As filed via EDGAR with the Securities and Exchange Commission on April 30, 1996
File No. 33-81574
File No. 811-8620
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 4
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
THE MILESTONE FUNDS
(Formerly LEARNING ASSETS(TM))
(Exact Name of Registrant as Specified in its Charter)
One Odell Plaza, Yonkers, New York 10701
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 800-941-6453
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Timothy J. Overzat
90 Washington Street
New York, New York 10286
(Name and Address of Agent for Service)
Copies of Communications to:
Susan Penry-Williams, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10019
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It is proposed that this filing will become effective:
- ---- immediately upon filing pursuant Rule 485, paragraph (b)
- ---- on [ ] pursuant to Rule 485, paragraph (b)
X 60 days after filing pursuant to Rule 485, paragraph (a)(i)
- ----
- ---- on [ ] pursuant to Rule 485, paragraph (a)(i)
- ---- 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
- ---- on [ ] pursuant to Rule 485, paragraph (a)(ii)
- ---- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. A Rule 24f-2
Notice for the Registrant's fiscal year ending November 30, 1995 was filed with
the Commission on or before January 31, 1996.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404 (C))
PART A
FORM N-1A LOCATION IN PROSPECTUS
ITEM NO. (CAPTION)
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expenses of Investing in the
Portfolio
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Prospectus Summary; Investment
of Registrant Objective and Policies; Other
Information
Item 5. Management of the Fund Prospectus Summary; Management of
the Trust
Item 5A. Management's Discussion of Not Applicable
Fund Performance
Item 6. Capital Stock and Investment Objective and Policies;
Other Securities Dividends and Tax Matters; Other
Information
Item 7. Purchase of Securities How to Invest in the Portfolio;
Being Offered Other Information; Management of the
Trust
Item 8. Redemption or Repurchase How to Invest in the Portfolio; How
to Redeem Shares of the Portfolio
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404 (C))
PART B
LOCATION IN STATEMENT
FORM N-1A OF ADDITIONAL INFORMATION
ITEM NO. (CAPTION)
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information Other Information
and History
Item 13. Investment Objectives Investment Policies; Investment
and Policies Limitations
Item 14. Management of the Fund Management
Item 15. Control Persons and Management; Other Information
Principal Holders of
Securities
Item 16. Investment Advisory Management
and Other Services
Item 17. Brokerage Allocation Portfolio Transactions
and Other Practices
Item 18. Capital Stock and Determination of Net Asset Value
Other Securities
Item 19. Purchase, Redemption Determination of Net Asset Value;
and Pricing of Securities Additional Purchase and Redemptions
Being Offered Information
Item 20. Tax Status Taxation
Item 21. Underwriters Management
Item 22. Calculation of Perfor- Advertising
mance Data
Item 23. Financial Statements Other Information
<PAGE>
THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO
ADVISER
MILESTONE CAPITAL MANAGEMENT, L.P.
PROSPECTUS
JUNE __, 1996
SERVICE SHARES
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THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO
SERVICE SHARES
One Odell Plaza Yonkers, New York 10701
(800) 941-MILE
This Prospectus offers Service Shares of the Treasury Obligations Portfolio (the
"Portfolio"), a diversified, no-load money market portfolio of The Milestone
Funds (the "Trust"), an open-end investment management company. The Portfolio
seeks to provide its shareholders with the maximum current income that is
consistent with the preservation of capital and the maintenance of liquidity.
Milestone Capital Management, L.P. serves as the Portfolio's investment adviser.
TREASURY OBLIGATIONS PORTFOLIO invests only in short-term obligations
of the U.S. Treasury and repurchase agreements fully collateralized by
obligations of the U.S.
Treasury.
