<PAGE> 1
As filed with the Securities and Exchange Commission on December 23, 1997
Registration No. 811-8494 and 33-78408
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 4 [x]
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 6
(Check appropriate box or boxes) [x]
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MAGNA FUNDS
(Exact name of registrant as specified in charter)
3435 Stelzer Road
Columbus, Ohio 43219
Registrant's Telephone Number, Including Area Code: (800) 219-4182
Name and address
of agent for service Copy to
- -------------------- -------
Walter B. Grimm John M. Loder, Esq.
BISYS Fund Services Ropes & Gray
3435 Stelzer Road One International Place
Columbus, Ohio 43219 Boston, MA 02110
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It is proposed that this filing will become effective on January 1, 1998
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933.
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MAGNA FUNDS
Cross Reference Sheet
Items required by Form N-1A
<TABLE>
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PART A
<S> <C> <C>
ITEM REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUS
NO.
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Financial Highlights
4 General Description of Registrant Cover Page; The Trust; Investment
Objectives and Policies; Risk and Other
Information About the Funds' Investments
5. Management of the Fund Cover Page; The Trust; The Funds'
Investment Adviser; Fund Management
and Expenses; Portfolio Transactions;
Back Cover
6 Capital Stock and Other Securities The Trust; Shareholder Services;
Dividends, Capital Gain Distributions
and Taxes
7. Purchase of Securities Being Offered How to Purchase Shares; Shareholder
Services; Fund Management and Expenses
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
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<TABLE>
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PART B
<S> <C> <C>
ITEM REGISTRATION STATEMENT CAPTION CAPTION IN STATEMENT OF ADDITIONAL
NO. INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives, Policies and
Restrictions
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Holders Management of the Trust; Description of
of Securities the Trust
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
18 Capital Stock and Other Securities How to Redeem Shares (Prospectus);
Redemptions; Dividends, Capital Gain
Distributions and Taxes (Prospectus);
Income Dividends, Capital Gain
Distributions and Tax Status; Description
of the Trust
19. Purchase, Redemption and Pricing of How to Purchase Shares (Prospectus);
Securities Being Offered Shareholder Services; How to Redeem
Shares (Prospectus); Redemptions; Net
Asset Value and Public Offering Price;
Specimen Price Make-Up
20. Tax Status Dividends, Capital Gain Distributions and
Taxes (Prospectus); Income Dividends,
Capital Gain Distributions and Tax Status
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PART B (CON'T)
<S> <C> <C>
ITEM REGISTRATION STATEMENT CAPTION CAPTION IN STATEMENT OF ADDITIONAL
NO. INFORMATION
21. Underwriters Investment Advisory and Other Services
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
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<PAGE> 5
MAGNA FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(800) 219-4182
PROSPECTUS
JANUARY 2, 1998
Magna Funds (the "Trust") is a mutual fund issuing two series of
shares--Magna Intermediate Government Bond Fund and Magna Growth & Income Fund
(the "Funds"). Each Fund has its own investment objective and invests in a
different portfolio of securities. Magna Bank, N.A. ("Magna") is the investment
adviser for each Fund.
This Prospectus concisely describes the information that you should know
before investing in a Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated January 2, 1998 is
available free of charge; write to Magna Funds, P.O. Box 182754, Columbus, Ohio
43218-2784 or telephone (800) 219-4182. The Statement of Additional Information,
which contains more detailed information about the Funds, has been filed with
the Securities and Exchange Commission (the "SEC") and is incorporated by
reference into this Prospectus.
Shares are offered to the public through BISYS Fund Services ("BISYS"), the
Trust's distributor. Shares are offered at net asset value plus a sales charge.
As of the date of this Prospectus, each Fund offers a single class of shares.
Shares of the Funds may, in the future, be offered in two or more classes with
different sales load arrangements.
For information about the Funds, including:
- -- Establishing an account
- -- Account procedures and status
- -- Exchanges
- -- Shareholder services
Call (800) 219-4182
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, Magna Group, Inc., Magna Bank, N.A. or any other bank, and shares
are not federally insured by the Federal Deposit Insurance Corporation or any
other government agency. Investment in the Funds involves the risk of a 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.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY OF EXPENSES................................................................... 1
FINANCIAL HIGHLIGHTS.................................................................. 2
INVESTMENT OBJECTIVES AND POLICIES.................................................... 3
RISK AND OTHER INFORMATION ABOUT THE FUNDS' INVESTMENTS............................... 5
THE FUNDS' INVESTMENT ADVISER......................................................... 11
FUND MANAGEMENT AND EXPENSES.......................................................... 12
PORTFOLIO TRANSACTIONS................................................................ 12
HOW TO PURCHASE SHARES................................................................ 13
REDUCED SALES CHARGES................................................................. 14
SHAREHOLDER SERVICES.................................................................. 15
HOW TO REDEEM SHARES.................................................................. 16
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES...................................... 17
THE TRUST............................................................................. 18
</TABLE>
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SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various expenses that, as an investor in a Fund, you will bear directly or
indirectly. The table below summarizes your maximum transaction costs from an
investment in the Funds and the expenses which each Fund is expected to incur
during the current fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in any Fund over specified
periods. The information below should not be considered a representation of
future expenses, as actual expenses may be greater or less than those shown.
Other Expenses for both Funds are actual expenses for the fiscal year ended
August 31, 1997. THE ASSUMED 5% ANNUAL RETURN IN THE EXAMPLE BELOW SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE FUND INVESTMENT PERFORMANCE, SINCE
ACTUAL PERFORMANCE WILL DEPEND UPON ACTUAL INVESTMENT RESULTS OF SECURITIES HELD
IN THE PARTICULAR FUND'S PORTFOLIO.
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
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Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchase (as % of offering
price)........................................................ 4.0% 4.0%
Maximum Sales Load Imposed on Reinvested Dividends (as % of
offering price)............................................... None None
Deferred Sales Load (as % of original purchase price or
redemption proceeds, as applicable)........................... None(1) None(1)
Redemption Fees(2)............................................. None None
Exchange Fees.................................................. None None
Annual Fund Operating Expenses (as % of net assets):
Investment Advisory Fees (after fee waiver)(3)................. 0.50% 0.40%
12b-1 Fees (after fee waiver)(3)............................... 0.00% 0.00%
Other Expenses................................................. 0.56% 0.56%
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Total Fund Operating Expenses.................................. 1.06% 0.96%
Example:
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return (with or without a redemption at
the end of each time period):
One Year.................................................. $50 $49
Three Years............................................... $72 $69
Five Years................................................ $96 $91
Ten Years................................................. $164 $153
</TABLE>
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(1) Purchases of over $3 million are not subject to any sales load at the time
of purchase, but a 1% contingent deferred sales charge applies on amounts
redeemed within one year after purchase.
(2) A Wire Fee (currently $5.00) will be deducted from the proceeds of
redemptions effected by telephone. See "How to Redeem Shares."
(3) The Trust's investment adviser and distributor have voluntarily agreed to
reduce their fees to the amounts shown in the table above through August 31,
1998. Without such voluntary reductions, the adviser would be entitled to
receive investment advisory fees of 0.75% and 0.50% of the average daily net
assets of the Growth & Income Fund and the Intermediate Government Bond
Fund, respectively, and the distributor would be entitled to receive 12b-1
fees of 0.25% of the average daily net assets of each Fund.
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<PAGE> 8
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
GROWTH & INCOME FUND BOND FUND
-------------------------------------- --------------------------------------
SEPTEMBER 1, SEPTEMBER 1,
1994* YEAR 1994*
YEAR ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1995 1997 1996 1995
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 16.42 $ 14.05 $ 12.50 $ 12.43 $ 12.75 $ 12.50
======= ======= ======= ======= ======= =======
Income from Investment
Operations:
Net Investment Income.......... 0.26 0.24 0.25 0.79 0.76 0.74
Net Realized and Unrealized
Gain (Loss) From Investment
Transactions................. 6.12 2.39 1.52 0.19 (0.32) 0.25
------- ------- ------- ------- ------- -------
Total From Investments
Operations................... 6.38 2.63 1.77 0.98 0.44 0.99
------- ------- ------- ------- ------- -------
Less Distributions:
Net Investment Income.......... (0.25) (0.23) (0.22) (0.79) (0.76) (0.74)
Net Realized Gain from
Investment Transactions...... (0.37) (0.03) -- (0.01) -- --
------- ------- ------- ------- ------- -------
Total Dividends and
Distributions................ (0.62) (0.26) (0.22) (0.80) (0.76) (0.74)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period..... $ 22.18 $ 16.42 $ 14.05 $ 12.61 $ 12.43 $ 12.75
======= ======= ======= ======= ======= =======
Total Return(1).................... 39.59% 18.77% 14.33% 7.96% 3.48% 8.30%
======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
- --------------------------
Net Assets, End of Period
($000's)......................... $70,276 $39,995 $30,284 $64,459 $56,764 $52,085
Ratio of Expenses to Average Net
Assets........................... 1.06% 1.27% 1.25% 0.96% 1.05% 1.10%
Ratio of Net Investment Income to
Average Net Assets............... 1.36% 1.56% 1.98% 6.15% 5.97% 6.00%
Ratio of Expenses to Average Net
Assets without Fee Waivers **.... 1.56% 1.77% 1.88% 1.31% 1.40% 1.43%
Ratio of Net Investment Income to
Average Net Assets without Fee
Waivers **....................... 0.86% 1.06% 1.35% 5.80% 5.62% 5.66%
Portfolio Turnover Rate............ 17% 31% 41% 19% 20% 34%
Average Commission Rate Paid(2).... $0.0500 $0.0600 $ N/A $ N/A $ N/A $ N/A
</TABLE>
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* Commencement of operations.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(1) Total return excludes sales charges. Had the advisor, distributor and
administrator not reduced or waived certain expenses, total returns would
have been lower.
(2) The average commission rate paid is applicable for Funds that invest greater
than 10% of average net assets in equity security transactions on which
commissions are charged. This disclosure is required for fiscal periods
beginning on or after September 1, 1995.
The above information has been audited by Coopers & Lybrand L.L.P.,
independent accountants. This statement should be read in connection with the
other audited financial statements and related notes which are incorporated by
reference in the Trust's Statement of Additional Information.
The investment adviser's discussion of performance of each Fund in the
fiscal year ended August 31, 1997, as well as a comparison of each Fund's
performance over the life of the Fund with that of a benchmark securities index
selected by the investment adviser, is included in the Trust's Annual Report for
the fiscal year ended August 31, 1997. Copies of the Annual Report are available
upon request without charge.
2
<PAGE> 9
INVESTMENT OBJECTIVES AND POLICIES
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
The investment objective of the Intermediate Government Bond Fund is to
achieve current income consistent with preservation of capital.
The Fund pursues this objective by investing in a portfolio consisting
primarily of U.S. Government Securities, and high grade bonds and notes of
non-governmental issuers. Under normal circumstances, the Fund will invest at
least 65% of the total value of its assets in U.S. Government Securities, which
include all securities issued or guaranteed by the U.S. Government or any of its
agencies, authorities or instrumentalities. Repurchase agreements that are fully
collateralized by U.S. Government Securities will be treated as U.S. Government
Securities for the purpose of this 65% test. U.S. Government Securities include
certain mortgage-backed securities. (See "Risk and Other Information About the
Funds' Investments--Intermediate Government Bond Fund--Mortgage-Backed and Other
Asset-Backed Securities.") The Fund will maintain a dollar-weighted average
portfolio maturity of between three and ten years, but may purchase individual
securities with longer or shorter maturities. For purposes of computing average
maturity, (1) securities that are subject to call, refund or redemption will be
treated as maturing on the ultimate maturity date unless Magna believes it is
probable that the issuer of the security will take advantage of the call, refund
or redemption provision (in which case the date of such probable call, refund or
redemption will be treated as the maturity date), (2) new issues by the
Government National Mortgage Association ("GNMA") or the Federal National
Mortgage Association ("FNMA") which have a 30-year stated maturity will be
treated as having a 12-year maturity unless Magna believes, based on publicly
available information from a nationally recognized source, that the issue will
have a longer or shorter average life; and (3) certain nominally long-term
securities will be deemed to have a shorter-maturity because of the existence of
a demand feature exercisable by the Fund prior to the stated maturity.
The securities in which the Fund invests include, but are not limited to:
-- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds;
-- obligations of U.S. government agencies, authorities or
instrumentalities such as the Federal Home Loan Banks, FNMA, GNMA, the
Federal Farm Credit Banks, the Student Loan Marketing Association, the
Federal Home Loan Mortgage Corporation or the Tennessee Valley
Authority;
-- corporate debt obligations having floating or fixed rates of interest
and rated in one of the three highest categories by a nationally
recognized statistical rating organization ("NRSRO") (that is, rated
Aaa, Aa or A by Moody's Investors Service, Inc. ("Moody's") or AAA, AA
or A by Standard & Poor's Corporation ("Standard & Poor's") or Fitch
Investors Service, Inc. ("Fitch")), or which are not rated but are of
comparable quality in the judgment of Magna;
-- asset-backed securities rated A or higher by an NRSRO, which may
include, but are not limited to, interests in pools of receivables such
as motor vehicle installment purchase obligations and credit card
receivables;
-- mortgage-backed securities;
-- collateralized mortgage obligations; and
3
<PAGE> 10
-- repurchase agreements collateralized by eligible investments.
If a security's rating is reduced below the required minimum after the Fund has
purchased it, the Fund is not required to sell the security, but may consider
doing so. However, the Fund does not intend to hold more than 5% of its total
assets in securities that have been downgraded below investment grade (that is,
below BBB or Baa).
The Fund may also engage in options transactions for hedging purposes.
MAGNA GROWTH & INCOME FUND
The investment objective of Magna Growth & Income Fund is to seek long-term
growth of capital, current income and growth of income.
The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends (or interest, in the case
of certain convertible securities). Over time, continued growth of earnings
tends to lead to higher dividends and enhancement of capital value. The Fund may
also purchase such securities which do not pay current dividends but which offer
prospects for growth of capital and future income. The Fund may invest a portion
of its assets in securities of foreign issuers traded in U.S. securities
markets, which may subject it to special risks. See "Foreign Securities" below.
The Fund allocates its investments among different industries and companies, and
changes its portfolio securities for investment considerations and not for
trading purposes.
In addition, the Fund may invest up to 10% of its total assets in debt
obligations with maturities of longer than one year at the time of purchase,
including U.S. Government Securities, high grade bonds and notes of
nongovernmental issuers and other fixed income securities generally suitable for
investment by the Intermediate Government Bond Fund. (See "Investment Objectives
and Policies--Magna Intermediate Government Bond Fund.") The Fund may also
invest in repurchase agreements, and may engage in options transactions for
hedging purposes.
BOTH FUNDS
There is no assurance that either Fund will achieve its investment
objective. Although the Funds have adopted policies designed to limit risk,
investments in the Funds involve the risk of losing a substantial portion of
your investment.
The Funds are permitted to invest in a variety of different securities and
instruments, subject to the policies and limitations described in this
Prospectus and the Statement of Additional Information. The Funds are not
required, however, to use all of the different investment instruments and
techniques described in this Prospectus and the Statement of Additional
Information. At any particular time, each Fund's assets will consist of
investments that Magna believes are appropriate for that Fund under the market
and economic conditions in effect at that time, consistent with the Fund's
investment objectives and policies.
Except for matters that are explicitly identified as "fundamental" in this
Prospectus or the Statement of Additional Information, the investment policies
of the Funds may be changed without shareholder approval. The investment
objective of each Fund is fundamental and thus may not be changed without a vote
of that Fund's shareholders.
4
<PAGE> 11
RISK AND OTHER INFORMATION ABOUT THE FUNDS' INVESTMENTS
INTERMEDIATE GOVERNMENT BOND FUND
General Characteristics of Bonds and Notes
All types of bonds and notes are subject to market and credit risk. Market
risk relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase when
prevailing interest rates fall and decrease when interest rates rise. Credit
risk relates to the ability of the issuer to make payments of principal and
interest. Corporate bonds and notes, which under normal circumstances may
constitute up to 35% of the Fund's total assets, generally involve more credit
risk than U.S. Government bonds and notes. The net asset value of the Fund's
shares will vary as a result of changes in the value of the securities in a
Fund's portfolio. Therefore, your investment may decline in value, resulting in
a loss of part of your invested principal. Because interest rates vary, it is
impossible to predict the income or yield of the Fund for any particular period.
Many bonds and notes are also subject to prepayment risk. This risk results
from the ability of the issuer to prepay all or part of the principal of the
bond or note before the stated maturity date. For example, a corporation may
issue a bond with a stated maturity of twenty years, but subject to the
corporation's right to "call" or prepay the bond after only five or seven years.
Many asset-backed securities (see below) are prepayable at any time. During
periods of falling interest rates, securities that can be called or prepaid may
decline in value relative to similar securities that are not subject to call or
prepayment.
U.S. Government Securities
U.S. Government Securities have different kinds of government support. For
example, some U.S. Government Securities, such as U.S. Treasury bonds and notes,
are supported by the full faith and credit of the United States. Certain other
U.S. Government Securities are not supported by the full faith and credit of the
United States, but may be backed by (1) the credit of a particular agency or
instrumentality, (2) the agency's or instrumentality's ability to borrow
specified amounts from the U.S. Treasury or (3) the discretionary authority of
the U.S. Government to purchase certain obligations of the agency or
instrumentality. Examples of U.S. Government Securities that are not backed by
the full faith and credit of the United States include obligations of the
Federal Home Loan Mortgage Corporation, the Federal Home Loan Banks, FNMA and
the Tennessee Valley Authority.
Although U.S. Government Securities generally do not involve the credit
risks associated with other types of fixed income securities, the market values
of U.S. Government Securities do go up and down as interest rates change. Thus,
the value of an investment in a mutual fund that holds U.S. Government
Securities, such as the Intermediate Government Bond Fund, may fall during times
of rising interest rates. Yields on U.S. Government Securities tend to be lower
than those of corporate securities of comparable maturities.
In addition to investing directly in U.S. Government Securities, the Funds
may purchase certificates of accrual or similar instruments ("strips")
evidencing undivided ownership interests in interest payments or principal
payments, or both, on U.S. Government Securities. These investment instruments
may be highly volatile. For purposes of its policy of normally investing at
least 65% of its total assets in U.S. Government Securities, the Fund will not
treat a "strip" as a U.S. Government Security unless the strip itself is
directly issued or guaranteed by the U.S. Government or an agency, authority or
instrumentality thereof.
5
<PAGE> 12
Zero Coupon Securities
The Fund may invest in "zero coupon" securities. These securities accrue
interest at a specified rate, but do not pay interest in cash on a current
basis. The Fund is required to distribute the income on these securities to Fund
shareholders as the income accrues, even though the Fund is not receiving the
income in cash on a current basis. Thus the Fund may have to sell other
investments to obtain cash to make income distributions. The market value of
zero coupon securities is often more volatile than that of non-zero coupon fixed
income securities of comparable quality and maturity.
Mortgage-Backed and Other Asset-Backed Securities
The Fund may invest in various types of asset-backed securities.
Asset-backed securities are created by the grouping of certain governmental,
government-related or private loans, receivables and other lender assets into
pools. Interests in these pools are sold as individual securities. Payments from
the asset pools may be divided into several different classes of debt
securities, with some classes entitled to receive regular installments of
principal and interest, other classes entitled to receive regular installments
of interest, with principal payable at maturity or upon specified call dates,
and other classes entitled to receive payments of principal and accrued interest
only at maturity or upon specified call dates. Different classes of securities
will bear different interest rates, which may be fixed or floating. Certain
classes may be entitled to receive only interest, or only principal; the value
of these classes may fluctuate dramatically during periods when market interest
rates are changing.
Because the loans held in an asset pool often may be prepaid without
penalty or premium (with prepayments passed through to the holders of the
asset-backed securities), asset-backed securities are generally subject to
higher prepayment risks than most other types of debt instruments. For example,
prepayment risks on mortgage securities tend to increase during periods of
declining mortgage interest rates, because many borrowers refinance their
mortgages to take advantage of the more favorable rates. Depending upon market
conditions, the yield that the Fund receives from the reinvestment of such
prepayments, or any scheduled principal payments, may be lower than the yield on
the original mortgage security. As a consequence, mortgage securities may be a
less effective means of "locking in" interest rates than other types of debt
securities having the same stated maturity and may also have less potential for
capital appreciation. For certain types of asset pools, such as collateralized
mortgage obligations ("CMOs") (see below), prepayments may be allocated to one
class of securities ahead of other classes, in order to reduce the risk of
prepayment for the other classes. Prepayments may result in a capital loss to
the Fund to the extent that the prepaid mortgage securities were purchased at a
market premium over their stated principal amount. Conversely, the prepayment of
mortgage securities purchased at a market discount from their stated principal
amount will accelerate the recognition of interest income by the Fund, which
would be taxed as ordinary income when distributed to shareholders.
CMOs are bonds issued by single purpose finance subsidiaries or trusts
established by financial institutions, government agencies, brokerage firms or
companies related to the construction industry. CMOs purchased by the Fund may
be:
-- collateralized by pools of mortgages in which every mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government;
6
<PAGE> 13
-- collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer of the CMO and such guarantee is
collateralized by government securities; or
-- securities in which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S.
government.
The Fund will not invest more than 25% of its total assets in CMOs.
The Fund may invest in non-mortgage related asset-backed securities,
including interests in pools of receivables, such as credit card or other
accounts receivable, student loans or motor vehicle and other installment
purchase obligations and leases. The securities, which are generally issued by
non-governmental entities and carry no direct or indirect government guarantee,
are structurally similar to collateralized mortgage obligations and mortgage
pass-through securities. Like mortgage-backed securities, other asset-backed
securities are typically subject to substantial prepayment risk.
Many mortgage-backed securities are issued or guaranteed by a U.S.
Government agency or instrumentality, such as GNMA, FNMA or the Federal Home
Loan Mortgage Corporation; they are treated as U.S. Government Securities for
purposes of the Fund's policy of normally investing at least 65% of its total
assets in U.S. Government Securities. For purposes of this policy, the Fund will
not treat as a U.S. Government Security any mortgage or other asset-backed
security that is not issued or guaranteed by a U.S. Government agency, authority
or instrumentality (even if the underlying mortgages or other assets are
Government-guaranteed). These non-U.S. Government mortgage-backed or other
asset-backed securities will constitute less than 25% of the Fund's total
assets, and together with any other assets that are not U.S. Government
Securities will normally constitute less than 35% of the Fund's total assets.
The credit characteristics of mortgage-backed and other asset-backed
securities differ in a number of respects from those of traditional debt
securities. The credit quality of most asset-backed securities (other than those
issued or guaranteed by a U.S. Government agency or instrumentality) depends
primarily upon the credit quality of the assets underlying such securities, how
well the entity issuing the securities is insulated from the credit risk of the
originator or any other affiliated entities, and the amount and quality of any
credit enhancement to such securities.
GROWTH & INCOME FUND
General Characteristics of Equity Securities
Common and preferred stocks and similar equity securities such as warrants
and convertibles are subject to greater fluctuation in value and risk of loss
than some other forms of investment. The values of these securities can rise or
fall based on the financial performance of, or other factors relating to, the
company that issued the securities, or based on more general factors affecting
particular industries or the stock market or economy as a whole. The value of
your investment in the Growth & Income Fund will rise or fall based on the value
of the stocks and other securities the Fund holds. Equity securities of
companies with relatively small market capitalization may be more volatile than
the securities of larger, more established companies and the broad equity market
indexes.
7
<PAGE> 14
Convertible Securities
Convertible securities are generally convertible into common stock at
either a stated price or a stated rate. The price of the convertible security
will normally vary in some proportion to changes in the price of the underlying
common stock because of this conversion feature. A convertible security will
normally also provide a fixed income stream. For this reason, a convertible
security may not decline in price as rapidly as the underlying common stock.
Magna will select convertible securities to be purchased by the Growth &
Income Fund based primarily upon its evaluation of the fundamental investment
characteristics and growth prospects of the issuer of the security. As a
fixed-income security, a convertible security tends to increase in market value
when interest rates decline and to decrease in value when interest rates rise.
While convertible securities generally offer lower interest or dividend yields
than non-convertible fixed-income securities of similar quality, their value
tends to increase as the market value of the underlying stock increases and to
decrease when the value of the underlying stock decreases. The Growth & Income
Fund will not purchase any convertible security that is rated below BBB by
Standard & Poor's or Baa by Moody's (or that is unrated but determined by Magna
to be comparable in quality to securities rated below BBB or Baa), if as a
result of such purchase more than 5% of the Fund's total assets would be
invested in such securities. Securities rated BBB or Baa or lower (and
comparable unrated securities) have speculative characteristics. Unfavorable
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuer of these securities to make principal and
interest payments than is the case with higher quality securities.
Foreign Securities
The Fund may invest any portion of its assets in securities of issuers
organized or headquartered outside the United States ("foreign securities"). The
Fund intends to invest in such securities only by buying "American Depository
Receipts," which are traded in U.S. stock markets, rather than by buying foreign
securities directly on foreign stock exchanges.
Although investing in foreign securities may increase the Fund's
diversification and thereby reduce portfolio volatility, foreign securities may
present risks not associated with investments in comparable securities of U.S.
issuers. There may be less information publicly available about a foreign
corporate or government issuer than about a U.S. issuer, and foreign corporate
issuers are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the United States. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. With respect to certain foreign
countries, there is a possibility of governmental expropriation of assets,
confiscatory taxation, political or financial instability and diplomatic
developments that could affect the value of investments in those countries.
