest Bank International, Iowa, and a
Director of Norwest Bank International, Wisconsin. Mr. Narayana is also a
Director and Secretary of Minnetonka Overseas Investments Limited, and a
Director of Minnetonka Representaocoes Commerciais Ltda. and Nortico
Investments Ltd. all of which are located at Grand Cayman, Cayman Islands,
British West Indies.
William H. Queenan, Director, is also Executive Vice President of Norwest
Corporation.
John T. Thornton, Director, is also Executive Vice President and Chief
Financial Officer of Norwest Corporation. Mr. Thornton is also a Director
of Northern Prairie Indemnity, Limited, Grand Cayman, Cayman Islands,
British West Indies, a Director of Norwest Capital Markets, Inc. Mr.
Thornton is also a Director of Norwest Growth Fund, Inc., Norwest Venture
Capital Management, Inc. and Norwest Equity Capital, Inc., and
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<PAGE>
Director, President and Treasurer of Norwest Investors, Inc., and Director,
President and CEO of Norwest Limited, Inc., all located at 2800 Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, MN 54402. Mr.
Thornton is also Director and President of Superior Guaranty Insurance
Company and Norwest Holding Company, and a Director of Bettendorf Asset
Management, Inc. Mr. Thornton is also a Director of Eau Claire Asset
Management, Inc., Green Bay Asset Management, Inc., Iowa Asset Management,
Inc., LaCrosse Asset Management, Inc., South Bend Asset Management, Inc.,
South Dakota Asset Management, Inc., Waupun Asset Management, Inc., all
located at 100 West Commons Blvd., Suite 303, New Castle, DE 19720.
Richard C. Westergaard, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr.Westergaard is also a Director of
Norwest Business Credit, Inc., Norwest Credit, Inc., First Interstate
Equipment Finance, Inc. and R.D. Leasing, Inc. and a Director of Norwest
Equipment Finance, Inc. and Commonwealth Leasing Corporation, located at
Investors Building, 733 Marquette, Suite 300, Minneapolis, MN 55479-2048.
Charles D. White, Senior Vice President, has served in various capacities
as an employee of Norwest Bank Minnesota, N.A. and/or its affiliates during
the last two years. Mr. White is also Treasurer and Chief Financial
Officer of Norwest Limited, Inc. Mr. White is also a Director of
Bettendorf Asset Management, Inc., Eau Claire Asset Management, Inc., Green
Bay Asset Management, Inc., IntraWest Asset Management, Inc., Iowa Asset
Management, Inc., LaCrosse Asset Management, Inc., South Bend Asset
Management, Inc., South Dakota Asset Management, Inc., and Waupun Asset
Management, Inc., located at 100 West Commons Boulevard, Suite 303, New
Castle, DE 19720.
CRESTONE CAPITAL MANAGEMENT, INC.
The description of Crestone Capital Management, Inc. ("Crestone") under the
caption "Management - Investment Advisory Services - Crestone Capital
Management, Inc." in the Prospectus and "Management - Investment Advisory
Services - Subadviser - Small Company Stock Fund" in the Statement of Additional
Information relating to the Small Company Stock Fund, constituting certain of
Parts A and B, respectively, of the Registration Statement, are incorporated by
reference herein.
The following are the directors and principal officers of Crestone, including
their business connections which are of a substantial nature.
Kirk McCown, President and Director. His address is 7720 East Belleview
Avenue, Suite 220, Englewood, Colorado 80111.
Mark Steven Sunderhuse, Senior Vice President and Director. His address is
7720 East Belleview Avenue, Suite 220, Englewood, Colorado 80111.
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<PAGE>
P. Jay Kiedrowski, Director. Mr. Kiedrowski is an Executive Vice President
of Norwest and is also a Director and Chairman of the Board of Norwest
Investment Management, Inc. His address is Sixth and Marquette Avenue,
Minneapolis, Minnesota 55479.
Steven P. Gianoli, Director. Mr. Gianoli is a Vice President of Norwest.
His address is Sixth and Marquette Avenue, Minneapolis, Minnesota 55479.
Susan Koonsman, Director. Ms. Koonsman is President of Norwest Investments
& Trust. Her address is 1740 Broadway, Denver, Colorado 80274.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter to Avalon Capital, Inc., Core Trust (Delaware), The CRM Funds,
The Cutler Trust, Forum Funds, Monarch Funds, Norwest Advantage Funds,
Norwest Select Funds, Sound Shore Fund, Inc., Stone Bridge Funds, Inc. and
Trans Adviser Funds, Inc.
(b) John Y. Keffer, President and Secretary of Forum Financial Services, Inc.,
is the Chairman and President of Registrant. David R. Keffer, Vice
President and Treasurer of Forum Financial Services, Inc., is the Vice
President, Assistant Treasurer and Assistant Secretary of Registrant.
Their business address is Two Portland Square, Portland, Maine.
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of accounts, books and other documents required to be maintained by
31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of Forum Financial Services, Inc. at Two Portland
Square, Portland, Maine 04101 and at Forum Financial Corp., Two Portland Square,
Portland, Maine 04101. The records required to be maintained under Rule 31a-
1(b)(1) with respect to journals of receipts and deliveries of securities and
receipts and disbursements of cash are maintained at the offices of Registrant's
custodian. The records required to be maintained under Rule 31a-1(b)(5), (6)
and (9) are maintained at the offices of Registrant's investment advisers as
indicated in the various prospectuses constituting Part A of this Registration
Statement.
Additional records are maintained at the offices of Norwest Bank Minnesota,
N.A., 733 Marquette Avenue, Minneapolis, MN 55479-0040, Registrant's investment
adviser, custodian and transfer agent.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
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<PAGE>
ITEM 32. UNDERTAKINGS.
Registrant undertakes to:
(a) file a post-effective amendment with respect to Income Equity Fund,
using financial statements which need not be certified, within four to
six months from the effective date of this amendment to registrant's
Securities Act of 1933 Registration Statement;
(b) contain in its Trust Instrument or Bylaws provisions for assisting
shareholder communications and for the removal of trustees
substantially similar to those provided for in Section 16(c) of the
Investment Company Act of 1940, except to the extent that such
provisions are mandatory or prohibited under Delaware law; and
(c) to the extent the information called for by Item 5A of Form N-1A under
the Investment Company Act of 1940 is required to be contained in
Registrant's prospectuses or annual report and is not so contained in
a prospectus, to deliver a copy of Registrant's annual report to
shareholders upon request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Portland, State of Maine on the 25th day
of April, 1996.
NORWEST SELECT FUNDS
By: /s/ John Y. Keffer
---------------------
John Y. Keffer
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 25th
day of April, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ John Y. Keffer Chairman and President
-----------------------
John Y. Keffer
(b) Principal Financial and Accounting Officer
/s/ Michael D. Martins Treasurer
-----------------------
Michael D. Martins
(c) A Majority of the Trustees
/s/ John Y. Keffer Chairman
-----------------------
John Y. Keffer
Robert C. Brown Trustee
Donald H. Burkhardt Trustee
James C. Harris Trustee
Richard M. Leach Trustee
Donald C. Willeke Trustee
Timothy J. Penny Trustee
By: /s/ John Y. Keffer
-----------------------
John Y. Keffer
Attorney in Fact
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<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit Page Number
- ------- -----------
1 Trust Instrument of the Registrant.
2 By-Laws of the Registrant.
5(a) Investment Advisory Agreement between Registrant
and Norwest Bank Minnesota, N.A.
5(b) Investment Subadvisory Agreement among
Registrant, Norwest Bank Minnesota, N.A. and Crestone
Capital Management, Inc. relating to Small Company
Stock Fund
6 Distribution Agreement between Registrant and Forum
Financial Services, Inc.
8 Custodian Agreement between Registrant and
Norwest Bank Minnesota, N.A.
9(a) Management Agreement between Registrant and
Forum Financial Services, Inc.
(b) Transfer Agency Agreement between Registrant and
Norwest Bank Minnesota, N.A.
(c) Form of Fund Accounting Agreement between Registrant
and Norwest Bank Minnesota, N.A. (filed herewith).
(d) Fund Accounting Agreement between Registrant and
Forum Financial Corp.
10 Opinion of Seward & Kissel.
11 Consent of Independent Auditors
13 Investment representation letter of initial purchaser of shares of
beneficial interest of the Registrant.
Other Exhibit (A) Trustee Powers of Attorney
<PAGE>
EXHIBIT (1)
<PAGE>
NORWEST SELECT FUNDS
TRUST INSTRUMENT
DATED DECEMBER 8, 1993
<PAGE>
NORWEST SELECT FUNDS
TABLE OF CONTENTS
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name 1
Section 1.02 Definitions 1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest 2
Section 2.02 Issuance of Shares 2
Section 2.03 Register of Shares and Share Certificates 3
Section 2.04 Transfer of Shares 3
Section 2.05 Treasury Shares 3
Section 2.06 Establishment of Series 3
Section 2.07 Investment in the Trust 4
Section 2.08 Assets and Liabilities of Series 4
Section 2.09 No Preemptive Rights 6
Section 2.10 No Personal Liability of Shareholders 6
Section 2.11 Assent to Trust Instrument 6
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust 6
Section 3.02 Initial Trustees 7
Section 3.03 Term of Office 7
Section 3.04 Vacancies and Appointments 7
Section 3.05 Temporary Absence 8
Section 3.06 Number of Trustees 8
Section 3.07 Effect of Ending of a Trustee's Service 8
Section 3.08 Ownership of Assets of the Trust 8
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers 9
Section 4.02 Issuance and Repurchase of Shares 12
Section 4.03 Trustees and Officers as Shareholders 12
Section 4.04 Action by the Trustees 12
Section 4.05 Chairman of the Trustees 13
Section 4.06 Principal Transactions 13
ARTICLE V EXPENSES OF THE TRUST 13
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser 14
Section 6.02 Principal Underwriter 15
Section 6.03 Administrator 15
Section 6.04 Transfer Agent 15
<PAGE>
Section 6.05 Parties to Contract 15
Section 6.06 Provisions and Amendments 16
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers 16
Section 7.02 Meetings 17
Section 7.03 Quorum and Required Vote 17
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties 18
Section 8.02 Central Certificate System 18
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions 19
Section 9.02 Redemptions 19
Section 9.03 Determination of Net Asset Value 20
and Valuation of Portfolio Assets
Section 9.04 Suspension of the Right of Redemption 21
Section 9.05 Redemption of Shares in Order to 21
Qualify as Regulated Investment Company
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability 21
Section 10.02 Indemnification 22
Section 10.03 Shareholders 23
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership 23
Section 11.02 Trustee's Good Faith Action, 24
Expert Advice, No Bond or Surety
Section 11.03 Establishment of Record Dates 24
Section 11.04 Termination of Trust 25
Section 11.05 Reorganization 25
Section 11.06 Filing of Copies, References, Headings 26
Section 11.07 Applicable Law 26
Section 11.08 Amendments 27
Section 11.09 Fiscal Year 27
Section 11.10 Provisions in Conflict with Law 27
-ii-
<PAGE>
NORWEST SELECT FUNDS
December 8, 1993
TRUST INSTRUMENT, made by John Y. Keffer, James F. Patterson and David I.
Goldstein (the "Trustees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property contributed
to the trust hereunder shall be held and managed in trust under this Trust
Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "Norwest
Select Funds."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the trust as adopted by the Trustees, as
amended from time to time;
(b) "Commission" has the meaning given it in the 1940 Act. "Affiliated
Person", "Assignment," "Interested Person" and "Principal Underwriter" shall
have the respective meanings given them in the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(c) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time in the
books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have
<PAGE>
been redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust;
(f) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(g) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(h) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(i) The "Trust" means Norwest Select Funds and reference to the Trust,
when applicable to one or more Series of the Trust, shall refer to any such
Series;
(j) The "Trustees" means the person or persons who has or have signed this
Trust Instrument, so long as he or they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
III hereof and reference herein to a Trustee or to the Trustees shall refer to
the individual Trustees in their capacity as Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(l) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
2
<PAGE>
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into
a greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A register shall
be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As to
Shares for which no certificate has been issued, such register shall be entitled
to receive dividends or other distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or other distribution, nor to have notice given to him as herein
or in the Bylaws provided, until he has given his address to the transfer agent
or such officer or other agent of the Trustees as shall keep the said register
for entry thereon. No share certificates shall be issued by the Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be
3
<PAGE>
entitled to any dividends or other distributions declared with respect to the
Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue shares. At any time that there are no Shares outstanding of any
particular Series previously established and designated, the Trustees may by a
majority vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require.
All provisions herein relating to the Trust shall apply equally to each Series
of the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of all distributions made with
respect to such Series. Upon redemption of his Shares, such Shareholder shall
be paid solely out of the funds and property of such Series of the Trust.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received or accepted as may be
determined by the
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Trustees; provided, however, that the Trustees may, in their sole discretion,
(a) fix the Net Asset Value per Share of the initial capital contribution, (b)
impose a sales charge upon investments in the Trust in such manner and at such
time determined by the Trustees or (c) issue fractional Shares.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration received
by the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever from the same may be,
shall be held and accounted for separately from the other assets of the Trust
and of every other Series and may be referred to herein as "assets belonging to"
that Series. The assets belonging to a particular Series shall belong to that
Series for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, changes or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the
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State of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on inter-Series liabilities (and the
statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any
debt, with respect to that Series. No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or belonging
to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust or the Trustees, whether of the same or other Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. Each Shareholder of
the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligation and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue of
having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices
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both within and without the State of Delaware, in any and all states of the
United States of America, in the District of Columbia, in any and all
commonwealths, territories, dependencies, colonies, or possessions of the United
States of America, and in any foreign jurisdiction and to do all such other
things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the persons
named herein. On a date fixed by the Trustees, the Shareholders shall elect at
least three (3) but not more than twelve (12) Trustees, as specified by the
Trustees pursuant to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, become physically or mentally incapacitated by reason
of disease or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least two-
thirds of the Outstanding Shares.
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SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy
in the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at least
three (3), and thereafter shall be such number as shall be fixed from time to
time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than twelve (12).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination to
serve, death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart
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for any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. Legal title in all of the
assets of the Trust and the right to conduct any business shall at all times be
considered as vested in the Trustees on behalf of the Trust, except that the
Trustees may cause legal title to any Trust Property to be held by, or in the
name of the Trust, or in the name of any person as nominee. No Shareholder
shall be deemed to have a severable ownership in any individual asset of the
Trust or of any Series or any right of partition or possession thereof, but each
Shareholder shall have, except as otherwise provided for herein, a proportionate
undivided beneficial interest in the Trust or Series. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust:
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of an obligation or engagement of any other Person and to lend
Trust Property;
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(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the Shareholders; such Bylaws
shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, manager, custodian, underwriter or
other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or either
in the name of the Trust or in the name of a custodian or a nominee or nominees,
subject in either case to proper safeguards according to the usual practice of
Delaware business trusts or investment companies;
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(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders
in the manner provided herein;
(t) To establish, from time to time, a minimum investment for Shareholders
in the Trust or in one or more Series or class, and to require the redemption of
the Shares of any Shareholders whose investment is less than such minimum upon
giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers of
the Trustees to said committees and to adopt a committee charter providing for
such responsibilities, membership (including Trustees, officers or other agents
of the Trust therein) and any other characteristics of said committees as the
Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be
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brought before any court, administrative agency or other adjudicatory body;
(v) To interpret the investment policies, practices or limitations of any
Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see the application of
any payments make or property transferred to the Trustees or upon their order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer
or other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if he were not a Trustee, officer or agent; and the Trustees may issue
and sell or cause to be issued and sold Shares to and buy such Shares from any
such person or any firm or company in which he is interested, subject only to
the general limitations herein contained as to the sale
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and purchase of such Shares; and all subject to any restrictions which may be
contained in the Bylaws.
SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority
vote at a meeting duly called or by unanimous written consent without a meeting
or by telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman of
the Board of Trustees or by any two other Trustees. Notice of the time, date
and place of all meetings of the Trustees shall be given by the party calling
the meeting to each Trustee by telephone, facsimile or other electronic
mechanism sent to his home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to his home or business
address at least seventy-two hours in advance of the meeting. Notice need not
be given to any Trustee who attends the meeting without objecting to the lack of
notice or who executes a written waiver of notice with respect to the meeting.
Any meeting conducted by telephone shall be deemed to take place at the
principal office of the Trust, as determined by the Bylaws or by the Trustees.
Subject to the requirements of the 1940 Act, the Trustees by majority vote may
delegate to any one or more of their number their authority to approve
particular matters or take particular actions on behalf of the Trust. Written
consents or waivers of the Trustees may be executed in one or more counterparts.
Execution of a written consent or waiver and delivery thereof to the Trust may
be accomplished by facsimile or other similar electronic mechanism.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one of
their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited
by applicable law, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust
to, any Trustee or officer of the Trust or any firm of which any such Trustee
or officer is a member acting as principal, or have any such dealings with
any investment adviser, administrator, distributor or transfer agent for the
Trust or with any Interested Person of such person; and the Trust may employ
any such person, or firm or company in which such person is an Interested
Person, as broker, legal counsel, registrar, investment adviser,
administrator, distributor,
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transfer agent, dividend disbursing agent, custodian or in any other capacity
upon customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the Trustees
shall be reimbursed from the Trust estate or the assets belonging to the
appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodian,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; expenses of meetings of shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trust's
trustees; compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust; costs of Trustee meetings;
Securities and Exchange Commission registration fees and related expenses; state
or foreign securities laws registration fees and related expenses and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series, prior to
any rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts with
respect to the Trust or any Series whereby the other party or parties to such
contract or contracts
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shall undertake to furnish the Trustees with such investment advisory,
statistical and research facilities and services and such other facilities and
services, if any, all upon such terms and conditions as may be prescribed in the
Bylaws or as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws). Notwithstanding any other provision of this Trust
Instrument, the Trustees may authorize any investment adviser (subject to such
general or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities, other investment
instruments of the Trust, or other Trust Property on behalf of the Trustees, or
may authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales and exchanges shall
be deemed to have been authorized by all of the Trustees.
The Trustees may authorize the investment adviser to employ, from time to
time, one or more sub-advisers to perform such of the acts and services of the
investment adviser, and upon such terms and conditions, as may be agreed upon
between the investment adviser and sub-adviser (such terms and conditions not to
be inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Any reference in this Trust Instrument to the investment adviser shall be deemed
to include such sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of Shares, whereby the Trust may either
agree to sell Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the contract shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws); and
such contract may also provide for the repurchase or sale of Shares by such
other party as principal or as agent of the Trust.
SECTION 6.03 ADMINISTRATION. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
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SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character described
in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any contract of the
character described in Article VIII hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered void or voidable by reason of the existence of
any relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
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SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Sections 6.01 and 6.06 hereof, and (d) with respect to
such additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted separately by individual Series, except (i) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series; and (ii)
when the Trustees have determined that the matter affects the interests of more
than one Series, then the Shareholders of all such Series shall be entitled to
vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. A proxy may
be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III hereof at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware.
Special meetings of the Shareholders of any Series may be called by the Trustees
and shall be called by the Trustees upon the written request of Shareholders
owning at least one-tenth of the Outstanding Shares entitled to vote. Whenever
ten or more Shareholders meeting the qualifications set forth in Section 16(c)
of the 1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view to
obtaining signatures on such a
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request for a meeting, the Trustees shall comply with the provisions of said
Section 16(c) with respect to providing such Shareholders access to the list of
the Shareholders of record of the Trust or the mailing of such materials to such
Shareholders of record, subject to any rights provided to the Trust or any
Trustees provided by said Section 16(c). Notice shall be sent, by First Class
Mail or such other means determined by the Trustees, at least 15 days prior to
any such meeting.
SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent. Actions taken by Series (or
class) may be consented to unanimously in writing by Shareholders of that Series
(or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank, a company that is a member of a national securities exchange, or
a trust company, each having capital, surplus and undivided profits of at least
twenty million dollars ($20,000,000) and is a member of the Depository Trust
Company as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Bylaws of the Trust: (a) to hold the securities owned by the Trust and
deliver the same upon written order or oral order confirmed in writing; (b) to
receive and receipt for any moneys due to the Trust and deposit the same in its
own banking department or elsewhere as the Trustees may direct; and (c) to
disburse such funds upon orders or vouchers.