This Prospectus provides you with information about the Trust and the Portfolio
which you should know before investing in shares of the Portfolio. A Statement
of Additional Information, dated June o, 1996, has been filed with the
Securities and Exchange Commission ("SEC") and is available free of charge by
contacting The Milestone Funds, One Odell Plaza, Yonkers, New York 10701, or by
calling (800) 941-MILE (6453). This information contained in the Statement of
Additional Information, as amended from time to time, is incorporated by
reference into this prospectus.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
----
Prospectus Summary.................................. 2
Expenses of Investing in the Portfolio.............. 3
Financial Highlights................................ 4
Investment Objective and Policies................... 5
Risk Considerations................................. 6
Additional Investment Policies and Practices........ 7
Management of the Trust............................. 8
How to Invest in the Portfolio...................... 11
How to Redeem Shares of the Portfolio............... 13
Dividends and Tax Matters........................... 14
Other Information................................... 15
PROSPECTUS SUMMARY
PORTFOLIO HIGHLIGHTS
SERVICE SHARES. This prospectus offers Service Shares of the Treasury
Obligations Portfolio. The Treasury Obligations Portfolio (the "Portfolio") is a
money market fund that invests only in U.S. Treasury obligations and repurchase
agreements fully collateralized by U.S. Treasury obligations. Service Shares are
designed for certain investors as a convenient investment vehicle for short-term
funds. The Portfolio also offers Institutional Shares and Investor Shares by
separate prospectus. Institutional Shares and Investor Shares are subject to
different expenses that affect their performance. For information about
Institutional Shares and Investor Shares, speak to your sales representative or
call (800) 941-MILE. See "Other Information".
MANAGEMENT. The Portfolio's investment adviser is Milestone Capital Management,
L.P. (the "Adviser"), One Odell Plaza, Yonkers, New York 10701. See "Management
of the Trust".
ADMINISTRATION, UNDERWRITING AND SHAREHOLDER SERVICING. The administrator of the
Trust is The Bank of New York, 90 Washington Street, New York, New York 10286.
Bear, Stearns & Co. Inc. ("Bear Stearns"), 245 Park Avenue, New York, New York
10167, is the primary dealer of the Trust's shares and, under a separate
agreement with the Adviser, services the accounts of those shareholders of the
Trust who purchase their shares through Bear Stearns. Midwest Group Financial
Services, Inc., P. O. Box 5354, Cincinnati, Ohio 45201-5354, serves as statutory
underwriter of the Trust's shares. See "Management of the Trust".
PURCHASES AND REDEMPTIONS. Investors may purchase and redeem shares of
beneficial interest in the Portfolio without any sales loads or other charges
any day the New York Stock Exchange and the Federal Reserve Bank of New York are
open ("Fund Business Day") between
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the hours of 9:00 a.m. and 6:00 p.m. (Eastern Time). To allow the Adviser to
manage the Portfolio most effectively, investors are encouraged to execute as
many trades as possible before 2:30 p.m. If MGF Service Corp. (the "Transfer
Agent") receives a firm indication of the approximate size of a purchase by 2:30
p.m. (Eastern Time), and the completed purchase order by 4:15 p.m., the shares
purchased will earn dividends on the same day. If the Transfer Agent receives a
firm indication of the approximate size of a redemption by 2:30 p.m. (Eastern
Time), and the completed redemption order by 4:00 p.m., redemption proceeds will
ordinarily be wired that day, and the investor will not receive that day's
dividends. The minimum initial investment is $o. The Trust and the Transfer
Agent each reserves the right to waive this minimum initial investment
limitation. There is no minimum subsequent investment. See "How To Invest In The
Portfolio" and "How To Redeem Shares Of The Portfolio".
DIVIDENDS. Dividends of net investment income are declared daily and paid
monthly by the Portfolio and are reinvested in Portfolio shares unless the
shareholder has elected cash distributions. See "Dividends and Tax Matters".
EXPENSES OF INVESTING IN THE PORTFOLIO
The purpose of the following table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases.................. None
Maximum Sales Load Imposed on Reinvested Dividends....... None
Deferred Sales Load...................................... None
Redemption Fees.......................................... None
Exchange Fees............................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of annual average net
assets):
Advisory Fees............................................. 0.10%
12b-1 Fees (after fee deferrals)......................... 0.35%*
Shareholder Servicing Fees................................ 0.25%
Other Expenses............................................ 0.10%
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Total Operating Expenses.................................. 0.80%
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* Under the Rule 12b-1 Plan of the Portfolio's Service Shares, the
Service Shares may incur distribution expenses of up to 0.50% of the
average daily net assets attributable to such Shares. For the current
fiscal year, the Portfolio will limit such payments to 0.35% of the
average daily net assets attributable to the Service Shares. Under the
Plan, expenses not reimbursed by the distribution fee may be carried
forward to subsequent fiscal years for submission by the Portfolio for
payment, subject to continuation of the Plan. Such amounts are not
recognized in the financial statements of the Service Shares, because
the Plan can be terminated on an annual basis without further liability
to the Service Shares.