Long-Term Debt Obligations
The Fund may invest up to 10% of its total assets in debt obligations with
maturities of longer than one year at the time of purchase, including U.S.
Government Securities, high-grade bonds and notes of non-governmental issuers
and other fixed income securities generally suitable for investment by the
Intermediate Government Bond Fund. See "Risk and Other Information About the
Funds' Investments -- Intermediate Government Bond Fund" for a detailed
description of such investments and the risks associated with them.
8
<PAGE> 15
BOTH FUNDS
Short-Term Investments
Each Fund may invest a portion of its assets in short-term investments with
remaining maturities of less than one year at the time of purchase, such as U.S.
Treasury obligations, U.S. Government Securities, commercial paper and other
money market instruments or repurchase agreements (see below). Under normal
market conditions, these investments will not exceed 35% of a Fund's total
assets. Under unusual market conditions, however, when Magna determines that a
more "defensive" portfolio position is appropriate, the Funds may invest any
portion of their assets in short-term investments.
Repurchase Agreements
Each Fund may enter into repurchase agreements. Repurchase agreements are
arrangements in which banks, broker-dealers and other recognized financial
institutions sell U.S. Government Securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. If the original seller does not repurchase the securities from the Fund,
the Fund has rights to sell the securities. However, the Fund may be subject to
various delays and risks of loss, including (a) possible declines in the value
of the underlying security during the period while the Fund seeks to enforce its
rights thereto, (b) possible reduced levels of income and lack of access to
income during this period and (c) possible inability to enforce rights and the
expenses involved in enforcement or attempted enforcement.
Investments in Other Investment Companies
Each Fund may invest up to 10% of its total assets in securities of
investment companies. As a shareholder of an investment company, a Fund will
indirectly bear investment management fees and other operating expenses of that
investment company, which are in addition to the management fees the Fund pays
Magna and the Fund's other expenses.
Illiquid Securities
Each Fund will limit its investments in illiquid securities, including
non-negotiable time deposits, and repurchase agreements providing for settlement
in more than seven days, to 15% of its net assets.
When-Issued and Delayed Delivery Transactions
Each Fund may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Fund purchases
securities with payment and delivery scheduled for a future time. The Fund is
required to maintain in a segregated account with its custodian cash or liquid
securities with a value at least equal to the Fund's payment obligations for
when-issued or delayed delivery transactions. In when-issued and delayed
delivery transactions, the Fund relies on the seller to complete the
transaction. If the seller fails to complete the transaction, the Fund may be
unable to acquire the same securities at as favorable a price, or might acquire
other securities that have a less favorable yield. Also, the Fund may have
forgone the opportunity to make other attractive investments or to earn a higher
return on the amounts held in the segregated account.
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<PAGE> 16
Lending of Portfolio Securities
In order to generate additional income, each Fund may lend portfolio
securities on a short-term or long-term basis to broker-dealers, banks or other
institutional borrowers of securities. The Fund will enter into loan
arrangements only with broker-dealers, banks or other institutions that Magna
has determined are creditworthy and will receive collateral in the form of cash
or liquid securities equal to at least 100% of the value of the securities
loaned. The value of the collateral will be monitored on a daily basis. If the
borrower of the security does not redeliver the loaned security as required by
the terms of the loan, the Fund has rights to sell the collateral. However, the
Fund may be subject to various delays and risks of loss, including (a) possible
declines in the value of the collateral while the Fund seeks to enforce its
rights thereto, (b) possible reduced levels of income and lack of access to
income during this period and (c) possible inability to enforce rights and the
expenses involved in enforcement or attempted enforcement.
Purchase of Options on Securities or Indexes
For hedging purposes, each Fund may buy call or put options on securities
or securities indexes. Call options purchased by a Fund give the Fund the right
to buy a specified security at a stated exercise price on or before a specified
date; put options give the Fund the right to sell a specified security at a
stated price. Options on indexes are similar, but relate to an index of
securities (such as the Standard & Poor's 500) rather than to a specific stock
or bond. To acquire an option, the Fund pays an amount of cash known as a
"premium." There is no limit on the aggregate percentage of each Fund's assets
that may be invested in options.
Each Fund may seek to terminate an option prior to its expiration by
entering into a closing purchase transaction in which it sells an option having
the same terms as the option it previously purchased. It is possible, however,
that illiquidity in the options markets may make it difficult from time to time
for a Fund to close out its option positions.
Each Fund may purchase put options to hedge against a decline in the value
of its portfolio. For example, if Magna expects the value of securities held by
a Fund to decline, the Fund might buy a put option on those securities. If the
securities decline in value, the Fund could exercise the put, thereby selling
the securities at a price above the market value. Alternatively, it might sell
the option at a profit, thereby offsetting some or all of the decline in the
value of the securities. By using put options in this manner, the Fund will
reduce any profit it might otherwise have realized in the underlying security by
the amount of the premium paid for the put option and by transaction costs.
Each Fund may purchase call options on securities or on relevant securities
indexes to hedge against an increase in the value of securities that the Fund
wants to buy sometime in the future. For example, if Magna expects an increase
in the value of a security that a Fund might later purchase, the Fund could buy
a call, thereby "locking in," until the expiration of the option, a lower price.
Each Fund may purchase either exchange-traded or over-the-counter options
on securities. A Fund's ability to terminate options positions established in
the over-the-counter market may be more limited than in the case of
exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Fund.
The correlation between price movements of options and of the securities
which are the subject of the hedge is often imperfect. For example, the Growth &
Income Fund, which invests in equity securities, will
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<PAGE> 17
generally not own all the securities included in a particular stock index, and
so the value of the Fund's holdings of equities may change to a different extent
than does the value of an option on that index. Also, movements in the value of
options may not exactly correspond to movements in the value of the index or
security to which the option relates. It is also possible that, because of
market factors, a Fund will not be able to close out an option at the desired
time. In that event, the Fund would remain subject to the risks of adverse
movements in the value of the option.
Transactions in options involve costs. For example, to acquire an option, a
Fund pays cash. Since options expire after a specified time period, the Fund's
investment in the option becomes worthless if the Fund does not sell or exercise
the option before it expires. Furthermore, although the Funds are permitted to
use options, they are not required to do so. Therefore, at any particular time,
the Funds' portfolios may not be "hedged," and the Funds would then be fully
exposed to the risk of loss from adverse economic or market developments
affecting the Funds' investments in securities.
Successful use of options for hedging purposes depends in large part on
whether Magna is correct in its forecast of interest rates, market movements and
other economic factors. If Magna's forecast of these factors is incorrect, use
of options will in some cases result in a lower return than if the Fund had not
been "hedged."
THE FUNDS' INVESTMENT ADVISER
Magna serves as the investment adviser to the Funds. Magna was incorporated
under the laws of the State of Missouri in 1970 as a banking corporation. On
December 15, 1993, Magna was converted into a trust company chartered under the
laws of the State of Missouri. On November 17, 1995, Magna converted to a
national bank, and changed its name from "Magna Bank of Missouri" to "Magna
Bank, N.A.". Magna is a wholly-owned indirect subsidiary of Magna Group, Inc.,
1401 South Brentwood Boulevard, St. Louis, Missouri 63144, a bank holding
company.
Magna operates as a community bank and concentrates on
relationship-oriented financial service activities, including business, consumer
and real estate loans; credit cards; and checking, savings and time deposits.
Magna's deposit base consists of core deposits from within the communities it
serves, and lending activity is targeted to consumers and mid-sized businesses
in Magna's immediate geographic areas. Magna's customers can conveniently access
a broad range of investment and insurance services through certain of its
subsidiaries.
L. Clark Zedric is the Intermediate Government Bond Fund's portfolio
manager, and has acted as such since the Fund's inception. Mr. Zedric joined
Magna Trust Company, an affiliate of Magna the operations of which merged into
Magna in 1997, in 1983. He is currently Vice President of Magna. Mr. Zedric
received his MBA from Illinois State University.
Gary J. Guthrie is the Growth & Income Fund's portfolio manager, and has
acted as such since the Fund's inception. Mr. Guthrie joined Magna Trust Company
in 1991. Mr. Guthrie is currently Vice President of Magna. Mr. Guthrie is a
graduate of Southern Illinois University.
During the fiscal year ended August 31, 1997, Magna received, as
compensation for advisory services rendered in such year (after waiver) 0.40% of
the Intermediate Government Bond Fund's average net assets, and (after waiver)
0.50% of the Growth & Income Fund's average net assets.
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<PAGE> 18
FUND MANAGEMENT AND EXPENSES
Each Fund has agreed to pay Magna an investment advisory fee at the
following annual percentage of that Fund's average daily net assets: for the
Intermediate Government Bond Fund, 0.50%; for the Growth & Income Fund, 0.75%.
Magna has voluntarily agreed, however, to reduce the annual rate of its fee with
respect to the Growth & Income Fund, to 0.50%, and with respect to the
Intermediate Government Bond Fund, to 0.40%, through August 31, 1998.
Under an agreement with the Trust, BISYS Fund Services ("BISYS") provides
management and administrative services to the Funds, and, in general, supervises
the operations of the Trust. The Trust pays BISYS a fee for its services to each
Fund at the annual rate of 0.20% of the Trust's average daily net assets. Each
Fund has adopted a plan under Rule 12b-1 under the Investment Company Act of
1940 providing for payment to BISYS of a service fee at the annual rate of 0.25%
of the Fund's average daily net assets. BISYS has agreed to waive this fee
through August 31, 1998. If the fee were not being waived, BISYS would use the
fee to pay the dealer responsible for a shareholder's account a service fee at
the annual rate of 0.20% of the average daily net assets of such account.
In addition to the investment advisory, management and 12b-1 fees, each
Fund pays all expenses of the Fund's operations not expressly assumed by Magna
or BISYS, including taxes, brokerage commissions, fees and expenses of
registering or qualifying the Fund's shares under federal and state securities
laws, fees of the Fund's custodian, transfer agent, independent accountants and
legal counsel, expenses of shareholders' and trustees' meetings, expenses of
preparing, printing and mailing prospectuses to existing shareholders, and fees
of Trust trustees who are not directors, officers or employees of Magna, BISYS
or their respective affiliated companies.
The Trust's board of trustees oversees and supervises the affairs of the
Trust, including the provision of services to the Trust by Magna and BISYS.
PORTFOLIO TRANSACTIONS
Portfolio turnover considerations will not limit Magna's investment
discretion in managing the Funds' assets. Magna anticipates that the Funds'
portfolio turnover rates will vary significantly from time to time depending on
the volatility of economic and market conditions, but will not ordinarily exceed
100% annually for either Fund. High portfolio turnover may involve higher costs
and higher levels of taxable gains.
Magna selects brokers and dealers to execute portfolio transactions for the
Funds. In selecting brokers Magna may consider research and brokerage services
furnished to it and its affiliates, and may cause the Funds to pay higher
commissions in recognition of the provision of these services. Subject to
seeking best price and execution, Magna may allocate Fund portfolio transactions
to brokers or dealers whose customers have invested in the Trust.
HOW TO PURCHASE SHARES
Each Fund currently offers one class of shares (Class A shares).
Class A shares are offered at public offering prices determined by adding
the following sales charges to the net asset value of the shares being
purchased. On each purchase, the net asset value is invested in the Fund
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<PAGE> 19
and the sales charge is paid to BISYS as distributor. BISYS reallows a portion
of the sales charge to the dealer responsible for your order, as shown in the
following table. (If you do not place your order through a dealer, BISYS will
designate Magna Investments, Inc., an affiliate of Magna, as the dealer
responsible for your account, and Magna Investments, Inc. will receive any
dealer reallowance.)
<TABLE>
<CAPTION>
SALES CHARGE DEALER
--------------------- REALLOWANCE
AS % OF AS % OF AS % OF
PUBLIC NET PUBLIC
AMOUNT OF PURCHASE OFFERING AMOUNT OFFERING
($) PRICE INVESTED PRICE
- -------------------------------------------------------------- -------- -------- -----------
<S> <C> <C> <C>
Less than 100,000............................................. 4.00 4.17 3.50
100,000 but less than 250,000................................. 3.50 3.63 3.25
250,000 but less than 500,000................................. 3.00 3.09 2.75
500,000 but less than 750,000................................. 2.50 2.56 2.25
750,000 but less than 1 million............................... 1.75 1.78 1.50
1 million but less than 3 million............................. 1.00 1.01 1.00
over 3 million................................................ 0.00 0.00 0.00
</TABLE>
You may make an initial purchase of shares of any Fund by submitting a
completed application form and payment to:
Magna Funds
P.O. Box 182754
Columbus, OH 43218-2784
The minimum initial investment in any Fund is $250 for regular accounts and
$50 for IRAs and tax qualified retirement plans. Subsequent investments must be
at least $50. See "Shareholder Services" below for further information about
minimum investments in certain other circumstances.
Certificates will not be issued for shares. The Fund may refuse any
purchase order for its shares. See the Statement of Additional Information for
more information.
Upon acceptance of your order, BISYS Fund Services ("BISYS"), the Funds'
shareholder servicing agent, will open an account for you, apply the payment to
the purchase of full and fractional Fund shares and mail a statement of the
account confirming the transaction.
After an account has been established, you may send subsequent investments
at any time directly to BISYS at the above address. The remittance must be
accompanied by either the account identification slip detached from a statement
of account or a note containing sufficient information to identify the account,
i.e., the Fund name and your account number or your name and social security
number.
Subsequent investments can also be made by federal funds wire. To purchase
shares by wire, contact the Trust at (800) 219-4182 to obtain instructions
regarding the bank account number into which the funds should be wired and other
pertinent information.
Each Fund reserves the right to reject any purchase order, including orders
in connection with exchanges, for any reason which the Fund in its sole
discretion deems appropriate. Although the Funds do not anticipate that they
will do so, each Fund reserves the right to suspend or change the terms of the
offering of its shares.
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<PAGE> 20
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by BISYS, plus any applicable sales
charge. The net asset value of each Fund's shares is calculated once daily as of
the close of regular trading on the New York Stock Exchange on each day the
Exchange is open for trading, by dividing the Fund's net assets by the number of
shares outstanding. Portfolio securities are valued at their market value as
more fully described in the Statement of Additional Information.
Each Fund may accept telephone orders from broker-dealers who have been
previously approved by BISYS. It is the responsibility of such broker-dealers to
forward purchase or redemption orders promptly to the Fund. In addition to any
sales charge, broker-dealers may charge the investor a transaction-based fee or
other fee for their services at either the time of purchase or the time of
redemption. Such charges may vary among broker-dealers but in all cases will be
retained by the broker-dealer and not remitted to the Fund or Magna.
REDUCED SALES CHARGES
AMOUNTS REDEEMED FROM OTHER MUTUAL FUNDS
No sales charge applies on amounts invested in the Fund that represent the
proceeds of an investor's redemption, within the 30 days immediately preceding
investment in the Fund, of shares of another mutual fund on which the investor
paid a front-end sales charge. On such purchases of Fund shares where Magna
Investments, Inc., an affiliate of Magna, is the dealer of record, Magna will
pay Magna Investments, Inc. a commission in the amount of 1.00% of the amount of
the purchase. To qualify for this arrangement, the investor must furnish a
broker's confirmation statement (or other documentation satisfactory to BISYS)
showing the payment of the sales charge. This arrangement is not available if
the investor paid a contingent deferred sales charge on the redemption.
LETTER OF INTENT
An investor may obtain a reduced sales charge by means of a written Letter
of Intent that expresses the intention of such investor to invest a certain
amount in shares of the Funds within a period of 13 months. Each purchase of
shares under a Letter of Intent will be made at the public offering price plus
the sales charge applicable at the time of such purchase to a single transaction
of the total dollar amount indicated in the Letter of Intent. The 13-month
period during which the Letter of Intent is in effect will begin on the date of
the earliest purchase to be included. Five percent of all investments made by a
shareholder under a Letter of Intent will be held in escrow for the period of
the Letter. If the investor does not fulfill the Letter of Intent, the amount of
the sales charge that would apply in the absence of the Letter will be paid to
BISYS out of the escrowed portion of the shareholder's account. The Letter of
Intent program may be modified or eliminated at any time or from time to time by
either of the Funds without notice.
CONCURRENT PURCHASES AND RIGHTS OF ACCUMULATION
An investor may qualify for a lower sales charge by combining concurrent
purchases of shares of one or more of the Funds sold with a sales charge. For
example, if a shareholder concurrently purchases shares in one Fund sold with a
sales charge at the total public offering price of $50,000 and shares in another
Fund of the Trust at the total public offering price of $50,000, the sales
charge would be that applicable to a $100,000
14
<PAGE> 21
purchase as shown in the table above. This privilege, however, may be modified
or eliminated at any time or from time to time by the Funds without notice.
Pursuant to rights of accumulation, a shareholder may combine a current
purchase of shares of a Fund with prior purchases of shares of either Fund. The
public offering price applicable to a purchase of shares is based on the sum of
(i) the shareholder's current purchase of shares of any Fund of the Trust and
(ii) the then current net asset value of the shareholder's combined holdings of
shares of both Funds of the Trust.
PURCHASES BY CERTAIN INVESTORS
No sales charge applies to purchases by Magna for the account of its trust
customers, or to purchases by officers, trustees, directors, employees and
retired employees of the Trust, Magna and its affiliates, and BISYS Fund
Services and its affiliates (and spouses and children of such persons).
SHAREHOLDER SERVICES
The Funds offer the following shareholder services which are more fully
described in the Statement of Additional Information. Explanations and forms are
available from BISYS.
SYSTEMATIC WITHDRAWAL PLAN
If the value of your account is at least $5,000 you may have periodic cash
withdrawals automatically paid to you or any person you designate.
AUTOMATIC INVESTMENT PLAN
Voluntary monthly investments of at least $100 may be made automatically by
pre-authorized withdrawals from your checking account.
RETIREMENT PLANS
The Funds' shares may be purchased by all types of tax-deferred retirement
plans. Magna and its affiliates make available retirement plan forms for IRAs.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to Magna Funds,
P.O. Box 182754, Columbus, Ohio 43218-2754.
The request must include the name of the Fund, your account number, the
exact name(s) in which your shares are registered, and the number of shares or
the dollar amount to be redeemed. All owners of the shares must sign the request
in the exact names in which the shares are registered (this appears on your
confirmation statement) and should indicate any special capacity in which they
are signing (such as trustee or custodian or on behalf of a partnership,
corporation or other entity).
If you are redeeming shares worth more than $10,000, or requesting that the
proceeds check be made out to someone other than the registered owner(s), or be
sent to an address other than your record address, you
15
<PAGE> 22
must have your signature guaranteed by an eligible guarantor. Eligible
guarantors include commercial banks, trust companies, savings associations,
credit unions and brokerage firms that are members of domestic securities
exchanges. Before submitting your redemption request, you should verify with the
guarantor institution that it is an eligible guarantor. Signature guarantees by
notaries public are not acceptable.
If you have requested certificates for your investment, you must enclose
the certificates and a properly completed redemption form or stock power. The
Funds recommend that certificates be sent by registered mail.
You may also redeem your shares by making a telephone call directly to
BISYS at (800) 219-4182. When you telephone a redemption request, the proceeds
are wired to the bank account previously chosen by you. A telephonic redemption
request must be received by BISYS prior to the close of regular trading on the
New York Stock Exchange. If you telephone your request to BISYS after the
Exchange closes or on a day when the Exchange is not open for business, BISYS
cannot accept your request and a new request will be necessary. The Trust, BISYS
and Fifth Third Bank, the Trust's custodian, are not responsible for the
authenticity of withdrawal instructions received by telephone. Reasonable
procedures will be adopted to verify that telephone instructions are genuine.
You may select the telephone redemption service when you fill out your
initial application or you may select it later by completing the Service Options
Form (with a signature guarantee), available from BISYS. If you decide to change
the bank account to which proceeds are to be wired, you must send in this change
on the Service Options Form with a signature guarantee. Telephonic redemptions
may be made only if your bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If your account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. In times of heavy market activity, a shareholder who encounters
difficulty in placing a redemption or exchange order by telephone may wish to
place the order by mail as described above.
The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by BISYS in proper form.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order.
Telephonic redemption proceeds will normally be wired to your bank on the first
business day following receipt of a proper redemption request. If you purchased
your shares by check and your check was deposited less than 10 days prior to the
redemption request, the Fund may withhold redemption proceeds until your check
has cleared, which may take up to 10 days from the purchase date.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the New York Stock Exchange is closed for other than
weekends or holidays, or if permitted by the rules of the SEC when trading on
the Exchange is restricted or during an emergency which makes it impracticable
for the Fund to dispose of its securities or to determine fairly the value of
its net assets, or during any other period permitted by the SEC for the
protection of investors.
If the value of your account with a Fund falls below a minimum amount set
by the trustees of the Trust (currently $25), the Fund may close your account
and send you the balance. The Fund will notify you at least 60 days before
closing your account, to give you time to purchase additional shares to bring
your account value above the minimum. Accounts will not be closed solely because
the value of shares has fallen through market price movements.
16
<PAGE> 23
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Intermediate Government Bond Fund will declare dividends daily and make
payments monthly. The Growth & Income Fund will declare dividends quarterly and
make payments quarterly. Each Fund also distributes all of its net capital gains
realized from the sale of portfolio securities. Any capital gains distributions
are normally made annually, but may, to the extent permitted by law, be made
more frequently as deemed advisable by the trustees of the Trust. The Trust's
trustees may change the frequency with which the Funds declare or pay dividends.
Your dividends and capital gains distributions will automatically be
reinvested in additional shares of the same Fund on the record date unless you
have elected to receive cash.
Each Fund intends to qualify as a regulated investment company for federal
tax purposes and as such will not be subject to federal taxation on amounts of
net investment income and net capital gains it timely distributes to its
shareholders.
As a shareholder of the Fund, the dividends and distributions you receive
from Fund net investment income and short-term capital gains will be taxable to
you as ordinary income whether distributed to you in cash or automatically
reinvested in additional shares. Distributions designated by the Funds as
deriving from net gains on securities held for more than one year but not more
than 18 months and from net gains on securities held for more than 18 months
will be taxable to you as such, whether distributed to you in cash or
automatically reinvested in additional shares and regardless of how long you
have owned shares of the Fund. Any loss on shares held for six months or less
will be treated as long-term capital loss to the extent of any long-term capital
gains distribution received with respect to such shares.
Each Fund is required to withhold 31% of any redemption proceeds (including
the value of shares exchanged) and all income dividends and capital gains
distributions it pays to you unless you provide a correct, certified taxpayer
identification number. Such withholding is also required if the Fund is notified
to withhold by the Internal Revenue Service.
Dividends derived from interest on U.S. Government Securities may be exempt
from state and local taxes. A portion of the dividends from the Growth & Income
Fund is expected to be eligible for the dividends-received deduction for
corporate shareholders that meet the holding period requirements in the Internal
Revenue Code of 1986, as amended.
The Growth & Income Fund's investments in foreign securities may be subject
to withholding taxes at the source on dividend or interest payments. In that
case, the Fund's yield on those securities would be decreased.
The Trust will send you and the IRS an annual statement detailing federal
tax information, including information about dividends and distributions paid to
you during the preceding year. Be sure to keep this statement as a permanent
record. A fee may be charged for any duplicate information that you request.
Additional tax information is available in the Funds' Statement of Additional
Information.
THE TRUST
The Trust is a diversified open-end management investment company organized
as a Massachusetts business trust on April 28, 1994. The Trust is authorized to
issue an unlimited number of full and fractional
17
<PAGE> 24
shares of beneficial interest in multiple series. Shares are freely transferable
and entitle shareholders to receive dividends as determined by the Trust's board
of trustees and to cast a vote for each share held at shareholder meetings. The
Trust does not generally hold shareholder meetings and will do so only when
required by law. Shareholders may call meetings to consider removal of the
Trust's trustees.
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<PAGE> 25
==================================== ====================================
INVESTMENT ADVISER
Magna Bank, N.A.
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
ADMINISTRATOR & DISTRIBUTOR MAGNA FUNDS
A FAMILY OF FUNDS
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219 PROSPECTUS
AND
TRANSFER AND DIVIDEND
APPLICATION
PAYING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219 JANUARY 2, 1998
CUSTODIAN
Fifth Third Bank
Fifth Third Center
3435 STELZER ROAD
Cincinnati, Ohio 45263 COLUMBUS, OHIO 43219
(800) 219-4182
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, Ohio 43215
==================================== ================================
<PAGE> 26
Magna Funds
STATEMENT OF ADDITIONAL INFORMATION
January 2, 1998
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Magna Funds Prospectus dated
January 2, 1998, and should be read in conjunction therewith. A copy of the
Prospectus may be obtained by writing to Magna Funds, P.O. Box 182754, Columbus,
OH 43218-2784, or calling (800) 219-4182.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS..................................................................1
MANAGEMENT OF THE TRUST..........................................................................................13
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................17
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................20
DESCRIPTION OF THE TRUST.........................................................................................22
HOW TO BUY SHARES................................................................................................25
NET ASSET VALUE AND PUBLIC OFFERING PRICE........................................................................25
SHAREHOLDER SERVICES.............................................................................................26
Open Accounts...........................................................................................26
Systematic Withdrawal Plan..............................................................................27
IRAs ...............................................................................................27
REDEMPTIONS......................................................................................................27
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS.....................................................29
CALCULATION OF PERFORMANCE DATA..................................................................................31
APPENDIX A
DESCRIPTION OF BOND RATINGS............................................................................A-1
APPENDIX B
FINANCIAL STATEMENTS...................................................................................B-1
</TABLE>
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INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each series ("Fund") of Magna
Funds (the "Trust"), are summarized in the Prospectus under "Investment
Objectives and Policies" and "Risk and Other Information About the Funds'
Investments." The investment policies of each Fund set forth in the Prospectus
and in this Statement of Additional Information may be changed by Magna Bank,
N.A. ("Magna"), the Funds' adviser, subject to review and approval by the
Trust's board of trustees, without shareholder approval, except that the
investment objective of each Fund as set forth in the Prospectus and any Fund
policy explicitly identified as "fundamental" may not be changed without the
approval of the holders of a majority of the outstanding shares of the relevant
Fund (which in the Prospectus and this Statement of Additional Information means
the lesser of (i) 67% of the shares of that Fund represented at a meeting at
which 50% or more of the outstanding shares are represented or (ii) more than
50% of the outstanding shares).