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The Trustees may also authorize the custodian to employ one or more sub-
custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least twenty million dollars ($20,000,000) and is a
member of the Depository Trust Company or such other person as may be permitted
by the Commission or otherwise in accordance with the 1940 Act.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend
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payout plans or related plans as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a stock dividend pro rata among
the Shareholders of a particular Series, or class thereof, as of the record date
of that Series fixed as provided in Subsection 9.01(b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). The
Series shall make payment for any such Shares to be redeemed, as aforesaid, in
cash or property from the assets of that Series and payment for such Shares
shall be made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective. Upon redemption, shares shall become Treasury shares and
may be re-issued from time to time.
SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO
ASSETS. The term "Net Asset Value" of any Series shall mean that amount by
which the assets of that Series exceed its liabilities, all as determined by or
under the direction of the Trustees. Such value shall be determined separately
for each Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect to
securities for which market quotations are readily available, at the market
value of such securities; and with respect to other securities and assets, at
the fair value as determined in good faith by the Trustees; provided, however,
that the Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the Commission
or insofar as permitted by any Order of the Commission applicable to the Series.
The Trustees may delegate any of their powers and duties under this Section 9.03
with respect to valuation of assets and liabilities. The resulting amount,
which shall represent the total Net Asset Value of the particular Series, shall
be divided by the total number of shares of that Series outstanding at the time
and the quotient so obtained shall be the Net Asset Value per Share of that
Series. At any time the Trustees may cause the Net Asset Value per Share last
determined to be determined again in similar manner and may fix the time when
such redetermined value shall
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become effective. If, for any reason, the net income of any Series, determined
at any time, is a negative amount, the Trustees shall have the power with
respect to that Series (a) to offset each Shareholder's pro rata share of such
negative amount from the accrued dividend account of such Shareholder, (b) to
reduce the number of Outstanding Shares of such Series by reducing the number of
Shares in the account of each Shareholder by a pro rata portion of that number
of full and fractional Shares which represents the amount of such excess
negative net income, (c) to cause to be recorded on the books of such Series an
asset account in the amount of such negative net income (provided that the same
shall thereupon become the property of such Series with respect to such Series
and shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (d) to combine the methods described in clauses (a)
and (b) and (c) of this sentence; or (e) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per Share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the Net Asset Value per Share of the Series at a
constant Amount.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
SECTION 9.05 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation)
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by lot or other means deemed equitable by them (a) to call for redemption by any
such person of a number, or principal amount, of Shares sufficient to maintain
or bring the direct or indirect ownership of Shares into conformity with the
requirements for such qualification and (b) to refuse to transfer or issue
Shares to any person whose acquisition of Shares in question would result in
such disqualification. The redemption shall be effected at the redemption price
and in the manner provided in this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the requirements of any taxing authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as a "Covered Person") shall be indemnified
by the Trust to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the
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words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office
or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those Trustees
who are neither Interested Persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-
type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification
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under this Section 10.02; provided, however, that either (i) such Covered Person
shall have provided appropriate security for such undertaking, (ii) the Trust is
insured against losses arising out of any such advance payments or (iii) either
a majority of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Covered Person will be found entitled to indemnification under Section
10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Trust, on behalf of the affected Series, shall, upon request by the Shareholder,
assume the defense of any claim made against the Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the
Series.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder
shall have any power to bind personally either the Trust officers or any
Shareholder. All persons extending credit to, contracting with or having any
claim against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established
Series) of the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X
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hereof and to Section 11.01 of this Article XI, the Trustees shall not be liable
for errors of judgment or mistakes of fact or law. The Trustees may take advice
of counsel or other experts with respect to the meaning and operation of this
Trust Instrument, and subject to the provisions of Article X hereof and Section
11.01 of this Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
SECTION 11.04 TERMINATION OF TRUST.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder Vote
of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of the
Trust or any affected Series to another trust, partnership, association or
corporation, or to a separate series of shares thereof, organized under the
laws of any state which trust, partnership, association or corporation is
an open-end management investment company as defined in the 1940 Act, or is
a series thereof, for adequate
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consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust or any affected Series, and which may include shares of beneficial
interest, stock or other ownership interests of such trust, partnership,
association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in Subsection 11.05(b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties with respect to the Trust or Series shall be cancelled
and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
SECTION 11.05 REORGANIZATION. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (a) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth, possession or colony of the United
States or (b) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust
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Instrument or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been make and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof' and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument.
All expressions like "his", "he" and "him", shall be deemed to include the
feminine and neuter, as well as masculine, genders. Headings are placed herein
for convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust
Instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the
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limitations or liabilities or authorities and powers of the Trustees set forth
or referenced in this Trust Instrument. The Trust shall be of the type commonly
called a "business trust", and without limiting the provisions hereof, the Trust
may exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to
vote (a) on any amendment which would affect their right to vote granted in
Section 7.01 of Article VII hereof, (b) on any amendment to this Section 11.08,
(c) on any amendment as may be required by law or by the Trust's registration
statement filed with the Commission and (d) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Notwithstanding anything else herein, any amendment to Article X
hereof shall not limit the rights to indemnification or insurance provided
therein with respect to action or omission of Covered Persons prior to such
amendment.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
SECTION 11.10 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any
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matter affect such provisions in any other jurisdiction or any other provision
of this Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees of
the Trust, have executed this instrument as of date first written above.
/s/ John Y. Keffer
------------------------------
John Y. Keffer, as Trustee
and not individually
/s/ James F. Patterson
------------------------------
James F. Patterson, as Trustee
and not individually
/s/ Davis I. Goldstein
------------------------------
David I. Goldstein, as Trustee
and not individually
29
<PAGE>
EXHIBIT (2)
<PAGE>
NORWEST SELECT FUNDS
BYLAWS
DECEMBER 8, 1993
<PAGE>
NORWEST SELECT FUNDS
BYLAWS
These Bylaws of Norwest Select Funds (the "Trust"), a Delaware business
trust, are subject to the Trust Instrument of the Trust, dated December 8, 1993,
as from time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein which are defined in the Trust Instrument are used
as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in New York City, New
York, or such other location as the Trustees may, from time to time, determine.
The Trust may establish and maintain such other offices and places of business
as the Trustees may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
SECTION 2.01 OFFICERS. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers as the Trustees may from time to
time elect. The Trustees may delegate to any officer or committee the power to
appoint any subordinate officers or agents. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
SECTION 2.02 ELECTION OF OFFICERS. The Treasurer and Secretary shall be
chosen by the Trustees. The President shall be chosen by and from the Trustees.
Two or more offices may be held by a single person except the offices of
President and Secretary. Subject to the provisions of Section 3.13 hereof, the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees.
SECTION 2.03 RESIGNATIONS. Any officer of the Trust may resign,
notwithstanding Section 2.02 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
<PAGE>
SECTION 3.01 MANAGEMENT OF THE TRUST. The business and affairs of the
Trust shall be managed by, or under the direction of, the Trustees, and they
shall have all powers necessary and desirable to carry out their
responsibilities, so far as such powers are not inconsistent with the laws of
the State of Delaware, the Trust Instrument or with these Bylaws.
SECTION 3.02 EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect from
their own number an executive committee, which shall have any or all the powers
of the Trustees while the Trustees are not in session. The Trustees may also
elect from their own number other committees from time to time. The number
composing such committees and the powers conferred upon the same are to be
determined by vote of a majority of the Trustees. All members of such
committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
SECTION 3.03 COMPENSATION. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
SECTION 3.04 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint from
among their number a Chairman who shall serve as such at the pleasure of the
Trustees. When present, he shall preside at all meetings of the Shareholders
and the Trustees, and he may, subject to the approval of the Trustees, appoint a
Trustee to preside at such meetings in his absence. He shall perform such other
duties as the Trustees may from time to time designate.
SECTION 3.05 PRESIDENT. The President shall be the chief executive
officer of the Trust and, subject to the direction of the Trustees, shall have
general administration of the business and policies of the Trust. Except as the
Trustees may otherwise order, the President shall have the power to grant,
issue, execute or sign such powers of attorney, proxies, agreements or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust or any Series thereof. He shall also have the power to
employ attorneys, accountants and other advisors and agents and counsel for the
Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
SECTION 3.06 TREASURER. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ
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as Custodian in accordance with the Trust Instrument and applicable provisions
of law. He shall make annual reports regarding the business and condition of
the Trust, which reports shall be preserved in Trust records, and he shall
furnish such other reports regarding the business and condition of the Trust as
the Trustees may from time to time require. The Treasurer shall perform such
additional duties as the Trustees may from time to time designate.
SECTION 3.07 SECRETARY. The Secretary shall record in books kept for the
purpose all votes and proceedings of the Trustees and the Shareholders at their
respective meetings. He shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees may from time to
time designate.
SECTION 3.08 VICE PRESIDENT. Any Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 3.09 ASSISTANT TREASURER. Any Assistant treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer.
SECTION 3.10 ASSISTANT SECRETARY. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary.
SECTION 3.11 SUBORDINATE OFFICERS. The Trustees from time to time may
appoint such officers or agents as they may deem advisable, each of whom shall
have such title, hold office for such period, have such authority and perform
such duties as the Trustees may determine. The Trustees from time to time may
delegate to one or more officers or committees of Trustees the power to appoint
any such subordinate officers or agents and to prescribe their respective terms
of office, authorities and duties.
SECTION 3.12 SURETY BONDS. The Trustees may require any officer or agent
of the Trust to execute a bond (including without limitation, any bond required
by the 1940 Act and the rules and regulations of the Commission) to the Trust in
such sum
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and with such surety or sureties as the Trustees may determine, conditioned upon
the faithful performance of his duties to the Trust including responsibility for
negligence and for the accounting of any of the Trust's property, funds or
securities that may come into his hands.
SECTION 3.13 REMOVAL. Any officer may be removed from office whenever in
the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at any regular meeting
or any special meeting of the Trustees. In addition, any officer or agent
appointed in accordance with the provisions of Section 3.10 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Trustees.
SECTION 3.14 REMUNERATION. The salaries or other compensation, if any, of
the officers of the Trust shall be fixed from time to time by resolution of the
Trustees.
ARTICLE IV
SHAREHOLDER'S MEETINGS
SECTION 4.01 SPECIAL MEETINGS. A special meeting of the shareholders
shall be called by the Secretary whenever (a) ordered by the Trustees or (b)
requested in writing by the holder or holders of at least 10% of the Outstanding
Shares entitled to vote. If the Secretary, when so ordered or requested,
refuses or neglects for more than 30 days to call such special meeting, the
Trustees or the Shareholders so requesting, may, in the name of the Secretary,
call the meeting by giving notice thereof in the manner required when notice is
given by the Secretary. If the meeting is a meeting of the Shareholders of one
or more Series or classes of Shares, but not a meeting of all Shareholders of
the Trust, then only special meetings of the Shareholders of such one or more
Series or classes shall be called and only the shareholders of such one or more
Series or classes shall be entitled to notice of and to vote at such meeting.
SECTION 4.02 NOTICES. Except as provided in Section 4.01, notices of any
meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen (15) days
before the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable
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<PAGE>
notice is given to persons present at the meeting and the adjourned meeting is
held within a reasonable time after the date set for the original meeting.
SECTION 4.03 VOTING-PROXIES. Subject to the provisions of the Trust
Instrument, shareholders entitled to vote may vote either in person or by proxy,
provided that either (a) an instrument authorizing such proxy to act is executed
by the Shareholder in writing and dated not more than eleven (11) months before
the meeting, unless the instrument specifically provides for a longer period or
(b) the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act which authorization is received not more than eleven (11) months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contract from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden or proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. Except as otherwise provided
herein or in the Trust Instrument, as these Bylaws or such Trust Instrument may
be amended or supplemented from time to time, all maters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Shareholders
were shareholder of a Delaware corporation.
SECTION 4.04 PLACE OF MEETING. All special meetings of the Shareholders
shall be held at the principal place of business of the Trust or at such other
place in the United States as the Trustees may designate.
SECTION 4.05 ACTION WITHOUT A MEETING. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Shareholders
held at the principal place of business of the Trust.
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ARTICLE V
TRUSTEES' MEETINGS
SECTION 5.01 SPECIAL MEETINGS. Special meetings of the Trustees may be
called orally or in writing by the Chairman of the Board of Trustees or any two
other Trustees.
SECTION 5.02 REGULAR MEETINGS. Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
SECTION 5.03 QUORUM. A majority of the Trustees shall constitute a quorum
for the transaction of business and an action of a majority of the quorum shall
constitute action of the Trustees.
SECTION 5.04 NOTICE. Except as otherwise provided, notice of any special
meeting of the Trustees shall be given by the party calling the meeting to each
Trustee, as provided for the Section 4.04 of the Trust Instrument. A written
notice may be mailed, postage prepaid, addressed to him at his address as
registered on the books of the Trust or, if not so registered, at his last known
address.
SECTION 5.05 PLACE OF MEETING. All special meetings of the Trustees shall
be held at the principal place of business of the Trust or such other place as
the Trustees may designate. Any meeting may adjourn to any place.
SECTION 5.06 SPECIAL ACTION. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
SECTION 5.07 ACTION BY CONSENT. Any action by the Trustees may be taken
without a meeting if a written consent thereto is signed by all the Trustees and
filed with the records of the Trustees' meeting. Such consent shall be treated,
for all purposes, as a vote at a meeting of the Trustees held at the principal
place of business of the Trustees.
SECTION 5.08 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Trustees
may participate in a meeting of Trustees by
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conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting. Any meeting conducted by
telephone shall be deemed to take place at and from the principal office of the
Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.01 BENEFICIAL INTEREST. The beneficial interest in the Trust
shall at all times divided into such transferable Shares of one or more separate
and distinct Series, or classes thereof, as the Trustees shall from time to time
create and establish. The number of Shares is unlimited, and each Share of each
Series or class thereof shall be without par value and shall represent an equal
proportionate interest with each other Share in the Series, none having priority
or preference over another, except to the extent that such priorities or
preference are established with respect to one or more classes of shares
consistent with applicable law and any rule or order of the Commission.
SECTION 6.02 TRANSFER OF SHARES. The Shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer recorded
on the books of the Trust, in person or by attorney.
SECTION 6.03 EQUITABLE INTEREST NOT RECOGNIZED. The Trust shall be
entitled to treat the holder of record of any Share or Shares of beneficial
interest as equitable or other claim or interest in such Share or Shares on the
part of any other person except as may be otherwise expressly provided by law.
SECTION 6.04 SHARE CERTIFICATE. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise authorize. The
Trustees may issue certificates to a Shareholder of any Series or class thereof
for any purpose and the issuance of a certificate to one or more Shareholders
shall not require the issuance of certificates generally. In the event that the
Trustees authorize the issuance of Share certificates, such certificate shall be
in the form proscribed from time to time by the Trustees and shall be signed by
the President or a Vice President and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary. Such signatures may be facsimiles if the
certificate is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the
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same effect as if he or she were such officer at the time of its issue.
In lieu of issuing certificates for Shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trusts for the record holders of such Shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such Shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
SECTION 6.05 LOSS OF CERTIFICATES. In the case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
SECTION 6.06 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may
at any time discontinue the issuance of Share certificates and may, by written
notice to each Shareholder, require the surrender of Share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of Shares in the Trust.
ARTICLE VII
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be deemed to
hold legal and beneficial ownership of any income earned on securities held by
the Trust issued by any business entity formed, organized or existing under the
laws of any jurisdiction other than a state, commonwealth, possession or colony
of the United States or the laws of the United States.
ARTICLE VIII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what extent,
and at what times and places, and under what conditions and regulations the
accounts and books of the Trust or any of them shall be open to the inspection
of the Shareholder; and no Shareholder shall have any right to inspect any
account or book or document of the Trust except as conferred by law or otherwise
by the Trustees or by resolution of the Shareholders.
ARTICLE IX
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
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The Trust may purchase and maintain insurance on behalf of any Covered
Person or employee of the Trust, including any Covered Person or employee of the
Trust who is or was serving at the request of the Trust as a Trustee, officer or
employee of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that protects
or purports to protect any Trustee or officer of the Trust against any liability
to the Trust of its Shareholders to which he would otherwise be subject by
reason or willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE X
SEAL
The seal of the Trust shall be circular in form bearing the inscription:
"NORWEST SELECT FUNDS -- 1993
THE STATE OF DELAWARE"
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EXHIBIT 5(a)
<PAGE>
NORWEST SELECT FUNDS
INVESTMENT ADVISORY AGREEMENT
May 1, 1995
AGREEMENT made this 1st day of May, 1995, between Norwest Select Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at 61 Broadway, New York, New York 10006
and Norwest Bank Minnesota, N.A. (the "Adviser"), a banking association
organized under the laws of the United States of America with its principal
place of business at Sixth Street and Marquette, Minneapolis, Minnesota 55479.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "Act") as an open-end management investment company and is
authorized to issue interests (as defined in the Trust's Trust Instrument) in
separate series;
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for the series of the Trust as listed in Appendix A hereto (the
"Fund"), and the Adviser is willing to provide those services on the terms and
conditions set forth in this Agreement;
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "SEC ") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in a prospectus ("Prospectus") and statement of additional information
("Statement of Additional Information") relating to the Fund contained therein
and as may be supplemented from time to time, all in such manner and to such
extent as may from time to time be authorized by the Trust's Board of Trustees
(the "Board"). The Trust is currently authorized to issue four series of shares
and the Board is authorized to issue any unissued shares in any number of
additional classes or series. The Trust has delivered copies of the documents
listed in this Section 1 and will from time to time furnish the Adviser with any
amendments thereof.
SECTION 2. INVESTMENT ADVISER; APPOINTMENT
The Trust hereby employs the Adviser, subject to the direction and control
of the Board, to manage the investment and reinvestment of the assets in the
Fund and, without limiting the generality of the foregoing, to provide other
services specified in Section 3 hereof.
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<PAGE>
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Fund. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Trust, for the account of, at the risk of and in the name of the Trust, to
place orders and issue instructions with respect to those transactions of the
Fund. In all purchases, sales and other transactions in securities for the
Fund, the Adviser is authorized to exercise full discretion and act for the
Trust in the same manner and with the same force and effect as the Trust might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions.
(b) The Adviser will report to the Board at each meeting thereof all
changes in the Fund since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Fund and the
Adviser, and on its own initiative, will furnish the Board from time to time
with such information as the Adviser may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in the
Fund's holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser will also furnish the Board with such statistical and
analytical information with respect to securities in the Fund as the Adviser may
believe appropriate or as the Board reasonably may request. In making purchases
and sales of securities for the Fund, the Adviser will bear in mind the policies
set from time to time by the Board as well as the limitations imposed by the
Trust's Trust Instrument, By-Laws and Registration Statement under the Act and
the Securities Act, the limitations in the Act and in the Internal Revenue Code
of 1986, as amended in respect of regulated investment companies and the
investment objectives, policies and restrictions of the Fund.
(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on
the Trust's behalf in any such respect.
(d) The Adviser shall maintain records relating to portfolio transactions
and the placing and allocation of brokerage orders as are required to be
maintained by the Trust under the Act. The Adviser shall prepare and maintain,
or cause to be prepared and maintained, in such form, for such periods and in
such locations as may be required by applicable law, all documents and records
relating to the services provided by the Adviser pursuant to this Agreement
required to be prepared and maintained by the Trust pursuant to the rules and
regulations of any national, state, or local government entity with jurisdiction
over the Trust, including the SEC and the Internal Revenue Service. The books
and records pertaining to the Trust which are in possession of the Adviser shall
be the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such books and records at all times during
the Adviser's normal business hours. Upon the reasonable request of the Trust,
copies of any such books and records shall be provided promptly by the Adviser
to the Trust or the Trust's authorized representatives.
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(e) The Adviser shall have no duties or obligations pursuant to this
Agreement, including any obligation to reimburse Fund expenses pursuant to
Section 4 hereof, during any period in which the Fund invests all (or
substantially all) of its investment assets in a registered, open-end management
investment company, or separate series thereof, in accordance with Section
12(d)(1)(E) under the Act.