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The Adviser has voluntarily agreed to waive up to 100% of the shareholder
servicing fee for the Service Shares and may waive up to 100% of the advisory
fee of the Portfolio. This voluntary limitation may be terminated at any time.
For a further description of the various expenses incurred in the operation of
the Portfolio, see "Management of the Trust".
EXAMPLE
You would pay the
following expenses on a
$1,000 investment in Service
Shares of the Portfolio,
assuming a 5% annual
return and redemption at 1 Year 3 Years 5 Years 10 Years
the end of each period: . . . . . . $8 $26 $44 $99
This example is based on the fees listed in the table and assumes the
reinvestment of dividends. The example should not be considered a representation
of past or future expenses or performance.
Actual expenses may be greater or less than those shown.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Portfolio seeks to provide investors with maximum current income consistent
with the preservation of capital and the maintenance of liquidity. As with any
mutual fund, there is no assurance that the Portfolio will achieve this goal.
INVESTMENT POLICIES
The Portfolio invests ONLY in U.S. Treasury obligations and repurchase
agreements fully collateralized by U.S. Treasury obligations. The Portfolio may
purchase U.S. Treasury obligations on a when-issued or forward commitment basis.
The Portfolio will maintain an average maturity, computed on a dollar-weighted
basis, of 90 days or less.
The following permissible investments and investment restrictions are
fundamental investment policies of the Portfolio that may not be changed without
shareholder approval:
PERMISSIBLE INVESTMENTS.
The Portfolio seeks to achieve its investment objective by investing ONLY in:
U.S. Treasury obligations maturing in 397 days or less. U.S. Treasury
obligations are securities issued by the United States Treasury, such
as Treasury bills, notes and bonds,
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that are fully guaranteed as to payment of principal and interest by
the United States Government.
Repurchase agreements fully collateralized by U.S. Treasury
obligations. Repurchase agreements are transactions in which the
Portfolio purchases a security and simultaneously commits to resell
that security to the seller at an agreed-upon price on an agreed-upon
future date, normally one-to-seven days later. The resale price
reflects a market rate of interest that is not related to the coupon
rate or maturity of the purchased security. The Portfolio enters into
repurchase agreements ONLY WITH PRIMARY DEALERS designated by the
Federal Reserve Bank of New York which the Adviser believes present
minimal credit risks in accordance with guidelines established by the
Board of Trustees of the Trust (the "Board"). The Adviser monitors the
credit-worthiness of sellers under the Board's general supervision. If
a seller defaults on its repurchase obligation, however, the Portfolio
might suffer a loss.
The Portfolio may invest in U.S. Treasury obligations or repurchase agreements
without limit. Although the Portfolio intends to be fully invested in these
instruments, it may hold a de minimis amount of cash for a short period prior to
investment or payment of the proceeds of redemption.
In the future, the Portfolio may attempt to achieve its investment objectives by
holding, as its only investment securities, the securities of another investment
company having identical investment objectives and policies as the Portfolio in
accordance with the provisions of the Investment Company Act of 1940 or any
orders, rules or regulations thereunder adopted by the Securities and Exchange
Commission.
INVESTMENT RESTRICTIONS.
The Portfolio WILL NOT:
1. Invest in structured notes or instruments commonly known as
derivatives;
2. Invest in variable, adjustable or floating rate instruments of
any kind;
3. Enter into reverse repurchase agreements;
4. Invest in securities issued by agencies or instrumentalities
of the United States Government, such as the Federal National
Mortgage Association ("FNMA"), Government National Mortgage
Association ("GNMA"), Federal Home Loan Mortgage Corp.