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund (and
those marked with an asterisk are fundamental policies of each Fund):
Each Fund will not:
(1) Invest in companies for the purpose of exercising
control or management.
*(2) Act as underwriter, except to the extent that, in
connection with the disposition of portfolio securities, it may be
deemed to be an underwriter under certain federal securities laws.
*(3) Invest in oil, gas or other mineral leases, rights or
royalty contracts or in real estate, commodities or commodity
contracts. (This restriction does not prevent any Fund from investing
in issuers that invest or deal in the foregoing types of assets or from
purchasing securities that are secured by real estate.)
*(4) Make loans. (For purposes of this investment
restriction, neither (i) entering into repurchase agreements nor (ii)
purchasing bonds, debentures, commercial paper, corporate notes and
similar evidences of indebtedness, which are a part of an issue to the
public or of a type commonly purchased by financial institutions, is
considered the making of a loan.)
(5) Purchase any security (other than a U.S. Government
Security) if, as a result, more than 5% of the Fund's total assets
(taken at current value) would then be invested in securities of a
single issuer.
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(6) Invest more than 5% of its total assets (taken at
current value) in securities of companies that (with predecessor
companies) have a record of less than three years of continuous
operations.
(7) Acquire more than 10% of any class of securities of an
issuer (taking all preferred stock issues as a single class and all
debt issues as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer.
(8) Invest in the securities of other investment companies,
except by purchases in the open market involving only customary
brokers' commissions or in connection with a merger, consolidation or
similar transaction. (Under the Investment Company Act of 1940 (the
"1940 Act"), each Fund generally may not: (a) invest more than 10% of
its total assets (taken at current value) in such securities; (b) own
securities of any one investment company having a value in excess of 5%
of the Fund's total assets (taken at current value); or (c) own more
than 3% of the outstanding voting stock of any one investment company.)
(9) Pledge, mortgage, hypothecate or otherwise encumber any
of its assets, except that each Fund may pledge assets having a value
not exceeding 10% of its total assets to secure borrowings permitted by
restriction (12) below. (For the purpose of this restriction,
collateral arrangements with respect to options, futures contracts and
options on futures contracts and with respect to initial and variation
margin are not deemed to be a pledge or other encumbrance of assets.)
(10) Purchase or retain securities of an issuer if officers
and trustees of the Trust and officers and directors of its investment
adviser who individually own more than 1/2 of 1% of the shares or
securities of such issuer together own more than 5% of such shares or
securities.
*(11) Purchase any security (other than U.S. Government
Securities) if, as a result, 25% or more of the Fund's total assets
(taken at current value) would be invested in any one industry (in the
utilities category, gas, electric, water and telephone companies will
be considered as being in separate industries).
*(12) Borrow money in excess of 10% of its total assets (taken
at cost) or 5% of its total assets (taken at current value), whichever
is lower, nor borrow any money except as a temporary measure for
extraordinary or emergency purposes.
*(13) Purchase securities on margin (except such short term
credits as are necessary for clearance of transactions); or make short
sales (except where, by virtue of ownership of other securities, it has
the right to obtain, without payment of additional consideration,
securities equivalent in kind and amount to those sold).
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(14) Participate on a joint or joint and several basis in any
trading account in securities. (The "bunching" of orders for the
purchase or sale of portfolio securities with Magna or its affiliates
or accounts under their management to reduce brokerage commissions, to
average prices among them or to facilitate such transactions is not
considered a trading account in securities for purposes of this
restriction.)
(15) Purchase any illiquid security if, as a result, more
than 15% of the Fund's net assets (based on current value) would then
be invested in such securities; provided, however, that no more than
10% of the Fund's total assets may be invested in the aggregate in (1)
restricted securities, (2) securities of companies that (with
predecessor companies) have a record of less than three years of
continuous operations and (3) securities that are not readily
marketable.
(16) Write or purchase puts, calls or combinations of both
except that each Fund may (1) acquire warrants or rights to subscribe
to securities of companies issuing such warrants or rights, or of
parents or subsidiaries of such companies, (2) write, purchase and sell
put and call options on securities, securities indices or futures
contracts and (3) write, purchase and sell put and call options on
currencies and enter into currency forward contracts.
*(17) Issue senior securities. (For the purpose of this
restriction none of the following is deemed to be a senior security:
any pledge or other encumbrance of assets permitted by restriction (9)
above; any borrowing permitted by restriction (12) above; any
collateral arrangements with respect to options, futures contracts and
options on futures contracts and with respect to initial and variation
margin; and the purchase or sale of options, forward contracts, futures
contracts or options on futures contracts.)
Each Fund intends, based on the views of the staff of the Securities
and Exchange Commission (the "SEC"), to restrict its investments in repurchase
agreements maturing in more than seven days, together with other investments in
illiquid securities, to 15% of the Fund's net assets.
Although authorized to invest in restricted securities, each Fund, as a
matter of non- fundamental operating policy, currently does not intend to invest
in such securities in the coming year. Although authorized to make short sales
subject to the condition specified in restriction (13) above, each Fund as a
matter of non-fundamental operating policy currently does not intend to make
such short sales in the coming year. Although authorized under restriction (16)
above to write, purchase and sell put and call options on currencies and to
enter into currency forward contracts, each Fund, as a matter of non-fundamental
operating policy, currently does not intend to do so in the coming year.
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U.S. GOVERNMENT SECURITIES
As described in the Prospectus, each Fund may invest in U.S. Government
Securities. U.S. Government Securities include direct obligations of the U.S.
Treasury, as well as securities issued or guaranteed by U.S. Government
agencies, authorities and instrumentalities, including, among others, the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Federal Housing
Administration, the Resolution Funding Corporation, the Federal Farm Credit
Banks, the Federal Home Loan Banks, the Tennessee Valley Authority, the Student
Loan Marketing Association and the Small Business Administration. More detailed
information about some of these categories of U.S. Government Securities
follows.
o U.S. Treasury Bills--Direct obligations of the United States Treasury
which are issued in maturities of one year or less. No interest is
paid on Treasury bills; instead, they are issued at a discount and
repaid at full face value when they mature. They are backed by the
full faith and credit of the United States Government.
o US Treasury Notes and Bonds--Direct obligations of the United States
Treasury issued in maturities that vary between one and forty years,
with interest normally payable every six months. They are backed by
the full faith and credit of the United States Government.
o "Ginnie Maes"--Debt securities issued by a mortgage banker or other
mortgagee which represent an interest in a pool of mortgages insured
by the Federal Housing Administration or the Farmer's Home
Administration or guaranteed by the Veterans Administration. The
Government National Mortgage Association ("GNMA") guarantees the
timely payment of principal and interest when such payments are due,
whether or not these amounts are collected by the issuer of these
certificates on the underlying mortgages. An assistant attorney
general of the United States has rendered an opinion that the
guarantee by GNMA is a general obligation of the United States backed
by its full faith and credit. Mortgages included in single family or
multi-family residential mortgage pools backing an issue of Ginnie
Maes have a maximum maturity of up to 30 years. Scheduled payments of
principal and interest are made to the registered holders of Ginnie
Maes (such as the Fund) each month. Unscheduled prepayments may be
made by homeowners, or as a result of a default. Prepayments are
passed through to the registered holder of Ginnie Maes along with
regular monthly payments of principal and interest.
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o "Fannie Maes"--The Federal National Mortgage Association ("FNMA") is
a government- sponsored corporation owned entirely by private
stockholders that purchases residential mortgages from a list of
approved seller/servicers. Fannie Maes are pass-through securities
issued by FNMA that are guaranteed as to timely payment of principal
and interest by FNMA but are not backed by the full faith and credit
of the United States Government.
o "Freddie Macs"--The Federal Home Loan Mortgage Corporation ("FHLMC")
is a corporate instrumentality of the United States Government.
Freddie Macs are participation certificates issued by FHLMC that
represent interests in residential mortgages from FHLMC's National
Portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but Freddie Macs are not backed by
the full faith and credit of the United States Government.
As described in the Prospectus, U.S. Government Securities do not
involve the credit risks associated with investments in other types of
fixed-income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed-income securities. Like other fixed-income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.
WHEN-ISSUED SECURITIES
As described in the Prospectus, each Fund may enter into agreements
with banks or broker-dealers for the purchase or sale of securities at an
agreed-upon price on a specified future date. Such agreements might be entered
into, for example, when a Fund that invests in fixed- income securities
anticipates a decline in interest rates and is able to obtain a more
advantageous yield by committing currently to purchase securities to be issued
later. When a Fund purchases securities in this manner (i.e., on a when-issued
or delayed-delivery basis), it is required to create a segregated account with
the Trust's custodian and to maintain in that account cash, U.S. Government
Securities or other liquid securities in an amount equal to or
greater than, on a daily basis, the amount of the Fund's when-issued or
delayed-delivery commitments. Each Fund will make commitments to purchase on a
when-issued or delayed- delivery basis only securities meeting that Fund's
investment criteria. The Fund may take delivery of these securities or, if it is
deemed advisable as a matter of investment strategy, the Fund may sell these
securities before the settlement date. When the time comes to pay for when-
issued or delayed-delivery securities, the Fund will meet its obligations from
then available cash flow or the sale of securities, or from the sale of the
when-issued or delayed-delivery securities themselves (which may have a value
greater or less than the Fund's payment obligation).
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CONVERTIBLE SECURITIES
Convertible securities include corporate bonds, notes or preferred
stocks of U.S. or foreign issuers that can be converted into (that is, exchanged
for) common stocks or other equity securities. Convertible securities also
include other securities, such as warrants, that provide an opportunity for
equity participation. Because convertible securities can be converted into
equity securities, their values will normally vary in some proportion with those
of the underlying equity securities. Convertible securities usually provide a
higher yield than the underlying equity, however, so that the price decline of a
convertible security may sometimes be less substantial than that of the
underlying equity security.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations that do not entitle the holder
to any periodic payments of interest either for the entire life of the
obligation or for an initial period after the issuance of the obligations. Such
bonds are issued and traded at a discount from their face amounts. The amount of
the discount varies depending on such factors as the time remaining until
maturity of the bonds, prevailing interest rates, the liquidity of the security
and the perceived credit quality of the issuer. The market prices of zero coupon
bonds generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality. In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), each Fund must distribute each year at least 90% of its
net investment income, including the original issue discount accrued on zero
coupon bonds. Because a Fund investing in zero coupon bonds will not on a
current basis receive cash payments from the issuer in respect of accrued
original issue discount, the Fund may have to distribute cash obtained from
other sources in order to satisfy the 90% distribution requirement under the
Code. Such cash might be obtained from selling other portfolio holdings of the
Fund. In some circumstances, such sales might be necessary in order to satisfy
cash distribution requirements even though investment considerations might
otherwise make it undesirable for the Fund to sell such securities at such time.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements, by which the Fund
purchases a security and obtains a simultaneous commitment from the seller (a
bank or, to the extent permitted by the 1940 Act, a recognized securities
dealer) to repurchase the security at an agreed upon price and date (usually
seven days or less from the date of original purchase). The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford the Funds
the opportunity to earn a return on temporarily available cash at minimal market
risk. While the underlying security may be a bill, certificate of indebtedness,
note or bond issued by an agency, authority or instrumentality of the United
States Government, the obligation of the seller is not guaranteed by the U.S.
Government
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and there is a risk that the seller may fail to repurchase the underlying
security. In such event, the Fund would attempt to exercise rights with respect
to the underlying security, including possible disposition in the market.
However, the Fund may be subject to various delays and risks of loss, including
(a) possible declines in the value of the underlying security during the period
while the Fund seeks to enforce its rights thereto, (b) possible reduced levels
of income and lack of access to income during this period and (c) possible
inability to enforce rights and the expenses involved in enforcement or
attempted enforcement.
LOANS OF PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities to broker-dealers under
contracts calling for cash or eligible liquid securities as collateral equal to
at least the market value of the securities loaned, marked to the market on a
daily basis. A Fund will continue to benefit from interest or dividends on the
securities loaned and will also receive interest through investment of the cash
collateral in short-term liquid investments, which may include shares of money
market funds, subject to the investment restrictions listed above. Any voting
rights, or rights to consent, relating to securities loaned pass to the
borrowers. However, if a material event affecting the investment occurs, such
loans may be called so that the securities may be voted by the Fund. The Funds
pay various fees in connection with such loans. If the borrower of the security
does not redeliver the loaned securities as required by the terms of the loan,
the Fund has rights to sell the collateral. However, the Fund may be subject to
various delays and risks of loss, including (a) possible declines in the value
of the collateral while the Fund seeks to enforce its rights thereto, (b)
possible reduced levels of income and lack of access to income during this
period and (c) possible inability to enforce rights and the expenses involved in
enforcement or attempted enforcement.
OPTIONS
As described in the Prospectus, each Fund may engage in certain options
transactions for hedging purposes. The following information supplements the
information about options included in the Prospectus.
An "American style" option allows exercise of the option at any time
during the term of the option. A "European style" option allows an option to be
exercised only at the end of its term. Options may be traded on or off an
established securities exchange.
If the holder of an option wishes to terminate its position, it may
seek to effect a closing sale transaction by selling an option identical to the
option previously purchased. The effect of the purchase is that the previous
option position will be canceled. A Fund will realize a profit from closing out
an option if the price received for selling the offsetting position is more than
the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.
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The successful use of options depends in part on the ability of Magna
to forecast correctly the direction and extent of interest rate or stock price
movements within a given time frame. To the extent interest rates or stock
prices move in a direction opposite to that anticipated, a Fund may realize a
loss on the hedging transaction that is not fully or partially offset by an
increase in the value of portfolio securities. In addition, whether or not
interest rates or stock prices move during the period that the Fund holds
options positions, the Fund will pay the cost of acquiring those positions
(i.e., brokerage costs). As a result of these factors, the Fund's total return
for such period may be less than if it had not engaged in the hedging
transaction.
An over-the-counter option (an option not traded on an established
exchange) may be closed out only with the other party to the original option
transaction. While each Fund will seek to enter into over-the counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that a Fund will
be able to liquidate an over-the-counter option at a favorable price at any time
prior to its expiration. Accordingly, a Fund might have to exercise an
over-the-counter option it holds in order to achieve the intended hedge.
Over-the-counter options are not subject to the protections afforded purchasers
of exchange-listed options by the Options Clearing Corporation or other clearing
organization.
The staff of the SEC has taken the position that over-the-counter
options should be treated as illiquid securities for purposes of each Fund's
investment restriction prohibiting it from investing more than 15% of its net
assets in illiquid securities. The Funds intend to comply with this position.
FUTURES AND RELATED OPTIONS TRANSACTIONS
A futures contract is an agreement between two parties to buy and sell
a security or commodity for a set price on a future date. These contracts are
traded on exchanges, so that, in most cases, either party can close out its
position on the exchange for cash, without actually delivering the security or
commodity. An option on a futures contract gives the holder of the option the
right to buy or sell a position in a futures contract to the writer of the
option, at a specified price and on or before a specified expiration date.
Both Funds may buy or sell futures contracts relating to U.S.
Government Securities, and may buy or sell options on such futures contracts. In
addition, the Growth & Income Fund may buy or sell futures contracts relating to
stock indexes, and may buy or sell options on such futures contracts.
The Funds may use futures contracts to "hedge" against the adverse
effects of broad movements in the securities markets or changes in the value of
specific securities. For example, to protect against the fall in the value of
its investments in long-term debt securities that would result from in increase
in interest rates, the Intermediate Government Bond Fund might sell futures
contracts with respect to U.S. Government Securities. Then if interest rates do
rise and
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the value of the securities declines, the value of the futures contracts should
increase. Likewise, if the Intermediate Government Bond Fund holds cash reserves
and short-term investments and Magna expects interest rates to fall, the Fund
might purchase futures contracts on U.S. Government Securities. If, as expected,
the market value both of long-term debt securities and futures contracts with
respect thereto increases, the Fund would benefit from a rise in the value of
long-term securities without actually buying them until the market had
stabilized. The Growth & Income Fund could make similar use of stock index
futures, to hedge against broad movements in stock market values.
Options on futures contracts may also be used for hedging. For example,
if the value of the Intermediate Government Bond Fund's portfolio securities is
expected to decline as a result of an increase in interest rates, the Fund might
purchase put options on futures contracts rather than selling futures contracts.
Similarly, to hedge against an anticipated increase in the price of long-term
debt securities, the Fund might purchase call options as a substitute for the
purchase of futures contracts.
When a Fund enters into a futures contract, it is required to deposit
with the broker as "initial margin" an amount of cash or short-term U.S.
Government Securities equal to approximately 5% of the contract amount. That
amount is adjusted by payments to or from the broker ("variation margin") as the
value of the contract changes. Neither Fund will purchase or sell futures
contracts or related options if as a result such Fund's initial margin deposits
plus premiums paid for outstanding related options would be greater than 5% of
the Fund's total assets. Further information concerning futures contracts and
options on futures contracts is set forth below.
Futures Contracts. A futures contract sale creates an obligation by the
seller to deliver the type of commodity or financial instrument called for in
the contract in a specified delivery month for a stated price. A futures
contract purchase creates in obligation by the purchaser to take delivery of the
underlying commodity or financial instrument in a specified delivery month at a
stated price. The specific instruments delivered or taken, respectively, at
settlement date are not determined until at or near that date. The determination
is made in accordance with the rules of the exchange on which the futures
contract sale or purchase was made. A stock index futures contract is similar
except that the parties agree to take or make delivery of an amount of cash
equal to a specified dollar amount times the difference between the stock index
value at the close of the last trading day of the contract and the price at
which the futures contract is originally struck. Futures contracts are traded
only on commodity exchanges--known as "contract markets"- - approved for such
trading by the Commodity Futures Trading Commission (the "CFTC"), and must be
executed through a futures commission merchant or brokerage firm which is a
member of a contract market.
Although futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out a futures contract sale is effected by
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purchasing a futures contract for the same aggregate amount of the specific type
of financial instrument or commodity and the same delivery date. If the price of
the initial sale of the futures contract exceeds the price of the offsetting
purchase, the seller is paid the difference and realizes a gain. Conversely, if
the price of the offsetting purchase exceeds the price of the initial sale, the
seller realizes a loss. Similarly, the closing out of a futures contract
purchase is effected by the purchaser entering into a futures contract sale. If
the offsetting sale price exceeds the purchase price, the purchaser realizes a
gain, and if the purchase price exceeds the offsetting sale price, it realizes a
loss.
The purchase of (that is, assuming a long position in) or sale of (that
is, assuming a short position in) a futures contract differs from the purchase
or sale of a security or an option, in that no price or premium is paid or
received. Instead, an amount of cash or U.S. Treasury bills generally not
exceeding 5% of the contract amount must be deposited with the broker. This
amount is known as initial margin. Subsequent payments to and from the broker,
known as variation margin, are made on a daily basis as the price of the
underlying futures contract fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as "marking to
market." At any time prior to the settlement date of the futures contract, the
position may be closed out by taking an opposite position which will operate to
terminate the position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid to or
released by the broker, and the purchaser realizes a loss or gain. In addition,
a commission is paid on each completed purchase and sale transaction.
Each Fund may engage in transactions in futures contracts for the
purpose of hedging against changes in the values of securities. Each Fund may
sell such futures contracts in anticipation of a decline in the value of its
investments. The risk of such a decline could be reduced without employing
futures as a hedge by selling long-term debt securities or equity securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. This strategy, however, entails increased transaction
costs in the form of brokerage commissions and dealer spreads and will typically
reduce a Fund's average yield (with respect to futures on debt securities) as a
result of the shortening of maturities. The sale of futures contracts provides
an alternative means of hedging a Fund against a decline in the value of its
investments in debt or equity securities. As such values decline, the value of a
Fund's position in the futures contracts will tend to increase, thus offsetting
all or a portion of the depreciation in the market value of the securities that
are being hedged. While the Fund will incur commission expenses in establishing
and closing out futures positions, commissions on futures transactions may be
significantly lower than transaction costs incurred in the purchase and sale of
debt or equity securities. Employing futures as a hedge may also permit a Fund
to assume a defensive posture without reducing its yield on its investments.
Stock Index Futures. A stock index assigns relative values to the
common stocks included in the index. A stock index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the
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difference between the stock index value at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying stocks in the index is made.
The Growth & Income Fund may engage in transactions in stock index
futures contracts only for hedging purposes. Examples of the use of such
contracts for hedging purposes include (1) the sale of a futures contract to
offset possible declines in the value of securities the Fund owns and (2) the
purchase of a futures contract when the Fund holds cash and seeks to protect
against the possibility that the equity markets will rise before the Fund has
had the opportunity to invest the cash in equity securities. As discussed below
under "Risk Factors in Options and Futures Transactions," the Fund will
generally not own (or intend to own) all of the securities in the index that is
the subject of the futures contract. Thus, hedging through stock index futures
involves significant "correlation risk."
Call Options on Futures Contracts. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying securities or index, it may be more or less risky than ownership of
the futures contract or underlying securities. As with the purchase of a futures
contract, the Funds may purchase a call option on a futures contract to hedge
against a market advance when the Fund is not fully invested.
Put Options on Futures Contracts. The purchase of a put option on a
futures contract is similar in some respects to the purchase of protective put
options on portfolio securities. The Funds may purchase put options on futures
contracts to hedge against the risk of rising interest rates or declines in
stock market prices. The Funds may purchase put options on futures contracts for
the same reasons as they would sell futures contracts.
LIMITATIONS ON THE USE OF OPTIONS AND FUTURES PORTFOLIO STRATEGIES
Neither Fund will "over-hedge," that is, neither Fund will maintain
open short positions in futures contracts if, in the aggregate, the value of its
open positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on such open
positions, adjusted for the historical volatility relationship between the
portfolio and futures contracts.
A Fund's ability to engage in the options and futures strategies
described above will depend on the availability of liquid markets in such
instruments. Markets in certain options and futures are relatively new and still
developing. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures. Therefore no assurance can be
given that a Fund will be able to utilize these instruments effectively for the
purposes set forth above. Furthermore, a Fund's ability to engage in options and
futures transactions may be limited by tax considerations and CFTC rules.
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RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS
Options Transactions. An exchange-traded option may be closed out only
on a national securities exchange (an "Exchange") which generally provides a
liquid secondary market for an option of the same series. An over-the-counter
option may be closed out only with the other party to the option transaction. If
a liquid secondary market for an exchange-traded option does not exist, it might
not be possible to effect a closing transaction with respect to a particular
option, with the result that the Fund would have to exercise the option in order
to realize any profit. Reasons for the absence of a liquid secondary market on
an Exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an Exchange on
opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; (v) the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or (vi) one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.
The Exchanges have established limitations governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. It is possible that the Trust, Magna and its affiliates and their other
clients may be considered to be such a group. These position limits may restrict
the Funds' ability to purchase or sell options on a particular security.
Futures Transactions. Investment by a Fund in futures contracts
involves risk. Some of that risk may be caused by an imperfect correlation
between movements in the price of the futures contract and the price of the
security or other investment being hedged. The hedge will not be fully effective
where there is such imperfect correlation. For example, if the price of the
futures contract moves more than the price of the hedged security, a Fund would
experience either a loss or gain on the future which is not completely offset by
movements in the price of the hedged securities. To compensate for imperfect
correlations, a Fund may purchase or sell futures contracts in a greater dollar
amount than the hedged securities if the volatility of the hedged security is
historically greater than the volatility of the futures contracts. Conversely, a
Fund may purchase or sell fewer contracts if the volatility of the price of the
hedged securities is historically less than that of the futures contracts. The
risk of imperfect correlation generally tends to diminish as the maturity date
of a futures contract approaches.
Futures contracts or options thereon may be used to hedge against a
possible increase in the price of securities which a Fund anticipates
purchasing. In such instances, it is possible that
12
<PAGE> 40
the market may instead decline. If the Fund does not then invest in such
securities because of concern as to possible further market decline or for other
reasons, the Fund may realize a loss on the futures contract or option that is
not offset by a reduction in the price of securities purchased.
The amount of risk a Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days.
The successful use of transactions in futures and related options also
depends on the ability of Magna to forecast correctly the direction and extent
of interest rate movements within a given time frame. To the extent interest
rates or stock index levels remain stable during the period in which a futures
contract or related option is held by a Fund or such rates or index levels move
in a direction opposite to that anticipated, a Fund may realize a loss on the
hedging transaction which is not fully or partially offset by an increase in the
value of portfolio securities. As a result, a Fund's total return for such
period may be less than if it had not engaged in the hedging transaction.