SECTION 4. EXPENSES
The Adviser shall be responsible for that portion of the net expenses of
the Fund (except interest, taxes, brokerage fees and other expenses paid by the
Fund in accordance with an effective plan pursuant to Rule 12b-1 under the Act
and organization expenses, all to the extent such exceptions are permitted by
applicable state law and regulation) incurred by the Fund during the Fund's
fiscal year or portion thereof that this Agreement is in effect which, as to the
Fund, in any such year exceeds the limits applicable to the Fund under the laws
or regulations of any state in which shares of the Fund are qualified for sale
(reduced pro rata for any portion of less than a year) and which is not assumed
by Forum Financial Services, Inc., the Trust's manager and distributor, or any
other person.
The Trust hereby confirms that, subject to the foregoing, the Trust shall
be responsible and shall assume the obligation for payment of all the Trust's
other expenses, including: interest charges, taxes, brokerage fees and
commissions; certain insurance premiums; fees, interest charges and expenses of
the Trust's custodian, transfer agent and dividend disbursing agent;
telecommunications expenses; auditing, legal and compliance expenses; costs of
the Trust's formation and maintaining its existence; costs of preparing and
printing the Trust's Prospectuses, Statements of Additional Information, account
application forms and shareholder reports and delivering them to existing and
prospective shareholders; costs of maintaining books of original entry for
portfolio and fund accounting and other required books and accounts and of
calculating the net asset value of the Trust's shares; costs of reproduction,
stationery and supplies; compensation of the Trust's trustees, officers and
employees and costs of other personnel performing services for the Trust who are
not the Adviser's officers or officers of Forum Financial Services, Inc. or
their resepctive affiliates; costs of corporate meetings; registration fees and
related expenses for registration with the SEC and the securities regulatory
authorities of other countries in which the Trust's shares are sold; state
securities law registration fees and related expenses; fees and out-of-pocket
expenses payable to Forum Financial Services, Inc. under any distribution,
management or similar agreement; and all other fees and expenses paid by the
Trust pursuant to any distribution or shareholder service plan adopted pursuant
to Rule 12b-1 under the Act.
SECTION 5. STANDARD OF CARE
The Trust shall expect of the Adviser, and the Adviser will give the Trust
the benefit of, the Adviser's best judgment and efforts in rendering its
services to the Trust, and as an inducement to the Adviser's undertaking these
services the Adviser shall not be liable hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided
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that nothing herein shall be deemed to protect, or purport to protect, the
Adviser against any liability to the Trust or to the Trust's security holders to
which the Adviser would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the Adviser's duties
hereunder, or by reason of the Adviser's reckless disregard of its obligations
and duties hereunder.
SECTION 6. COMPENSATION
(a) In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to the Fund, a fee at an annual rate as listed in Appendix A
hereto. Such fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month. The Adviser's
reimbursement, if any, of the Fund's expenses as provided in Section 4 hereof,
shall be estimated and paid to the Trust monthly in arrears, at the same time as
the Trust's payment to the Adviser for such month. Payment of the advisory fee
will be reduced or postponed, if necessary, with any adjustments made after the
end of the year.
(b) For purposes of calculating the Fund's daily net assets in determining
the fees payable hereunder there shall be excluded all holdings (and liabilities
related to the purchase of holdings) in any registered open-end management
investment company for which the Adviser acts as investment adviser. No fee
shall be payable hereunder with respect to the Fund during any period in which
the Fund invests all (or substantially all) of its investment assets in a
registered, open-end management investment company, or separate series thereof,
in accordance with Section 12(d)(1)(E) under the Act.
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to the Fund
immediately upon approval by a majority of the outstanding voting securities of
the Fund.
(b) This Agreement shall remain in effect with respect to the Fund for a
period of one year from the date of its effectiveness and shall continue in
effect for successive twelve-month periods (computed from each anniversary date
of the approval) with respect to the Fund; provided that such continuance is
specifically approved at least annually (i) by the Board or by the vote of a
majority of the outstanding voting securities of the Fund, and, in either case,
(ii) by a majority of the Trust's trustees who are not parties to this Agreement
or interested persons of any such party (other than as trustees of the Trust);
provided further, however, that if this Agreement or the continuation of this
Agreement is not approved as to the Fund, the Adviser may continue to render to
the Fund the services described herein in the manner and to the extent permitted
by the Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to the a Fund at any
time, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Adviser or (ii) by the Adviser on 60 days' written notice to the
Trust. This agreement shall terminate upon assignment.
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<PAGE>
SECTION 8. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers, directors or employees who may also be a
trustee, officer or employee of the Trust, or persons otherwise affiliated with
the Trust to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
SECTION 9. SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations under
this agreement by employing, subject to its supervision, one or more persons who
are registered as investment advisers pursuant to the Investment Advisers Act of
1940, as amended, or who are exempt from registration thereunder
("Subadvisers"). Each Subadviser's employment will be evidenced by a separate
written agreement approved by the Board and, if required, by the shareholders of
the Fund. The Adviser shall not be liable hereunder for any act or omission of
any Subadviser, except to exercise good faith in the employment of the
Subadviser and except with respect to matters as to which the Adviser assumes
responsibility in writing.
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interest holders of the Fund shall not be
liable for any obligations of the Trust or of the Fund under this Agreement, and
the Adviser agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
the Adviser's rights or claims relate in settlement of such rights or claims,
and not to the Trustees of the Trust or the interest holders of the Fund.
SECTION 11. "NORWEST" NAME
If the Adviser ceases to act as investment adviser to the Trust or any Fund
whose name includes the word "Norwest," or if the Adviser requests in writing,
the Trust shall take prompt action to change the name of the Trust any such Fund
to a name that does not include the word "Norwest." The Adviser may from time
to time make available without charge to the Trust for the Trust's use any marks
or symbols owned by the adviser, including marks or symbols containing the word
"Norwest" or any variation thereof, as the Adviser deems appropriate. Upon the
Adviser's request in writing, the Trust shall cease to use any such mark or
symbol at any time. The Trust acknowledges that any rights in or to the word
"Norwest" and any such marks or symbols which may exist on the date of this
Agreement or arise hereafter are, and under any and all circumstances shall
continue to be, the sole property of the Adviser. The Adviser may permit other
parties, including other investment companies, to use the word "Norwest" in
their names without the consent of the Trust. The Trust shall not use the word
"Norwest" in conducting any
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<PAGE>
business other than that of an investment company registered under the Act
without the permission of the Adviser.
SECTION 12. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of the Fund.
(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware.
(d) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
NORWEST BANK MINNESOTA, N.A.
/s/ P. Jay Kiedrowski
P. Jay Kiedrowski
Executive Vice President
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<PAGE>
NORWEST SELECT FUNDS
INVESTMENT ADVISORY AGREEMENT
May 1, 1995
Appendix A
Fee as a % of
the Annual Average Daily
Funds of the Trust Net Assets of the Fund
- ------------------ ----------------------
Small Company Stock Fund 0.80%
<PAGE>
EXHIBIT 5(b)
<PAGE>
NORWEST SELECT FUNDS
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made this 24th day of April, 1995, among Norwest Select Funds
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at 61 Broadway, New York, New York
10006, Norwest Bank Minnesota, N.A. (the "Adviser"), a corporation organized
under the laws of State of Delaware with its principal place of business at
Sixth Street and Marquette, Minneapolis, Minnesota 55479 and Crestone Capital
Management, Inc. (the "Subadviser"), a corporation organized under the laws of
the State of Colorado with its principal place of business at 7720 East
BelleView Avenue, Englewood, Colorado 80111.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "Act") as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes; and
WHEREAS, the Trust and the Adviser desire that the Subadviser perform
investment advisory services for the Small Company Stock Fund (the "Fund") and
the Subadviser is willing to provide those services on the terms and conditions
set forth in this Agreement;
NOW THEREFORE, the Trust, the Adviser and the Subadviser agree as follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Fund contained therein and as may be supplemented from time to time, all in such
manner and to such extent as may from time to time be authorized by the Trust's
Board of Trustees (the "Board"). The Trust is currently authorized to issue
four series of shares and the Board is authorized to issue any unissued shares
in any number of additional classes or series. The Trust has delivered copies
of the documents listed in this Section 1 and will from time to time furnish
Subadviser with any amendments thereof.
SECTION 2. INVESTMENT ADVISER; APPOINTMENT
Subject to the direction and control of the Board, the Adviser manages the
investment and reinvestment of the assets of the Fund and provides for certain
management and services as
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<PAGE>
specified in the Investment Advisory Agreement between the Trust and the Adviser
with respect to the Fund.
Subject to the direction and control of the Board, the Subadviser shall
manage the investment and reinvestment of the assets of the Fund and, without
limiting the generality of the foregoing, shall provide the management and other
services specified below, all in such manner and to such extent as may be
directed from time to time by the Adviser.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Fund. To carry out such
decisions, the Subadviser is hereby authorized, as agent and attorney-in-fact
for the Trust, for the account of, at the risk of and in the name of the Trust,
to place orders and issue instructions with respect to those transactions of the
Fund. In all purchases, sales and other transactions in securities for the
Fund, the Subadviser is authorized to exercise full discretion and act for the
Trust in the same manner and with the same force and effect as the Trust might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions.
(b) The Subadviser will report to the Board at each meeting thereof all
changes in the Fund since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Fund and the
Subadviser, and on its own initiative, will furnish the Board from time to time
with such information as the Subadviser may believe appropriate for this
purpose, whether concerning the individual companies whose securities are
included in the Fund's holdings, the industries in which they engage, or the
economic, social or political conditions prevailing in each country in which the
Fund maintains investments. The Subadviser will also furnish the Board with
such statistical and analytical information with respect to securities in the
Fund as the Subadviser may believe appropriate or as the Board reasonably may
request. In making purchases and sales of securities for the Fund, the
Subadviser will bear in mind the policies set from time to time by the Board as
well as the limitations imposed by the Trust's Trust Instrument, By-Laws,
Registration Statement under the Act and the Securities Act, the limitations in
the Act and in the Internal Revenue Code of 1986, as amended in respect of
regulated investment companies and the investment objectives, policies and
restrictions of the Fund.
(c) The Subadviser may from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's behalf in any such respect.
(d) The Subadviser shall maintain records relating to portfolio
transactions and the placing and allocation of brokerage orders as are required
to be maintained by the Trust under the Act. The Subadviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such periods
and in such locations as may be required by applicable law, all documents
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<PAGE>
and records relating to the services provided by the Subadviser pursuant to this
Agreement required to be prepared and maintained by the Trust pursuant to the
rules and regulations of any national, state, or local government entity with
jurisdiction over the Trust, including the Securities and Exchange Commission
and the Internal Revenue Service. The books and records pertaining to the Trust
which are in possession of the Subadviser shall be the property of the Trust.
The Trust, or the Trust's authorized representatives, shall have access to such
books and records at all times during the Subadviser's normal business hours.
Upon the reasonable request of the Trust, copies of any such books and records
shall be provided promptly by the Subadviser to the Trust or the Trust's
authorized representatives.
SECTION 4. EXPENSES
Subject to any expenses reimbursement arrangements between the Adviser or
others and the Trust, the Trust shall be responsible and shall assume the
obligation for payment of all of the Trust's expenses.
SECTION 5. STANDARD OF CARE
The Trust shall expect of the Subadviser, and the Subadviser will give the
Trust the benefit of, the Subadviser's best judgment and efforts in rendering
its services to the Trust, and as an inducement to the Subadviser's undertaking
these services the Subadviser shall not be liable hereunder for any mistake of
judgment or in any event whatsoever, except for lack of good faith, provided
that nothing herein shall be deemed to protect, or purport to protect, the
Subadviser against any liability to the Trust or to the Trust's security holders
to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Subadviser's duties hereunder, or by reason of the Subadviser's reckless
disregard of its obligations and duties hereunder.
SECTION 6. COMPENSATION
In consideration of the foregoing, the Adviser and not the Trust shall pay
the Subadviser a fee as shall be determined from time to time in writing between
the Adviser and the Subadviser; provided, that no fee shall be paid to the
Subadviser by the Adviser from the date hereof until the date on which
shareholders of the Fund approve this Agreement.
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date first above written.
(b) This Agreement shall remain in effect for a period of one year from
the date of its effectiveness and shall continue in effect for successive
twelve-month periods (computed from each anniversary date of the approval);
provided that such continuance is specifically approved at least annually (i) by
the Board or by the vote of a majority of the outstanding voting securities of
the Fund, and, in either case, (ii) by a majority of the Trust's trustees who
are not parties to this Agreement or interested persons of any such party (other
than as trustees of the Trust); provided
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<PAGE>
further, however, that if this Agreement or the continuation of this Agreement
is not approved, the Subadviser may continue to render the services described
herein in the manner and to the extent permitted by the Act and the rules and
regulations thereunder.
(c) This Agreement may be terminated at any time, without the payment of
any penalty, (i) by the Board or by a vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Subadviser or
(ii) by the Subadviser on 60 days' written notice to the Trust. This agreement
shall terminate upon assignment unless prior approval of the Board is obtained.
SECTION 8. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's officers, directors or employees who may
also be a trustee, officer or employee of the Trust, or persons otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.
SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of the Fund shall not be
liable for any obligations of the Trust or of the Fund under this Agreement, and
the Subadviser agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Subadviser's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the shareholders of
the Fund.
SECTION 10. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of the Fund thereby affected.
(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware.
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<PAGE>
(d) The terms "vote of a majority of the outstanding voting securities",
"interested person", "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
NORWEST BANK MINNESOTA, N.A.
/s/ P. Jay Kiedrowski
P. Jay Kiedrowski
Executive Vice President
CRESTONE CAPITAL MANAGEMENT, INC.
/s/ Kirk McCown
Kirk McCown
President
-5-
<PAGE>
NORWEST SELECT FUNDS
INVESTMENT SUBADVISORY AGREEMENT
FEE AGREEMENT
This fee agreement is made as of the 24th day of April, 1995 by and between
Crestone Capital Management, Inc. ("Crestone") and Norwest Bank Minnesota, N.A.
("Norwest").
WHEREAS, the parties have entered into a Norwest Select Funds Investment
Subadvisory Agreement ("Subadvisory Agreement") whereby Crestone provides
investment management advice to Norwest;
WHEREAS, the Subadvisory provide that the fees to be paid Crestone are to
be as agreed upon in writing by the parties.
NOW THEREFORE, the parties agree that the fees to be paid Crestone under
the Subadvisory Agreement shall be calculated as follows on a monthly basis by
applying the following annual percentage rates to the assets managed by Crestone
pursuant to said Subadvisory Agreement:
a. 0.0040 on the first $30,000,000.00;
b. 0.0030 on the next $30,000,000.00;
c. 0.0020 on the next $40,000,000.00; and
d. 0.0015 on all sums in excess of $100,000,000.00;
The net assets under management against which the foregoing fees are to be
applied is the month-end average of net assets, determined at the end of each
month by dividing the sum of the average net assets managed by Crestone at the
end of each week during the month by the number of weeks ended during the
calendar month. The assets for each weekly period are determined by averaging
the net assets under management at the close of each business day for each
business day in the week that this agreement is in effect. If this agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of the total number
of days in such month. During any period when the determination of net asset
value is suspended, the
<PAGE>
average net asset value for the last day prior to such suspension shall for this
purpose be deemed to be the average net asset value at the close of each
succeeding week until it is again determined.
The foregoing fee schedule shall remain in effect until changed in writing
by the parties.
NORWEST BANK MINNESOTA, N.A.
/s/ P. Jay Kiedrowski
P. Jay Kiedrowski
Executive Vice President
CRESTONE CAPITAL MANAGEMENT, INC.
/s/ Kik McCown
Kirk McCown
President
-1-
<PAGE>
EXHIBIT 6
<PAGE>
NORWEST SELECT FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of June, 1994 and effective as of June 1, 1994,
between Norwest Select Funds (the "Trust"), a business trust organized under the
laws of the State of Delaware with its principal place of business at 61
Broadway, New York, New York 10006, and Forum Financial Services, Inc. (the
"Distributor"), a corporation organized under the laws of the State of Delaware
with its principal place of business at 61 Broadway, New York, New York 10006.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end management investment company and may
issue its shares of beneficial interest, no par value (the "Shares") in separate
series and classes; and
WHEREAS, the Trust desires that the Distributor, as principal underwriter,
offer the Shares of the Trust representing interests in each of the classes now
existing or in the future created in each of the separate investment portfolios
of the Trust as listed from time to time on Schedule A hereto (each a "Fund"
and, collectively, the "Funds") and Distributor is willing to act as principal
underwriter on the terms and conditions set forth in this Agreement;
NOW THEREFORE, the Trust and Distributor agree as follows:
SECTION 1. APPOINTMENT
The Trust hereby appoints Distributor, and Distributor hereby agrees, to
act as distributor of the Shares for the period and on the terms set forth in
this Agreement. In connection therewith, the Trust has delivered to Distributor
copies of its Trust Instrument and Bylaws, the Trust's Registration Statement
and all amendments thereto filed pursuant to the Securities Act of 1933, as
amended (the "Securities Act") or the Act (the "Registration Statement") and the
current Prospectus and Statement of Additional Information of each Fund
(collectively, as currently in effect and as amended or supplemented, the
"Prospectus") and, shall promptly furnish Distributor with all amendments of or
supplements to the foregoing.
SECTION 2. DISTRIBUTION SERVICES
Subject to the direction and control of the Trust's Board of Trustees (the
"Board"), the Distributor shall serve as distributor of the Shares.
(a) As agent of and sole distributor for the Trust, Distributor shall
offer, and solicit offers to subscribe to, the unsold balance of Shares as shall
then be effectively registered under the Securities Act and applicable state
securities laws. All subscriptions for Shares obtained by Distributor shall be
directed to the Trust for acceptance and shall not be binding on the Trust until
accepted by it. Distributor shall have no authority to make binding
subscriptions on behalf
-2-
<PAGE>
of the Trust. The Trust reserves the right to sell Shares directly to investors
through subscriptions received by the Trust. Distributor's rights hereunder
shall not apply to Shares issued in connection with (a) the merger or
consolidation of the Trust or its series or classes with any other investment
company or series or class thereof, (b) the Trust's acquisition by purchase or
otherwise of all or substantially all of the assets or stock of any other
investment company, or (c) the reinvestment in Shares by the Trust's
shareholders of dividends or other distributions or any other offering by the
Trust of securities to its shareholders.
(b) Distributor shall use its best efforts to obtain subscriptions to
Shares upon the terms and conditions contained herein and in the Prospectus,
including the offering price. Distributor shall send to the Trust promptly all
subscriptions placed with Distributor. The Trust shall advise Distributor in
its capacity as distributor of the approximate net asset value per Share at any
time requested by Distributor which is a net asset value determination time as
disclosed in the Prospectus and at such other times as it shall have been
determined. The Trust shall furnish Distributor from time to time, for use in
connection with the offering of Shares, such other information with respect to
the Trust and Shares as Distributor may reasonably request. The Trust shall
supply Distributor with such copies of the Prospectus as Distributor may
request. Distributor may use its employees, agents and other persons who need
not be its employees, at its cost and expense, to assist it in carrying out its
obligations hereunder, but no such employee, agent or other person shall be
deemed to be an agent of the Trust or have any rights under this Agreement.
(c) The Trust reserves the right to suspend the offering of Shares at any
time, in the absolute discretion of the Board, and upon notice of such
suspension Distributor shall cease to offer shares of Stock.
(d) The Trust and Distributor will cooperate with each other in taking
such action as may be necessary to qualify Shares for sale under the securities
laws of such states as the Trust may designate, provided, that Distributor shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state. The Trust shall pay all fees and expenses of
registering Shares under the Securities Act and of registering or qualifying
Shares and the Trust's qualification under applicable state securities laws.
Distributor shall pay all expenses relating to its broker-dealer qualification.