("Freddie Mac"), or the Small Business Administration ("SBA");
or,
5. Invest in zero coupon bonds.
The Portfolio will make no investment unless the Adviser first determines that
it is eligible for purchase and presents minimal credit risks, pursuant to
procedures adopted by the Board. The
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Portfolio's investments are subject to the restrictions imposed by Rule 2a-7
under the Investment Company Act of 1940.
RISK CONSIDERATIONS
Although the Portfolio invests in short-term Treasury obligations, an investment
in the Portfolio is subject to risk even if all securities in the Portfolio's
portfolio are paid in full at maturity. All money market instruments, including
U.S. Treasury obligations, can change in value in response to changes in
interest rates, and a major change in rates could cause the share price to
change. While U.S. Treasury obligations are backed by the full faith and credit
of the U.S. Government, an investment in the Portfolio is neither insured nor
guaranteed by the U.S. Government or any other party. Thus, while the Portfolio
seeks to maintain a stable net asset value of $1.00 per share, there is no
assurance that it will do so. For a discussion of the risks associated with
particular investment practices of the Portfolio, see "Additional Investment
Policies and Practices".
ADDITIONAL INVESTMENT POLICIES AND PRACTICES
THE PORTFOLIO MAY NOT CHANGE ITS INVESTMENT OBJECTIVE OR ANY INVESTMENT POLICY
DESIGNATED AS FUNDAMENTAL WITHOUT SHAREHOLDER APPROVAL. Investment policies or
practices of the Portfolio that are not designated as fundamental may be changed
by the Board without shareholder approval, following notice to shareholders. The
Portfolio's additional fundamental and nonfundamental investment policies are
described further below and in the Statement of Additional Information.
BORROWING. As a fundamental investment policy, the Portfolio may only borrow
money for temporary or emergency purposes (not for leveraging or investment),
including the meeting of redemption requests, in amounts up to 33 1/3% of the
Portfolio's total assets. Interest costs on borrowings may fluctuate with
changing market rates of interest and may partially offset or exceed the return
earned on borrowed funds (or on the assets that were retained rather than sold
to meet the needs for which funds were borrowed). Under adverse market
conditions, the Portfolio might have to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales. As a nonfundamental investment policy, the Portfolio may
not purchase securities for investment while any borrowing equaling 5% or more
of the Portfolio's total assets is outstanding.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Portfolio may purchase new
issues of U.S. Treasury Obligations on a "when-issued" basis or existing issues
of U.S. Treasury obligations on a "delayed delivery" basis. The Portfolio would
enter into these forward commitments to obtain securities at prices that might
not be available in the future. The price is fixed when the commitment is made,
but the securities are delivered on a future date beyond the customary
settlement time and paid for upon delivery. The Portfolio assumes the risk that
the value of the securities on the delivery date may be more or less than the
purchase price. Failure by the other party to deliver a security purchased by
the Portfolio may result in a loss or a missed opportunity to make an
alternative investment. Commitments for when-issued or
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delayed delivery transactions will be entered into only when the Portfolio
intends to acquire the securities. Although there is no limit on the amount of
these commitments that the Portfolio may make, under normal circumstances it
will not commit more than 30% of its total assets to such purchases.
ILLIQUID SECURITIES. The Portfolio may invest no more than 10% of its net assets
in securities that at the time of purchase are illiquid, including repurchase
agreements having a maturity of more than seven days and not entitling the
holder to payment of principal within seven days. In addition, the Portfolio
will not invest in repurchase agreements having a maturity in excess of one
year. Under the supervision of, and pursuant to guidelines established by, the
Board, the Adviser determines and monitors the liquidity of portfolio
securities. The Portfolio will not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities. If a
security becomes illiquid and, as a result, more than 10% of the Portfolio's net
assets are invested in illiquid securities, the Adviser will take reasonable
steps to reduce the Portfolio's holdings of illiquid securities to 10% or less
of its net assets.