MANAGEMENT OF THE TRUST
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows (an asterisk indicates a trustee who
is an "interested person" of the Trust as defined in the 1940 Act):
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position with the Trust During the Past Five Years
- --------------------- ----------------------- --------------------------
<S> <C>
Robert R. Archibald, Ph.D (49) Trustee President, Missouri
Missouri Historical Society Historical Society
P.O. Box 11940
St. Louis, MO 63112-0940
Earl E. Lazerson (66) Trustee President (until 1993) and
5 Hidden Valley Lane Professor (until 1994),
Edwardsville, IL 62022 So. Illinois University at
Edwardsville
</TABLE>
13
<PAGE> 41
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position with the Trust During the Past Five Years
- --------------------- ----------------------- --------------------------
<S> <C> <C>
Brad L. Badgley (45) Trustee Director of Magna Trust
Heiligenstein & Badgley PC Company from 1987 to
30 Public Square 1997 and Director of Banc
Belleville, Illinois 62220 Star One from 1995 to
present
Robert E. Saur (54) Trustee President and Owner,
750 S. Hanley Street Conrad Properties Corp.
Clayton, MO 63105 (real estate)
Harry R. Maier* (50) Trustee Chief Executive Officer,
118 Sun Lake Dr. Memorial Hospital
Belleville, IL 62221 Belleville, Illinois
Neil Seitz (54) Trustee Dean, School of Business,
School of Business St. Louis University;
St. Louis University Professor (until 1993),
3674 Lindell Blvd. St. Louis University
St. Louis, MO 63108
Walter B. Grimm (52) President From June 1992 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS Fund Services,
Columbus, Ohio 43219 Limited Partnership;
from July 1981 to
present, President
of Leigh Investments
Consulting (investments
firm)
</TABLE>
14
<PAGE> 42
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position with the Trust During the Past Five Years
- --------------------- ----------------------- --------------------------
<S> <C> <C>
William J. Tomko (38) Vice President Vice President of BISYS
BISYS Fund Services Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Alaina V. Metz (30) Assistant Secretary Chief Administrator,
BISYS Fund Services Administrative and
3435 Stelzer Road Regulatory Services,
Columbus, Ohio 43219 BISYS Fund Services,
Limited Partnership
Chuck L. Booth (37) Vice President Vice President of BISYS
BISYS Fund Services Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Michael J. Philipps (34) Treasurer Employee of Nationwide
BISYS Fund Services Insurance Company,
3435 Stelzer Road December 1997 to present;
Columbus, Ohio 43219 Employee of BISYS Fund
Services, from September
1995 to December 1997;
Assistant Vice President,
Merrill Lynch Asset
Management, from January
1994 to September 1995;
Supervisor, Sanford C.
Bernstein & Co., Inc., from
June 1989 to January 1994.
Robert L. Tuch (46) Secretary Vice President of BISYS
BISYS Fund Services Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Michael D. Miller (26) Assistant Secretary Associate Manager, Client
BISYS Fund Services Services of BISYS Fund
3435 Stelzer Road Services, from 1994 to
Columbus, Ohio 43219 present.
</TABLE>
Previous positions of Trust officers during the past five years with
BISYS, Magna or their affiliates are omitted if not materially different from
their current positions.
15
<PAGE> 43
The Trust pays no compensation to its officers. Each trustee is
compensated at the rate of $5,000 per annum plus $500 for each meeting of the
trustees he attends. The Trust provides no pension or retirement benefits to
Trustees, but has adopted a deferred payment arrangement under which each
Trustee may elect not to receive fees from the Trust on a current basis but to
receive in a subsequent period an amount equal to the value that such fees would
have if they had been invested in each Fund on the normal payment date for such
fees. As a result of this method of calculating the deferred payments, each
Fund, upon making the deferred payments, will be in the same financial position
as if the fees had been paid on the normal payment dates.
The following table sets forth the amount of the compensation paid (or
deferred in lieu of current payment) by the Trust during its fiscal year ended
August 31, 1997 to the persons who served as Trustees during all or any portion
of such fiscal year:
<TABLE>
<CAPTION>
Aggregate Total
Compensation Compensation
Person From Trust From Trust
- ------ ------------ ------------
<S> <C> <C>
Robert R. Archibald $6500 $6500
Earl E. Lazerson $7000 $7000
Robert E. Saur $7000 $7000
Harry R. Maier $7000 $7000
Neil Seitz $7000 $7000
</TABLE>
16
<PAGE> 44
As of November 25, 1997, the Trustees and officers of the Trust
beneficially owned as a group less than 1% of the outstanding shares of each of
the Intermediate Government Bond Fund and the Growth & Income Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Under a separate investment advisory agreement with each Fund, Magna
provides investment advice for, and supervises the investment programs of, the
Funds. Magna, located at 1401 South Brentwood Boulevard, St. Louis, Missouri
63144, is a wholly-owned subsidiary of HBC Acquisition Sub, Inc., itself a
wholly-owned subsidiary of Magna Group, Inc., a bank holding company with
approximately $7.04 billion in total consolidated assets as of September 30,
1997. Through their offices in Missouri, Illinois and Iowa, Magna Group, Inc.
and its subsidiaries provide a broad range of financial services to individuals
and businesses.
Each of the Funds pays Magna an annual investment advisory fee based on
a percentage of the Fund's average daily net assets. Pursuant to Magna's
voluntary reduction of its advisory fees through August 31, 1998, such fees are
as follows: Intermediate Government Bond Fund, 0.40%; Growth & Income Fund,
0.50%. Without such voluntary reduction, such fees would be as follows:
Intermediate Government Bond Fund, 0.50%; Growth & Income Fund, 0.75%.
Each advisory agreement provides that it will continue in effect for
two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the board of trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a majority of the trustees who are not
"interested persons" of the Trust, as that term is defined in the 1940 Act, cast
in person at a meeting called for the purpose of voting on such approval. Any
amendment to an advisory agreement must be approved (i) by vote of a majority of
the outstanding voting securities of the relevant Fund and (ii) by vote of a
majority of the trustees who are not such interested persons, cast in person at
a meeting called for the purpose of voting on such
17
<PAGE> 45
approval. Each agreement may be terminated without penalty by vote of the board
of trustees or by vote of a majority of the outstanding voting securities of
the relevant Fund, upon sixty days' written notice, or by Magna upon ninety
days' written notice, and terminates automatically in the event of its
assignment. In addition, each agreement will automatically terminate if the
Trust or the Fund shall at any time be required by Magna to eliminate all
reference to the word "Magna" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a
majority of the outstanding voting securities of the relevant Fund and by a
majority of the trustees who are not interested persons of the Trust or Magna.
Each advisory agreement provides that Magna shall not be subject to any
liability in connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Magna and its affiliates also provide investment advice to numerous
other corporate and fiduciary clients. These other clients sometimes invest in
securities in which the Funds also invest. If a Fund and such other clients
desire to buy or sell the same portfolio securities at the same time, purchases
and sales may be allocated, to the extent practicable, on a pro rata basis in
proportion to the amounts desired to be purchased or sold for each. It is
recognized that in some cases the practices described in this paragraph could
have a detrimental effect on the price or amount of the securities which a Fund
purchases or sells. In other cases, however, it is believed that these practices
may benefit the Funds. It is the opinion of the trustees that the desirability
of retaining Magna as adviser for the Funds outweighs the disadvantages, if any,
which might result from these practices.
During the last three fiscal years, each Fund paid the following
amounts as investment advisory fees to Magna pursuant to the relevant advisory
agreement:
<TABLE>
<CAPTION>
Fiscal Gross Net
Year (before (after
Ended voluntary voluntary
Fund Aug. 31, reduction) Reduction reduction)
- ---- -------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Magna Intermediate 1995 $236,230 $ -0- $236,230
Government Bond Fund 1996 $274,199 $ 54,840 $219,359
1997 $304,596 $ 60,919 $243,677
Magna Growth 1995 $190,761 $ 38,152 $152,609
& Income Fund 1996 $271,864 $ 90,621 $181,243
1997 $396,797 $132,266 $264,531
</TABLE>
18
<PAGE> 46
ADMINISTRATOR
BISYS Fund Services ("BISYS"), under an agreement with the Trust,
provides management and administrative services to the Funds, and, in general
supervises the operations of the Trust. BISYS does not provide investment
advisory services. As part of its duties, BISYS provides office space, equipment
and clerical personnel for managing and administering the affairs of the Trust.
BISYS supervises the provision of custodial, auditing, valuation, bookkeeping,
legal, and dividend disbursing services and provides other management and
administrative services. The Trust pays BISYS a fee for its services to each
Fund at the annual rate of 0.20% of the Trust's average daily net assets. For
the period June 2, 1997 (the date the Trust entered into this Agreement with
BISYS) through August 31, 1997, pursuant to the terms of this agreement, the
Growth & Income Fund paid BISYS $29,572, and the Intermediate Government Bond
Fund paid BISYS $27,878. Prior to June 2, 1997, Ernst Asset Management
Corporation ("EAMC") provided management and administrative services to the
Funds. For the period September 1, 1996 through June 1, 1997, the Growth &
Income Fund and the Intermediate Bond Fund paid EAMC $70,951 and $87,869,
respectively. For the fiscal years ended August 31, 1995 and August 31, 1996,
the Growth & Income Fund paid EAMC $48,326 and $68,872, respectively, and the
Intermediate Government Bond Fund paid EAMC $89,767 and $104,196, respectively.
TRUST EXPENSES
The Trust pays the compensation of its trustees; registration, filing
and other fees in connection with requirements of regulatory authorities; all
charges and expenses of its custodian and transfer agent; the charges and
expenses of its independent accountants; all brokerage commissions and transfer
taxes in connection with portfolio transactions; all taxes and fees payable to
governmental agencies; the cost of any certificates representing shares of the
Funds; the expenses of meetings of the shareholders and trustees of the Trust;
the charges and expenses of the Trust's legal counsel; interest on any
borrowings by the Funds; the cost of services, including services of counsel,
required in connection with the preparation of, and the cost of printing, the
Trust's registration statements and prospectuses, including amendments and
revisions thereto, annual, semiannual and other periodic reports of the Trust,
and notices and proxy solicitation material furnished to shareholders or
regulatory authorities, to the extent that any such materials relate to the
Trust or its shareholders; and the Trust's expenses of bookkeeping, accounting,
auditing and financial reporting, including related clerical expenses.
19
<PAGE> 47
Custodial Arrangements. Fifth Third Bank, Fifth Third Center,
Cincinnati, Ohio 45263 became the Trust's custodian on June 2, 1997. As such,
Fifth Third Bank holds in safekeeping securities and cash belonging to the Funds
and, in such capacity, is the registered owner of securities held in book entry
form belonging to the Funds. Upon instruction, Fifth Third Bank receives and
delivers cash and securities of the Funds in connection with Fund transactions
and collects all dividends and other distributions made with respect to Fund
portfolio securities. Pursuant to an agreement with the Trust, the Custodian
receives compensation from each Fund for such services based upon a percentage
of each Fund's average daily net assets.
Independent Accountants. The Funds' independent accountants are Coopers
& Lybrand L.L.P., 100 East Broad Street, Columbus, Ohio 43215. Coopers & Lybrand
L.L.P. conducts an annual audit of the Trust's financial statements, assists in
the preparation of the Funds' federal and state income tax returns and consults
with the Funds as to matters of accounting and federal and state income
taxation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Transactions on U.S. stock exchanges and other agency transactions for
the account of a Fund involve the payment by the Fund of negotiated brokerage
commissions. Such commissions vary among different brokers. A particular broker
may charge different commissions according to such factors as the difficulty and
size of the transaction. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Fund usually includes an undisclosed dealer commission or markup. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. It is anticipated
that most purchases and sales of securities by the Intermediate Government Bond
Fund will be with the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, the Intermediate Government Bond
Fund will not ordinarily pay significant brokerage commissions with respect to
securities transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934 (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from third parties
with which such broker-dealers have arrangements. Magna or its affiliates
receive brokerage and research services and other similar services from many
broker-dealers with which Magna places the Funds' portfolio transactions and
from third parties with which these broker-dealers have arrangements. These
services include such matters as general economic and market reviews, industry
and company reviews, evaluations of investments, newspapers, magazines, pricing
services, quotation services, news services, timing services and personal
computers utilized by Magna's or its affiliates' portfolio managers and
analysts. Some of these services are of value to Magna and its
20
<PAGE> 48
affiliates in advising various of their clients (including the Funds), although
not all of these services are necessarily useful and of value in managing the
Funds. The management fees paid by the Funds are not reduced because Magna and
its affiliates receive these services, even though Magna might otherwise be
required to purchase some of these services for cash.
Magna places all orders for the purchase and sale of portfolio
investments for the Funds. In doing so, Magna uses its best efforts to obtain
for each Fund the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions as described
below. In seeking the most favorable price and execution, Magna, having in mind
the Fund's best interests, considers all factors it deems relevant, including,
by way of illustration, price, the size of the transaction, the nature of the
market for the security or other investment, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker-dealer involved and
the quality of service rendered by the broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, Magna may cause each
Fund to pay a broker-dealer which provides "brokerage and research services" (as
defined in the 1934 Act) to Magna or its affiliates an amount of disclosed
commission for effecting securities transactions on stock exchanges and other
transactions for the Fund on an agency basis in excess of the commission which
another broker would have charged for effecting that transaction. Magna's
authority to cause the Funds to pay any such greater commissions is also subject
to such policies as the Trust's trustees may adopt from time to time. It is the
position of the staff of the SEC that Section 28(e) does not apply to the
payment of such greater commissions in "principal" transactions. Accordingly,
Magna will use its best effort to obtain the most favorable price and execution
available with respect to such transactions, as described above.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trust's trustees may
determine, Magna considers sales of shares of the Funds as a factor in the
selection of broker-dealers to execute portfolio transactions for the Funds.
Under the 1940 Act, persons affiliated with the Trust are prohibited
from dealing with the Funds as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principals for their own accounts,
affiliated persons of the Trust, such as BISYS, may not serve as the Funds'
dealer in connection with such transactions.
During the fiscal years ended August 31, 1995, August 31, 1996 and
August 31, 1997, the Trust paid, on behalf of the Growth & Income Fund, $28,183,
$19,499 and
21
<PAGE> 49
$24,797, respectively, in brokerage commissions. No such commissions were paid
to the Trust.
DESCRIPTION OF THE TRUST
The Trust, registered as a diversified open-end management investment
company, is organized as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust (the "Declaration of
Trust") dated April 28, 1994.
SERIES AND CLASSES OF SHARES
The Declaration of Trust currently permits the trustees to issue an
unlimited number of full and fractional shares, in multiple series. Each Fund
represents a separate series of shares. Each share of each Fund represents an
equal proportionate interest in such Fund with each other share of that Fund and
is entitled to a proportionate interest in the dividends and distributions from
that Fund. The shares of each Fund do not have any preemptive rights. Upon
termination of any Fund, whether pursuant to liquidation of the Trust or
otherwise, shareholders of that Fund are entitled to share pro rata in the net
assets of that Fund available for distribution to shareholders. The Declaration
of Trust also permits the Trustees to charge shareholders directly for
custodial, transfer agency and servicing expenses.
The assets received by each Fund for the issue or sale of its shares
and all income, earnings, profits, losses and proceeds therefrom, subject only
to the rights of creditors, are allocated to, and constitute the underlying
assets of, that Fund. The underlying assets are segregated and are charged with
the expenses with respect to that Fund and with a share of the general expenses
of the Trust. Any general expenses of the Trust that are not readily
identifiable as belonging to a particular Fund are allocated by or under the
direction of the Trustees in such manner as the trustees determine to be fair
and equitable. Although the expenses of the Trust are allocated to the separate
books of account of each Fund, certain expenses may be legally chargeable
against the assets of both Funds.
The Declaration of Trust also permits the trustees, without shareholder
approval, to subdivide any series of shares into various sub-series or classes
of shares with such dividend preferences and other rights as the trustees may
designate. The Trust may, at a future date offer different classes of shares of
each Fund with different sales charge arrangements. The trustees may also,
without shareholder approval, establish one or more additional separate
portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust or any Fund, however, may be terminated at any time by a vote
of at least two-thirds
22
<PAGE> 50
of the outstanding shares of each Fund affected. The Declaration of Trust
further provides that the trustees may also terminate the Trust or any Fund upon
written notice to the shareholders.
VOTING RIGHTS
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for each fractional share held)
and may vote (to the extent provided in the Declaration of Trust) in the
election of trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.
The Declaration of Trust provides that on any matter submitted to a
vote of all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule l8f-2 under the 1940 Act provides in effect that a
class shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are substantially identical or that the
matter does not affect any interest of such class. On matters affecting an
individual series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of all series vote
together, irrespective of series, on the election of trustees and the selection
of the Trust's independent accountants, but shareholders of each series vote
separately on other matters requiring shareholder approval, such as certain
changes in investment policies of that series or the approval of the investment
advisory agreement relating to that series.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two- thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to provide a list of
23
<PAGE> 51
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders).
Except as set forth above, the trustees shall continue to hold office
and may appoint successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust and (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value).
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund of
which they are shareholders. However, the Declaration of Trust disclaims
shareholder ability for acts or obligations of each Fund and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees. The Declaration of Trust
provides for indemnification out of Fund property for all loss and expense of
any shareholder held personally liable for the obligations of a Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the relevant Fund itself would be unable to meet
its obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects 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
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
RECORD AND BENEFICIAL OWNERS OF 5% OR MORE OF THE FUND'S SHARES
As of November 20, 1997, 99.2% of the Intermediate Government Bond Fund
shares and 97.5% of the Growth & Income Fund shares were owned of record by
Magna; all of such shares were held for the benefit of accounts for which Magna
acts as trustee or custodian.
24
<PAGE> 52
The following chart sets forth the names, addresses and percentage
ownership of those shareholders known to the Trust as owning beneficially 5% or
more of the outstanding shares of either Fund as of November 20, 1997:
<TABLE>
<CAPTION>
Name and Address %
Fund of Beneficial Owner Ownership
---- ------------------- ---------
<S> <C> <C>
Magna Growth & Magna Group, Inc. Pension Fund 8.21%
Income Fund c/o Magna Trust Company as Trustee,
One South Church Street
Belleville, IL 62220
</TABLE>
HOW TO BUY SHARES
The procedures for purchasing shares of the Funds are summarized in the
Prospectus under "How to Purchase Shares."
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The net asset value of the shares of each Fund is determined by
dividing that Fund's total net assets (the excess of its assets over its
liabilities) by the total number of shares of the Fund outstanding and rounding
to the nearest cent. Such determination is made as of the close of regular
trading on the New York Stock Exchange on each day on which that Exchange is
open for unrestricted trading, and no less frequently than once daily on each
day during which there is sufficient trading in a Fund's portfolio securities
that the value of that Fund's shares might be materially affected. During the
25
<PAGE> 53
twelve months following the date of this Statement of Additional Information,
the New York Stock Exchange is expected to be closed on the following week days:
Thanksgiving Day, Christmas Day, New Year's Day, President's Day, Good Friday,
Martin Luther King Day, Memorial Day, Independence Day and Labor Day. Equity
securities listed on an established securities exchange or on the NASDAQ
National Market System are normally valued at their last sale price on the
exchange where primarily traded or, if there is no reported sale during the day,
and in the case of over-the-counter securities not so listed, at the last bid
price. Long-term debt securities are valued by a pricing service, which
determines valuations of normal institutional-size trading units of long- term
debt securities. Such valuations are determined using methods based on market
transactions for comparable securities and on various relationships between
securities which are generally recognized by institutional traders. Other
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
trustees.
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment in any Fund is automatically credited to an
open account maintained for the shareholder by BISYS Fund Services, Inc.
("BISYS"), the shareholder servicing agent for Trust. Following each transaction
in the account, a shareholder will receive an account statement disclosing the
current balance of shares owned and the details of recent transactions in the
account. After the close of each fiscal year, BISYS will send each shareholder a
statement providing federal tax information on dividends and distributions paid
to the shareholder during the year. This should be retained as a permanent
record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates the problems of handling and safekeeping
certificates, and the cost and inconvenience of replacing lost, stolen,
mutilated or destroyed certificates.
The costs of maintaining the open account system are borne by the
Trust, and no direct charges are made to shareholders. Although the Trust has no
present intention of making such direct charges to shareholders, it reserves the
right to do so. Shareholders will receive prior notice before any such charges
are made.
26
<PAGE> 54
SYSTEMATIC WITHDRAWAL PLAN
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least $250
at the time the plan is established.
Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a signature guarantee will be required on the Plan
application. All shares in an account that is subject to a Systematic Withdrawal
Plan must be held in an open account rather than in certificated form. Income
dividends and capital gain distributions will be reinvested at the net asset
value determined as of the close of regular trading on the New York Stock
Exchange on the record date for the dividend or distribution.
Since withdrawal payments represent proceeds from the liquidation of
shares, the shareholder should recognize that withdrawals may reduce and
possibly exhaust the value of the account, particularly in the event of a
decline in net asset value. Accordingly, the shareholder should consider whether
a Systematic Withdrawal Plan and the specified amounts to be withdrawn are
appropriate in the circumstances. The Fund makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
IRAS
Under "Shareholder Services--Retirement Plans," the Prospectus refers
to IRAs established under a prototype plan made available by Magna. These plans
may be funded with shares of either Fund.
All income dividends and capital gain distributions of plan
participants must be reinvested. Plan documents and further information can be
obtained from Magna.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
27
<PAGE> 55
Except as noted below, signatures on redemption requests must be
guaranteed by commercial banks, trust companies, savings associations, credit
unions or brokerage firms that are members of domestic securities exchanges.
Signature guarantees by notaries public are not acceptable. However, as noted in
the Prospectus, a signature guarantee will not be required if the proceeds of
the redemption do not exceed $100,000 and the proceeds check is made payable to
the registered owner(s) and mailed to the record address.
If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by making a
telephone call directly to BISYS at (800) 219-4182. When a telephonic redemption
request is received, the proceeds are wired to the bank account previously
chosen by the shareholder and a nominal wire fee (currently $5.00) is deducted.
Telephonic redemption requests must be received by BISYS prior to the close of
regular trading on the New York Stock Exchange on a day when the Exchange is
open for business. Requests made after that time or on a day when the New York
Stock Exchange is not open for business cannot be accepted by BISYS and a new
request will be necessary.
In order to redeem shares by telephone, a shareholder must either
select this service when completing the Fund application or must do so
subsequently on the Service Options Form available from BISYS. When selecting
the service, a shareholder must designate a bank account to which the redemption
proceeds should be wired. Any change in the bank account so designated must be
made by furnishing to BISYS a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if an investor's bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Trust, BISYS and Fifth Third Bank are not responsible for the
authenticity of withdrawal instructions received by telephone.
The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by BISYS in proper form. Proceeds resulting from a written
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. Telephonic redemption proceeds will
normally be wired on the first business day following receipt of a proper
redemption request. In those cases where you have recently purchased your shares
by check and your check was received less than 10 days prior to the redemption
request, the Fund may withhold redemption proceeds until your check has cleared,
which may take up to 10 days from the purchase date.
Each Fund will normally redeem shares for cash; however, each Fund
reserves the right to pay the redemption price wholly or partly in kind if the
board of trustees of
28
<PAGE> 56
the Trust determines it to be advisable in the interest of the remaining
shareholders. If portfolio securities are distributed in lieu of cash, the
shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Trust has elected to be
governed by Rule l8f-l under the 1940 Act pursuant to which the Trust is
obligated to redeem shares solely in cash for any shareholder during any 90- day
period up to the lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gains
or loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
It is the policy of each Fund to pay its shareholders, as dividends,
substantially all net investment income and to distribute annually all net
realized capital gains, if any, after offsetting any capital loss carryovers.
Income dividends and capital gains distributions are payable in full
and fractional shares of the particular Fund based upon the net asset value
determined as of the close of regular trading on the New York Stock Exchange on
the record date for each dividend or distribution. Shareholders, however, may
elect to receive their income dividends or capital gains distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to BISYS. In order for a change to be in effect for any dividend or
distribution, it must be received by BISYS on or before the record date for such
dividend or distribution.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Code. In order so to qualify, the Fund must,
among other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
or other disposition of stock or securities, or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock or securities; (ii)
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year; and (iii) at the end of each fiscal quarter maintain at least 50% of the
value of its total assets in cash, U.S. government securities, securities of
other regulated investment companies, and other securities of issuers which
represent, with respect to each issuer, no more than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities
29
<PAGE> 57
of such issuer, with no more than 25% of its assets invested in the securities
(other than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the Fund controls
and which are engaged in the same, similar or related trades and businesses. To
satisfy these conditions, the Funds may be limited in their ability to use
certain investment techniques and may be required to liquidate assets to
distribute income. Moreover, some investment techniques used by the Funds may
change the character and amount of income recognized by the Funds. As a
regulated investment company, each Fund will not be subject to federal income
tax on income paid on a timely basis to its shareholders in the form of
dividends or capital gain distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" (as defined in the Code) over its actual
distributions in any calendar year. Generally, the "required distribution" is
98% of the Fund's ordinary income for the calendar year plus 98% of its capital
gain net income recognized during the one-year period ending on October 31 plus
undistributed amounts from prior years. Each Fund intends to make distributions
sufficient to avoid imposition of the excise tax. Distributions declared by a
Fund during October, November or December to shareholders of record on a date in
any such month and paid by the Fund during the following January will be treated
for federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Shareholders of each Fund will be subject to federal income taxes on
distributions made by the Fund, whether received in cash or additional shares of
the Fund. Distributions by each Fund of net income and short-term capital gains,
if any, will be taxable to shareholders as ordinary income. Pursuant to the
Taxpayer Relief Act of 1997, two different tax rates apply to net capital gains
(that is, the excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than one year). One
rate (generally 28%) applies to net gains on capital assets held for more than
one year but not more than 18 months ("28% rate gains") and a second, preferred
rate (generally 20%) applies to the balance of such net capital gains ("adjusted
net capital gains"). Distributions of net capital gains will be treated in the
hands of shareholders as 28% rate gains to the extent designated by the Fund as
deriving from net gains from assets held for more than one year but not more
than 18 months, and the balance will be treated as adjusted net capital gains.