(e) The Trust represents that its Registration Statement and Prospectus
under the Securities Act have been or will be, as the case may be, carefully
prepared in conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission (the "Commission")
thereunder. The Trust represents and warrants that its Registration Statement
and Prospectus contain or will contain all statements required to be stated
therein in accordance with the Securities Act and the rules and regulations of
the Commission thereunder, and that all statements of fact contained or to be
contained therein are or will be true and correct at the time indicated or on
the effective date as the case may be; that the Trust's Registration Statement
and Prospectus, when they shall become effective or be authorized for use, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a
-3-
<PAGE>
purchaser of Shares. The Trust will from time to time file such amendment or
amendments to its Registration Statement and Prospectus as, in the light of
future developments, shall, in the opinion of the Trust's counsel, be necessary
in order to have such Registration Statement and Prospectus at all times contain
all material facts required to be stated therein or necessary to make any
statements therein not misleading to a purchaser of Shares, but, if the Trust
shall not file such amendment or amendments within fifteen days after receipt of
a written request from Distributor to do so, Distributor may, at its option,
terminate this Agreement immediately. The Trust shall not file any amendment to
its Registration Statement and Prospectus without giving Distributor reasonable
notice thereof in advance; provided, however, that nothing in this Agreement
contained shall in any way limit the Trust's right to file at any time such
amendments to its Registration Statement and Prospectus, of whatever character,
as it deems advisable, such right being in all respects absolute and
unconditional. The Trust represents and warrants that any amendment to its
Registration Statement and Prospectus hereafter filed will, when it becomes
effective, contain all statements required to be stated therein in accordance
with the Act and the rules and regulations of the Commission thereunder, that
all statements of fact contained therein will, when the same shall become
effective, be true and correct and that no such amendment, when it becomes
effective, will include an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of Shares.
(f) The Trust will indemnify, defend and hold Distributor, its several
officers and directors, and any person who controls Distributor within the
meaning of Section 15 of the Securities Act (collectively, the "Distributor
Indemnities"), free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) which any Distributor Indemnity may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Trust's Registration
Statement and Prospectus under the Securities Act or arising out of or based
upon any alleged omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that in no event shall anything contained in this paragraph (f) be so construed
as to protect Distributor against any liability to the Trust or its security
holders to which Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Section 2. This agreement to indemnify Distributor Indemnities is expressly
conditioned upon the Trust being notified of any action brought against any
Distributor Indemnity, such notification to be given by letter, facsimile
transmission or telegram to the Trust and referring to the person against whom
such action is brought within ten days after the summons or other first legal
process shall have been served on such person. The failure so to notify the
Trust of any such action shall not relieve the Trust from any liability which it
may have to any Distributor Indemnity otherwise than on account of the
indemnification provided for in this paragraph (f). The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, and to
retain counsel of good standing chosen by it and approved by Distributor. In
the event the Trust elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendants in such suit
shall bear the fees and expenses of any additional
-4-
<PAGE>
counsel retained by any of them. In the event the Trust does not elect to
assume the defense of any such suit, or in case Distributor does not approve of
counsel chosen by the Trust or has been advised that it may have available
defenses or claims which are not available to or conflict with those available
to the Trust, the Trust will reimburse any Distributor Indemnity named as
defendant in such suit for the fees and expenses of any counsel retained by any
such person. The indemnification provisions contained in this paragraph (f) and
the Trust's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Distributor Indemnity and shall survive the sale of any
Shares made pursuant to subscriptions obtained by Distributor. The
indemnification provisions of this paragraph (f) will inure exclusively to the
benefit of the Distributor Indemnities and their respective successors and
assigns. The Trust agrees promptly to notify Distributor of the commencement of
any litigation or proceeding against the Trust or any of its trustees or
officers in connection with the issue or sale of Shares.
(g) Distributor agrees to indemnify, defend and hold the Trust, its
several officers and directors, and any person who controls the Trust within the
meaning of Section 15 of the Securities Act (collectively, the "Trust
Indemnities"), free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which any Trust Indemnity may incur under the Act, or
under common law or otherwise, but only to the extent that such liability, or
expense incurred by the Trust Indemnities resulting from such claims or demands
shall arise out of or be based upon any alleged untrue statement of a material
fact contained in information furnished in writing by Distributor in its
capacity as distributor to the Trust for use in the Trust's Registration
Statement or Prospectus under the Securities Act, or shall arise out of or be
based upon any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust Indemnities is expressly conditioned upon Distributor being
notified of any action brought against a Trust Indemnity, such notification to
be given by letter, facsimile transmission or telegram addressed and referring
to the person against whom such action is brought within ten days after the
summons or other first legal process shall have been served on such person.
Distributor shall have a right to control the defense of such action, with
counsel of its own choosing, satisfactory to the Trust, if such action is based
solely upon such alleged misstatement or omission on Distributor's part, and in
any other event Distributor and the Trust Indemnities named shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure so to notify Distributor of any such action shall not
relieve Distributor from any liability which it may have to any Trust Indemnity
otherwise than on account of the indemnification provisions in this
paragraph (g).
(h) The Trust shall advise Distributor immediately: (i) of any request by
the Commission for amendments to the Trust's Registration Statement or
Prospectus or for additional information; (ii) in the event of the issuance by
the Commission of any stop order suspending the effectiveness of the Trust's
Registration Statement or Prospectus or the initiation of any proceedings for
that purpose; (iii) of the happening of any material event which makes untrue
any statement made in the Trust's Registration Statement or Prospectus or which
requires
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the making of a change in either in order to make the statements therein not
misleading; and (iv) of all action of the Commission with respect to any
amendments to the Trust's Registration Statement or Prospectus which may from
time to time be filed with Commission under the Act or the Securities Act.
SECTION 3. STANDARD OF CARE
The Distributor shall give the Trust the benefit of its best judgment and
efforts in rendering its services to the Trust and shall not be liable for error
of judgment or mistake of law, for any loss arising out of any investment, or in
any event whatsoever, provided that nothing herein shall be deemed to protect,
or purport to protect, the Distributor against any liability to the Trust or to
the security holders of the Trust to which it would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties hereunder, or by reason of reckless disregard of its obligations
and duties hereunder.
SECTION 4. EXPENSES
Subject to any expense reimbursement arrangements between the Distributor
or others and the Trust, the Trust shall be responsible and assumes the
obligation for payment of all its expenses.
SECTION 5. COMPENSATION
(a) The Distributor shall be entitled to no compensation or reimbursement
of expenses for the distribution and service activities provided by the
Distributor pursuant to this Agreement, except to the extent such compensation
or reimbursement is provided, with respect to any Fund or any class of a Fund,
pursuant to a plan of distribution adopted under Rule 12b-1 under the Act.
(b) Notwithstanding anything in this Agreement to the contrary, the
Distributor and its affiliated persons may receive compensation or reimbursement
from the Trust with respect to (i) the provision of distribution and service
activities on behalf of the Funds in accordance with any distribution plan
adopted by the Trust pursuant to Rule 12b-1 under the Act, (ii) the provision of
shareholder support or other services, (iii) the provision of management
services or (iv) service as a Trustee or officer of the Trust.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date on which the Trust's
Registration Statement relating to the shares of the Norwest Select Funds
becomes effective and shall relate to every other Fund as of the date on which
the Trust's Registration Statement relating to the shares of such Fund becomes
effective. Upon the effectiveness of this Agreement, it shall supersede all
previous agreements between the Trust and the Distributor covering the subject
matter hereof.
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(b) This Agreement shall continue in effect for twelve months and,
thereafter, shall continue in effect for successive twelve-month periods,
provided that such continuance is specifically approved at least annually (i) by
the Board or by a vote of a majority of the outstanding voting securities of the
Trust and (ii) by a vote of a majority of Trustees of the Trust (I) who are not
parties to this Agreement or interested persons of any such party and (II) with
respect to each class of a Fund, who do not have any direct or indirect
financial interest in any plan of distribution adopted under Rule 12b-1 under
the Act applicable to the class or in any agreements related to such plan, cast
in person at a meeting called for the purpose of voting on such approval. If
the continuation of this Agreement is not approved, the Distributor may continue
to render the services described herein in the manner and to the extent
permitted by the Act.
(c) This Agreement may be terminated at any time, without the payment of
any penalty, (i) by the Board or by a vote of a majority of the outstanding
voting securities of the Trust or, with respect to each class of a Fund for
which there is an effective plan of distribution adopted under Rule 12b-1 under
the Act, a majority of Trustees of the Trust who do not have any direct or
indirect financial interest in any such plan or in any agreements related to
such plan, on 60 days' written notice to the Distributor or (ii) by the
Distributor on 60 days' written notice to the Trust. This Agreement shall
automatically terminate in the event of its assignment.
SECTION 8. ACTIVITIES OF DISTRIBUTOR
Except to the extent necessary to perform its obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of its officers, directors or employees (whether or
not they are a director, officer, employee or other affiliated person of the
Trust) to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or of the Funds under this Agreement,
and the Distributor agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Distributor's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the shareholders of
the Funds.
SECTION 10. MISCELLANEOUS
(a) Except for Schedule A, no provisions of this Agreement may be amended
or modified in any manner except by a written agreement properly authorized and
executed by both parties hereto and, if required by the Act, by a vote of a
majority of the outstanding voting securities of the Trust.
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(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did no contain the particular part, term or provision held to be illegal or
invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.
(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
FORUM FINANCIAL SERVICES, INC.
/s/ David R. Keffer
David R. Keffer
Vice President
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NORWEST SELECT FUNDS
DISTRIBUTION AGREEMENT
June 1, 1994
As Amended May 1, 1995
SCHEDULE A
FUNDS OF THE TRUST
ValuGrowth Stock Fund
Intermediate Bond Fund
Adjustable U.S. Government Reserve Fund
Small Company Stock Fund
<PAGE>
EXHIBIT 8
NORWEST SELECT FUNDS
CUSTODIAN AGREEMENT
June 1, 1994
AGREEMENT, dated as of June 1, 1994, between Norwest Select Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at 61 Broadway, New York, New York 10006
and Norwest Bank Minnesota, N.A. (the "Custodian"), a banking association
organized under the laws of the United States of America with its principal
place of business at Sixth Street and Marquette, Minneapolis, Minnesota 55479.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes;
WHEREAS, the Trust desires to appoint Norwest Bank Minnesota, N.A.,
custodian of its securities and cash and Norwest Bank Minnesota, N.A. is willing
to act in such capacity upon the terms and conditions set forth below; and
WHEREAS, pursuant to a separate agreement between the Trust and Norwest
Bank Minnesota, N.A. (the "Transfer Agency Agreement"), Norwest Bank Minnesota,
N.A. will perform the duties of transfer agent of the Trust
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. DEFINITIONS. Whenever used in this Agreement, the following
terms shall have the meanings specified, insofar as the context will allow.
(a) Act: The term Act shall mean the Investment Company Act of 1940, as
amended from time to time.
(b) Board: The term Board shall mean the Board of Trustees of the Trust.
(c) Book-Entry Account: The term Book-Entry Account shall mean an account
maintained by a Federal Reserve Bank in which Book-Entry Securities are held.
(d) Book-Entry Securities: The term Book-Entry Securities shall mean
securities issued by the United States Treasury and United States Federal
agencies and instrumentalities that are maintained in the book-entry system
maintained by a Federal Reserve Bank.
(e) Custodian: The term Custodian shall mean Norwest Bank, Minnesota,
N.A., in its capacity as custodian under this Agreement.
(f) Foreign Securities: The term Foreign Securities shall mean "Foreign
Securities" as that term is defined in Rule 17f-5 under the Act.
(g) Foreign Sub-Custodian: The term Foreign Sub-Custodian shall mean
"Eligible Foreign Sub-Custodian" as that term is defined in Rule 17f-5 under the
Act.
(h) Fund Business Day: The term Fund Business Day shall mean a day that
is a business day for a Series as defined in the Series' prospectus.
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(i) Oral Instructions: The term Oral Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to the Custodian in person or by telephone, vocal telegram or
other electronic means, by a person or persons reasonably believed in good faith
by the Custodian to be a person or persons authorized by a resolution of the
Board to give Oral Instructions on behalf of the Trust. Each Oral Instruction
shall specify whether it is applicable to the entire Trust or a specific Series
of the Trust.
(j) Securities: The term Securities shall mean bonds, debentures, notes,
stocks, shares, evidences of indebtedness, and other securities and investments
from time to time owned by the Trust.
(k) Securities Depository: The term Securities Depository shall mean a
system, domestic or foreign, for the central handling of securities in which all
securities of any particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of the securities and shall include any system
for the issuance of Book-Entry Securities.
(l) Series: The term Series shall mean the Series listed in Appendix A or
any series that the Trust shall subsequently establish provided, that the
Custodian may decline to act as custodian for any series subsequently
established
(m) Share Certificates: The term Share Certificates shall mean the
certificates for the Shares.
(n) Shareholders: The term Shareholders shall mean the registered owners
from time to time of the Shares, as reflected on the share registry records of
the Trust.
(o) Shares: The term Shares shall mean the issued and outstanding shares
of beneficial interest, no par value, of the Trust, including any fractions
thereof.
(p) Sub-Custodian: The term Sub-Custodian shall mean any person selected
by the Custodian under Section 20 hereof and in accordance with the requirements
of the Act to custody any or all of the Securities and cash of the Trust, and
shall include Foreign Sub-Custodians.
(q) Trust: The term Trust shall mean Norwest Select Funds.
(r) Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to the Custodian in original writing containing original
signatures, or a copy of such document transmitted by telecopy, including
transmission of such signature, or other mechanical or documentary means, at the
request of a person or persons reasonably believed in good faith by the
Custodian to be a person or persons authorized by a resolution of the Board to
give Written Instructions on behalf of the Trust. Each Written Instruction
shall specify whether it is applicable to the entire Trust or a specific Series
of the Trust.
(s) 1934 Act: The term 1934 Act shall mean the Securities Exchange Act of
1934, as amended from time to time.
SECTION 2. APPOINTMENT. The Trust hereby appoints the Custodian as
custodian of the Securities and cash of each Series from time to time on deposit
hereunder. The Securities and cash of the Trust shall be and remain the sole
property of the Trust and the Custodian shall have only custody thereof. The
Custodian shall hold, earmark and physically segregate for the appropriate
Series account of the Trust all non-cash property, including all Securities that
are not maintained pursuant to Section 6 in a Securities Depository or Book-
Entry Account. The Custodian will collect from time to time the dividends and
interest of the Securities held by the Custodian.
The Custodian shall open and maintain a separate bank or trust account or
accounts in the name of the Trust, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, 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 Trust. Notwithstanding the foregoing, a separate
bank account may be established by the Trust to be used as a petty
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cash account in accordance with Rule 17f-3 under the Act and the Custodian shall
have not duty or liability with regard to such account.
Upon receipt of Written Instructions, funds held by the Custodian for the
Trust may be deposited by the Custodian to its credit 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. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
SECTION 3. DELIVERY OF BOARD RESOLUTIONS. The Trust shall, as necessary,
file with the Custodian a certified copy of the operative resolution of the
Board authorizing execution of Written Instructions and the number of
signatories required and setting forth authentic signatures of all signatories
authorized to sign on behalf of the Trust or any Series thereof. Such
resolution shall constitute conclusive evidence of the authority of all
signatories designated therein to act and shall be considered in full force and
effect, with the Custodian fully protected in acting in reliance thereon, until
the Custodian receives a certified copy of a replacement resolution adding or
deleting a person or persons authorized to give written Instructions.
The Trust shall, as necessary, file with the Custodian a certified copy of
the operative resolution of the Board authorizing the transmittal of Oral
Instructions and specifying the person or persons authorized to give Oral
Instructions on behalf of the Trust or any Series. Such resolution shall
constitute conclusive evidence of the authority of the person or persons
designated therein to act and shall be considered in full force and effect, with
the Custodian fully protected in acting in reliance therein, until the Custodian
actually receives a certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Oral Instructions. If the
officer certifying the resolution is authorized to give Oral Instructions, the
certification shall also be signed by a second officer of the Trust.
SECTION 4. INSTRUCTIONS. For all purposes under this Agreement, the
Custodian is authorized to act upon receipt of the first of any Written or Oral
Instruction it receives. If the first Instruction is an Oral Instruction, the
Trust shall deliver or have delivered to the Custodian a confirmatory Written
Instruction; and if the Custodian receives an Instruction, whether Written or
Oral, with respect to a Securities transaction, the Trust shall cause the broker
or dealer to send a written confirmation of the transaction to the Custodian.
The Custodian shall be entitled to rely on the first Instruction received and,
for any act or omission undertaken in compliance therewith, shall be free of
liability and fully indemnified and held harmless by the Trust. The sole
obligation of the Custodian with respect to any confirmatory Written Instruction
or broker or dealer written confirmation shall be to make reasonable efforts to
detect any discrepancy between the original Instruction and such confirmation
and to report such discrepancy to the Trust. The Trust shall be responsible, at
the Trust's expense, for taking any action, including any reprocessing,
necessary to correct any discrepancy or error, and to the extent such action
requires the Custodian to act, the Trust shall give the Custodian specific
Written Instructions as to the action required.
SECTION 5. DEPOSIT OF TRUST ASSETS. The Trust will initially transfer and
deposit or cause to be transferred and deposited with the Custodian all of the
Securities, other property and cash owned by the Trust at the time this
Agreement becomes effective, provided that the Custodian shall have the right,
in its sole discretion, to refuse to accept any securities or other property
that are not in proper form for deposit or any reason. Such transfer and
deposit shall be evidenced by appropriate schedules duly executed by the Trust.
The Trust may deposit with the Custodian additional Securities of the Trust and
dividends or interest collected on such Securities as the same are acquired from
time to time.
The Trust will cause to be deposited with the Custodian from time to time
(i) the net proceeds of Securities sold, (ii) the applicable net asset value of
Shares sold, whether representing initial issue or any other securities and
(iii) cash as may be acquired. Deposits with respect to sales of Shares shall
be accompanied by Written or Oral Instructions stating the amount to be
deposited with the Custodian and registration instructions.
SECTION 6. DEPOSIT OF TRUST ASSETS WITH THIRD PARTIES. The Trust hereby
authorizes the Custodian to deposit assets of the Trust as follows:
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(a) With the Custodian or any other bank licensed and regularly examined
by the United States or any state thereof assets held in the Option Account
created pursuant to Section 13(b).
(b) In the Custodian's or Sub-Custodian's account(s) with any Securities
Depository as the Trust shall permit by Written or Oral Instruction.
(c) Book-Entry Securities belonging to the Trust in a Book-Entry Account
maintained for the Custodian.
So long as any deposit referred to in (b) or (c) above is maintained for
the Trust, the Custodian shall: (i) deposit the Securities in an account that
includes only assets held by the Custodian for customers; (ii) send the Trust a
confirmation (i.e., an advice of notice of transaction) of any transfers of the
Trust to or from the account; (iii) with respect to Securities of the Trust
transferred to the account, identify as belonging to the Trust a quantity of
securities in a fungible bulk of securities that are registered in the name of
the Custodian or its nominee, or credited to the Custodian's account on the
books of a Securities Depository or the Custodian's agent; (iv) promptly send to
the Trust all reports it receives from the appropriate Federal Reserve Bank or
Securities Depository on its respective system of internal accounting control;
and (v) send to the Trust such reports of the systems of internal accounting
control of the Custodian and its agents through which Securities are deposited
as are available and as the Trust may reasonably request from time to time.
The Custodian shall be liable to the Trust for any loss or damage to the
Trust resulting from the negligence (including failure to act), fault or willful
misconduct of the Custodian, its agents or employees in selecting a Securities
Depository or Book-Entry Account. The Custodian shall not waive any rights it
may have against a Securities Depository or Federal Reserve Bank. The Trust may
elect to be subrogated to the rights of the Custodian against the Securities
Depository or Federal Reserve Bank or any other person with respect to any claim
that the Custodian may have as a consequence of any such loss or damage, if and
to the extent that the Trust has not been made whole for any such loss or
damage.
SECTION 7. REGISTRATION OF SECURITIES. The Securities held by the
Custodian, unless payable to bearer or maintained in a Securities Depository or
Book-Entry Account pursuant to Section 6, shall be registered in the name of the
Custodian or in the name of its nominee, or if directed by Written Instructions,
in the name of the Trust or its nominee. In the event that any Securities are
registered in the name of the Trust or its nominee, the Trust will endorse, or
cause to be endorsed, to the Custodian dividend and interest checks, or will
issue appropriate orders to the issuers of the Securities to pay dividends and
interest to the Custodian. Securities, excepting bearer securities, delivered
from time to time to the Custodian shall, in all cases, be in due form for
transfer, or registered as above provided.
SECTION 8. DISBURSEMENTS OF CASH. The Custodian is hereby authorized and
directed to disburse cash to or from the Trust from time to time as follows:
(a) For the purchase of Securities by the Trust, upon receipt by the
Custodian of (i) Written or Oral Instructions specifying the Securities and
stating the purchase price and the name of the broker, investment banker or
other party to or upon whose order the purchase price is to be paid and (ii)
either the Securities so purchased, in due form for transfer or already
registered as provided in Section 7, or notification by a Securities Depository
or a Federal Reserve Bank that the Securities have been credited to the
Custodian's account with the Securities Depository or Federal Reserve Bank.
(b) For transferring funds, including mark-to-the-market payments, in
connection with a repurchase agreement covering Securities that have been
received by the Custodian as provided in subsection (a) above, upon receipt by
the Custodian of (i) Written or Oral Instruction specifying the Securities, the
purchase price and the party to whom the purchase price is to be paid and (ii)
written agreement to repurchase the Securities from the Trust.
(c) For transferring funds to a duly-designated redemption paying agent to
redeem or repurchase Shares, upon receipt of (i) either Share Certificates in
due form for transfer, or proper processing of Shares for
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which no Share Certificates are outstanding and (ii) Written or Oral
Instructions stating the applicable redemption price.
(d) For exercising warrants and rights received upon the Securities, upon
timely receipt of Written or Oral Instructions authorizing the exercise of such
warrants and rights and stating the consideration to be paid.
(e) For repaying, in whole or in part, any loan of the Trust, or returning
cash collateral for Securities loaned by the Trust, upon receipt of Written or
Oral Instructions directing payment and stating the Securities, if any, to be
received against payment.
(f) For paying over to a duly-designated dividend disbursing agent such
amounts as may be stated in Written or Oral Instructions as the Trust deems
appropriate to include in dividends or distributions declared on the Shares.
(g) For paying or reimbursing the Trust for other corporate expenditures,
upon receipt of Written or Oral Instructions stating that such expenditures are
or were authorized by resolution of the Board and specifying the amount of
payment, the purposes for which such payment is to be made, and the person or
persons to whom payment is to be made.
(h) For transferring funds to any Sub-Custodian, upon receipt of Written
or Oral Instructions and upon agreement by the Custodian.
(i) To advance or pay out accrued interest on bonds purchased, dividends
on stocks sold and similar items.
(j) To pay proper compensation and expenses of the Custodian.
(k) To pay, or provide the Trust with money to pay, taxes, upon receipt of
appropriate Written or Oral Instructions.
(l) To transfer funds to a separate checking account maintained by the
Trust.
(m) To pay interest, management or supervisory fees, administration,
dividend and transfer agency fees and costs, compensation of personnel and
operating expenses, including but not limited to fees for legal, accounting and
auditing services.
Before making any payments or disbursements, however, the Custodian shall
receive, and may conclusively rely upon, Written or Oral Instructions requesting
such payment or disbursement and stating that it is for one or more or the
purposes enumerated above. Notwithstanding the foregoing, the Custodian may
disburse cash for other corporate purposes; provided, however, that such
disbursement maybe made only upon receipt of Written or Oral Instructions
stating that such disbursement was authorized by resolution of the Board.
SECTION 9. DELIVERY OF SECURITIES. The Custodian is hereby authorized and
directed to deliver Securities of the Trust from time to time as follows:
(a) For completing sales of Securities sold by the Trust, upon receipt of
(i) Written or Oral Instructions specifying the Securities sold, the amount to
be received and the broker, investment banker or other party to or upon whose
order the Securities are to be delivered and (ii) the net proceeds of sale;
provided, however, that the Custodian may accept payment in connection with the
sale of Book-Entry Securities and Securities on deposit with a Securities
Depository by means of a credit in the appropriate amount to the account
described in Section 6(b) or (c) above.
(b) For exchanging Securities for other Securities (and cash, if
applicable), upon timely receipt of (i) Written or Oral Instructions stating the
Securities to be exchanged, cash to be received and the manner in which the
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exchange is to be made and (ii) the other Securities (and cash, if applicable)
as specified in the Written or Oral Instructions.
(c) For exchanging or converting Securities pursuant to their terms or
pursuant to any plan of conversion, consolidation, recapitalization,
reorganization, re-adjustment or otherwise, upon timely receipt of (i) Written
or Oral Instructions authorizing such exchange or conversion and stating the
manner in which such exchange or conversion is to be made and (ii) the
Securities, certificates of deposit, interim receipts, and/or cash to be
received as specified in the Written or Oral Instructions.
(d) For presenting for payment Securities that have matured or have been
called for redemption;
(e) For delivering Securities upon redemption of Shares in kind, upon
receipt of (i) Share Certificates in due form for transfer, or proper processing
of Shares for which no Share Certificates are outstanding and (ii) appropriate
Written or Oral Instructions.
(f) For depositing with the lender Securities to be held as collateral for
a loan to the Trust or depositing with a borrower Securities to be loaned by the
Trust, (i) upon receipt of Written or Oral Instructions directing delivery to
the lender or borrower and suitable collateral, if Securities are loaned or (ii)
pursuant to the terms of a separate securities lending agreement.
(g) For complying with a repurchase agreement, upon receipt of Written or
Oral Instructions stating (i) the securities to be delivered and the payment to
be received and (ii) payment.
(h) For depositing with a depository agent in connection with a tender or
other similar offer to purchase Securities of the Trust, upon receipt of Written
or Oral Instructions.
(i) For depositing Securities with the issuer thereof, or its agents, for
the purpose of transferring such Securities into the name of the Trust, the
Custodian or any nominee of either in accordance with Section 7.
(j) For other proper corporate purposes; provided, that the Custodian
shall receive Written or Oral Instructions requesting such delivery.
(k) Notwithstanding the foregoing, the Custodian may, without Written or
Oral Instructions, surrender and exchange Securities for other Securities in
connection with any reorganization, recapitalization, or similar transaction in
which the owner of the Securities is not given an option; provided, however,
that the Custodian has no responsibility to effect any such exchange unless it
has received actual notice of the event permitting or requiring such exchange.
To facilitate any such exchange, the Custodian is authorized to surrender
against payment maturing obligations and obligations called for redemption and
to effectuate the exchange in accordance with customary practices and procedures
established in the market for exchanges.
SECTION 10. BORROWINGS. The Trust will cause any person (including the
Custodian) from which it borrows money using Securities as collateral to deliver
to the Custodian a notice of undertaking in the form currently employed by the
lender setting forth the amount that the lender will loan to the Trust against
delivery of a stated amount of collateral. The Trust shall promptly deliver to
the Custodian Written or Oral Instructions for each loan, stating (i) the name
of the lender, (ii) the amount and terms of the loan, which terms may be
specified by incorporating by reference an attached promissory note or loan
agreement duly endorsed by the Trust, (iii) the time and date, if known, on
which the loan will be consummated (the "borrowing date"), (iv) the date on
which the loan becomes due and payable, (v) the total amount payable to the
Trust on the borrowing date, (vi) the market value of Securities to be delivered
as collateral for such loan and (vii) the name of the issuer, the title and the
number of shares or principal amount of the Securities to be delivered as
collateral. The Custodian shall deliver on the borrowing date such specified
collateral and the executed promissory note, if any, and receive from the lender
the total amount of the loan proceeds; provided, however, that no delivery of
Securities shall occur if the amount of loan proceeds does not conform to the
amount set forth in the Written or Oral Instructions, or if such Instruction do
not contain the requirements of (vii) above. The Custodian may, at the option
of the lender, keep such collateral in
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its possession; provided such collateral is subject to all rights given the
lender by any promissory note or loan agreement executed by the Trust.
The Custodian shall deliver, from time to time, any Securities required as
additional collateral for any transaction described in this Section, upon
receipt of Written or Oral Instructions. The Trust shall cause all Securities
released from collateral status to be returned directly to the Custodian.
SECTION 11. INDEBTEDNESS TO CUSTODIAN. If, in its sole discretion, the
Custodian advances funds to the Trust to pay for the purchase of Securities, to
cover an overdraft of the Trust's account with the Custodian, or to pay any
other indebtedness to the Custodian, the Trust's indebtedness shall be deemed to
be a loan by the Custodian to the Trust, payable on demand and bearing interest
at the rate then charged by the Custodian for such loans; provided, however,
that the Custodian shall give the Trust notice of any such advance that exceeds
five percent of the value of the Securities and cash held by the Custodian at
the time of the advance. The Trust hereby agrees that the Custodian shall have
a continuing lien and security interest, to the extent of any such overdraft or
indebtedness, in any property then held by the Custodian or its agents for the
benefit of the Trust, or in which the Trust may have an interest. The Trust
authorizes the Custodian, in its sole discretion at any time, to charge any such
overdraft or indebtedness, together with interest due thereon, against any
balance then credited to the Trust on the Custodian's books.
SECTION 12. SECURITIES LOANS. The Custodian may from time to time lend
securities of the Trust in accordance with and pursuant to a separate securities
lending agreement.
SECTION 13. OPTIONS, FUTURES CONTRACTS AND SEGREGATED ACCOUNTS. The
Custodian's responsibilities regarding option contracts will be governed by the
following sub-paragraphs:
(a) OPTIONS.
(i) Upon receipt of Written or Oral Instructions relating to the purchase
of an option or sale of a covered call option, the Custodian shall: (A)
receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of the option; (B) if the transaction involves the sale of
a covered call option, deposit and maintain in a segregated account the
Securities (either physically or by book-entry in a Securities Depository)
subject to the covered call option written on behalf of the Series; and (C)
pay, release and/or transfer such securities, cash or other assets in accordance
with any notices or other communications evidencing the expiration, termination
or exercise of such options which are furnished to the Custodian by the Options
Clearing Corporation (the "OCC"), the Securities or Options Exchanges on which
such options were traded, or such other organization as may be responsible for
handling such option transactions.
(ii) Upon receipt of instructions relating to the sale of a naked option
(including stock index and commodity options), the Custodian, the Trust and the
broker-dealer shall enter into an agreement to comply with the rules of the OCC
or of any registered national securities exchange or similar organizations(s).
Pursuant to that agreement and any Written or Oral Instructions, the Custodian
shall: (A) receive and retain confirmations or other documents, if any,
evidencing the writing of the option; (B) deposit and maintain in a segregated
account Securities (either physically or by book-entry in a Securities
Depository cash and/or other assets; and (C) pay, release and/or transfer such
Securities, cash or other assets in accordance with any such agreement and with
any notices or other communications evidencing the expiration, termination or
exercise of such option which are furnished to the Custodian by the OCC, the
Securities or Options Exchanges on which such options were traded, or such other
organization as may be responsible for handling such option transactions. The
Custodian shall not be responsible for determining the quality and quantity of
assets held in any segregated account established in compliance with applicable
margin maintenance requirements and the performance of other terms of any option
contract.
(b) FUTURES CONTRACTS. Upon receipt of Written or Oral Instructions, the
custodian shall enter into a futures margin procedural agreement among the Fund,
the Custodian and the designated futures commission merchant (a "Procedural
Agreement"). Under the Procedural Agreement the Custodian shall: (A) receive
and retain confirmations, if any, evidencing the purchase or sale of a futures
contract or an option on a futures contract
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<PAGE>
by a Series; (B) deposit and maintain in a segregated account cash, Securities
and/or other assets designated as initial, maintenance or variation "margin"
deposits intended to secure the Series' performance of its obligations under any
futures contracts purchased or sold, or any options on futures contracts written
by the Series, in accordance with the provisions of any Procedural Agreement
designed to comply with the provisions of the Commodity Futures Trading
Commission and/or any commodity exchange or contract market (such as the Chicago
Board of Trade), or any similar organization(s), regarding such margin deposits;
and (C) release assets from and/or transfer assets into such margin accounts
only in accordance with any such Procedural Agreements. The Custodian shall not
be responsible for determining the type and amount of assets held in the
segregated account or paid to the broker-dealer in compliance with applicable
margin maintenance requirements and the performance of any futures contract or
option on a futures contract in accordance with its terms.
(c) SEGREGATED ACCOUNTS. Upon receipt of Written or Oral Instructions,
the Custodian shall establish and maintain on its books a segregated account or
accounts for and on behalf of the Series, into which account or accounts may be
transferred assets of each Series, including Securities maintained by the
Custodian in a Securities Depository, said account or accounts to be maintained
(i) for the purpose of compliance by the Series with the procedures required by
SEC Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies or (ii) for such other purposes as may be set forth, from
time to time in Written or Oral Instructions. The Custodian shall not be
responsible for the determination of the type or amount of assets to be held in
any segregated account referred to in this paragraph.
SECTION 14. EXERCISE OF POWERS WITH RESPECT TO SECURITIES. The Custodian
assumes no duty, obligation or responsibility whatsoever to exercise any voting
or consent powers with respect to the Securities held by it from time to time
hereunder. The Trust or such persons as it may designate shall have the right
to vote, consent or otherwise act with respect to Securities. The Custodian
will exercise its best efforts (as defined in Section 16) to furnish to the
Trust in a timely manner all proxies or other appropriate authorizations with
respect to Securities registered in the name of the Custodian or its nominee, so
that the Trust or its designee may vote, consent or otherwise act.
SECTION 15. COMPENSATION.
(a) The Trust agrees to pay to the Custodian compensation for its services
as set forth in Appendix B hereto, or as shall be set forth in written
amendments to Appendix B approved by the Trust and the Custodian from time to
time.
(b) The Trust shall pay all fees and expenses of any Sub-Custodian
approved by the Trust.
SECTION 16. CORPORATE ACTIVITY. The Custodian will exercise its best
efforts to forward to the Trust in a timely manner all notices of shareholder
meetings, proxy statements, annual reports, conversion notices, call notices, or
other notices or written materials of any kind (excluding share certificates and
dividend, principal and interest payments) sent to the Custodian as registered
owner of Securities. Best efforts as used in this Agreement shall mean the
efforts reasonably believed in good faith by the Custodian to be adequate in the
circumstances.
Upon receipt of warrants or rights issued in connection with the assets of
the Trust, the Custodian shall enter into its ledgers appropriate notations
indicating such receipt and shall notify the Trust of such receipt. However,
the Custodian shall have no obligation to take any other action with respect to
such warrants or rights, except as directed in Written or Oral Instructions.
Custodian shall take all reasonable actions, as agreed to by the Trust and
the Custodian, to assist the Trust in obtaining from year to year favorable
opinions from the Trust's independent auditors with respect to the Custodian's
activities hereunder.
SECTION 17. RECORDS. The Custodian acknowledges and agrees that all books
and records maintained for the Trust in any capacity under this Agreement are
the property of the Trust and may be inspected by the Trust
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<PAGE>
or any authorized regulatory agency at any reasonable time. Upon request all
such books and records will be surrendered promptly to the Trust. The Custodian
agrees to make available upon request and to preserve for the periods prescribed
in Rule 31a-2 of the Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 under the Act.
SECTION 18. LIABILITY. The Custodian assumes only the usual duties and
obligations normally performed by custodians of open-end investment companies.
The Custodian specifically assumes no responsibility for the management,
investment or reinvestment of the Securities from time to time owned by the
Trust, whether or not on deposit hereunder. The Custodian assumes no duty,
obligation or responsibility whatsoever with respect to Securities not deposited
with the Custodian.
The Custodian may rely upon the advice of counsel, who may be counsel for
the Trust or for the Custodian, and upon statements of accountants, brokers or
other persons believed by the Custodian in good faith to be expert in the
matters upon which they are consulted. The Custodian shall not be liable for
any action taken in good faith reliance upon such advice or statements. The
Custodian shall not be liable for action taken in good faith in accordance with
any Written or Oral Instructions, request or advice of the Trust or its
officers, or information furnished by the Trust or its officers. The Custodian
shall not be liable for any non-negligent action taken in good faith and
reasonably believed by it to be within the powers conferred upon it by this
Agreement.
No liability of any kind, other than to the Trust, shall attach to the
Custodian by reason of its custody of the Securities and cash held by the
Custodian hereunder or otherwise as a result of its custodianship. In the event
that any claim shall be made against the Custodian, it shall have the right to
pay the claim and reimburse itself from the assets of the Trust; provided,
however, that no such reimbursement shall occur unless the Trust is notified of
the claim and is afforded an opportunity to contest or defend the claim, if it
so elects. The Trust agrees to indemnify and hold the Custodian harmless for
any loss, claim, damage or expense arising out of the custodian relationship
under this Agreement; provided such loss, claim, damage or expense is not the
direct result of the Custodian's negligence or willful misconduct.
SECTION 19. TAXES. The Custodian shall not be liable for any taxes,
assessments or governmental charges that may be levied or assessed upon the
Securities held by it hereunder, or upon the income therefrom. Upon Written or
Oral Instruction, the Custodian may pay any such tax, assessment or charge and
reimburse itself out of the monies of the Trust or the Securities held
hereunder.
SECTION 20. SUB-CUSTODIANS.
(a) The Custodian may from time to time request appointment of one or more
Sub-Custodians. Upon receipt of Written or Oral Instructions authorizing the
use of a Sub-Custodian, the Custodian shall appoint one or more Sub-Custodians
or Foreign Sub-Custodians of Securities and cash owned by the Trust from time to
time.
(b) Custodian shall cause Foreign Securities and amounts of cash
reasonably required to effect Trust's Foreign Securities transactions in the
Custodian Account to be held in such countries or other jurisdictions as Trust
shall direct in Written or Oral Instructions.
Custodian may hold Foreign Securities and cash in sub-custody accounts,
which shall be deemed part of the Custodian Account and which have been
established by Custodian or by a Sub-Custodian with those Foreign Sub-Custodians
as Trust shall approve in Written or Oral Instructions.
Each Foreign Sub-Custodian is authorized to hold Foreign Securities in an
account with any foreign Securities Depository as Trust shall approve in Written
or Oral Instructions.
The contractual agreement between the Custodian and any Foreign Sub-
Custodian must provide at a minimum that the Foreign Sub-Custodian shall
provide, obtain or use its best efforts to assist the Trust in obtaining
information responsive to the "notes" to Rule 17f-5 under the Act with respect
to (i) each country or jurisdiction where the Trust's assets are proposed to be
maintained, are maintained or in the future may be maintained and (ii)
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<PAGE>
each Foreign Sub-Custodian which is proposed to hold, holds or in the future may
hold Foreign Securities or cash of the Trust. Notwithstanding any other
provisions of this Agreement, each Foreign Sub-Custodian's undertaking to assist
Trust in obtaining such information shall neither increase the Foreign Sub-
Custodian's duty of care nor reduce Trust's responsibility to determine for
itself the prudence of entrusting its assets to any particular Foreign Sub-
Custodian or foreign Securities Depository.
The Custodian shall deposit Foreign Securities and cash of the Trust with a
Foreign Sub-Custodian only in an account of the Foreign Sub-Custodian which
holds only assets held by Custodian as custodian for its customers. In the
event that a Foreign Sub-Custodian is authorized to hold any of the Foreign
Securities placed in its care in a foreign Securities Depository, Custodian will
direct the Foreign Sub-Custodian to identify the Foreign Securities on the books
of the foreign Securities Depository as being held for the account of Custodian
as custodian for its customers.
(c) The Custodian shall have no liability to the Trust by reason of any
act or omission of any Sub-Custodian approved by the Trust, and the Trust shall
indemnify the Custodian and hold it harmless from and against any and all
actions, suits, claims, losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising directly or indirectly out of or in connection
with the performance of any Sub-Custodian approved by the Trust. The Custodian
assigns to the Trust any and all claims for any losses, costs, expenses, or
damages that may be incurred by the Trust by reason of the negligence, gross
negligence or misconduct of any Sub-Custodian approved by the Trust, or by
reason of the failure of a Sub-Custodian approved by the Trust to perform in
accordance with any applicable agreement, including instructions of the
Custodian. The Custodian shall be under no obligation to prosecute or to defend
any action, suit or claim arising out of, or in connection with, the performance
of any Sub-Custodian approved by the Trust, if, in the opinion of the
Custodian's counsel, such action will involve expense or liability to the
Custodian. The Trust shall, upon request, furnish the Custodian with
satisfactory indemnity against such expense or liability, and upon request of
the Custodian, the Trust shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity.