Distributions of 28% rate gains and adjusted net capital gains will be taxable
to shareholders as such, regardless of how long a shareholder has held shares in
the Fund. A loss on the sale of shares held for six months or less will be
treated as a long-term capital loss to the extent of any long-term capital gain
dividend paid to the shareholder with respect to such shares.
Dividends and distributions on Fund shares are subject to federal
income taxes even if in effect they are a return of capital.
30
<PAGE> 58
Redemptions, sales and exchanges of each Fund's shares are taxable
events and, accordingly, shareholders may realize gains and losses on these
transactions. Provided the shareholder holds the shares as a capital asset, any
gain realized upon a taxable disposition of shares will be treated as 28% rate
gain if the shares have been held for more than 12 months but not more than 18
months, and as adjusted net capital gains if the shares have been held for more
than 18 months. Otherwise, the gain on the redemption, sale or exchange of fund
shares will be treated as short-term capital gain. In general, any loss realized
upon a taxable disposition of shares will be treated as a long-term capital loss
if the shares have been held for more than 12 months, and otherwise as
short-term capital loss. No loss will be allowed on the sale of Fund shares to
the extent the shareholder acquired other shares of the same Fund within 30 days
prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. investors. Non-U.S.
investors should consult their tax advisers concerning the tax consequences of
ownership of shares of a Fund, including the possibility that distributions may
be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
31
<PAGE> 59
PERFORMANCE INFORMATION
Each Fund may from time to time include its total return in advertisements
or in information furnished to present or prospective shareholders. Each Fund
may from time to time include in advertisements its total return and the ranking
of those performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having the same investment
objectives.
Quotations of average annual total return for a Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund or class over periods of one, five, and ten years (or for
such shorter periods as shares of the Fund have been offered), calculated
pursuant to the following formula: P (1 + T)[n exponent]= ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return,
n = the number of years, and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). Except as noted below, all
total return figures reflect the deduction of a proportional share of Fund
expenses on an annual basis, and assume that (i) the maximum sales load (or
other charges deducted from payments) is deducted from the initial $1,000
payment and (ii) all dividends and distributions are reinvested when paid.
Quotations of total return may also be shown for other periods. The Funds may
also, with respect to certain periods of less than one year, provide total
return information for that period that is unannualized. Any such information
would be accompanied by standardized total return information.
The table below sets forth the average annual total return of each Fund for
the one year period ending August 31, 1997 and for the period from the
commencement of the Funds' operations until August 31, 1997:
TOTAL RETURN OF FUND SHARES FOR THE PERIODS LISTED
Assuming MAXIMUM sales load (4.00%):
- --------------------------------------------------------------------------------
Total Return Total Return
FUND (One Year) (Since Inception)
- --------------------------------------------------------------------------------
Magna Growth & Income Fund 34.04% 22.08%
(commencement of operations:
September 1, 1994)
- --------------------------------------------------------------------------------
Magna Intermediate Government 3.63% 5.12%
Bond Fund (commencement of
operations: September 1, 1994)
- --------------------------------------------------------------------------------
Assuming NO sales load (0.00%):
- --------------------------------------------------------------------------------
Total Return Total Return
FUND (One Year) (Since Inception)
- --------------------------------------------------------------------------------
Magna Growth & Income Fund 39.59% 23.74%
(commencement of operations:
September 1, 1994)
- --------------------------------------------------------------------------------
Magna Intermediate Government 7.96% 6.55%
Bond Fund (commencement of
operations: September 1, 1994)
- --------------------------------------------------------------------------------
SPECIMEN PRICE MAKE-UP
Total Offering Price Per Unit (as of August 31, 1997):
<TABLE>
<CAPTION>
Growth & Intermediate
Income Government
Fund Bond Fund
<S> <C> <C>
Shares of beneficial interest outstanding 3,168,108 5,111,891
Net asset value and redemption price per $22.18 $12.61
share
Maximum offering price per share $23.10 $13.14
($22.18/0.96 and $12.61/0.96)
APPENDIX A
</TABLE>
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S CORPORATION AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S CORPORATION
AAA
This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.
AA
Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A
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.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for bonds in higher-rated categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC 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.
A-1
<PAGE> 60
C
The rating C is reserved for income bonds on which no interest is being
paid.
D
Bonds rated D are in default. and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa
Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins 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 that make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that 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
that suggest a susceptibility to impairment sometime in the future.
A-2
<PAGE> 61
Baa
Bonds that are rated Baa are considered as medium-grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba
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.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
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
Ca
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.
C
Bonds which are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded having extremely poor prospects of ever attaining any
real investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
A-3
<PAGE> 62
4. The issue was privately placed, in which case the rating is
not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up- to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1.
A-4
<PAGE> 63
APPENDIX B
FINANCIAL STATEMENTS
The Trust's audited Financial Statements for the fiscal year ended
August 31, 1997 included in the Trust's Annual Report filed with the Securities
and Exchange Commission on October 29, 1997 pursuant to Section 30(d) of the
Investment Company Act of 1940, as amended, and the rules promulgated
thereunder, are hereby incorporated in this Statement of Additional Information.
A copy of the Trust's Annual Report is available without charge upon request
from Magna Funds, P.O. Box 182754, Columbus, Ohio 43218-2754, or by calling
(800) 219-4182.
B-1
<PAGE> 64
<TABLE>
<CAPTION>
Part C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
<S> <C> <C> <C>
(a) Financial statements: See "Financial Highlights" in the Prospectus and
"Financial Statements" in the Statement of Additional
Information.
(b) Exhibits:
1. Agreement and Declaration of Trust.(1)
2. By-Laws.(1)
3. None.
4. Form of Share Certificate.
5. Form of Investment Advisory Agreement.(1)
6. Form of Distribution Agreement.
7. None.
8. Form of Custodian Agreement.
9.(a) Form of Administration Agreement.
9.(b) Form of Transfer Agent Agreement.
9.(c) Form of Fund Accounting Agreement.
9.(d) Form of Organizational Expense Reimbursement Agreement.
10. Opinion and Consent of Counsel.
11. Consent of Independent Accountant.
</TABLE>
- --------
(1) Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement (File No. 33-78408) filed electronically
with the Securities and Exchange Commission on December 20, 1996.
-1-
<PAGE> 65
<TABLE>
<CAPTION>
<S> <C> <C>
12. None.
13. Letter regarding sale of initial shares.
14. Not Applicable.
15. Rule 12b-1 Plan.
16. Computations of Performance Data.
17. Financial Data Schedule.
18. Not Applicable.
19. Powers of Attorney of Robert A. Archibald,
Earl E. Lazerson, Robert E. Saur, Harry R.
Maier, Neil Seitz and Brad L.
Badgley.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
The following table sets forth the number of recordholders of
each class of the Trust's securities as of November 29, 1997:
</TABLE>
<TABLE>
<CAPTION>
Number of
Fund Record Holders
---- --------------
<S> <C>
Magna Intermediate
Government Bond Fund 26
Magna Growth & Income
Fund 114
</TABLE>
-2-
<PAGE> 66
<TABLE>
<CAPTION>
<S> <C>
Item 27. Indemnification
See Item 27 of Pre-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-78408) filed on July 15, 1994, which is hereby
incorporated by reference.
Item 28. Business and Other Connections of Investment Adviser
(a) Magna Bank, N.A. ("Magna"), the adviser of the
Registrant, is a national bank. Magna operates as a
community bank providing various financial services
to customers and mid-sized businesses in its
immediate geographic area. Magna does not serve as
investment adviser to any other registered investment
company.
(b) Magna's directors and officers have been engaged
during the past two years in the following other
businesses, vocations or employments of a substantial
nature:
</TABLE>
<TABLE>
<CAPTION>
Name and Office Name and Address Nature of
with Magna of Other Affiliations Connection
- ---------- --------------------- ----------
<S> <C> <C>
G. Thomas Andes Magna Group, Inc. Chairman of the
Director and Chairman 1401 South Brentwood Blvd. Board and Chief
of the Board, President St. Louis, MO 63144 Executive Officer
Chief Executive Officer
and Director
James A. Auffenberg, Jr. Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
St. Clair Auto Mall President and
105 Auto Court Director
O'Fallon, IL 62269
Auffenberg Belleville President and
901 South Illinois St. Director
Belleville, IL 62220
</TABLE>
-3-
<PAGE> 67
<TABLE>
<CAPTION>
Name and Office Name and Address Nature of
with Magna of Other Affiliations Connection
- ---------- --------------------- ----------
<S> <C> <C>
Auffenberg Enterprises President and Director
of Illinois, Inc.
830 South Illinois St.
Belleville, IL 62220
Ronald A. Buerges Magna Group, Inc. Senior Executive
Executive Vice President, 1401 South Brentwood Blvd. Vice President
Chief Executive Officer St. Louis, MO 63144
Wayne T. Ewing Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
The Ewing Company Owner and
24310 Woodsage Drive President
Bonita Springs, FL 34134
Kerr-McGee Corporation Officer
123 Robert S. Kerr (until 10/96)
P.O. Box 25861
Oklahoma City, OK 73102
Linda K. Fabel Magna Group, Inc. Executive Vice
Executive Vice President, 1401 South Brentwood Blvd. President, Retail
Retail St. Louis, MO 63144
Donald P. Gallop Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Gallop, Johnson & Neuman, L.C. Chairman
Interco Corporate Tower
101 South Hanley Rd.
St. Louis, MO 63105
Randall E. Ganim, C.P.A. Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Ganim, Medor, Childers & President
Hoering, P.C.
1 Bronze Point
Swansea, IL 62221
</TABLE>
-4-
<PAGE> 68
<TABLE>
<CAPTION>
Name and Office Name and Address Nature of
with Magna of Other Affiliations Connection
- ---------- --------------------- ----------
<S> <C> <C>
C.E. Heiligenstein Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Heiligenstein & Badgley, P.C. Attorney
30 Public Square
Belleville, IL 62220
John G. Helmkamp, Jr. Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
River Bend Bancshares, Inc. Chairman and
347 West Main St. Chief Executive
East Alton, IL 62024 Officer (until 2/96)
Gary D. Hemmer Magna Group, Inc. Executive Vice
Executive Vice President, 1401 South Brentwood Blvd. President, Financial
Financial Markets St. Louis, MO 63144 Markets
Carl S. Hogan, Sr. Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Hogan Motor Leasing, Inc. Chairman and
1000 N. 14th St. Chief Executive
St. Louis, MO Officer
Franklin A. Jacobs Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Falcon Products, Inc. Chairman and Chief
9387 Dielman Industrial Dr. Executive Officer
St. Louis, MO 63132
Robert S. Kahler Magna Group, Inc. Executive Vice
Executive Vice President 1401 South Brentwood Blvd. President and Chief
and Chief Financial Officer St. Louis, MO 63144 Financial Officer
</TABLE>
-5-
<PAGE> 69
<TABLE>
<CAPTION>
Name and Office Name and Address Nature of
with Magna of Other Affiliations Connection
- ---------- --------------------- ----------
<S> <C> <C>
Homeland Bankshares Corp. Executive Vice
229 East Park Ave. President and Chief
Waterloo, IA 50703 Financial Officer (until
3/97)
S. Lee Kling Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Kling, Rechter & Co. Chairman of
1401 South Brentwood Blvd the Board
Suite 800
St. Louis, MO 63144
Bradford W. Koeneman Magna Group, Inc. Executive Vice
Executive Vice President, 1401 South Brentwood Blvd. President, Investor
Investor Relations and St. Louis, MO 63144-1401 Relations and
Marketing Marketing
Goldman, Sachs & Co.
6075 Poplar Ave Vice President (until
Suite 720 11/97)
Memphis, TN 38119
Ralph F. Korte Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Korte Construction Company Chairman of
P.O. Box 146 the Board
Highland, IL 62249
Roger J. Lowery Magna Group, Inc. Director
Director 1401 S. Brentwood Blvd.
St. Louis, MO 63144-1401
The Lowery Group Owner
804 South 59th St.
Belleville, IL 62223
</TABLE>
-6-
<PAGE> 70
<TABLE>
<CAPTION>
Name and Office Name and Address Nature of
with Magna of Other Affiliations Connection
- ---------- --------------------- ----------
<S> <C> <C>
Northwestern Mutual District Agent
Life Insurance
720 East Wisconsin Ave.
Milwaukee, WI 53202
Robert J. Mathias Magna Group, Inc. Executive Vice
Executive Vice President, 1401 South Brentwood Blvd. President, Credit
Credit St. Louis, MO 63144-1401
Nations Bank, N.A. Executive Vice
1 Nations Bank Plaza President and Division
800 Market St. Manager of Corporate
St. Louis, MO 63101 Banking (until 2/97)
Robert M. Olson, Jr. Magna Group, Inc. Executive Vice
Executive Vice President, 1401 South Brentwood Blvd. President, Operations
Operations and Technology St. Louis, MO 63144 and Technology
William A. Peck, M.D. Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144-1401
Washington University Executive Vice
660 South Euclid Chancellor for Medical
St. Louis, MO 63110 Affairs, Washington
University; Dean,
Washington University
School of Medicine;
President, Washington
University Medical
Center; Professor of
Medicine, Washington
University
Earl A. Schmiesing Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Homeland Bankshares Corp. Chairman, President
229 East Park Ave. and Chief Executive
Waterloo, IA 50703 Officer (until 3/97)
</TABLE>
-7-
<PAGE> 71
<TABLE>
<CAPTION>
Name and Office Name and Address Nature of
with Magna of Other Affiliations Connection
- ---------- --------------------- ----------
<S> <C> <C>
Douglas K. Shull Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Casey's General Stores, Inc. Treasurer and Chief
#1 Convenience Blvd. Financial Officer
P.O. Box 3001
Ankeny, IA 50021
Frank R. Trulaske Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
True Fitness Technology, Chief Executive
Inc. Officer
P.O. Box 8803
O'Fallon, MO 63366
George T. Wilkins, Jr., M.D. Magna Group, Inc. Director
Director 1401 South Brentwood Blvd.
St. Louis, MO 63144
Physician Physician
#1 Gingerhill Court
P.O. Box 837
Edwardsville, IL 62025
Item 29. Principal Underwriters
BISYS Fund Services ("BISYS") acts as distributor and
administrator for Registrant. BISYS Fund Services also
distributes the securities of the following investment
companies: The Riverfront Funds, Inc., The Victory Portfolios,
AmSouth Mutual Funds, The Parkstone Group of Funds, The
Sessions Group, the MarketWatch Funds, the BB&T Mutual Funds
Group, The Coventry Group, Pacific Capital Funds, The ARCH
Fund, Inc., M.S.D. & T. Funds, Inc., MMA Praxis Mutual Funds,
Summit Investment Trust, the Fountain Square Funds, HSBC
Family of Funds, The Infinity Mutual Funds, Inc., The Kent
Funds, the Parkstone Advantage Funds, Pegasus Funds, the
Republic Funds Trust, The Republic Adviser Funds Trust, SBSF
Funds, Inc., First Choice Funds Trust, InTrust Fund Trusts,
Minerva Fund, Inc., Empire Builder Tax Free Bond
</TABLE>
-8-
<PAGE> 72
<TABLE>
<CAPTION>
<S> <C>
Fund, Hirtle Callaghan Trust, Meyers Sheppard Investment
Trust, Sefton Funds, and Emerald Funds, The One Group Funds,
Barr Rosenburg Funds, Centura Funds, CVO China Funds, ESC
Strategic Funds, Eureka Funds, IBJ Funds, LifeCycle Funds,
Performance Funds and Pro Funds.
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Distributor with Registrant
- ---------------- ---------------- ---------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
150 Clove Road
Little Falls, NJ 07424
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
Each of these corporations is a subsidiary of The BISYS Group, Inc., 150 Clove Road, Little Falls, NJ 07424
</TABLE>
* The mailing address of each of the directors and officers is c/o BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219 unless otherwise indicated.
<TABLE>
<CAPTION>
<S> <C>
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(a) Magna Bank, N.A.
Rule 31a-1(b)(9),(10),(11) and
(12),(e) and (f)
Rule 31a-2(d) and (e)
(b) Fifth Third Bank
Rule 31a-1(b)(1) - (3), (5) - (9)
Rule 31a-2(c)
(c) BISYS Fund Services
Rule 31a-1(a), (b)(4),(12), (c) and (d)
Rule 31a-2(a) and (c)
Item 31. Management Services
</TABLE>
-9-
<PAGE> 73
<TABLE>
<CAPTION>
<S> <C>
Not applicable.
Item 32. Undertakings
(a) See Item 32(ii) of Pre-Effective Amendment No. 2 to the Registration Statement
on Form N-1A (File No. 33-78408) filed on July 15, 1994 which is hereby
incorporated by reference.
(b) The Registrant hereby undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders containing the
information required by Item 5A of Form N-1A omitted from the
Prospectus, upon request and without charge.
</TABLE>
-10-
<PAGE> 74
********************
NOTICE
------
A copy of the Agreement and Declaration of Trust of Magna Funds (the
"Trust") is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the obligations of or
arising out of this Registration Statement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust.
-11-
<PAGE> 75
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Magna Funds, represents that
this Post-Effective Amendment is being filed solely for one or more purposes
specified in paragraph (b)(1) of Rule 485 under the Securities Act of 1933, and
that no material event requiring disclosure in the Prospectus other than those
specified in such paragraph (b)(1) has occurred since the effective date of the
Registration Statement, and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus and the State of Ohio, on the 22nd day
of December, 1997.
MAGNA FUNDS
By: /S/ WALTER B. GRIMM
--------------------
Walter B. Grimm
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/ WALTER B. GRIMM
Walter B. Grimm
President
Date: December 22, 1997
/S/ MICHAEL J. PHILIPPS
Michael J. Philipps
Treasurer (Chief Accounting Officer)
Date: December 2, 1997
*BRAD L. BADGLEY
Brad L. Badgley
Trustee
*EARL E. LAZERSON *ROBERT E. SAUR *NEIL SEITZ
Earl E. Lazerson Robert E. Saur Neil Seitz
Trustee Trustee Trustee
*ROBERT R. ARCHIBALD *HARRY R. MAIER *By: /S/ WALTER B. GRIMM
Robert R. Archibald Harry R. Maier Walter B. Grimm
Trustee Trustee Attorney in Fact
Date: December 22, 1997
-12-
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Name of Exhibit
- ----------- ---------------
<S> <C>
4 Form of Share Certificate
6 Form of Distribution Agreement
8 Form of Custodian Agreement
9(a) Form of Administration Agreement
9(b) Form of Transfer Agency Agreement
9(c) Form of Fund Accounting Agreement
9(d) Form of Organizational Expense Reimbursement Agreement
10 Opinion and Consent of Counsel
11 Consent of Independent Accountant
13 Letter regarding initial sale of shares
15 Rule 12b-1 Plan
16 Computation of Performance Data
17 Financial Data Schedule
19 Powers of Attorney
</TABLE>
-13-
<PAGE> 1
EXHIBIT 4
---------
Number Shares
- ------ ------
----
CUSIP
--------------
MAGNA FUNDS
See reverse side for
[NAME OF FUND] certain definitions
This certifies that [ ] is the owner of shares of beneficial
interest in the above named Fund, a series of shares of beneficial interest of
MAGNA FUNDS, fully paid and non-assessable, the said Shares being issued,
received, and held under and subject to the terms and provisions of the
Agreement and Declaration of Trust dated April 28, 1994 establishing MAGNA
FUNDS, and all amendments thereto, copies of which are on file with the
Secretary of State of The Commonwealth of Massachusetts and the Trust's Bylaws,
and all amendments thereto. The said owner by accepting this certificate agrees
to and is bound by all of the said terms and provisions. The shares represented
hereby are transferable in writing by the owner thereof in person or by attorney
upon surrender of this certificate to the Trust properly endorsed for transfer.
This certificate is executed on behalf of the Trustees of the Trust as Trustees
and not individually and the obligations hereof are not binding upon any of the
Trustees, officers, or shareholders of the Trust individually but are binding
only upon the assets and property of the Trust. This certificate is not valid
until countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Trustees of MAGNA FUNDS have caused this
certificate to be signed by its duly authorized officers and the seal of the
Trust to be affixed hereto.
Countersigned and Registered, Dated:
-------------
Transfer Agent and Registrar
- ----------------------- ------------------- -----------------
Authorized Signature President Treasurer
<PAGE> 2
The following abbreviations, when used in the form of ownership on the
face of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C> <C>
Custodian
------- --------
(Cust) (Minors)
TEN IN COM As tenants in common UNIF GIFT MIN ACT - Under Uniform Gifts to Minors
TEN ENT As tenants by the entireties Act
JT TEN As joint tenants, with rights of ---------------
survivorship and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
Assignment
----------
For value received, I/We hereby sell, assign and transfer unto:
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
/-------------------/
/-------------------/ ------------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, including Zip Code, of Assignee)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
(____________________________) Shares, represented by the within Certificate, and do hereby irrevocably
constitute and appoint (_______________________________) attorney to transfer the said Shares on the books of the
within-named Trust with full power of substitution in the premises.
Dated _________________, 19__ Signature(s)_____________________________________
_____________________________________
_____________________________________
Signature Guaranteed By (THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THIS CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.)
_________________________
</TABLE>
<PAGE> 1
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT made this ____ day of June, 1997, between MAGNA FUNDS (the
"Trust"), a Massachusetts business trust, and BISYS FUND SERVICES LIMITED
PARTNERSHIP d/b/a BISYS FUND SERVICES ("Distributor"), an Ohio limited
partnership.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR.
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Trust then in
effect under the Securities Act of 1933, as amended (the "Securities Act"). As
used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion as
it believes reasonable in connection with such solicitation. The Trust
understands that Distributor is now and may in the future be the distributor of
the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the Trust.
The Trust further understands that investors and potential investors in the
Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable, which are primarily intended to result in
the sale of the Shares, including, but not limited to, advertising, compensation
of underwriters, dealers and sales personnel, the printing and
<PAGE> 2
mailing of prospectuses to other than current Shareholders, and the printing and
mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized list
of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and regulations of the Commission
thereunder. The registration statement and prospectus contain all statements
required to be stated therein in conformity with said Act and the rules and
regulations of said Commission and all statements of fact contained in any such
registration statement and
2
<PAGE> 3
prospectus are true and correct. Furthermore, neither any registration statement
nor any prospectus includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares. The Trust may,
but shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the Trust's counsel, be necessary or advisable. If the Trust shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Trust of a written request from Distributor to do so,
Distributor may, at its option, terminate this Agreement. The Trust shall not
file any amendment to any registration statement or supplement to any prospectus
without giving Distributor reasonable notice thereof in advance; provided,
however, that nothing contained in this Agreement shall in any way limit the
Trust's right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Columbus, Ohio and
3
<PAGE> 4
sent to the Trust by the person against whom such action is brought, within 10
days after the summons or other first legal process shall have been served. The
failure to so notify the Trust of any such action shall not relieve the Trust
from any liability which the Trust may have to the person against whom such
action is brought by reason of any such untrue, or allegedly untrue, statement
or omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 1.11. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the Trust and approved by Distributor, which approval shall
not be unreasonably withheld. In the event the Trust elects to assume the
defense of any such suit and retain counsel of good standing approved by
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its partners and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.11 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to
Distributor's benefit, to the benefit of its several partners and employees, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Trust agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Trust or any of its
officers or Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Trust and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Trust required to be stated in such
answers or necessary to make such information not misleading. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal
4
<PAGE> 5
office in Columbus, Ohio, and sent to Distributor by the person against whom
such action is brought, within 10 days after the summons or other first legal
process shall have been served. Distributor shall have the right of first
control of the defense of such action, with counsel of its own choosing,
satisfactory to the Trust, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the
Trust, its officers or Trustees or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the Trust,
its officers or Trustees, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission, otherwise
than on account of Distributor's indemnity agreement contained in this
paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Commission of any
stop order suspending the effectiveness of the
registration statement or prospectus then in effect or
the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration
statement or prospectus then in effect or which requires
the making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus
which may from time to time be filed with the Commission.
5
<PAGE> 6
For purposes of this section, informal requests by or acts of
the Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State of
Ohio.
2. FEE.
Distributor shall receive from the Funds identified in the
Distribution and Shareholder Service Plan attached as Schedule A hereto (the
"Distribution Plan Funds") a distribution fee at the rate and upon the terms and
conditions set forth in such Plan. The distribution fee shall be accrued daily
and shall be paid on the first business day of each month, or at such time(s) as
the Distributor shall reasonably request.