With respect to each Sub-Custodian not approved by the Trust, which may not
be a Foreign Sub-Custodian, the Custodian shall be liable to the Trust for any
loss which shall occur as a result of the failure of the Sub-Custodian to
exercise reasonable care with respect to the safekeeping of assets to the same
extent that the Custodian would be liable to the Trust if the Custodian were
holding such assets in its own premises. The Custodian shall be liable to the
Trust under this paragraph only to the extent of the Trust's direct damages, to
be determined based on the market value of the assets which are subject to loss
and without reference to any special conditions or circumstances.
SECTION 21. EFFECTIVENESS, DURATION AND TERMINATION.
(a) This Agreement may be executed in more than one counterpart, each of
which shall be deemed to be an original, and shall become effective on the date
hereof. This Agreement shall remain in effect for a period of one year from the
date of its effectiveness and shall continue in effect for successive twelve-
month periods; provided that such continuance is specifically approved at least
annually by the Board and by a majority of the Trustees who are not parties to
this Agreement or interested persons of any such party.
(b) This Agreement may be terminated by either party upon notice to the
other. The termination shall become effective at the time specified in the
notice but no earlier than sixty (60) days after the date of the notice. Upon
notice of termination, the Trust shall use its best efforts to obtain a
successor custodian. If a successor custodian is not appointed within ninety
(90) days after the date of the notice of termination, the Board shall, by
resolution, designate the Trust as its own custodian. Each successor custodian
shall be a person qualified to serve under the Act. Promptly following receipt
of written notice from the Trust of the appointment of a successor custodian and
receipt of Written or Oral Instructions, the Custodian shall deliver all
Securities and cash it then holds directly to the successor custodian and shall,
upon request of the Trust and the successor custodian and upon payment of the
Custodian's reasonable charges and disbursements, (i) execute and deliver to the
successor custodian an instrument approved by the successor custodian's counsel
transferring to the successor custodian all the rights, duties and obligations
of the Custodian, (ii) transfer to the successor custodian the originals or
copies of all books
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<PAGE>
and records maintained by the Custodian hereunder and (iii) cooperate with, and
provide reasonable assistance to, the successor custodian in the establishment
of the books and records necessary to carry out the successor custodian's
responsibilities hereunder. Upon delivery of the Securities and other assets of
the Trust and compliance with the other requirements of this Section 21, the
Custodian shall have no further duty or liability hereunder. Every successor
custodian appointed hereunder shall execute and deliver an appropriate written
acceptance of its appointment and shall thereupon become vested with the rights,
duties and obligations of the predecessor custodian.
SECTION 22. REQUIRED PERFORMANCE ON FUND BUSINESS DAYS. Nothing contained
in this Agreement is intended to or shall require the Custodian, in any capacity
hereunder, to perform any functions or duties on any day other than a Fund
Business Day. Functions or duties normally scheduled to be performed on any day
which is not a Fund Business Day shall be performed on, and as of, the next Fund
Business Day unless otherwise required by law.
SECTION 23. MISCELLANEOUS.
(a) This Agreement shall extend to and bind 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 Custodian, or
by the Custodian without the written consent of the Trust. Notwithstanding the
foregoing, either party may assign this Agreement without the consent of the
other party so long as the assignee is an affiliate, parent or subsidiary of the
assigning party and the assignee of the Custodian is qualified to serve as
custodian under the Act.
(b) This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota.
(c) The captions inserted herein are for convenience of reference and
shall not affect, in any way, the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
NORWEST BANK MINNESOTA, N.A.
/s/ P. Jay Kiedrowski
P. Jay Kiedrowski
Executive Vice President
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<PAGE>
NORWEST SELECT FUNDS
CUSTODIAN AGREEMENT
June 1, 1994
APPENDIX A
SERIES OF THE TRUST
ValuGrowth Stock Fund
Intermediate Bond Fund
Adjustable U.S. Government Reserve Fund
Small Company Stock Fund
<PAGE>
NORWEST SELECT FUNDS
CUSTODIAN AGREEMENT
June 1, 1994
APPENDIX B
COMPENSATION
(a) ACCOUNT ADMINISTRATIVE FEE. $0.20/1000 up to $100 million; $0.15/1000
on next $100 million; and $0.10/1000 on over $200 million. Based on the fair
market value of custody assets. Market value charges will be based on the
average size of the account during the year using quarterly valuations.
(b) HOLDING FEE PER ISSUE. $20.00/Book entry item and $25.00/Physical
item per annum. Charges are based on the average number of assets held during
the year using quarterly valuations.
(c) TRANSACTION FEE. $15.00/Book entry transaction and $20.00/Physical
transaction for any asset movement defined as a purchase or sale. No
transaction charge will be made for the initial receipt of securities related to
the opening of any account.
(d) LIMITATION. The Custodian's total fees for the services rendered by
it pursuant to this Agreement shall not exceed, with respect to any Series,
0.05% of the average daily net assets of such Series, computed and paid monthly.
<PAGE>
EXHIBIT 9(a)
<PAGE>
NORWEST SELECT FUNDS
MANAGEMENT AGREEMENT
June 1, 1994
AGREEMENT made this 1st day of June, 1994, between Norwest Select Funds
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at 61 Broadway, New York, New York
10006, and Forum Financial Services, Inc. ("Forum"), a corporation organized
under the laws of State of Delaware with its principal place of business at 61
Broadway, New York, New York 10006.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end management investment company and may
issue its shares of beneficial interest, no par value, in separate series and
classes; and
WHEREAS, the Trust desires that Forum perform administrative services for
each of the series of the Trust as listed in Appendix A hereto (each a "Fund"
and collectively the "Funds") and Forum is willing to provide those services on
the terms and conditions set forth in this Agreement;
NOW THEREFORE, the Trust and Forum agree as follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and registration statement filed with
the Securities and Exchange Commission (the "SEC"), under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in a prospectus ("Prospectus") or statement of additional information
("Statement of Additional Information") relating to a Fund contained therein and
as may be supplemented from time to time, all in such manner and to such extent
as may from time to time be authorized by the Trust's Board of Trustees (the
"Board"). The Trust is currently authorized to issue three classes of shares
and the Board is authorized to issue any unissued shares in any number of
additional classes or series. The Trust has delivered copies of the documents
listed in this Section and will from time to time furnish Forum with any
amendments thereof.
SECTION 2. APPOINTMENT
The Trust hereby employs Forum, subject to the direction and control of the
Board, to manage all aspects of the Trust's operations with respect to each Fund
except those which are the responsibility of Norwest Bank Minnesota, N.A.
("Adviser"), the Trust's investment adviser.
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<PAGE>
SECTION 3. ADMINISTRATIVE DUTIES
With respect to the Funds, Forum will arrange to:
(a) provide the Trust, at the Trust's expense, with the maintenance of
certain books and records, such as journals, ledger accounts and other records
described in Rule 31a-1 under the Act, the transmission of purchase and
redemption orders for shares of the Funds, the notification to the Trust's
investment adviser of available funds for investment, the reconciliation of
account information and balances among its custodian, transfer agent and
dividend disbursing agent and its investment adviser, and the calculation of the
net asset value of shares of the Funds;
(b) provide the Trust, at the Trust's expense, with the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary to provide effective operation of the Trust,
including the services described in subparagraph (a) above of this Section 3;
(c) oversee the performance of administrative and professional services
rendered to the Trust by others, including its custodian, transfer agent and
dividend disbursing agent, as well as accounting, auditing and other services
performed for the Trust;
(d) provide the Trust with adequate general office space and facilities;
(e) oversee the preparation and the printing of the periodic updating of
the Trust's registration statement, Prospectuses and Statement of Additional
Information, the Trust's tax returns, and reports to its stockholders, the SEC
and state securities administrators; and
(f) maintain records relating to its services as are required to be
maintained by the Trust under the Act. The books and records pertaining to the
Trust which are in possession of Forum shall be the property of the Trust. The
Trust, or the Trust's authorized representatives, shall have access to such
books and records at all times during Forum's normal business hours. Upon the
reasonable request of the Trust, copies of any such books and records shall be
provided promptly by Forum to the Trust or the Trust's authorized
representatives.
SECTION 4. STANDARD OF CARE
The Trust shall expect of Forum, and Forum will give the Trust the benefit
of, Forum's best judgment and efforts in rendering these services to the Trust,
and the Trust agrees as an inducement to Forum's undertaking these services that
Forum shall not be liable hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that nothing herein shall be
deemed to protect, or purport to protect, Forum against any liability to the
Trust or to its security holders to which Forum would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of Forum's duties hereunder, or by reason of Forum's reckless disregard of its
obligations and duties hereunder.
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<PAGE>
SECTION 5. COMPENSATION; EXPENSES
(a) In consideration of the administrative services performed by Forum as
described herein, the Trust will pay Forum, with respect to each Fund a fee at
the annual rate as listed in Appendix A hereto. Such fee shall be accrued by
the Trust daily and shall be payable monthly in arrears on the first day of each
calendar month for services performed hereunder during the prior calendar month.
(b) Subject to section 4 of the investment advisory agreements between the
Trust and the Adviser, the Trust shall be responsible and hereby assumes the
obligation for payment of all the Trust's other expenses, including payment of
the fee payable to Forum under this Section 5 and the fee payable to the Adviser
pursuant to the Investment Advisory Agreement between the Adviser and the Trust;
interest charges, taxes, brokerage fees and commissions; certain insurance
premiums; fees, interest charges and expenses of the Trust's custodian, transfer
agent and dividend disbursing agent; telecommunications expenses; auditing,
legal and compliance expenses; costs of the Trust's formation and maintaining
its existence; costs of preparing and printing the Trust's Prospectuses,
Statements of Additional Information, subscription application forms and
stockholder reports and delivering them to existing and prospective
shareholders; costs of maintaining books of original entry for portfolio and
fund accounting and other required books and accounts and of calculating the net
asset value of the Trust's shares; costs of reproduction, stationery and
supplies; compensation of the Trust's trustees, officers and employees and costs
of other personnel performing services for the Trust who are not Forum's
officers or officers of the Adviser, or their respective affiliates; costs of
corporate meetings; SEC registration fees and related expenses for registration
with the SEC and the securities regulatory authorities of other countries in
which the Trust's shares are sold; state securities laws registration fees and
related expenses; and all other fees and expenses paid by the Trust pursuant to
any distribution plan or shareholder service adopted by the Trust pursuant to
Rule 12b-1 under the Act.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each Fund on the
date hereof. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Funds.
(b) This Agreement shall continue in effect with respect to a Fund for a
period of one year from its effectiveness and shall continue in effect for
successive twelve-month periods; provided, however, that continuance is
specifically approved at least annually (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund and (ii) by a vote of
a majority of Trustees of the Trust who are not parties to this agreement or
interested persons of any such party (other than as Trustees of the Trust);
provided further, however, that if the continuation of this agreement is not
approved as to a Fund, Forum may continue to render to the Fund the services
described herein in the manner and to the extent permitted by the Act and the
rules and regulations thereunder.
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<PAGE>
(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board on 60 days' written notice
to Forum or (ii) by Forum on 60 days' written notice to the Trust.
SECTION 7. ACTIVITIES OF FORUM
Except to the extent necessary to perform Forum's obligations hereunder,
nothing herein shall be deemed to limit or restrict Forum's right, or the right
of any of Forum's officers, directors or employees who may also be a trustee,
officer or employee of the Trust, or persons otherwise affiliated persons of the
Trust to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
SECTION 8. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or of the Funds under this Agreement,
and Forum agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
Forum's rights or claims relate in settlement of such rights or claims, and not
to the Trustees of the Trust or the shareholders of the Funds.
SECTION 9. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.
(d) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
FORUM FINANCIAL SERVICES, INC.
/s/ David R. Keffer
David R. Keffer
Vice President
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<PAGE>
NORWEST SELECT FUNDS
MANAGEMENT AGREEMENT
June 1, 1994
As Amended May 1, 1995
Appendix A
Fee as a % of
the Annual Average Daily
Funds of the Trust Net Assets of the Fund
- ------------------ ----------------------
ValuGrowth Stock Fund 0.20%
Intermediate Bond Fund 0.20%
Adjustable U.S. Government Reserve Fund 0.20%
Small Company Stock Fund 0.20%
<PAGE>
EXHIBIT 9(b)
<PAGE>
NORWEST SELECT FUNDS
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 1st day of June, 1994 and effective as of June 1, 1994,
between Norwest Select Funds (the "Trust"), a business trust organized under the
laws of the State of Delaware with its principal place of business at 61
Broadway, New York, New York 10006 and Norwest Bank Minnesota, N.A. ("Norwest"),
a banking association organized under the laws of the United States of America
with its principal place of business at 733 Marquette Avenue, Minneapolis,
Minnesota 55479.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes;
WHEREAS, the Trust desires that Norwest perform certain transfer agency and
related services for each class of each series of the Trust and Norwest is
willing to provide those services on the terms and conditions set forth in this
Agreement; and
WHEREAS, pursuant to a separate agreement between the Trust and Norwest,
Norwest will perform the duties of custodian of the securities and cash of the
Trust;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. APPOINTMENT. The Trust hereby appoints Norwest as its Transfer
Agent and Norwest agrees to act in such capacity upon the terms set forth in
this Agreement.
SECTION 2. DEFINITIONS. Whenever used in this Agreement, the following
terms shall have the meanings specified, insofar as the context will allow:
(a) Act: The term Act shall mean the Investment Company Act of 1940, as
amended from time to time.
(b) Board: The term Board shall mean the Board of Trustees of the Trust.
(c) Class: The term Class shall mean the classes of each Series listed in
Appendix A or any class that the Trust shall subsequently establish; provided,
that Norwest may decline to accept any class subsequently established.
(d) Custodian; Custodian Agreement: The term Custodian shall mean Norwest
Bank Minnesota, N.A. or any successor or other custodian acting as such for any
Series of the Trust. The term Custodian Agreement shall mean the agreement or
agreements between the Trust and the Custodian or Custodians providing for
custodial services to the Trust.
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(e) Manager: The term Manager shall mean Forum Financial Services, Inc.
or any successor thereto who acts as the manager of the Trust.
(f) Oral Instruction: The term Oral Instruction shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to Norwest in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed in good faith by
Norwest to be a person or persons authorized by a resolution of the Board of
Trustees of the Trust to give Oral Instructions on behalf of the Trust. Each
Oral Instruction shall specify whether it is applicable to all of the Trust or
to a specific Series or Class.
(g) Prospectus: The term Prospectus shall mean the then-current
prospectus forming a part of an effective Registration Statement of the Trust
under the Securities Act of 1933, as amended, and the Act covering the Shares of
a Series or Class as the case may be, as the same may be amended or supplemented
from time to time.
(h) Series: The term Series shall mean each series listed in Appendix A
or any series that the Trust shall subsequently establish; provided, that
Norwest may decline to accept any series subsequently established.
(i) Share Certificates: The term Share Certificates shall mean the
certificates for the Shares.
(j) Shareholders: The term Shareholders shall mean the registered owners
from time to time of the Shares, as reflected on the share registry records of
the Trust.
(k) Shares: The term Shares shall mean the issued and outstanding shares
of beneficial interest, no par value, of the Trust, including any fractions
thereof.
(l) Trust: The term Trust shall mean Norwest Select Funds.
(m) Valuation Time: The term Valuation Time shall mean, with respect to
each Series, the time at which the Series' net asset value is calculated, as
disclosed in the Series' Prospectus.
(n) Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to Norwest in original writing containing original signatures,
or a copy of such document transmitted by facsimile, including transmission of
such signature, or other mechanical or documentary means at the request of a
person or persons reasonably believed in good faith by Norwest to be a person or
persons authorized by a resolution of the Board to give Written Instructions on
behalf of the Trust. Each Written Instruction shall specify whether it is
applicable to all of the Trust or a specific Series or Class.
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SECTION 3. SHARE CERTIFICATES. The Trust may furnish to Norwest a supply
of blank Share Certificates of each Class of each Series and, from time to time,
will renew such supply upon Norwest's request. Blank Share Certificates shall
be signed manually or by facsimile signatures of officers of the Trust
authorized to sign by the by-laws of the Trust and, if required by Norwest, and
shall bear the Trust's seal or a facsimile thereof.
SECTION 4. ISSUANCE OF SHARES. Norwest shall make original issues of
Shares of each Class of each Series in accordance with Section 11 below and the
Trust's then current Prospectus, upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a resolution of the Board
authorizing the issuance, (iii) necessary funds for the payment of any original
issue tax applicable to such Shares, and (iv) an opinion of the Trust's counsel
as to the legality and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Trust of an appropriate notice with the
Securities and Exchange Commission, as required by Rule 24f-2 under the Act. If
the opinion described in (iv) above is contingent upon a filing under Rule 24f-
2, the Trust shall fully indemnify Norwest for any liability arising from the
failure of the Trust to comply with that rule.
SECTION 5. TRANSFER OF SHARES. Transfers of Shares of each Class of each
Series shall be registered on the Shareholder records maintained by Norwest. In
registering transfers of Shares, Norwest may rely upon the Uniform Commercial
Code as in effect in the State of Delaware or any other statutes that, in the
opinion of Norwest's counsel, protect Norwest and the Trust from liability
arising from (i) not requiring complete documentation, (ii) registering a
transfer without an adverse claim inquiry, (iii) delaying registration for
purposes of such inquiry or (iv) refusing registration whenever an adverse claim
requires such refusal. As Transfer Agent, Norwest will be responsible for
delivery to the transferor and transferee of such documentation as is required
by the Uniform Commercial Code.
SECTION 6. ISSUANCE AND TRANSFER OF SHARE CERTIFICATES. Subject to the
provisions of Section 8, new Share Certificates shall be issued by Norwest upon
surrender of outstanding Share Certificates in the form deemed by Norwest to be
properly endorsed for transfer and satisfactory evidence of compliance with all
applicable laws relating to the payment or collection of taxes. Norwest shall
forward Share Certificates in "non-negotiable" form by first-class or registered
mail, or by whatever means Norwest deems equally reliable and expeditious.
While in transit to the addressee, all deliveries of Share Certificates shall be
insured by Norwest as it deems appropriate. Norwest shall not mail Share
Certificates in "negotiable" form unless requested in writing by the Trust and
fully indemnified by the Trust to Norwest's satisfaction. Norwest may issue new
Share Certificates in place of those lost, destroyed or stolen, upon receiving
indemnity satisfactory to Norwest, and may issue new Share Certificates in
exchange for, and upon surrender of, mutilated Share Certificates as Norwest
deems appropriate. Unless otherwise directed by the Trust, Norwest may issue or
register Share Certificates reflecting the signature, or facsimile thereof, of
an officer who has died, resigned or been removed by the Trust. The Trust shall
file promptly with Norwest approval, adoption or ratification of such action as
may be required by law or Norwest. All share certificates submitted for
transfer or replacement shall be marked "canceled" or destroyed by Norwest
following the issuance in lieu
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of the Share Certificate of a new or replacement Share Certificate or shares not
evidenced by a Share Certificate.
SECTION 7. MAINTENANCE OF STOCK RECORDS. Norwest shall maintain customary
stock registry records for each Class of each Series, noting the issuance,
transfer or redemption of Shares and the issuance and transfer of Share
Certificates. Norwest will also maintain for each Class of each Series an
account entitled "Unissued Certificate Account" (or similar name) in which it
will record the Shares issued and outstanding from time to time for which
issuance of Share Certificates has not been requested. Norwest is authorized to
keep records for each Class of each Series, containing the names and addresses
of record of Shareholders, and the number of Shares from time to time owned by
them for which no Share Certificates are outstanding. Each Shareholder account
will be assigned a single account number for each Class of each Series, even
though Shares for which Certificates have been issued will be accounted for
separately.