3. SALE AND PAYMENT.
Shares of a Fund may be subject to a sales load and may be subject to
the imposition of a distribution fee pursuant to the Distribution and
Shareholder Service Plan referred to above. To the extent that Shares of a Fund
are sold at an offering price which includes a sales load or at net asset value
subject to a contingent deferred sales load with respect to certain redemptions
(either within a single class of Shares or pursuant to two or more classes of
Shares), such Shares shall hereinafter be referred to collectively as "Load
Shares" (in the case of Shares that are sold with a front-end sales load or
Shares that are sold subject to a contingent deferred sales load), "Front-End
Load Shares" or "CDSL Shares" and individually as a "Load Share," a "Front-End
Load Shares" or a "CDSL Share." A Fund that contains Front-End Load Shares shall
hereinafter be referred to collectively as "Load Funds" or "Front-End Load
Funds" and individually as a "Load Fund" or a "Front-end Load Fund." A Fund that
contains CDSL Shares shall hereinafter be referred to collectively as "Load
Funds" or "CDSL Funds" and individually as a "Load Fund" or a "CDSL Fund." Under
this Agreement, the following provisions shall apply with respect to the sale
of, and payment for, Load Shares.
3. 1 Distributor shall have the right to purchase Load Shares at
their net asset value and to sell such Load Shares to the public against orders
therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by
6
<PAGE> 7
Distributor, which concession shall not exceed the amount of the sales charge or
underwriting discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load Fund
to, or on the order of, Distributor, Distributor shall pay or cause to be paid
to the Load Fund or to its order an amount in Boston or New York clearing house
funds equal to the applicable net asset value of such Shares. Distributor may
retain so much of any sales charge or underwriting discount as is not allowed by
Distributor as a concession to dealers.
4. PUBLIC OFFERING PRICE.
The public offering price of a Load Share shall be the net asset value
of such Load Share, plus any applicable sales charge, all as set forth in the
current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the then-current prospectus of the Load Fund.
5. ISSUANCE OF SHARES.
The Trust reserves the right to issue, transfer or sell Load Shares at
net asset value (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding Shares of any other investment company; (b) in connection with a pro
rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current prospectus of the Load Fund.
6. TERM, DURATION AND TERMINATION.
This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date first written above (or, if a particular
Fund is not in existence on such date, on the date an amendment to Schedule A to
this Agreement relating to that Fund is executed) and, unless sooner terminated
as provided herein, shall continue until May ___, 1999. Thereafter, if not
terminated, this Agreement shall continue with respect to a particular Fund
automatically for successive one-year terms, provided that such continuance is
specifically approved at least annually by (a) by the vote of a majority of
those members of the Trust's Board of Trustees who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
for the purpose of voting on such approval and (b) by the vote of the Trust's
Board of Trustees or the vote of a majority of the outstanding voting securities
of such Fund. This Agreement is terminable without penalty, on not less than
sixty days' prior written notice, by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities of the Trust or by the
Distributor. This
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<PAGE> 8
Agreement will also terminate automatically in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meanings
as ascribed to such terms in the 1940 Act.)
7. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
MAGNA FUNDS BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ________________________ By: __________________________
Title: _____________________ Title: _______________________
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Dated: June ___, 1997
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MAGNA FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
A-1
<PAGE> 1
EXHIBIT 8
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of June 2, 1997, by and between MAGNA FUNDS, a
business trust organized under the laws of the Commonwealth of Massachusetts
(the "Trust"), and THE FIFTH THIRD BANK, a banking company organized under the
laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto (such investment portfolios
and individually referred to herein as a "Fund" and collectively as the
"Funds"), be held and administered by the Custodian pursuant to this Agreement;
and
WHEREAS, the Trust is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the qualifications
prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the Trust
and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Trust and named in Exhibit B
hereto or in such resolutions of the Board of Trustees, certified by an
Officer, as may be received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time serving
under the Trust's Amended and Restated Declaration of Trust, dated
April 28, 1994, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies
as are substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Fund
computes the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person,
(ii) recorded and kept among the records of the Custodian made in the
ordinary course of business and (iii) orally confirmed by the
Custodian. The Trust shall cause all Oral Instructions to be confirmed
by Written Instructions. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction,
it shall in no way affect the validity of the transaction or the
authorization thereof by the Trust.
<PAGE> 2
If Oral Instructions vary from the Written Instructions which purport
to confirm them, the Custodian shall notify the Trust of such variance
but such Oral Instructions will govern unless the Custodian has not yet
acted.
1.8 "Custody Account" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
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1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written
Instructions when deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have
received a copy of a resolution of the Board of Trustees, certified by
an Officer, specifically approving the use of such clearing agency as a
depository for the Trust) any other clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities
and Exchange Act of 1934 (the "1934 Act"), which acts as a system for
the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed
securities, shares or units of an investment company registered under
the 1940 Act money market instruments, guaranteed investment contracts
or other obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights
or interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust.
1.13 "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the
Board of Trustees shall have from time to time authorized, or (ii)
communications by telex or any other such system from a person or
persons reasonably believed by the Custodian to be Authorized, or (iii)
communications transmitted electronically through the Institutional
Delivery System (IDS), or any other similar electronic instruction
system acceptable to Custodian and approved by resolutions of the Board
of Trustees, a copy of which, certified by an Officer, shall have been
delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of
the Funds at any time during the period of this Agreement, provided
that such Securities or cash at all times shall be and remain the
property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth and
in accordance with the 1940 Act as amended. Except as specifically set
forth herein, the Custodian shall have no liability and assumes no
responsibility for any non-compliance by the Trust or a Fund of any
laws, rules or regulations.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the Custodian
for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically
segregated from other Securities and non-cash property in the
possession of the Custodian and shall be identified as subject to this
Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to
draft or order of the Custodian, in which the Custodian shall enter and
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<PAGE> 4
carry all Securities, cash and other assets of the Fund which are
delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a
custodian under the 1940 Act, as sub-custodian to hold Securities and
cash of the Funds and to carry out such other provisions of this
Agreement as it may determine, and may also open and maintain one or
more banking accounts with such a bank or trust company (any such
accounts to be in the name of the Custodian and subject only to its
draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or
liabilities under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause to be
delivered, to the Custodian all of the Fund's Securities, cash and
other assets, including (a) all payments of income, payments of
principal and capital distributions received by the Fund with respect
to such Securities, cash or other assets owned by the Fund at any time
during the period of this Agreement, and (b) all cash received by the
Fund for the issuance, at any time during such period, of Shares. The
Custodian shall not be responsible for such Securities, cash or other
assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities
Depository or in a Book-Entry System, subject to the following
provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund shall
deliver to the Custodian a resolution of the Board of
Trustees, certified by an Officer, authorizing and instructing
the Custodian on an on-going basis to deposit in such
Securities Depository or Book-Entry System all Securities
eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent
possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral
consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed
for the deposit of Securities of the Funds, the Trust shall
re-adopt such resolution and deliver a copy thereof, certified
by an Officer, to the Custodian as deemed necessary.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book-Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) The records of the Custodian and the Custodian's account on
the books of the Book-Entry System and Securities Depository
as the case may be, with respect to Securities of a Fund
maintained in a Book-Entry System or Securities Depository
shall, by book-entry, or otherwise identify such Securities as
belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that such
Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from
the Book-Entry System or Securities depository that payment
for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund.
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<PAGE> 5
(e) Upon request, the Custodian shall provide the Fund with copies
of any report (obtained by the Custodian from a Book-Entry
System or Securities Depository in which Securities of the
Fund is kept) on the internal accounting controls and
procedures for safeguarding Securities deposited in such
Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to the Trust resulting (i) from the use of a Book-Entry
System or Securities Depository by reason of any negligence or
willful misconduct on the part of Custodian or any
sub-custodian appointed pursuant to Section 3.3 above or any
of its or their employees or agents, or (ii) from failure of
Custodian or any such sub-custodian to enforce effectively
such rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Trust shall be
subrogated to the rights of the Custodian with respect to any
claim against a Book-Entry System or Securities Depository or
any other person for any loss or damage to the Funds arising
from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Trust has been made
whole for any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or any sub-custodian appointed
pursuant to Section 3.3 above) of such Securities registered
as provided in Section 3.9 below in proper form for transfer,
or if the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in accordance with
the conditions set forth in Section 3.5 above; (ii) in the
case of shares or units of investment companies registered
under the 1940 Act against confirmation evidencing ownership
in favor of the Trust (iii) in the case of options on
Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iv) in the case of
futures contracts and options on futures contracts, against
delivery to the Custodian (or such sub-custodian) of evidence
of title thereto in favor of the Trust or any nominee referred
to in Section 3.9 below; and (v) in the case of repurchase or
reverse repurchase agreements entered into between the Trust
and a bank which is a member of the Federal Reserve System or
between the Trust and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities
either in certificate form or through an entry crediting the
Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.7(f) below, of Securities owned by the
Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for
the account of a Fund: interest; taxes; administration,
investment management, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal fees;
and other operating expenses of a Fund; in all cases, whether
or not such expenses are to be in whole or in part capitalized
or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and
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<PAGE> 6
a broker-dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with
transactions by the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities
from a Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
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<PAGE> 7
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) In the case of a sale of shares or units of an investment
company delivery shall be effected through a sale of the
assets off the custodian's system, to reflect the transaction
within the investment company's book-entry system;
(d) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of a Fund; provided that,
in any such case, the cash or other consideration is to be
delivered to the Custodian;
(e) To the issuer thereof or its agent (i) for transfer into the
name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any nominee or
nominees of any of the foregoing, or (ii) for exchange for a
different number of certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new Securities are
to be delivered to the Custodian;
(f) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(g) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or pursuant to
provisions for conversion contained in such Securities, or
pursuant to any deposit agreement, including surrender or
receipt of underlying Securities in connection with the
issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any,
are to be delivered to the Custodian;
(h) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by a Fund;
(i) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(j) For delivery in connection with any loans of Securities of a
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(k) For delivery as security in connection with any borrowings by
the Trust on behalf of a Fund requiring a pledge of assets by
such Fund, but only against receipt by the Custodian of the
amounts borrowed;
(l) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Trust or a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions
by the Trust on behalf of a Fund;
(n) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the Custodian,
and a futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any
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<PAGE> 8
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by
the Trust on behalf of a Fund; or
(o) For any other proper corporate purposes, but only upon receipt
of Proper Instructions.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held
for a Fund;
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(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Trust is entitled
either by law or pursuant to custom in the securities
business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the
Internal Revenue Service ("IRS") and to the Trust at such
time, in such manner and containing such information as is
prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
3.9 Registration and Transfer of Securities. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held
in a Book-Entry System for the account of the Trust on behalf of a
Fund, if eligible therefor. All other Securities held for a Fund may be
registered in the name of the Trust on behalf of such Fund, the
Custodian, or any sub-custodian appointed pursuant to Section 3.3
above, or in the name of any nominee of any of them, or in the name of
a Book-Entry System, Securities Depository or any nominee of either
thereof or in the case of shares or units of an investment company in
book-entry with the investment company and listed on the records of the
Custodian. Provided, however, that such Securities are held
specifically for the account of the Trust on behalf of a Fund. The
Trust shall furnish to the Custodian appropriate instruments to enable
the Custodian to hold or deliver in proper form for transfer, or to
register in the name of any of the nominees hereinabove referred to or
in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property
held for the Trust, including (i) journals or other records of original
entry containing an itemized daily record in detail of all receipts and
deliveries of Securities and all receipts and disbursements of cash;
(ii) ledgers (or other records) reflecting (A) Securities in transfer,
(B) Securities in physical possession, (C) monies and Securities
borrowed and monies and Securities loaned (together with a record of
the collateral therefor and substitutions of such collateral), (D)
dividends and interest received, and (E) dividends receivable and
interest accrued; and (iii) canceled checks and bank records related
thereto. The Custodian shall keep such other books and records of the
Trust as the Trust shall reasonably request, or as may be required by
the 1940 Act, including, but not limited to Section 31 and Rule 31a-1
and Rule 31a-2 promulgated thereunder. Customer agrees to review
statements and reports promptly on receipt and inquiries regarding any
valuations or other reports must be submitted within one month of the
receipt of the Custodian's statement or report, and on expiration of
this period, statements and reports are considered agreed as correct.
Express or tacit approval of such statement or report implies
acceptance of the various entries listed therein and approval of any
reservations made by the Custodian. Thereafter, Customer assumes the
responsibility to correct any errors.
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(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with
rules and regulations of the Securities and Exchange Commission, (ii)
be the property of the Trust and at all times during the regular
business hours of the Custodian be made available upon request for
inspection by duly authorized officers, employees or agents of the
Trust and employees or agents of the Securities and Exchange
Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2
under the 1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust with a
daily activity statement by Fund and a summary of all transfers to or
from the Custody Account on the day following such transfers. At least
monthly and from time to time, the Custodian shall furnish the Trust
with a detailed statement, by Fund, of the Securities and moneys held
for the Trust under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on
the internal accounting controls and procedures for safeguarding
Securities, which are employed by the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies, if
any, relating to Securities which are not registered in the name of a
Fund, to be promptly executed by the registered holder of such
Securities, without indication of the manner in which such proxies are
to be voted, and shall include all other proxy materials, if any,
promptly deliver to the Trust such proxies, all proxy soliciting
materials, which should include all other proxy materials, if any, and
all notices to such Securities.
3.14 Information on Corporate Actions. Custodian will promptly notify the
Trust of corporate actions, limited to those Securities registered in
nominee name and to those Securities held at a Depository or
sub-Custodian acting as agent for Custodian. Custodian will be
responsible only if the notice of such corporate actions is published
by the Financial Daily Card Service, J.J. Kenny Called Bond Service,
DTC, or received by first class mail from the agent. For market
announcements not yet received and distributed by Custodian's services,
Trust will inform its custody representative with appropriate
instructions. Custodian will, upon receipt of Trust's response within
the required deadline, effect such action for receipt or payment for
the Trust. For those responses received after the deadline, Custodian
will effect such action for receipt or payment, subject to the
limitations of the agent(s) effecting such actions. Custodian will
promptly notify Trust for put options only if the notice is received by
first class mail from the agent. The Trust will provide or cause to be
provided to Custodian all relevant information contained in the
prospectus for any security which has unique put/option provisions and
provide Custodian with specific tender instructions at least ten
business days prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities for
the Trust, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and
the title or other description thereof, (b) the number of shares,
principal amount (and accrued interest, if any) or other units
purchased, (c) the date of purchase and settlement, (d) the purchase
price per unit, (e) the total amount payable upon such purchase, and
(f) the name of the person to whom such amount is payable. The
Custodian shall upon receipt of such Securities purchased by a Fund pay
out of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover
the cost of a purchase of Securities for a Fund, if in the relevant
Custody Account there is insufficient cash available to the Fund for
which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment
10
<PAGE> 11
for the purchase of Securities for a Fund is made by the Custodian in
advance of receipt for the account of the Fund of the Securities
purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for
such Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title
or other description thereof, (b) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (c) the
date of sale and settlement (d) the sale price per unit, (e) the total
amount payable upon such sale, and (f) the person to whom such
Securities are to be delivered. Upon receipt of the total amount
payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such
Written Instructions. Subject to the foregoing, the Custodian may
accept payment in such form as shall be satisfactory to it, and may
deliver Securities and arrange for payment in accordance with the
customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to
deliver Securities against payment, shall be entitled, if in accordance
with generally accepted market practice, to deliver such Securities
prior to actual receipt of final payment therefor. In any such case,
the Trust shall bear the risk that final payment for such Securities
may not be made or that such Securities may be returned or otherwise
held or disposed of by or through the person to whom they were
delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior
to actual receipt of final payment thereof, with (i) proceeds from the
sale of Securities which it has been instructed to deliver against
payment, (ii) proceeds from the redemption of Securities or other
assets of the Trust, and (iii) income from cash, Securities or other
assets of the Trust. Any such credit shall be conditional upon actual
receipt by Custodian of final payment and may be reversed if final
payment is not actually received in full. The Custodian may, in its
sole discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt of
final payment. Any such funds shall be repayable immediately upon
demand made by the Custodian at any time prior to the actual receipt of
all final payments in anticipation of which funds were credited to the
Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to
facilitate the settlement of a Trust transactions on behalf of a Fund
in its Custody Account. Any such advance shall be repayable immediately
upon demand made by Custodian.
ARTICLE V
REDEMPTION OF TRUST SHARES
Transfer of Funds. From such funds as may be available for the purpose in the
relevant Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of a Fund, the Custodian shall wire
each amount specified in such Proper Instructions to or through such bank as the
Trust may designate with respect to such amount in such Proper Instructions.
Upon effecting payment or distribution in accordance with proper Instructions,
the Custodian shall not be under any obligation or have any responsibility
thereafter with respect to any such paying bank.
ARTICLE VI
SEGREGATED ACCOUNTS
11
<PAGE> 12
Upon receipt of Proper Instructions, the Custodian shall establish and maintain
a segregated account or accounts for and on behalf of each Fund, into which
account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by a Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by a Fund,
(c) which constitute collateral for loans of Securities made by a
Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated accounts
by registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
12
<PAGE> 13
(e) for other proper corporate purposes, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement,
and shall be without liability to the Trust for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or
claim unless such loss, damages, cost, expense, liability or claim
arises directly or indirectly from bad faith, negligence or reckless or
willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian's cumulative
liability within a calendar year shall be limited with respect to the
Trust or any party claiming by, through or on behalf of the Trust for
the initial and all subsequent renewal terms of this Agreement, to the
actual damages sustained by the Trust (actual damages for uninvested
funds shall be the overnight Feds fund rate). The Custodian shall be
entitled to rely on and may act upon advice of counsel on all matters,
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice, subject to the standard of care set
forth above. The Custodian shall promptly notify the Trust of any
action taken or omitted by the Custodian pursuant to advice of counsel.
Except as otherwise explicitly set forth herein, the Custodian shall
not be under any obligation at any time to ascertain whether the Trust
is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its
investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Trust or
any money represented by a check, draft or other instrument for the
payment of money, until the Custodian or its agents actually receive
such cash or collect on such instrument.
7.3 No Responsibility for title, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any property or
evidence of title thereto received or delivered by it pursuant to this
Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or
property due and payable with respect to Securities held for the Trust
if such Securities are in default or payment is not made after due
demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in
writing received by it and reasonably believed by it to be genuine. The
Custodian shall be entitled to rely upon any Oral Instructions and/or
any Written Instructions actually received by it pursuant to this
Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set
forth in this Agreement, and no covenant or obligation shall be implied
in this Agreement against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply necessary
information, by the Trust, to the entity or entities appointed by the
Trust to keep the books of account of the Trust and/or compute the
value of the assets of the Trust. The Custodian shall take all such
reasonable actions as the Trust may from time to time request to enable
the Trust to obtain, from year to year, favorable opinions from the
Trust's independent accountants with respect to the Custodian's
activities hereunder in connection with (a) the preparation of the
Trust's registration statement on Form N-1A, its reports on Form N-SAR
and any other reports required by the
13
<PAGE> 14
Securities and Exchange Commission, and (b) the fulfillment by the
Trust of any other requirements of the Securities and Exchange
Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such sub-custodian from
and against any loss, damage, cost, expense (including attorneys' fees
and disbursements), liability (including, without limitation, liability
arising under the Securities Act of 1933, the 1934 Act, the 1940 Act,
and any state or foreign securities and/or banking laws) or claim
arising directly or indirectly (a) from the fact that Securities are
registered in the name of any such nominee, or (b) from any action or
inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon
Proper Instructions, or (c) generally, from the performance of its
obligations under this Agreement or any sub-custody agreement with a
sub-custodian appointed pursuant to Section 3.3 above or, in the case
of any such sub-custodian, from the performance of its obligations
under such custody agreement, provided that neither the Custodian nor
any such sub-custodian shall be indemnified and held harmless from and
against any such loss, damage, cost, expense, liability or claim
arising from the Custodian's or such sub-custodian's negligence, bad
faith or willful misconduct, or the negligence, bad faith or wilful
misconduct of an agent or employee of the Custodian or a sub-custodian.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for
the payment of money or incurring liability of some other form, the
Custodian shall not be required to take such action until the Trust
shall have provided indemnity therefor to the Custodian in an amount
and form satisfactory to the Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the
date of the giving of such notice. If a successor custodian shall have
been appointed by the Board of Trustees, the Custodian shall, upon
receipt of a notice of acceptance by the successor custodian, on such
specified date of termination (a) deliver directly to the successor
custodian all Securities (other than Securities held in a Book-Entry
System
14
<PAGE> 15
or Securities Depository) and cash then owned by the Trust and held by
the Custodian as custodian, and (b) transfer any Securities held in a
Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian, provided that the
Trust shall have paid to the Custodian all fees, expenses and other
amounts to the payment or reimbursement of which it shall then be
entitled. Upon such delivery and transfer, the Custodian shall be
relieved of all obligations under this Agreement. The Trust may at any
time immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian is not
designated by the Trust on or before the date of termination specified
pursuant to Section 10.2 above, then the Custodian shall have the right
to deliver to a bank or trust company of its own selection, which is
(a) a "Bank" as defined in the 1940 Act, (b) has aggregate capital,
surplus and undivided profits as shown on its then most recent
published report of not less than $25 million, and (c) is doing
business in New York, New York, all Securities, cash and other property
held by Custodian under this Agreement and to transfer to an account of
or for the Trust at such bank or trust company all Securities of the
Trust held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the
successor custodian under this Agreement and the Custodian shall be
relieved of all obligations under this Agreement. If, after reasonable
inquiry, Custodian cannot find a successor custodian as contemplated in
this Section 10.3, then Custodian shall have the right to deliver to
the Trust all Securities and cash then owned by the Trust and to
transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Trust. Thereafter, the Trust
shall be deemed to be its own custodian with respect to the Trust and
the Custodian shall be relieved of all obligations under this
Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time to time
by the Trust and the Custodian. The fees and other charges in effect on the date
hereof and applicable to the Funds are set forth in Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of the Commonwealth of
Massachusetts. A copy of the Trust's Agreement and Declaration of Trust is
hereby made a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and any and all amendments thereto so filed or
hereafter filed. Notice is hereby given that the obligations of the Trust
entered into in the name of the Trust or on behalf thereof by any of the
Trustees, officers, employees or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, officers, employees,
agents or shareholders of the Trust or the Funds personally, but bind only the
assets of the Trust, and all persons dealing with any of the Funds of the Trust
must look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and other
communications to be given hereunder shall be in writing and shall be sent or
delivered to the other party at the address set forth under its name herein
below:
To the Trust: To the Fund:
Magna Funds The Fifth Third Bank
15
<PAGE> 16
c/o Bisys Fund Services 38 Fountain Square Plaza
3435 Stelzer Road Cincinnati, Ohio 45263
Columbus, Ohio 43219 Attn: Area Manager - Trust Operations
Attn: Mike Miller
Telephone: (614) 470-8454 Telephone: (513) 579-5300
Facsimile: (614) 470-8715 Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior
written approval of Custodian, excepting printed matter contained in
the prospectus or statement of additional information or its
registration statement for the Trust and such other printed matter as
merely identifies Custodian as custodian for the Trust. The Trust shall
submit printed matter requiring approval to Custodian in draft form,
allowing sufficient time for review by Custodian and its counsel prior
to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by either party hereto of any right
hereunder shall
16
<PAGE> 17
not preclude the exercise of any other right, and the remedies provided
herein are cumulative and not exclusive of any remedies provided at law
or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no amendment to
this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each
of which shall be deemed an original but all of which together shall
constitute but one and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall
not be affected or impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement shall
not be assignable by either party hereto without the written consent of
the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: MAGNA FUNDS
- --------------------------
By: -------------------------------
Its: ------------------------------
ATTEST: THE FIFTH THIRD BANK
- --------------------------
By: -------------------------------
Its: ------------------------------
17
<PAGE> 18
Dated: June 2, 1997
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
MAGNA FUNDS AND THE FIFTH THIRD BANK
JUNE 2, 1997
Name of Fund Date
------------ ----
Magna Growth and Income Fund June 2, 1997
Magna Intermediate Government Bond Fund June 2, 1997
MAGNA FUNDS
By: ------------------------------------
Its: ------------------------------------
THE FIFTH THIRD BANK
By: ------------------------------------
Its: ------------------------------------
18
<PAGE> 19
Dated: _______, 199__
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
MAGNA FUNDS AND THE FIFTH THIRD BANK
_____________, 199__
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons authorized
by the Trust to Administer each Custody Account.
Name Signature
- --------------------------------- --------------------------------
- --------------------------------- --------------------------------
- --------------------------------- --------------------------------
- --------------------------------- --------------------------------
19
<PAGE> 20
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of MAGNA FUNDS and any of them,
namely the Chairman, President, Vice President, Secretary and Treasurer, are
hereby authorized as signers for the conduct of business for an on behalf of the
Funds with THE FIFTH THIRD BANK:
CHAIRMAN
- ------------------------------ ------------------------------
PRESIDENT
- ------------------------------ ------------------------------
VICE PRESIDENT
- ------------------------------ ------------------------------
VICE PRESIDENT
- ------------------------------ ------------------------------
VICE PRESIDENT
- ------------------------------ ------------------------------
VICE PRESIDENT
- ------------------------------ ------------------------------
TREASURER
- ------------------------------ ------------------------------
SECRETARY
- ------------------------------ ------------------------------
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
ASSISTANT TREASURER
The undersigned officers of MAGNA FUNDS hereby certify that the foregoing is
within the parameters of a Resolution adopted by Trustees of the Trust in a
meeting held -----------------, 19---, directing and authorizing preparation
of documents and to do everything necessary to effect the Custody Agreement
between MAGNA FUNDS and THE FIFTH THIRD BANK.
By:
---------------------------------
Its:
---------------------------------
By:
---------------------------------
Its:
----------------------------------
20
<PAGE> 21
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
MAGNA FUNDS AND THE FIFTH THIRD BANK
_____________, 19__
MUTUAL FUND CUSTODY FEE SCHEDULE
<TABLE>
<CAPTION>
BASIC ACCOUNT CHARGE
<S> <C>
FUND SIZE:
Less than $50MM $
$50MM - $99MM $
$100MM - $199MM $
$200MM - $349MM $
Greater than $350MM $
TRANSACTION FEES
DTC/FED Eligible Trades $
DTC/FED Ineligible Trades $
Amortized Security Trades $
Repurchase Agreements (purchase and maturity) $
Third Party Repo's (purchase and maturity) $
Physical Commercial Paper Trades
(purchase and maturity) $
Book-Entry Commercial Paper Trades
(purchase and maturity) $
Options, each transaction $
Amortized Security Receipts $
</TABLE>
A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repo's).
<TABLE>
<CAPTION>
MISCELLANEOUS FEES
<S> <C>
Wire Transfers & Check Disbursements $
Depository/Transfer Agent Reject $
</TABLE>
21
<PAGE> 1
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this day of June, 1997, by and between MAGNA
FUNDS, a Massachusetts business trust (the "Trust"), and BISYS FUND SERVICES
LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES (the "Administrator"), an Ohio
limited partnership.
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Trust Act of 1940, as amended (the "1940 Act"), which is
authorized to issue multiple series of shares of beneficial interest ("Shares");
and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Trust as the Trust and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Trust hereby engages the
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such engagement and agrees to
perform the duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. ADMINISTRATIVE SERVICES. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Trust,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Trustees of the Trust with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Trust with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for meetings of shareholders ("Shareholders") and Trustees
of the Trust) for handling the affairs of the Portfolios and such other services
as the Administrator shall, from time to time, determine to be necessary to
<PAGE> 2
perform its obligations under this Agreement. In addition, at the request of the
Board of Trustees, the Administrator shall make reports to the Trust's Trustees
concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Trust expenses and control all disbursements for
the Trust, and as appropriate compute the Trust's yields, including
tax-equivalent yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average dollar-weighted
maturity;
(b) assist Trust counsel with the preparation of prospectuses, statements
of additional information, registration statements and proxy
materials;
(c) prepare such reports, applications and documents (including reports
regarding the sale and redemption of Shares as may be required in
order to comply with Federal and state securities law) as may be
necessary or desirable to register the Trust's Shares with state
securities authorities, monitor the sale of Trust Shares for
compliance with state securities laws, and file with the appropriate
state securities authorities the registration statements and reports
for the Trust and the Trust's Shares and all amendments thereto, as
may be necessary or convenient to register and keep effective the
Trust and the Trust's Shares with state securities authorities to
enable the Trust to make a continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Trust's investment
adviser, communications to Shareholders, including the annual report
to Shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Trust Shareholders, and
supervise and facilitate the proxy solicitation process for all
shareholder meetings, including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Trust with, among others, the
Trust's investment adviser, distributor, custodian, transfer agent and
fund accountant;
(f) supervise the Trust's transfer agent with respect to the payment of
dividends and other distributions to Shareholders;
(g) calculate performance data of the Trust and its Portfolios for
dissemination to information services covering the investment company
industry;
(h) coordinate and supervise the preparation and filing of the Trust's tax
returns;
2
<PAGE> 3
(i) examine and review the operations and performance of the various
organizations providing services to the Trust or any Portfolio of the
Trust, including, without limitation, the Trust's investment adviser,
distributor, custodian, fund accountant, transfer agent, outside legal
counsel and independent public accountants, and at the request of the
Board of Trustees, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of the
Trust's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the Trust
Portfolios, including new classes, investment objectives, policies and
structure;
(l) provide individuals reasonably acceptable to the Trust's Board of
Trustees to serve as officers of the Trust, who will be responsible
for the management of certain of the Trust's affairs as determined by
the Trust's Board of Trustees;
(m) advise the Trust and its Board of Trustees on matters concerning the
Trust and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust in
accordance with the requirements of Rules 17g-1 and 17d-1(d)(7) under
the 1940 Act as such bonds and policies are approved by the Trust's
Board of Trustees;
(o) monitor and advise the Trust and its Portfolios on their registered
investment company status under the Internal Revenue Code of 1986, as
amended;
(p) perform all administrative services and functions of the Trust and
each Portfolio to the extent administrative services and functions are
not provided to the Trust or such Portfolio pursuant to the Trust's or
such Portfolio's investment advisory agreement, distribution
agreement, custodian agreement, transfer agent agreement and fund
accounting agreement;
(q) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Trust and the
Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the Trust on
Form N-SAR and all required notices pursuant to Rule 24f-2.
3
<PAGE> 4
The Administrator shall perform such other services for the Trust that are
mutually agreed upon by the parties from time to time. Such services may include
performing internal audit examinations; mailing the annual reports of the
Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the Trust
will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own expense
the executive, supervisory and clerical personnel necessary to perform its
obligations under this Agreement. The Administrator shall also provide the items
which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Trustees of the Trust
to perform services on behalf of the Trust.
(B) THE TRUST. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of the Administrator or the Investment Adviser to the Trust
or any affiliated corporation of the Administrator or the Investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Trust.
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Trust shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Trust
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
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<PAGE> 5
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of the
Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable law which
cannot be waived or modified hereby. (As used in this Article 5, the term
"Administrator" shall include partners, officers, employees and other agents of
the Administrator as well as the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence and
without negligence, the Trust assumes full responsibility and shall indemnify
the Administrator and hold it harmless from and against any and all actions,
suits and claims, whether groundless or otherwise, and from and against any and
all losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of the Administrator's actions taken or
inactions with respect to the performance of services hereunder. The indemnity
and defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust, but failure to do so in good faith shall not affect the rights
hereunder.
The Trust shall be entitled to participate at its own expense or, if it so
elects, to assume the defense of any suit brought to enforce any claims subject
to this indemnity provision. If the Trust elects to assume the defense of any
such claim, the defense shall be conducted by counsel chosen by the Trust and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Trust does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
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<PAGE> 6
The Administrator may apply to the Trust at any time for instructions and
may consult counsel for the Trust or its own counsel and with accountants and
other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as partners, officers, employees and shareholders or otherwise
and that partners, officers and employees of the Administrator and its counsel
are or may be or become similarly interested in the Trust, and that the
Administrator may be or become interested in the Trust as a Shareholder or
otherwise.
ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall be
as specified in Schedule A hereto.
ARTICLE 8. ASSIGNMENT. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that,
upon the provision of advance written notice to the Trust, the Administrator
may, at its expense, subcontract with any entity or person concerning the
provision of the services contemplated hereunder. The Administrator shall not,
however, be relieved of any of its obligations under this Agreement by the
appointment of such subcontractor and provided further, that the Administrator
shall be responsible, to the extent provided in Article 5 hereof, for all acts
of such subcontractor as if such acts were its own. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
ARTICLE 9. AMENDMENTS. This Agreement may be amended by the parties hereto
only if such amendment is specifically approved (i) by the vote of a majority of
the Trustees of the Trust, and (ii) by the vote of a majority of the Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party.
ARTICLE 10. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
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<PAGE> 7
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person" and
"affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: 3435 Stelzer Road, Columbus, Ohio 43219, or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
ARTICLE 13. GOVERNING LAW AND MATTERS RELATING TO THE TRUST AS A
MASSACHUSETTS BUSINESS TRUST. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the State of Ohio. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but shall bind only the trust property of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees, and this Agreement has been signed and delivered by an authorized
officer of the Trust, acting as such, and neither such authorization by the
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in
the Trust's Agreement and Declaration of Trust.
ARTICLE 14. MULTIPLE ORIGINALS. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MAGNA FUNDS
By: ___________________________________
Title: ________________________________
BISYS FUND SERVICES LIMITED PARTNERSHIP
BY: BISYS FUND SERVICES,
GENERAL PARTNER
By: ___________________________________
Title: ________________________________
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<PAGE> 9
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF JUNE __, 1997
BETWEEN MAGNA FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios of the Trust, either
now or hereafter created (collectively, the "Portfolios"). As of
June __, 1997, the Trust consists of the following Portfolios:
Magna Intermediate Government Bond Fund
Magna Growth & Income Fund
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Trust will pay
the Administrator on the first business day of each month, or at
such time(s) as the Administrator shall request and the parties
hereto shall agree, a fee computed daily at the annual rate of:
Twenty one-hundredths of one percent (.20%) of the
Trust's average daily net assets
The fee for the period from the day of the month this Agreement
is entered into until the end of that month shall be prorated
according to the proportion which such period bears to the full
monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement.
For purposes of determining the fees payable to the
Administrator, the value of the net assets of a particular
Portfolio shall be computed in the manner described in the
Trust's Declaration of Trust or in the Prospectus or Statement of
Additional Information respecting that Portfolio as from time to
time is in effect for the computation of the value of such net
assets in connection with the determination of the liquidating
value of the shares of such Portfolio.
The parties hereby confirm that the fees payable hereunder shall
be applied to each Portfolio as a whole, and not to separate
classes of shares within the Portfolios.
Term: The initial term of this Agreement (the "Initial Term") shall be
for a period commencing on the date first written above and
ending on June __, 2000. This Agreement shall be renewed
automatically for successive periods of one year after
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<PAGE> 10
the Initial Term, unless written notice of nonrenewal is provided
by either party not less than 90 days prior to the end of the
then-current term. In the event of a material breach of this
Agreement by either party, the non-breaching party shall notify
the breaching party in writing of such breach and upon receipt of
such notice, the breaching party shall have 45 days to remedy the
breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this
Agreement.
Notwithstanding the foregoing, after such termination for so long
as the Administrator, with the written consent of the Trust, in
fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit hereto,
the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in
full force and effect. Compensation due the Administrator and
unpaid by the Trust upon such termination shall be immediately
due and payable upon and notwithstanding such termination. The
Administrator shall be entitled to collect from the Trust, in
addition to the compensation described in this Schedule A, the
amount of all of the Administrator's reasonable cash
disbursements for services in connection with the Administrator's
activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the
Trust's property, records, instruments and documents, or any
copies thereof. Subsequent to such termination, for a reasonable
fee, the Administrator will provide the Trust with reasonable
access to any Trust documents or records remaining in its
possession.
If, for any reason other than a material breach of this
Agreement, the Administrator is replaced as administrator, or if
a third party is added to perform all or a part of the services
provided by the Administrator under this Agreement (excluding any
sub-administrator appointed by the Administrator as provided in
Article 8 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages, to the Administrator equal to the
balance due the Administrator for the remainder of the term of
this Agreement, assuming for purposes of calculation of the
payment that the asset level of the Trust on the date the
Administrator is replaced, or a third party is added, will remain
constant for the balance of the contract term.
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<PAGE> 1
EXHIBIT 9(b)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this ____ day of June, 1997, between MAGNA FUNDS (the
"Trust"), a Massachusetts business trust, and BISYS FUND SERVICES, INC.
("BISYS"), a Delaware corporation.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust (individually referred to herein as a "Fund" and
collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF BISYS.
BISYS shall perform for the Trust the transfer agent services set
forth in Schedule A hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. FEES.
The Trust shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
<PAGE> 2
3. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 2 hereof,
the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Trust and in
delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment adviser or
custodian, dealers, shareholders or others as required for
BISYS to perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other form of printed material which shall
be required by BISYS for the performance of the services to be
provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Trust thereunto duly authorized.
4. EFFECTIVE DATE.
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. TERM.
The initial term of this Agreement (the "Initial Term") shall be for a
period commencing on the Effective Date and ending on June __, 2000. Thereafter,
it shall be renewed automatically for successive one-year terms unless written
notice not to renew is given by the non-renewing party to the other party at
least 60 days prior to the expiration of the then-current term; provided,
however, that after such termination, for so long as BISYS, with the written
consent of the Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the fees and disbursements provided by Sections 2 and 3
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<PAGE> 3
hereof, the amount of all of BISYS' reasonable cash disbursements and a
reasonable fee (which fee shall not be less than one hundred and two percent
(102%) of the sum of the actual costs, not including such cash disbursements,
incurred by BISYS in performing such service) for services in connection with
BISYS' activities in effecting such termination, including without limitation,
the delivery to the Trust and/or its distributor or investment adviser and/or
other parties, of the Trust's property, records, instruments and documents, or
any copies thereof. To the extent that BISYS may retain in its possession copies
of any Trust documents or records subsequent to such termination which copies
had not been requested by or on behalf of the Trust in connection with the
termination process described above, BISYS, for a reasonable fee, will provide
the Trust with reasonable access to such copies.
In the event of a material breach of this Agreement by either party,
the non-breaching party shall notify the breaching party in writing of such
breach and, upon receipt of such notice, the breaching party shall have 45 days
to remedy the breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this Agreement.
If, for any reason other than a material breach of this Agreement,
BISYS is replaced as transfer agent, or if a third party is added to perform all
or a part of the services provided by BISYS under this Agreement (excluding any
sub-transfer agent appointed by BISYS as provided in Section 1 hereof), then the
Trust shall make a one-time cash payment, as liquidated damages to, BISYS equal
to the balance due BISYS for the remainder of the term of this Agreement,
assuming for purposes of calculation of the payment that the asset level of the
Trust on the date BISYS is replaced, or a third party is added, will remain
constant for the balance of the contract term.
6. UNCONTROLLABLE EVENTS.
BISYS assumes no responsibility hereunder, and shall not be liable for
any damage, loss of data, delay or any other loss whatsoever caused by events
beyond its reasonable control.
7. LEGAL ADVICE.
BISYS shall notify the Trust at any time BISYS believes that it is in
need of the advice of counsel (other than counsel in the regular employ of BISYS
or any affiliated companies) with regard to BISYS' responsibilities and duties
pursuant to this Agreement; and after so notifying the Trust, BISYS, at its
discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving BISYS' willful misfeasance, bad faith,
gross negligence or reckless disregard with respect to BISYS' responsibilities
and duties hereunder and BISYS shall in no event be liable to the Trust or any
Fund or any shareholder or beneficial owner of the Trust for any action
reasonably taken pursuant to such advice.
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<PAGE> 4
8. INSTRUCTIONS.
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Fund, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication, believed by BISYS to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Trust or by
the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS' actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or made to BISYS by the Trust, the investment adviser and on any records
provided by any fund accountant or custodian thereof; provided that this
indemnification shall not apply to actions or omissions of BISYS (including
actions or omissions by its employees, agents, directors, officers or nominees)
in cases of its own bad faith, willful misfeasance, negligence or reckless
disregard by it of its obligations and duties; and further provided that prior
to confessing any claim against it which may be the subject of this
indemnification, BISYS shall give the Trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
BISYS.
10. RECORD RETENTION AND CONFIDENTIALITY.
BISYS shall keep and maintain on behalf of the Trust all books and
records which the Trust or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and
<PAGE> 5
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Trust and to
make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
11. REPORTS.
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule C attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
C. The Trust agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein.
12. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Trust and all such other records and data will be
furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and records
will be retained by BISYS for six years from the year of creation. At the end of
such six-year period, such records and documents will be turned over to the
Trust unless the Trust authorizes in writing the destruction of such records and
documents.
14. BANK ACCOUNTS.
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds
5
<PAGE> 6
or other purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. REPRESENTATIONS OF THE TRUST.
The Trust certifies to BISYS that: (a) as of the close of business on
the Effective Date, each Fund which is in existence as of the Effective Date has
authorized unlimited shares, and (b) by virtue of its Declaration of Trust,
shares of each Fund which are redeemed by the Trust may be sold by the Trust
from its treasury, and (c) this Agreement has been duly authorized by the Trust
and, when executed and delivered by the Trust, will constitute a legal, valid
and binding obligation of the Trust, enforceable against the Trust in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
16. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. INSURANCE.
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such Declaration has been filed.
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<PAGE> 7
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto.
2. Certified copies of resolutions of the Board of Trustees
covering the following matters:
A. Approval of this Agreement and authorization of a
specified officer of the Trust to execute and deliver
this Agreement and authorization for specified officers
of the Trust to instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer Agent for the
Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with specimen
signatures of those officers, who are authorized to instruct
BISYS in all matters.
(d) Two copies of the following (if such documents are employed by
the Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the Trust
authorized, issued, and outstanding as of the Effective Date of
BISYS' appointment as Transfer Agent (or as of the date on
which BISYS' services are commenced, whichever is the later
date) and as to receipt of full consideration by the Trust for
all shares outstanding, such statement to be certified by the
Treasurer of the Trust.
19. INFORMATION FURNISHED BY BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' By-Laws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
7
<PAGE> 8
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13 under the Exchange Act.
20. AMENDMENTS TO DOCUMENTS.
The Trust shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in Section 18 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Trust agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Trust which might have the effect of changing the procedures
employed by BISYS in providing the services agreed to hereunder or which
amendment might affect the duties of BISYS hereunder unless the Trust first
obtains BISYS' approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS.
BISYS may rely on any amendments to or changes in any of the documents
and other items to be provided by the Trust pursuant to Sections 18 and 20 of
this Agreement and the Trust hereby indemnifies and holds harmless BISYS from
and against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, counsel fees and other expenses of every nature
and character which may result from actions or omissions on the part of BISYS in
reasonable reliance upon such amendments and/or changes. Although BISYS is
authorized to rely on the above-mentioned amendments to and changes in the
documents and other items to be provided pursuant to Sections 18 and 20 hereof,
BISYS shall be under no duty to comply with or take any action as a result of
any of such amendments or changes unless the Trust first obtains BISYS' written
consent to and approval of such amendments or changes.
22. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Section 10 hereof,
the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
8
<PAGE> 9
23. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: 3435 Stelzer Road, Columbus, Ohio 43219, or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
24. HEADINGS.
Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
25. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. GOVERNING LAW AND MATTERS RELATING TO THE TRUST AS A MASSACHUSETTS
BUSINESS TRUST.
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the State of Ohio. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust. The execution
and delivery of this Agreement have been authorized by the Trustees, and this
Agreement has been signed and delivered by an authorized officer of the Trust,
acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the Trust's
Agreement and Declaration of Trust.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MAGNA FUNDS
By:________________________________
Title:_____________________________
BISYS FUND SERVICES, INC.
By:________________________________
Title:_____________________________
10
<PAGE> 11
Dated: June ___, 1997
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MAGNA FUNDS
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
1. SHAREHOLDER TRANSACTIONS
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. SHAREHOLDER INFORMATION SERVICES
a. Provide toll-free lines for direct shareholder use and customer
liaison staff with on-line inquiry capacity.
b. Make information available to appropriate shareholder servicing
personnel and other remote access units regarding trade date, share
price, current holdings, yields, and dividend information.
c. Produce detailed history of transactions through duplicate or special
order statements upon request.
A-1
<PAGE> 12
d. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
3. COMPLIANCE REPORTING
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in which the
Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service forms for
corresponding Fund and shareholder income and capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING (IF APPLICABLE)
a. Provide reports for tracking rights of accumulation and purchases made
under a Letter of Intent.
b. Account for separation of shareholder investments from transaction
sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load Fund.
5. SHAREHOLDER ACCOUNT MAINTENANCE
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE> 13
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MAGNA FUNDS
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
ANNUAL PER FUND FEE: $18,000
ANNUAL PER ACCOUNT FEE:
<TABLE>
<CAPTION>
Retail Front-End Retail Retail
Load CDSC No-load Institutional
---------------- ------ ------- -------------
<S> <C> <C> <C> <C>
Daily Dividend $25 27 21 17
Periodic Dividend $23 25 19 15
</TABLE>
ADDITIONAL SERVICES:
In addition, for payroll deduction, a $500 set-up fee shall be paid and a
per-transaction charge of $.50 shall be imposed. For IRA processing, a
per-account fee of $20 per tax year shall be paid. Additional services such as
development of interface capabilities, servicing of 403(b) and 408(c) accounts
and management of cash sweeps between DDAs and mutual fund accounts are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
MULTIPLE CLASSES OF SHARES:
Classes of shares which have different net asset values or pay different
daily dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
OUT-OF-POCKET EXPENSES:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule B is attached.
B-1
<PAGE> 14
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MAGNA FUNDS
AND
BISYS FUND SERVICES, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed with
the Securities and Exchange Commission pursuant to Rule 17Ad-13 of the
Securities Exchange Act of 1934, as amended.
C-1
<PAGE> 1
EXHIBIT 9(c)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this __ day of June __, 1997, between MAGNA FUNDS (the "Trust"),
a Massachusetts business trust, and BISYS FUND SERVICES, INC. ("Fund
Accountant"), a corporation organized under the laws of the State of Delaware.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT.
(a) MAINTENANCE OF BOOKS AND RECORDS. Fund Accountant will keep and
maintain the following books and records of each Fund pursuant
to Rule 31a-1 under the Investment Company Act of 1940 (the
"Rule"):
(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 subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(I) of the
Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8)
of the Rule.
(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES. In addition to the
maintenance of the books and records specified above, Fund
Accountant shall perform the following accounting services
daily for each Fund:
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection
1(b)(ii) below;
<PAGE> 2
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then obtain
such prices from each Fund's investment adviser or its
designee, as approved by the Trust's Board of Trustees;
(iii) Verify and reconcile with the Fund's custodian all daily
trade activity;
(iv) Compute, as appropriate, each Fund's net income and
capital gains, dividend payables, dividend factors,
30-day yields, including tax-equivalent yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to release
to shareholders, check and confirm the net asset values
and dividend factors for reasonableness and deviations,
and distribute net asset values and yields to NASDAQ;
(vi) Report to the Trust the daily market pricing of
securities in any money market Funds, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested
by the Trust;
(ix) Update fund accounting system to reflect rate changes,
as received from a Fund's investment adviser, on
variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to instructions
received from the Trust's Administrator;
(xii) Determine the outstanding receivables and payables for
all (1) security trades, (2) Fund share transactions and
(3) income and expense accounts;
(xiii) Provide accounting reports in connection with the
Trust's regular annual audit and other audits and
examinations by regulatory agencies; and
2
<PAGE> 3
(xiv) Provide such periodic reports as the parties shall agree
upon, as set forth in a separate schedule.
(c) SPECIAL REPORTS AND SERVICES.
(i) Fund Accountant may provide additional special reports
upon the request of the Trust or a Fund's investment
adviser, which may result in an additional charge, the
amount of which shall be agreed upon between the
parties.
(ii) Fund Accountant may provide such other similar services
with respect to a Fund as may be reasonably requested by
the Trust, which may result in an additional charge, the
amount of which shall be agreed upon between the
parties.
(d) ADDITIONAL ACCOUNTING SERVICES. Fund Accountant shall also
perform the following additional accounting services for each
Fund:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon request
of the Trust. The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal
excise tax returns;
(B) the Trust's semi-annual reports with the
Securities and Exchange Commission ("ASEC") on
Form N-SAR;
(C) the Trust's annual, semi-annual and quarterly (if
any) shareholder reports;
(D) registration statements on Form N-1A and other
filings relating to the registration of Shares;
3
<PAGE> 4
(E) the Administrator's monitoring of the Trust's
status as a regulated investment company under
Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. SUBCONTRACTING.
Fund Accountant may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Fund Accountant shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 6 hereof, for all acts of such subcontractor as if such acts
were its own.
3. COMPENSATION.
The Trust shall pay Fund Accountant for the services to be provided by
Fund Accountant under this Agreement in accordance with, and in the manner set
forth in, Schedule A hereto, as such Schedule may be amended from time to time.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying Fund Accountant the fees described in Section 3
hereof, the Trust agrees to reimburse Fund Accountant for its out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
(a) All freight and other delivery and bonding charges incurred by
Fund Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Fund
Accountant in communication with the Trust, the Trust's
investment advisor or custodian, dealers or others as required
for Fund Accountant to perform the services to be provided
hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials;
4
<PAGE> 5
(e) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Trust thereunto duly authorized;
and
(f) Any additional expenses reasonably incurred by Fund Accountant
in the performance of its duties and obligations under this
Agreement.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Fund as of the
date first written above (the "Effective Date").
6. TERM.
The initial term of this Agreement (the "Initial Term") shall be for a
period commencing on the Effective Date and ending on June __, 2000. This
Agreement shall be renewed automatically for successive one-year terms unless
written notice not to renew is given by the non-renewing party to the other
party at least 60 days prior to the expiration of the then-current term;
provided, however, that after such termination for so long as Fund Accountant,
with the written consent of the Trust, in fact continues to perform any one or
more of the services contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Fund Accountant and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Fund Accountant shall be entitled to collect from the Trust, in
addition to the compensation described under Section 3 hereof, the amount of all
of Fund Accountant's cash disbursements for services in connection with Fund
Accountant's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination, for a reasonable fee, Fund Accountant will provide the
Trust with reasonable access to any Trust documents or records remaining in its
possession.
In the event of a material breach of this Agreement by either party,
the non-breaching party shall notify the breaching party in writing of such
breach and, upon receipt of such notice, the breaching party shall have 45 days
to remedy the breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this Agreement.
If, for any reason other than a material breach of this Agreement,
Fund Accountant is replaced as Fund Accountant, or if a third party is added to
perform all or a part of the services provided by Fund Accountant under this
Agreement (excluding any sub-accountant appointed by Fund Accountant as provided
in Section 2 hereof), then the Trust shall make a one-time cash payment, as
liquidated damages, to Fund Accountant equal to the balance due Fund Accountant
for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Trust on the date Fund
Accountant is replaced, or a third party is added, will remain constant for the
balance of the contract term.