SECTION 8. RECORDS REFLECTING ISSUANCES AND REDEMPTIONS. Norwest shall
issue Share Certificates for Shares only upon receipt of a written request from
a Shareholder. If Shares are purchased without such request, Norwest shall
merely note on its stock registry records the issuance of the Shares and credit
the Unissued Certificate Account and the respective Shareholders' accounts with
the Shares. Whenever Shares owned by Shareholders are surrendered for
redemption, Norwest shall make appropriate entries in the stock transfer records
and debit the Unissued Certificate Account, if appropriate, and the record of
issued Shares outstanding; and shall cancel any Share Certificate surrendered
for redemption.
SECTION 9. RELIANCE BY NORWEST. In performing its duties hereunder,
Norwest may rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith to be genuine and
unaltered, and to have been signed, countersigned or executed or authorized by a
duly-authorized person or persons, or by the Trust, or upon the advice of
counsel for the Trust or for Norwest. Norwest may record any transfer of Share
Certificates which it reasonably believes in good faith to have been duly-
authorized, or may refuse to record any transfer of Share Certificates if, in
good faith, it deems such refusal necessary in order to avoid any liability on
the part of either the Trust or Norwest. The Trust agrees to indemnify and hold
harmless Norwest from and against any and all losses, claims, damages,
liabilities or expenses that it may suffer or incur by reason of such good faith
reliance, action or failure to act.
SECTION 10. INSPECTION OF RECORDS. Norwest shall notify the Trust of any
request or demand for the inspection of the Trust's share records. Norwest
shall abide by the Trust's instructions for granting or denying the inspection;
provided, however, Norwest may grant the inspection without such instructions if
it is advised by counsel to Norwest that failure to do so will result in
liability to Norwest.
SECTION 11. SHARE PURCHASES; COMPUTATION OF NET ASSET VALUE.
(a) Instructions from insurance company separate accounts, directing
investment of a specific dollar amount in a Class of a Series shall be deemed to
be a completed purchase order at
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the time the instruction is received by Norwest, provided that Federal Funds in
respect of the instruction in that amount are received by Norwest prior to 4:00
p.m., Eastern time, that day, or such other cut-off time prescribed by the Trust
in Oral or Written Instructions, and provided further that if the cut-off time
is on a day other than the day the instruction is received, the purchase order
shall be deemed to be completed at the time the instruction is received by
Norwest, subject to cancellation.
(b) Other instructions directing investment in a Class of a Series shall
be deemed to be a completed purchase order upon receipt by Norwest of Federal
Funds in respect of the instruction in that amount, provided that in the case of
a purchase order accompanied by a check drawn on any member bank of the Federal
Reserve System, Federal Funds shall be deemed to have been received upon the
lesser of two business days after receipt of the check or upon the actual time
of receipt by Norwest of Federal Funds in respect of the check.
(c) On each Fund Business Day, as soon as possible after each Valuation
Time for a Series, Norwest shall obtain from the Manager a quotation (on which
it may conclusively rely) of the net asset value for each Class of the Series as
of that Valuation Time. Norwest shall use the net asset values determined as of
the Valuation Time to compute the number of Shares of each Class of a Series to
be purchased and the aggregate purchase proceeds to be deposited with the
Custodian based on the completed purchase orders received by Norwest on that day
prior to the Valuation Time for the Series, and Norwest shall thereupon pay the
Custodian the aggregate net asset value of shares of each Class of the Series
purchased for which payment has been received by Norwest. As necessary but no
more frequently than once daily (unless a more frequent basis is agreed to by
Norwest), Norwest shall issue the proper number of Shares to be purchased
pursuant to the preceding sentence and promptly thereafter shall send written
confirmation of such purchase to the Custodian and the Trust or Manager.
Norwest shall also credit each Shareholder's separate account with the number of
Shares purchased by such Shareholder. Norwest shall promptly thereafter mail
written confirmation of the purchase to each Shareholder and to the Trust if
requested. Each confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Share Certificates are outstanding (if any),
the amount invested and the price paid for the newly-purchased Shares.
SECTION 12. SHARE REDEMPTIONS. Prior to each Valuation Time for a Series
on each Fund Business Day, as specified in accordance with Section 11 above,
Norwest shall process all requests to redeem Shares of each Class of the Series
in accordance with Section 8. Upon confirmation of the net asset value by the
Manager, Norwest shall notify the Trust and the Custodian of the redemption
amount, apply the redemption proceeds in accordance with Section 13 and the
Prospectus, record the redemption in the stock registry books, and debit the
redeemed Shares from the Unissued Certificates Account, if appropriate, and the
account of the Shareholder and mark "canceled" or destroy any Share Certificates
evidencing the redeemed shares.
In lieu of carrying out the redemption procedures described in the
preceding paragraph, Norwest may, at the request of the Trust, sell Shares of
each class of each Series to the Trust as repurchases from Shareholders,
provided that the sale price is not less than the applicable
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redemption price. The redemption procedures shall then be appropriately
modified. The Trust may authorize Norwest by Written Instruction to effect any
redemptions upon provision of an indemnity satisfactory in form to Norwest.
SECTION 13. REDEMPTION PROCEEDS. The proceeds of redemption shall be
remitted by Norwest in accordance with the Prospectus and by procedures commonly
followed by mutual funds and in a Written Instruction from the Trust and
mutually agreed upon by the Trust and Norwest. For purposes of redemption of
shares of any Class of any Series that have been purchased by check within
fifteen (15) days prior to receipt of the redemption request, the Trust shall
provide Norwest with Written Instructions concerning the time within which such
requests may be honored. The authority of Norwest to perform its
responsibilities under Sections 12 and 13 shall be suspended if Norwest receives
notice of the suspension of the determination of a Class' or Series' net asset
value.
SECTION 14. DIVIDENDS. Upon the declaration with respect to a Class of
each dividend and capital gain distribution by the Board, the Trust shall notify
Norwest of the date of such declaration, the amount payable per Share, the
record date for determining the Shareholders entitled to payment, and the
payment and reinvestment date. On or before each payment date the Trust will
transfer, or cause the Custodian to transfer, to Norwest the total amount of the
dividend or distribution currently payable. Norwest will, on the designated
payment date, reinvest all dividends and distributions in additional Shares of
the same Class and promptly mail to each Shareholder at his address of record, a
statement showing the number of Shares (rounded to three decimal places) of that
Class then owned by the Shareholder and the net asset value of such Shares, or
transmit such information in accordance with any arrangement between the
Shareholder and Norwest; provided, however, that if a Shareholder elects to
receive dividends and distributions in cash, Norwest shall prepare a check in
the appropriate amount and mail it to the Shareholder at the Shareholder's
address of record within five (5) Fund Business Days after the designated
payment date or transmit the appropriate amount in Federal funds in accordance
with any arrangement between the Shareholder and Norwest.
SECTION 15. RECORDS.
(a) The Trust shall deliver or cause to be delivered over to Norwest (i) an
accurate list of Shareholders of the Trust, showing each Shareholder's address
of record, number of Shares owned and whether such Shares are represented by
outstanding Share Certificates or by non-certificated Share accounts and (ii)
all Shareholder records, files, and other materials necessary or appropriate for
proper performance of the functions assumed by Norwest under this Agreement
(collectively referred to as the "Materials"). The Trust shall indemnify and
hold harmless Norwest from and against any and all losses, claims, damages,
liabilities or expenses arising out of or in connection with any error,
omission, inaccuracy or other deficiency of the Materials, or out of the failure
of the Trust to provide any portion of the Materials or to provide any
information in the Trust's possession needed by Norwest to knowledgeably perform
its functions.
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(b) Norwest shall prepare and maintain or cause to be prepared and
maintained records in such form for such periods and in such locations as may be
required by applicable regulations, all documents and records relating to the
services provided to the Trust pursuant to this Agreement required to be
maintained pursuant to the Act, rules and regulations of the Securities and
Exchange Commission, the Internal Revenue Service and any other national, state
or local government entity with jurisdiction over the Trust.
SECTION 16. COOPERATION WITH INDEPENDENT ACCOUNTANTS. Norwest shall
cooperate with the Trust's independent public accountants and shall take
reasonable action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 17. OTHER SERVICES. In addition to the services described above,
Norwest will perform other services for the Trust as mutually agreed upon in
writing from time to time, including but not limited to preparing and filing
federal tax forms with the Internal Revenue Service, mailing federal tax
information to Shareholders, mailing Shareholder reports, mailing notices of
Shareholders' meetings, proxies and proxy statements and tabulating proxies.
Norwest shall answer certain Shareholder inquiries related to their share
accounts and other correspondence requiring an answer from the Trust. Norwest
shall maintain dated copies of written communications from Shareholders, and
replies thereto.
SECTION 18. REQUIRED PERFORMANCE ON FUND BUSINESS DAY. Nothing contained
in this Agreement is intended to or shall require Norwest, in any capacity
hereunder, to perform any functions or duties on any day other than a Fund
Business Day. Functions or duties normally scheduled to be performed on any day
which is not a Fund Business Day shall be performed on, and as of, the next Fund
Business Day, unless otherwise required by law.
SECTION 19. COMPENSATION. The Trust agrees to pay to Norwest compensation
for its services as set forth in Appendix A attached hereto, or as shall be set
forth in written amendments to Appendix A approved by the Trust and Norwest from
time to time. Such amounts will be computed and paid monthly in arrears by the
Trust. Except as permitted by this Agreement with regard to indemnity, the
foregoing fee shall be full and complete compensation and reimbursement for all
Norwest's expenses incurred in connection with the services contemplated by this
Agreement, and Norwest shall be entitled to no additional expense reimbursement
or other payments of any nature.
SECTION 20. TAXES. Norwest shall not be liable for any taxes, assessments
or governmental charges that may be levied or assessed on any basis whatsoever
in connection with the Trust or any Shareholder, excluding taxes assessed
against Norwest for compensation received by it hereunder.
SECTION 21. STANDARD OF CARE; LIABILITY. Norwest shall, at all times, act
in good faith and shall use whatever methods it deems appropriate to ensure the
accuracy of all services performed under this Agreement. Norwest shall not be
liable for any non-negligent action taken in good faith and reasonably believed
by Norwest to be within the powers conferred upon it by this Agreement. The
Trust shall indemnify Norwest and hold it harmless from and against any
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and all losses, claims, damages, liabilities or expenses (including reasonable
expenses for legal counsel) arising directly or indirectly out of or in
connection with this Agreement; provided such loss, claim, damage, liability or
expense is not the direct result of Norwest's negligence or willful misconduct,
and provided further that Norwest shall give the Trust notice and reasonable
opportunity to defend against any such loss, claim, damage, liability or expense
in the name of the Trust or Norwest, or both. The Trust will be entitled to
assume the defense of any suit brought to enforce any such claim or demand, and
to retain counsel of good standing chosen by the Trust and approved by Norwest,
such approval not to be unreasonably withheld. In the event the Trust does
elect to assume the defense of any such suit and retain counsel of good standing
approved by Norwest, the defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by any of them; but in case
the Trust does not elect to assume the defense of any such suit, or in case
Norwest does not approve of counsel chosen by the Trust or Norwest has been
advised that it may have available defenses or claims which are not available or
conflict with those available to the Trust, the Trust will reimburse Norwest,
its officers or directors or the controlling person or persons named as
defendant or defendants in such suit, for the fees and expenses of any counsel
retained by Norwest or them. Norwest may, at any time, waive its right to
indemnification hereunder and assume its own defense. Without limiting the
foregoing:
(a) Norwest may rely upon the advice of the Trust or counsel to the Trust
or Norwest, and upon statements of accountants, brokers and other persons
believed by Norwest in good faith to be expert in the matters upon which are
consulted. Norwest shall not be liable for any action taken in good faith
reliance upon such advice or statements;
(b) Norwest shall not be liable for any action reasonably taken in good
faith reliance upon any Written Instructions or certified copy of any resolution
of the Board; provided, however, that upon receipt of a Written Instruction
countermanding a prior Instruction that has not been fully executed by Norwest,
Norwest shall verify the content of the second Instruction and honor it, to the
extent possible. Norwest may rely upon the genuineness of any such document, or
copy thereof, reasonably believed by Norwest in good faith to have been validly
executed;
(c) Norwest may rely, and shall be protected by the Trust 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 reasonably believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties; and
SECTION 22. SIGNATURE GUARANTEES. Upon receipt of Written Instructions,
Norwest is authorized to make payment upon redemption of Shares or otherwise
effect any transaction or class of transaction without a signature guarantee,
and the Trust hereby agrees to indemnify and hold Norwest harmless from any and
all expenses, damages, claims, suits, liabilities, actions, demands or losses
whatsoever arising out of or in connection with such payment or transactions if
made in accordance with such Written Instructions. Signature guarantees may be
provided by any eligible institution, as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, that is authorized to guarantee signatures, and
is acceptable to Norwest.
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SECTION 23. ADOPTION OF PROCEDURES. The parties hereto may adopt
procedures as may be appropriate or practical under the circumstances, and
Norwest may conclusively rely on the determination of the Trust that any
procedure that has been approved by the Trust does not conflict with or violate
any requirement of its Trust Instrument, By-Laws or Registration Statement, or
any rule, regulation or requirement of any regulatory body.
SECTION 24. TRUST BOARD RESOLUTIONS. The Trust shall file with Norwest a
certified copy of the operative resolution of the Board authorizing the
execution of Written Instructions or the transmittal of Oral instructions.
SECTION 25. RETURNED CHECKS. In the event that any check or other order
for the payment of money is returned unpaid for any reason, Norwest shall
promptly notify the Trust of the non-payment.
SECTION 26. NOTICES. 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 by first-class mail, postage prepaid, or by
overnight or two-day private mail service to the respective party. Notice to
the Trust shall be given as follows until further notice:
Norwest Select Funds
c/o Forum Financial Services, Inc.
61 Broadway, Suite 2770
New York, NY 10006
Notice to Norwest shall be given as follows until further notice:
Institutional Custody Services
Norwest Bank Minnesota, N.A.
Eighth Street and Marquette Avenue
Minneapolis, MN 55479
SECTION 27. REPRESENTATIONS AND WARRANTIES. The Trust represents and
warrants to Norwest that the execution and delivery of this Agreement by the
undersigned officer of the Trust has been duly and validly authorized by
resolution of the Board. Norwest represents and warrants to the Trust that the
execution and delivery of this Agreement by the undersigned officer of Norwest
has also been duly and validly authorized.
SECTION 28. EFFECTIVENESS, DURATION AND TERMINATION. This Agreement may
be executed in more than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the date hereof. This Agreement shall
remain in effect for a period of one year from the date of its effectiveness and
shall continue in effect for successive twelve-month periods; provided that such
continuance is specifically approved at least annually by the Board and by a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party.
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Either party may terminate this Agreement upon sixty (60) days written
notice to the other, such termination to take effect at the time specified in
the notice. Upon receiving notice of termination by Norwest, the Trust shall
use its best efforts to obtain a successor transfer agent. If a successor
transfer agent is not appointed prior to the date of termination, the Board
shall designate the Trust as its transfer agent. Upon receipt of written notice
from the Trust of the appointment of the successor transfer agent and upon
receipt of Oral or Written Instructions Norwest shall, upon request of the Trust
and the successor transfer agent and upon payment of Norwest's reasonable
charges and disbursements, promptly transfer to the successor transfer agent the
original or copies of all books and records maintained by Norwest hereunder
including, in the case of records maintained on computer systems, copies of such
records in machine-readable form, and shall cooperate with, and provide
reasonable assistance to, the successor transfer agent in the establishment of
the books and records necessary to carry out the successor transfer agent's
responsibilities hereunder.
SECTION 29. MISCELLANEOUS.
(a) This Agreement shall extend to and shall bind 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 Norwest or
by Norwest without the written consent of the Trust. Notwithstanding the
foregoing, either party may assign this Agreement without the consent of the
other party so long as the assignee is an affiliate of or successor to the
parent or subsidiary of the assigning party and is qualified to act under the
Act.
(b) This Agreement shall be governed and construed in accordance with the
laws of the State of Minnesota.
(c) The captions inserted herein are for convenience of reference and
shall not affect, in any way, the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
NORWEST BANK MINNESOTA, N.A.
/s/ P.Jay Kiedrowski
P. Jay Kiedrowski
Executive Vice President
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NORWEST SELECT FUNDS
TRANSFER AGENCY AGREEMENT
APPENDIX A
Fee as a % of
the Annual Average Daily
Funds (Classes) of the Trust Net Assets of the Class
- ---------------------------- -----------------------
ValuGrowth Stock Fund 0.05%
Intermediate Bond Fund 0.05%
Adjustable U.S. Government Reserve Fund 0.05%
<PAGE>
EXHIBIT 9(c)
<PAGE>
NORWEST SELECT FUNDS
FUND ACCOUNTING AGREEMENT
June 1, 1994
AGREEMENT made 1st day of June, 1994, between Norwest Select Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at 61 Broadway, New York, New York 10006,
and Norwest Bank Minnesota, N.A. ("Norwest"), a banking association organized
under the laws of the United States of America with its principal place of
business at Sixth Street and Marquette, Minneapolis, Minnesota 55479.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "Act") as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes; and
WHEREAS, the Trust desires that Norwest perform certain fund accounting
services for each class (each a "Class" and collectively, the "Classes") of each
series (each a "Fund" and collectively, the "Funds") of the Trust as now exist
or may in the future be created and Norwest is willing to perform the services
on the terms and conditions set forth in this Agreement;
NOW THEREFORE, the Trust and Norwest agree as follows:
SECTION 1. SERVICES TO BE PERFORMED
For each Fund, Norwest shall perform the services listed in this Section.
Norwest and the Trust's manager, Forum Financial Services, Inc. ("Forum") may
from time to time adopt such procedures as they agree upon to implement the
terms of this Section.
(a) BOOKS AND RECORDS. Norwest shall prepare and maintain on behalf of
the Trust the following books and records of each Fund, and each Class thereof,
pursuant to Rule 31a-1 under the Act (the "Rule"):
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of
cash and all other debits and credits, as required by sub-section
(b) (1) of the Rule;
(ii) Journals and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, as required by sub-
section (b) (2) of the Rule (but not including the ledgers required
by sub-section (b) (2) (iv);
(iii) A record of each brokerage order given by or on behalf of the Trust
for, or in connection with, the purchase or sale of securities, and
all other portfolio purchases or sales, as required by sub-sections
(b) (5) and (b) (6) of the Rule;
(iv) A record of all options, if any, in which the Trust has any direct or
indirect interest or which the Trust has granted or guaranteed and a
record of any contractual commitments to purchase, sell, receive or
deliver any property as required by sub-section (b) (7) of the Rule;
(v) A monthly trial balance of all ledger accounts (except shareholder
accounts) as required by sub-section (b) (8) of the Rule; and
(vi) Other records required by the Rule or any successor rule or pursuant
to interpretations thereof to be kept by open-end management
investment companies, but limited to these provisions of the Rule
applicable to portfolio transactions and as agreed upon between the
parties hereto.
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The foregoing books and records shall be prepared and maintained in such
form, for such periods and in such locations as may be required by applicable
regulation and shall be the property of the Trust. Norwest agrees to make such
books and records available for inspection by the Trust or by the Securities and
Exchange Commission at reasonable times and as otherwise directed by Forum.
(b) ACCOUNTING SERVICES. Norwest shall:
(i) Calculate the net asset value per share with the frequency prescribed
in each Fund's then-current Prospectus;
(ii) Calculate dividends and capital gain distributions, if any, as
required by the Trust;
(iii) Calculate the yield, effective yield, tax equivalent yield and total
return for each Fund, and each Class thereof, as applicable, and such
other measure of performance as may be agreed upon between the parties
hereto;
(iv) Provide the Trust and such other persons as Forum may direct with the
following reports:
(A) a current security position report,
(B) a summary report of transactions and pending maturities
(including the principal, cost, and accrued interest on each
portfolio security in maturity date order), and
(C) a current cash position and projection report;
(v) Prepare and record, as of each time when the net asset value of a Fund
is calculated or as otherwise directed by Forum, either
(A) a valuation of the assets in the Fund (based upon the use of
outside services normally used and contracted for this purpose by
Norwest in the case of securities for which information and
market price or yield quotations are readily available and based
upon evaluations conducted in accordance with Forum's
instructions in the case of all other assets) or
(B) a calculation confirming that the market value of the Fund's
assets does not deviate from the amortized cost value of those
assets by more than a specified percentage agreed to from time to
time by Norwest and Forum;
(vi) Make such adjustments over such periods as Norwest deems necessary to
reflect over-accruals or under-accruals of estimated expenses or
income; and
(vii) Obtain necessary information from Forum and the Trust's transfer agent
in order to prepare the Trust's form N-SAR.