5
<PAGE> 6
7. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
Fund Accountant shall use its best efforts to insure the accuracy of
all services performed under this Agreement, but shall not be liable to the
Trust for any action taken or omitted by Fund Accountant in the absence of bad
faith, willful misfeasance, negligence or reckless disregard by it of its
obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to such Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to such
Fund given or made to Fund Accountant by a duly authorized representative of the
Trust; provided that this indemnification shall not apply to actions or
omissions of Fund Accountant (including actions or omissions by its employees,
agents, directors, officers or nominees) in cases of its own bad faith, willful
misfeasance, negligence or reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against it which
may be the subject of this indemnification, Fund Accountant shall give the Trust
written notice of and reasonable opportunity to defend against said claim in its
own name or in the name of Fund Accountant.
8. RECORD RETENTION AND CONFIDENTIALITY.
Fund Accountant shall keep and maintain on behalf of the Trust all
books and records which the Trust and Fund Accountant is, or may be, required to
keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the maintenance of books
and records in connection with the services to be provided hereunder. Fund
Accountant further agrees that all such books and records shall be the property
of the Trust and to make such books and records available for inspection by the
Trust or by the Securities and Exchange Commission at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders; except when requested to divulge
such information by duly-constituted authorities or court process.
9. UNCONTROLLABLE EVENTS.
Fund Accountant assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
6
<PAGE> 7
10. REPORTS.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto.
11. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by Fund Accountant under this Agreement are the property
of Fund Accountant. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. RETURN OF RECORDS.
Fund Accountant may at its option at any time, and shall promptly upon
the Trust's demand, turn over to the Trust and cease to retain Fund Accountant's
files, records and documents created and maintained by Fund Accountant pursuant
to this Agreement which are no longer needed by Fund Accountant in the
performance of its services or for its legal protection. If not so turned over
to the Trust, such documents and records will be retained by Fund Accountant for
six years from the year of creation. At the end of such six-year period, such
records and documents will be turned over to the Trust unless the Trust
authorizes in writing the destruction of such records and documents.
13. REPRESENTATIONS OF THE TRUST.
The Trust certifies to Fund Accountant that: (1) as of the close of
business on each Conversion Date, each Fund that is in existence as of the
Conversion Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. REPRESENTATIONS OF FUND ACCOUNTANT.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment, facilities and other property used in the performance of its
7
<PAGE> 8
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. INSURANCE.
Fund Accountant shall notify the Trust should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Fund Accountant shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such document has been filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Board of Trustees
covering the approval of this Agreement, authorization of
a specified officer of the Trust to execute and deliver
this Agreement and authorization for specified officers
of the Trust to instruct Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct
Fund Accountant in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
8
<PAGE> 9
17. INFORMATION FURNISHED BY FUND ACCOUNTANT.
(a) Fund Accountant has furnished to the Trust the following:
(i) Fund Accountant's Articles of Incorporation; and
(ii) Fund Accountant's Bylaws and any amendments thereto.
(b) Fund Accountant shall, upon request, furnish certified copies
of corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of Fund Accountant to execute and
deliver this Agreement; and
(ii) Authorization of Fund Accountant to act as fund
accountant for the Trust and to provide accounting
services for the Trust.
18. AMENDMENTS TO DOCUMENTS.
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
19. COMPLIANCE WITH LAW.
Except for the obligations of Fund Accountant set forth in Section 8
hereof, the Trust assumes full responsibility for the preparation, contents and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
Shares. The Trust represents and warrants that no Shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
9
<PAGE> 10
20. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219, or at
such other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
21. HEADINGS.
Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
22. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. GOVERNING LAW AND MATTERS RELATING TO THE TRUST AS A MASSACHUSETTS
BUSINESS TRUST.
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the State of Ohio. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust. The execution
and delivery of this Agreement have been authorized by the Trustees, and this
Agreement has been signed and delivered by an authorized officer of the Trust,
acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the Trust's
Agreement and Declaration of Trust.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MAGNA FUNDS
By: ______________________________
Title: ___________________________
BISYS FUND SERVICES, INC.
By: ______________________________
Title: ___________________________
11
<PAGE> 12
Dated: June ____, 1997
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
MAGNA FUNDS
AND
BISYS FUND SERVICES, INC.
FEES
Fund Accountant shall be entitled to receive an annual fee from each Fund
in accordance with the following schedule, subject to the annual minimum fees
per Fund set forth below:
Three one-hundredths of one percent (.03%) of the Trust's average
daily net assets up to $500 million;
Two one-hundredths of one percent (.02%) of the Trust's average daily
net assets in excess of $500 million up to $1 billion; and
One one-hundredth of one percent (.01%) of the Trust's average daily
net assets in excess of $1 billion.
Such fees shall be subject to the following annual minimum fees per Fund:
$30,000 for taxable money market funds.
$35,000 for tax-free funds, including variable net asset value funds.
$35,000 for all other domestic variable net asset value funds.
$40,000 for international funds.
MULTIPLE CLASSES OF SHARES:
An additional annual charge of $10,000 per class per Fund shall be
imposed in the event new classes of shares are created after the
Effective Date of this Agreement.
A-1
<PAGE> 13
REIMBURSEMENT OF EXPENSES:
In addition to the fees set forth above, Fund Accountant shall be
entitled to be reimbursed for its out-of-pocket expenses, as described
in Section 4 of this Agreement.
MAGNA FUNDS BISYS FUND SERVICES, INC.
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
A-2
<PAGE> 1
EXHIBIT 9(d)
------------
ORGANIZATIONAL EXPENSE
REIMBURSEMENT AGREEMENT
This Agreement, made this _____ day of ___________, 1994, by and
between Magna Funds, a Massachusetts business trust (the "Trust") and Ernst &
Company (the "Distributor").
WITNESSETH:
-----------
WHEREAS, the Trust is in the process of registering as an open-end
management investment company under the Investment Company Act of 1940;
WHEREAS, there have been and will be certain organizational expenses
incurred as a part of such registration, which are properly expenses of the
Trust, that have been and will in the future be paid by the Distributor by
reason of the fact that the Trust was not or will not be capitalized when such
expenses otherwise became or become due and payable;
WHEREAS, such organizational expenses include expenses necessary to
organize and establish the Trust and to create the necessary relationships and
legal qualifications to enable it to commence business and operations,
including, but not by way of limitation, such expenses as outside legal
counsel's fees, fees and taxes imposed by The Commonwealth of Massachusetts on
Massachusetts business trusts, independent public accountant fees and state blue
sky filing and registration fees (such expenses being hereinafter referred to as
"Organization Expenses"):
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. After the issuance and sale of shares of beneficial interest of the
Trust to the public, the Trust shall reimburse and pay to the Distributor the
amounts expended by the Distributor for Organization Expenses for the Trust.
2. Such reimbursement shall be paid by the Trust to the Distributor
upon demand, without interest, and in no event later than five years from the
commencement of operations of the Trust. Upon demand for payment, the
Distributor shall present copies of
-1-
<PAGE> 2
invoices or receipts, and copies of cancelled checks or other evidence of
payment by the Distributor, of the Organization Expenses for which it is
demanding reimbursement.
MAGNA FUNDS
--------------------
Barry Hartstone
President
ERNST & COMPANY
--------------------
Robert A. Bonelli
Executive Vice President
-2-
<PAGE> 1
EXHIBIT 10
----------
July 8, 1994
Magna Funds
Four Copley Place
Boston, Massachusetts 02116
Gentlemen:
You have informed us that you propose to register under the Securities
Act of 1933, as amended (the "Act"), and offer and sell from time to time shares
of beneficial interest, without par value ("Shares"), of each of your Magna
Intermediate Government Bond Fund series and Magna Growth & Income Fund series
(each such series, a "Series").
We have examined an executed copy of your Agreement and Declaration of
Trust dated April 28, 1994 (the "Declaration of Trust") on file in the office of
the Secretary of State of The Commonwealth of Massachusetts. We are familiar
with the action taken by your trustees to authorize the issue and sale to the
public from time to time of authorized and unissued Shares. We have also
examined a copy of your By-Laws and such other documents as we have deemed
necessary for the purpose of this opinion.
Based on the foregoing, we are of the opinion that:
1. The beneficial interest of each Series is divided into an unlimited
number of Shares.
2. The issue and sale of the authorized but unissued Shares of each
Series has been duly authorized under Massachusetts law. Upon the original issue
and sale of any of such authorized but unissued Shares and upon receipt by Magna
Funds (the "Trust") of the authorized consideration therefor in an amount not
less than the applicable net asset value, the Shares so issued will be validly
issued, fully paid and nonassessable by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder
-1-
<PAGE> 2
Magna Funds
July 8, 1994
Page 2
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or its trustees. The Declaration of Trust provides for
indemnification out of the property of the particular series of shares for all
loss and expense of any shareholder held personally liable solely by reason of
his being or having been a shareholder of that series. Thus, the risk of a
shareholder incurring financial loss on account of being such a shareholder is
limited to circumstances in which that series of shares itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection with the
registration of an indefinite number of Shares for offering and sale pursuant to
the Act. We consent to the filing of this opinion with and as part of your
Registration Statement on Form N-lA (File No. 33-78408) relating to such
offering and sale.
Very truly yours,
/S/ Ropes & Gray
Ropes & Gray
-2-
<PAGE> 1
EXHIBIT 11
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post Effective Amendment No.4 of
the Registration Statement of the Magna Funds on Form N-1A (File No. 33-78408)
of our report dated October 21, 1997 on our audit of the financial statements
and the financial highlights of the Magna Growth & Income Fund and the Magna
Intermediate Government Bond Fund, which report is included in the Annual Report
to Shareholders for the year ended August 31, 1997 which is incorporated by
reference in the Post-Effective Amendment to the Registration Statement. We also
consent to the reference to our Firm under the captions "Independent
Accountants" and "Financial Highlights" in the Prospectus and under the captions
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information relating to the Magna Funds in this Post-Effective
Amendment No.4 to the Registration Statement on Form N-1A (File No. 33-78408).
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 18, 1997
<PAGE> 1
EXHIBIT 13
----------
ERNST & COMPANY
One Battery Park Plaza
New York, NY 10004-1478
July 5, 1994
Magna Funds
Four Copley Place
Suite 110
Boston, MA 02116
Ladies and Gentlemen:
With respect to our purchase from you of 4,000 shares of beneficial
interest, no par value, of your Magna Intermediate Government Bond Fund series
and 4,000 shares of beneficial interest, no par value, of your Magna Growth &
Income Fund series, we hereby advise you that we are purchasing such shares with
no present intention to dispose of them either through resale to others or
redemption by Magna Fund.
Very truly yours,
ERNST & COMPANY
By /s/ Robert A. Bonelli
------------------------
Robert A. Bonelli
Executive Vice President
<PAGE> 1
EXHIBIT 15
----------
MAGNA GROWTH AND INCOME FUND
----------------------------
CLASS A SERVICE PLAN
This Plan (the "Plan") constitutes the Service Plan relating to the
Class A shares of MAGNA GROWTH AND INCOME FUND (the "Series"), a series of Magna
Funds, a Massachusetts business trust (the "Trust").
Section 1. The Trust, on behalf of the Series, will pay to Ernst &
Company, a corporation that acts as the Principal Distributor of the Series'
shares, or such other entity as shall from time to time act as the Principal
Distributor of the Series' shares (the "Distributor"), a fee (the "Service Fee")
for expenses borne by the Distributor in connection with the provision of
personal services provided to investors in Class A shares of the Series and/or
the maintenance of shareholder accounts, at an annual rate not to exceed .25% of
the Series' average daily net assets attributable to the Class A shares. Subject
to such limit and subject to the provisions of Section 7 hereof, the Service Fee
shall be as approved from time to time by (a) the Trustees of the Trust and (b)
the Independent Trustees of the Trust. The Service Fee shall be accrued daily
and paid monthly or at such other intervals as the Trustees shall determine. The
Distributor may pay all or any portion of the Service Fee to securities dealers
or other organizations (including, but not limited to, any affiliate of the
Distributor) as service fees pursuant to agreements with such organizations for
providing personal services to investors in Class A shares of the Series and/or
the maintenance of shareholder accounts, and may retain all or any portion of
the Service Fee as compensation for providing personal services to investors in
Class A shares of the Series and/or the maintenance of shareholder accounts. All
payments under this Service Plan are intended to qualify as "service fees" as
defined in Section 26 of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (or any successor provision) as in effect from time
to time.
Section 2. This Plan shall not take effect until it has been approved
by votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class A shares of this Series, and shall in no event take effect
before the effective date under the Securities Act of 1933 of the Trust's
registration statement on Form N-1A relating to the Shares. This Plan shall
continue in effect for a period of more than one year after the date this Plan
takes effect, but only so long as such continuance is specifically approved at
least annually by votes of the majority (or whatever other percentage may, from
time to time, be required by Section 12(b) of the Investment Company Act of 1940
(the "Act") or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust, cast in person at a
meeting called for the purpose of voting on this Plan.
<PAGE> 2
Section 3. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Section 4. This Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Class A shares of the Series.
Section 5. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the
outstanding Class A shares of the Series, on not more than 60
days' written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 6. This Plan may not be amended to increase materially the
amount of expenses permitted pursuant to Section 1 hereof without approval by a
vote of at least a majority of the outstanding Class A shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 2.
Section 7. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the Act and
the rules and regulations thereunder, and (c) the term "majority of the
outstanding Class A shares of the Series" shall mean the lesser of the 67% or
the 50% voting requirements specified in clauses (A) and (B), respectively, of
the third sentence of Section 2(a)(42) of the Act, all subject to such
exemptions as may be granted by the Securities and Exchange Commission.
-2-
<PAGE> 3
EXHIBIT 15 (cont'd)
-------------------
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
---------------------------------------
CLASS A SERVICE PLAN
This Plan (the "Plan") constitutes the Service Plan relating to the
Class A shares of MAGNA INTERMEDIATE GOVERNMENT BOND FUND (the "Series"), a
series of Magna Funds, a Massachusetts business trust (the "Trust").
Section 1. The Trust, on behalf of the Series, will pay to Ernst &
Company, a corporation that acts as the Principal Distributor of the Series'
shares, or such other entity as shall from time to time act as the Principal
Distributor of the Series' shares (the "Distributor"), a fee (the "Service Fee")
for expenses borne by the Distributor in connection with the provision of
personal services provided to investors in Class A shares of the Series and/or
the maintenance of shareholder accounts, at an annual rate not to exceed .25% of
the Series' average daily net assets attributable to the Class A shares. Subject
to such limit and subject to the provisions of Section 7 hereof, the Service Fee
shall be as approved from time to time by (a) the Trustees of the Trust and (b)
the Independent Trustees of the Trust. The Service Fee shall be accrued daily
and paid monthly or at such other intervals as the Trustees shall determine. The
Distributor may pay all or any portion of the Service Fee to securities dealers
or other organizations (including, but not limited to, any affiliate of the
Distributor) as service fees pursuant to agreements with such organizations for
providing personal services to investors in Class A shares of the Series and/or
the maintenance of shareholder accounts, and may retain all or any portion of
the Service Fee as compensation for providing personal services to investors in
Class A shares of the Series and/or the maintenance of shareholder accounts. All
payments under this Service Plan are intended to qualify as "service fees" as
defined in Section 26 of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (or any successor provision) as in effect from time
to time.
Section 2. This Plan shall not take effect until it has been approved
by votes of the majority of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust, in each case cast in person at a meeting
called for the purpose of voting on this Plan, and by vote of a majority of the
outstanding Class A shares of this Series, and shall in no event take effect
before the effective date under the Securities Act of 1933 of the Trust's
registration statement on Form N-1A relating to the Shares. This Plan shall
continue in effect for a period of more than one year after the date this Plan
takes effect, but only so long as such continuance is specifically approved at
least annually by votes of the majority (or whatever other percentage may, from
time to time, be required by Section 12(b) of the Investment Company Act of 1940
(the "Act") or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust, cast in person at a
meeting called for the purpose of voting on this Plan.
<PAGE> 4
Section 3. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Section 4. This Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Class A shares of the Series.
Section 5. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the
outstanding Class A shares of the Series, on not more than 60
days' written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 6. This Plan may not be amended to increase materially the
amount of expenses permitted pursuant to Section 1 hereof without approval by a
vote of at least a majority of the outstanding Class A shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 2.
Section 7. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the Act and
the rules and regulations thereunder, and (c) the term "majority of the
outstanding Class A shares of the Series" shall mean the lesser of the 67% or
the 50% voting requirements specified in clauses (A) and (B), respectively, of
the third sentence of Section 2(a)(42) of the Act, all subject to such
exemptions as may be granted by the Securities and Exchange Commission.
-2-
<PAGE> 1
EXHIBIT 16
MAGNA FUNDS
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
GROWTH & INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ----------------------------
T = (ERV/P)[to the power of (1/N-1)]
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION:( 09/01/94 TO 08/31/97 ):
( 1,895.95 /1000 [to the power of (1/( 1096 /365))-1)]
= 23.74%
ONE YEAR: ( 09/01/96 TO 08/31/97 ):
( 1,395.90 /1000 [to the power of (1/( 365 /365))-1)]
= 39.59%
<PAGE> 2
MAGNA FUNDS
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
INTERMEDIATE GOVERNMENT BOND FUND
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 0.00%
- ----------------------------
T = (ERV/P)[to the power of (1/N-1)]
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 09/01/94 TO 08/31/97 ):
( 1,209.98 /1000[to the power of (1/( 1096 /365))-1)]
= 6.55%
ONE YEAR: ( 09/01/96 TO 08/31/97 ):
( 1,079.60 /1000[to the power of (1/( 365 /365))-1)]
= 7.96%
<PAGE> 3
MAGNA FUNDS
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
GROWTH & INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 4.00%
- ----------------------------
T = (ERV/P)[to the power of (1/N-1)]
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 09/01/94 TO 08/31/97 ):
( 1,820.27 /1000[to the power of (1/( 1096 /365))-1)]
= 22.08%
ONE YEAR: ( 09/01/96 TO 08/31/97 ):
( 1,340.40 /1000[to the power of (1/( 365 /365))-1)]
= 34.04%
<PAGE> 4
MAGNA FUNDS
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
INTERMEDIATE GOVERNMENT BOND FUND
AVERAGE ANNUAL TOTAL RETURN
WITH SALES LOAD OF: 4.00%
- ----------------------------
T = (ERV/P)[to the power of (1/N-1)]
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 09/01/94 TO 08/31/97 ):
( 1,161.71 /1000[to the power of (1/( 1096 /365))-1)]
= 5.12%
ONE YEAR: ( 09/01/96 TO 08/31/97 ):
( 1,036.30 /1000[to the power of (1/( 365 /365))-1)]
= 3.63%
<PAGE> 1
EXHIBIT 19
----------
POWER OF ATTORNEY
The undersigned officer and/or trustee of Magna Funds hereby
constitutes Walter B. Grimm, William J. Tomko and Michael D. Miller, and each of
them singly, his true and lawful attorneys, with full power to them and each of
them to sign for him, in his name and in his capacity as an officer and/or
trustee of the Magna Funds, a Massachusetts business trust, any and all
registration statements and amendments thereto under the Securities Act of 1933
or the Investment Company Act of 1940, and generally to do all such things in
his name and in his behalf to enable Magna Funds to comply with the provisions
of the Securities Act of 1933, the Investment Company Act of 1940, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by his said attorneys
to any and all registration statements and amendments thereto.
Witness my hand this 3rd day of December 1997.
/S/ HARRY R. MAIER
------------------
Harry R. Maier
Trustee
<PAGE> 2
POWER OF ATTORNEY
The undersigned officer and/or trustee of Magna Funds hereby
constitutes Walter B. Grimm, William J. Tomko and Michael D. Miller, and each of
them singly, his true and lawful attorneys, with full power to them and each of
them to sign for him, in his name and in his capacity as an officer and/or
trustee of the Magna Funds, a Massachusetts business trust, any and all
registration statements and amendments thereto under the Securities Act of 1933
or the Investment Company Act of 1940, and generally to do all such things in
his name and in his behalf to enable Magna Funds to comply with the provisions
of the Securities Act of 1933, the Investment Company Act of 1940, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by his said attorneys
to any and all registration statements and amendments thereto.
Witness my hand this 2nd day of December 1997.
/S/ ROBERT R. ARCHIBALD
-----------------------
Robert R. Archibald
Trustee
<PAGE> 3
POWER OF ATTORNEY
The undersigned officer and/or trustee of Magna Funds hereby
constitutes Walter B. Grimm, William J. Tomko and Michael D. Miller, and each of
them singly, his true and lawful attorneys, with full power to them and each of
them to sign for him, in his name and in his capacity as an officer and/or
trustee of the Magna Funds, a Massachusetts business trust, any and all
registration statements and amendments thereto under the Securities Act of 1933
or the Investment Company Act of 1940, and generally to do all such things in
his name and in his behalf to enable Magna Funds to comply with the provisions
of the Securities Act of 1933, the Investment Company Act of 1940, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by his said attorneys
to any and all registration statements and amendments thereto.
Witness my hand this 3rd day of November 1997.
/S/ NEIL SEITZ
--------------
Neil Seitz
Trustee
<PAGE> 4
POWER OF ATTORNEY
The undersigned officer and/or trustee of Magna Funds hereby
constitutes Walter B. Grimm, William J. Tomko and Michael D. Miller, and each of
them singly, his true and lawful attorneys, with full power to them and each of
them to sign for him, in his name and in his capacity as an officer and/or
trustee of the Magna Funds, a Massachusetts business trust, any and all
registration statements and amendments thereto under the Securities Act of 1933
or the Investment Company Act of 1940, and generally to do all such things in
his name and in his behalf to enable Magna Funds to comply with the provisions
of the Securities Act of 1933, the Investment Company Act of 1940, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by his said attorneys
to any and all registration statements and amendments thereto.
Witness my hand this 30th day of November 1997.
/S/ EARL E. LAZERSON
--------------------
Earl E. Lazerson
Trustee
<PAGE> 5
POWER OF ATTORNEY
The undersigned officer and/or trustee of Magna Funds hereby
constitutes Walter B. Grimm, William J. Tomko and Michael D. Miller, and each of
them singly, his true and lawful attorneys, with full power to them and each of
them to sign for him, in his name and in his capacity as an officer and/or
trustee of the Magna Funds, a Massachusetts business trust, any and all
registration statements and amendments thereto under the Securities Act of 1933
or the Investment Company Act of 1940, and generally to do all such things in
his name and in his behalf to enable Magna Funds to comply with the provisions
of the Securities Act of 1933, the Investment Company Act of 1940, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by his said attorneys
to any and all registration statements and amendments thereto.
Witness my hand this 2nd day of November 1997.
/S/ ROBERT E. SAUR
------------------
Robert E. Saur
Trustee
<PAGE> 6
POWER OF ATTORNEY
The undersigned officer and/or trustee of Magna Funds hereby
constitutes Walter B. Grimm, William J. Tomko and Michael D. Miller, and each of
them singly, his true and lawful attorneys, with full power to them and each of
them to sign for him, in his name and in his capacity as an officer and/or
trustee of the Magna Funds, a Massachusetts business trust, any and all
registration statements and amendments thereto under the Securities Act of 1933
or the Investment Company Act of 1940, and generally to do all such things in
his name and in his behalf to enable Magna Funds to comply with the provisions
of the Securities Act of 1933, the Investment Company Act of 1940, and all
requirements and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by his said attorneys
to any and all registration statements and amendments thereto.
Witness my hand this 30th day of November 1997.
/S/ BRAD L. BADGLEY
-------------------
Brad L. Badgley
Trustee
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922637
<NAME> MAGNA FUNDS
<SERIES>
<NUMBER> 02
<NAME> MAGNA GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 46,887,320
<INVESTMENTS-AT-VALUE> 69,876,614
<RECEIVABLES> 724,571
<ASSETS-OTHER> 28,558
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,629,743
<PAYABLE-FOR-SECURITIES> 254,995
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 98,261
<TOTAL-LIABILITIES> 353,256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,443,226
<SHARES-COMMON-STOCK> 3,168,108
<SHARES-COMMON-PRIOR> 2,436,247
<ACCUMULATED-NII-CURRENT> 188,483
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 655,484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,989,294
<NET-ASSETS> 70,276,487
<DIVIDEND-INCOME> 926,793
<INTEREST-INCOME> 353,347
<OTHER-INCOME> 0
<EXPENSES-NET> 560,630
<NET-INVESTMENT-INCOME> 719,510
<REALIZED-GAINS-CURRENT> 664,115
<APPREC-INCREASE-CURRENT> 15,434,191
<NET-CHANGE-FROM-OPS> 16,817,816
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 645,485
<DISTRIBUTIONS-OF-GAINS> 917,850
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,017,201
<NUMBER-OF-SHARES-REDEEMED> 346,284
<SHARES-REINVESTED> 60,944
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<PER-SHARE-NAV-BEGIN> 16.42
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922637
<NAME> MAGNA FUNDS
<SERIES>
<NUMBER> 01
<NAME> MAGNA INTERMEDIATE GOVERNMENT BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
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<INVESTMENTS-AT-VALUE> 63,718,466
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<ACCUMULATED-NII-PRIOR> 1,466
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</TABLE>