(C) OTHER SERVICES. Norwest shall:
(i) Assist the Trust's independent accountants and, upon approval of the
Trust or Forum, any regulatory body in any requested review of the
Trust's books and records maintained by Norwest; and
(ii) Prepare periodic reports to shareholders and the Securities and
Exchange Commission and such other reports as may be agreed to from
time to time and provide information typically supplied in
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<PAGE>
the investment company industry to companies that track or report
the price, performance or other information with respect to investment
companies.
SECTION 2. COMPENSATION
(a) FEE. For the services provided by Norwest pursuant to this Agreement,
the Trust shall pay to Norwest a fee with respect to each Fund as calculated in
accordance with Appendix A hereto. These fees shall be paid monthly in advance.
Fees will begin to accrue for each Fund on the latter of the effective date of
this Agreement or the date of commencement of operations of the Fund.
(b) REIMBURSEMENT OF EXPENSES. The Trust shall reimburse Norwest for all
of Norwest's reasonable out-of-pocket expenses incurred in the performance of
its duties hereunder. The Trust also shall reimburse Norwest for all Norwest
expenses and employee time attributable to any review of the Trust's accounts
and records by the Trust's independent accountants or any regulatory body
outside of routine and normal periodic reviews and for all Norwest expenses for
services in connection with Norwest's activities in effecting any termination of
this Agreement (except the termination of Norwest for cause), including expenses
incurred by Norwest to deliver the Trust's property in Norwest's possession to
the Trust or other persons.
SECTION 3. TERM
This Agreement shall become effective as of the date first above written
and shall remain in effect for 12 months. Thereafter, this Agreement shall
remain in effect indefinitely. This Agreement may be terminated with respect to
any Fund, or Class thereof, without the payment of any penalty, (i) by a vote of
a majority of the Trust's Board of Trustees on 60 days' written notice to
Norwest or (ii) by Norwest on 60 days' written notice to the Trust. For so long
as Norwest continues to perform any of the services contemplated by this
Agreement after termination of this Agreement (as agreed to by the Trust and
Norwest), the provisions of Sections 2 and 4 hereof shall continue in full force
and effect.
SECTION 4. STANDARD OF CARE; LIMITATION OF LIABILITY
Norwest shall use its best judgment and efforts in rendering the services
described herein and shall not be liable to the Trust for any action or inaction
of Norwest in the absence of bad faith, willful misconduct or gross negligence.
Norwest shall not be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control. The
Trust agrees to indemnify and hold harmless Norwest, its employees, agents,
officers and directors against and from any and all claims, demands, actions,
suits, judgments, liabilities, losses, damages, costs, charges, counsel fees and
other expenses of every nature and character arising out of or in any way
related to Norwest's actions taken or failures to act with respect to a Fund or
based, if applicable, upon information, instructions or requests with respect to
a Fund given or made to Norwest by an officer of the Trust duly authorized.
This indemnification shall not apply to Norwest's actions taken or failures to
act in cases of Norwest's own bad faith, willful misconduct or gross negligence.
The Trust shall not be required to indemnify Norwest if, prior to confessing any
claim against it which may be subject to indemnification, Norwest does not give
the Trust written notice of and reasonable opportunity to defend against the
claim in its own name or in the name of Norwest.
SECTION 5. ASSIGNMENT
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
SECTION 6. MISCELLANEOUS
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<PAGE>
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) Section and Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal addresses, or at such other address as a
party may have designated in writing, shall be deemed to have been properly
given.
(e) This Agreement shall be governed by and shall by construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
-----------------------------
John Y. Keffer
President
NORWEST BANK MINNESOTA, N.A.
-----------------------------
P. Jay Kiedrowski
Executive Vice President
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<PAGE>
NORWEST SELECT FUNDS
FUND ACCOUNTING AGREEMENT
APPENDIX A
June 1, 1994
Standard Fee per Fund with one Class $36,000/year
Fee for each additional Class $ 6,000/year
Plus Additional Surcharges for each of:
Tax-Free Money Market Funds $12,000/year
Global or International Funds $12,000/year
Funds with more that 25% of
their total assets invested in
asset backed securities $ 1,000/month
Funds with more than
100 security positions $ 1,000/month
Funds with a monthly portfolio
turnover rate of 10% or greater $ 1,000/month
Monthly surcharges are based upon the total assets or security positions as
of the end of the prior month and on the portfolio turnover rate for the prior
month. Portfolio turnover rate shall have the meaning ascribed thereto in
Securities and Exchange Commission Form N-1A.
<PAGE>
EXHIBIT 9(d)
<PAGE>
NORWEST SELECT FUNDS
FUND ACCOUNTING AGREEMENT
December 19, 1994
AGREEMENT made 1st day of December, 1994, between Norwest Select Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at 61 Broadway, New York, New York 10006,
and Forum Financial Corp. ("FFC"), a corporation organized under the laws of the
State of Delaware with its principal place of business at Two Portland Square,
Portland, Maine 04101.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "Act") as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes; and
WHEREAS, the Trust desires that FFC perform certain fund accounting
services for each class (each a "Class" and collectively, the "Classes") of each
series (each a "Fund" and collectively, the "Funds") of the Trust as now exist
or may in the future be created and FFC is willing to perform the services on
the terms and conditions set forth in this Agreement;
NOW THEREFORE, the Trust and FFC agree as follows:
SECTION 1. SERVICES TO BE PERFORMED
For each Fund, FFC shall perform the services listed in this Section. FFC
and the Trust's manager, Forum Financial Services, Inc. ("Forum") may from time
to time adopt such procedures as they agree upon to implement the terms of this
Section.
(a) BOOKS AND RECORDS. FFC shall prepare and maintain on behalf of the
Trust the following books and records of each Fund, and each Class thereof,
pursuant to Rule 31a-1 under the Act (the "Rule"):
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of
cash and all other debits and credits, as required by sub-section (b)
(1) of the Rule;
(ii) Journals and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, as required by sub-
section (b) (2) of the Rule (but not including the ledgers required
by sub-section (b) (2) (iv);
(iii) A record of each brokerage order given by or on behalf of the Trust
for, or in connection with, the purchase or sale of securities, and
all other portfolio purchases or sales, as required by sub-sections
(b) (5) and (b) (6) of the Rule;
(iv) A record of all options, if any, in which the Trust has any direct or
indirect interest or which the Trust has granted or guaranteed and a
record of any contractual commitments to purchase, sell, receive or
deliver any property as required by sub-section (b) (7) of the Rule;
(v) A monthly trial balance of all ledger accounts (except shareholder
accounts) as required by sub-section (b) (8) of the Rule; and
(vi) Other records required by the Rule or any successor rule or pursuant
to interpretations thereof to be kept by open-end management
investment companies, but limited to these provisions of the Rule
applicable to portfolio transactions and as agreed upon between the
parties hereto.
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<PAGE>
The foregoing books and records shall be prepared and maintained in such
form, for such periods and in such locations as may be required by applicable
regulation and shall be the property of the Trust. FFC agrees to make such
books and records available for inspection by the Trust or by the Securities and
Exchange Commission at reasonable times and as otherwise directed by Forum.
(b) ACCOUNTING SERVICES. FFC shall:
(i) Calculate the net asset value per share with the frequency prescribed
in each Fund's then-current Prospectus;
(ii) Calculate dividends and capital gain distributions, if any, as
required by the Trust;
(iii) Calculate the yield, effective yield, tax equivalent yield and total
return for each Fund, and each Class thereof, as applicable, and such
other measure of performance as may be agreed upon between the parties
hereto;
(iv) Provide the Trust and such other persons as Forum may direct with the
following reports:
(A) a current security position report,
(B) a summary report of transactions and pending maturities
(including the principal, cost, and accrued interest on each
portfolio security in maturity date order), and
(C) a current cash position and projection report;
(v) Prepare and record, as of each time when the net asset value of a Fund
is calculated or as otherwise directed by Forum, either
(A) a valuation of the assets in the Fund (based upon the use of
outside services normally used and contracted for this purpose by
FFC in the case of securities for which information and market
price or yield quotations are readily available and based upon
evaluations conducted in accordance with Forum's instructions in
the case of all other assets) or
(B) a calculation confirming that the market value of the Fund's
assets does not deviate from the amortized cost value of those
assets by more than a specified percentage agreed to from time to
time by FFC and Forum;
(vi) Make such adjustments over such periods as FFC deems necessary to
reflect over-accruals or under-accruals of estimated expenses or
income; and
(vii) Obtain necessary information from Forum and the Trust's transfer agent
in order to prepare the Trust's form N-SAR.
(c) OTHER SERVICES. FFC shall:
(i) Assist the Trust's independent accountants and, upon approval of the
Trust or Forum, any regulatory body in any requested review of the
Trust's books and records maintained by FFC; and
(ii) Prepare periodic reports to shareholders and the Securities and
Exchange Commission and such other reports as may be agreed to from
time to time and provide information typically supplied in the
investment company industry to companies that track or report the
price, performance or other information with respect to investment
companies.
-2-
<PAGE>
SECTION 2. COMPENSATION
(a) FEE. For the services provided by FFC pursuant to this Agreement, the
Trust shall pay to FFC a fee with respect to each Fund as calculated in
accordance with Appendix A hereto. These fees shall be paid monthly in advance.
Fees will begin to accrue for each Fund on the latter of the effective date of
this Agreement or the date of commencement of operations of the Fund.
(b) REIMBURSEMENT OF EXPENSES. The Trust shall reimburse FFC for all of
FFC's reasonable out-of-pocket expenses incurred in the performance of its
duties hereunder. The Trust also shall reimburse FFC for all FFC expenses and
employee time attributable to any review of the Trust's accounts and records by
the Trust's independent accountants or any regulatory body outside of routine
and normal periodic reviews and for all FFC expenses for services in connection
with FFC's activities in effecting any termination of this Agreement (except the
termination of FFC for cause), including expenses incurred by FFC to deliver the
Trust's property in FFC's possession to the Trust or other persons.
SECTION 3. TERM
This Agreement shall become effective as of the date first above written
and shall remain in effect for 12 months. Thereafter, this Agreement shall
remain in effect indefinitely. This Agreement may be terminated with respect to
any Fund, or Class thereof, without the payment of any penalty, (i) by a vote of
a majority of the Trust's Board of Trustees on 60 days' written notice to FFC or
(ii) by FFC on 60 days' written notice to the Trust. For so long as FFC
continues to perform any of the services contemplated by this Agreement after
termination of this Agreement (as agreed to by the Trust and FFC), the
provisions of Sections 2 and 4 hereof shall continue in full force and effect.
SECTION 4. STANDARD OF CARE; LIMITATION OF LIABILITY
FFC shall use its best judgment and efforts in rendering the services
described herein and shall not be liable to the Trust for any action or inaction
of FFC in the absence of bad faith, willful misconduct or gross negligence. FFC
shall not be responsible or liable for any failure or delay in performance of
its obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control. The Trust agrees to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification shall not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence. The Trust shall not be required to
indemnify FFC if, prior to confessing any claim against it which may be subject
to indemnification, FFC does not give the Trust written notice of and reasonable
opportunity to defend against the claim in its own name or in the name of FFC.
SECTION 5. ASSIGNMENT
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
SECTION 6. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
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<PAGE>
(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) Section and Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal addresses, or at such other address as a
party may have designated in writing, shall be deemed to have been properly
given.
(e) This Agreement shall be governed by and shall by construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST SELECT FUNDS
/s/ John Y. Keffer
John Y. Keffer
President
FORUM FINANCIAL CORP.
/s/ David R. Keffer
David R. Keffer
Vice President
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<PAGE>
NORWEST SELECT FUNDS
FUND ACCOUNTING AGREEMENT
APPENDIX A
December 1, 1994
Standard Fee per Fund with one Class $36,000/year
Fee for each additional Class $ 6,000/year
Plus Additional Surcharges for each of:
Tax-Free Money Market Funds $12,000/year
Global or International Funds $12,000/year
Funds with more that 25% of
their total assets invested in
asset backed securities $ 1,000/month
Funds with more than
100 security positions $ 1,000/month
Funds with a monthly portfolio
turnover rate of 10% or greater $ 1,000/month
Monthly surcharges are based upon the total assets or security positions as
of the end of the prior month and on the portfolio turnover rate for the prior
month. Portfolio turnover rate shall have the meaning ascribed thereto in
Securities and Exchange Commission Form N-1A.
<PAGE>
EXHIBIT 10
<PAGE>
EUGENE P. SOUTHER Seward & Kissel GEORGE C. SEWARD*
BLAISE G.A. PASZTORY 1200 G Street, N.W. SENIOR COUNSEL
ALBERT A. WALSH* Washington, D.C. 20005
ARRIAL S. COGAN (202)-737-8833 LESTER KISSEL
BRUCE D. SENZEL FAX (202) 737-5184 RICHARD H. VALENTINE
MARLENE D. DANIELS EDWARD W. BEUCHERT
JAMES H. HANCOCK* ROBERT B. SIMON
ANTHONY R. MANSFIELD* KEITH H. ELLIS
ANTHONY C. NULAND* COUNSEL
M. WILLIAM MUNNO
BRADFORD J. RACE, JR. ONE BATTERY PARK PLAZA
DAVID L. FOBES NEW YORK, N.Y. 10004
HADLEY S. ROE (212) 574-1200
RUSSELL C. PRINCE FAX (212) 480-8421
CRAIG T. HICKERNELL ----
JANET R. ZIMMER* REPRESENTATIVE OFFICE
ROBERT A WALDER NADOR UTCA ll
JOHN E. TAVSS 1051 BUDAPEST, HUNGARY
GARY J. WOLFE (361) 132-7115
LAWRENCE RUTKOWSKI FAX (361) 132-7940
RONALD L. COHEN
MARK J. HYLAND
PAUL T. CLARK*
JONATHAN BERGER
THOMAS G. MacDONALD
MARK A BRODY
PAUL M. GOTTLIEB
JOHN J. CLEARY
MICHAEL J. McNAMARA
KALYAN DAS
* ADMITTED IN DISTRICT OF COLUMBIA
May 23, 1994
Norwest Select Funds
61 Broadway
New York, New York 10006
Dear Sir or Madam:
We have acted as counsel for Norwest Select Funds, a Delaware business
trust with transferable shares (the "Trust"), in connection with the
organization of the Trust, the registration of the Trust under the Investment
Company Act of 1940 and the registration of an indefinite number of shares of
beneficial interest of the Trust under the Securities Act of 1933.
As counsel for the Trust, we have participated in the preparation of the
Registration Statement on Form N-1A (the "Registration Statement") and the
Prospectus contained therein (the "Prospectus") relating to such shares and have
examined and relied upon such records of the Trust and such other documents,
including certificates as to factual matters, as we have deemed necessary to
render the opinions expressed herein.
Based on such examination, we are of the opinion that:
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<PAGE>
1. The Trust has been duly organized and is validly existing as a business
trust with transferable shares of the type commonly called a Delaware business
trust.
2. The Trust is authorized to issue an unlimited number of shares. The
shares to be offered for sale by the Prospectus (the "Registered Shares") have
been duly and validly authorized by all requisite action of the Trustees of the
Trust and no action of the shareholders of the Trust is required in connection
therewith.
3. When the Registered Shares have been duly sold, issued and paid for as
contemplated by the Prospectus, they will be validly and legally issued, fully
paid and non-assessable by the Trust.
Our opinion above stated is expressed as members of the bar of the District
of Columbia and the State of New York. This opinion does not extend to the
securities or "blue sky" laws of any state.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement.
Very truly yours,
/S/ Seward & Kissel
AMFuller
trg
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<PAGE>
EXHIBIT 11
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
Norwest Select Funds:
We consent to the use of our report, incorporated by reference into the
statement of additional information, and to the reference to our Firm under the
headings "Financial Highlights" in the prospectuses and "Counsel and Auditors"
in the statements of additional information.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
April 26, 1996
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<PAGE>
EXHIBIT 13
<PAGE>
LOGO FORUM FINANCIAL SERVICES, INC.
- --------------------------------------------------------------------------------
61 Broadway, New York, New York 10006
- Telephone 212/363-3301 Facsimile 212/363-7878
May 24, 1994
Board of Trustees
Norwest Select Funds
61 Broadway
New York, New York 10006
Ladies and Gentlemen:
In connection with the purchase by Forum Financial Services, Inc. ("Forum")
of 3,333 shares of ValuGrowth Stock Fund, 3,333 shares of Intermediate Bond Fund
and 3,333 shares of Adjustable U.S. Government Reserve Fund, the three initial
portfolios of Norwest Select Funds, and for the consideration of cash of $10.00
per share, this letter will confirm that Forum is purchasing those shares for
its account for investment only and not with a view to reselling or otherwise
distributing those shares.
Sincerely,
/s/ John Y. Keffer
John Y. Keffer
President
NEW YORK - PORTLAND - LOS ANGELES - SEATTLE - LONDON
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<PAGE>
OTHER EXHIBITS
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that James C. Harris constitutes and
appoints John Y. Keffer, David I. Goldstein, Thomas G. Sheehan, Anthony C.J.
Nuland and Robert M. Nelson and each of them, as true and lawful attorneys-in-
fact and agents with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of Norwest Select
Funds, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
/s/ James C. Harris
James C. Harris
Dated: December 8, 1993
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Richard M. Leach constitutes and
appoints John Y. Keffer, David I. Goldstein, Thomas G. Sheehan, Anthony C.J.
Nuland and Robert M. Nelson and each of them, as true and lawful attorneys-in-
fact and agents with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of Norwest Select
Funds, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
/s/ Richard M. Leach
Richard M. Leach
Dated: December 8, 1993
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Robert C. Brown constitutes and
appoints John Y. Keffer, David I. Goldstein, Thomas G. Sheehan, Anthony C.J.
Nuland and Robert M. Nelson and each of them, as true and lawful attorneys-in-
fact and agents with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of Norwest Select
Funds, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
/s/ Robert C. Brown
Robert C. Brown
Dated: December 8, 1993
-3-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Donald H. Burkhardt constitutes and
appoints John Y. Keffer, David I. Goldstein, Thomas G. Sheehan, Anthony C.J.
Nuland and Robert M. Nelson and each of them, as true and lawful attorneys-in-
fact and agents with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of Norwest Select
Funds, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
/s/ Donald H. Burkhardt
Donald H. Burkhardt
Dated: December 8, 1993
-4-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Donald C. Willeke constitutes and
appoints John Y. Keffer, David I. Goldstein, Thomas G. Sheehan and Anthony C.J.
Nuland and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Norwest Select Funds, and to file the
same, with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Donald C. Willeke
---------------------------
Donald C. Willeke
Dated: October 16, 1995
-5-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Timothy J. Penny constitutes and
appoints John Y. Keffer, David I. Goldstein, Thomas G. Sheehan and Anthony C.J.
Nuland and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Norwest Select Funds, and to file the
same, with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Timothy J. Penny
---------------------------
Timothy J. Penny
Dated: January 29, 1996
-6-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that John Y. Keffer constitutes and
appoints David I. Goldstein, Thomas G. Sheehan, Anthony C.J. Nuland and Robert
M. Nelson and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Norwest Select Funds, and to file the
same, with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ John Y. Keffer
John Y. Keffer
Dated: December 8, 1993
-7-
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<PAGE>
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<LEGEND>
type from sheet
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<NUMBER> 1
<NAME> NORWEST SELECT ARM FUND
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<NET-INVESTMENT-INCOME> 20863
<REALIZED-GAINS-CURRENT> (18291)
<APPREC-INCREASE-CURRENT> (317)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 65113
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 39541
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<SHARES-REINVESTED> 7357
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type from sheet
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<NAME> NORWEST SELECT VALUGROWTH STOCK FUND
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<GROSS-EXPENSE> 114976
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<ARTICLE> 6
<LEGEND>
type from sheet
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> NORWEST SELECT SMALL COMPANY STOCK FUND
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type from sheet
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<NUMBER> 2
<NAME> NORWEST SELECT INTERMEDIATE BOND FUND
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