TEMPORARY DEFENSIVE POSITIONS. Under abnormal market or economic conditions, the
Portfolio temporarily may hold up to 100% of its investable assets in cash.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The business of the Trust and the Portfolio is managed under the direction of
the Board of Trustees. The Board formulates the general policies of the
Portfolio and meets regularly to review the Portfolio's performance, monitor its
investment activities and practices, and review other matters affecting the
Portfolio and the Trust. Additional information regarding the Trustees, as well
as the Company's executive officers, may be found in the Statement of Additional
Information under the heading "Management - Trustees and Officers".
THE ADVISER
Milestone Capital Management, L.P. (the "Adviser") serves as investment adviser
to the Portfolio pursuant to an investment advisory agreement with the Trust.
Subject to the general control of the Board, the Adviser continually manages the
Portfolio, including the purchase, retention and disposition of its securities
and other assets. The Adviser is a limited partnership organized under the laws
of the State of New York on August 1, 1994, and is a registered investment
adviser under the Investment Advisers Act of 1940. The General Partner of the
Adviser is Milestone Capital Management Corp., a New York corporation.
Janet Tiebout Hanson is President and Chief Executive Officer of the Adviser.
Ms. Hanson is also President and Chief Executive Officer of Milestone Capital
Management Corp., in which she holds the controlling interest. She is a former
vice-president of Goldman, Sachs & Co., a leading investment banking firm.
During her fourteen year tenure with Goldman Sachs, Ms. Hanson held
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significant sales, marketing, and management positions in both the Fixed Income
and Asset Management Divisions, including co-manager of Money Market Sales in
New York in 1986 and 1987. Ms. Hanson was responsible for developing many of the
firm's key relationships with major institutional investors. In addition, she
was instrumental in raising assets for Goldman Sachs Asset Management's money
market and bond mutual funds. Ms. Hanson holds a BA in government from Wheaton
College in Massachusetts and an MBA in finance from Columbia University.
Marc H. Pfeffer is Chief Investment Officer of the Adviser. He is primarily
responsible for the day-to-day management of the Treasury Obligations Portfolio
and heads the Adviser's portfolio management and research team. Before joining
the Adviser, Mr. Pfeffer was with Goldman, Sachs & Co. for eight years. In 1989,
he joined Goldman Sachs' Asset Management Division ("GSAM") in portfolio
management, and became a vice-president of the firm in 1993. At GSAM, he was
responsible for managing six institutional money market portfolios which grew to
over $3 billion in total assets as of November 1994. Mr. Pfeffer holds a BS in
finance from the State University of New York at Buffalo and an MBA in finance
from Fordham University.
For its services, the Adviser receives a fee at an annual rate equal to 0.10% of
the Portfolio's average daily net assets. The Adviser is responsible for payment
of salaries of its portfolio manager and staff as well as other expenses
necessary to the performance of its duties under the investment advisory
agreement. The Adviser may, at its own expense and from its own resources,
compensate certain persons who provide services in connection with the sale or
expected sale of shares of the Portfolio without reimbursement from the Trust.
The Trust, on behalf of the Portfolio, is responsible for all expenses other
than those expressly borne by the Adviser under the investment advisory
agreement. The expenses borne by the Trust include, but are not limited to, the
investment advisory fee, administration fee, transfer agent fee, and custodian
fee, costs of preparing, printing and delivering to shareholders the Trust's
prospectuses, statements of additional information, and shareholder reports,
legal fees, auditing and tax fees, taxes, blue sky fees, SEC fees, compliance
expenses, insurance expenses, and compensation of certain of the Trust's
Trustees, officers and employees and other personnel performing services for the
Trust. Should the expenses of the Portfolio (including the fees of the Adviser
but excluding interest, taxes, brokerage commissions, litigation and
indemnification expenses and other extraordinary expenses) for any fiscal year
exceed the limits prescribed by any state in which the Portfolio's shares are
qualified for sale, the Adviser will reduce its fee or reimburse expenses by the
amount of such excess.
ADMINISTRATOR
The Bank of New York, 90 Washington Street, New York, New York 10286 serves as
the administrator of the Trust, pursuant to an Administration Agreement with the
Trust.
The services The Bank of New York provides to the Trust include: coordinating
the activities of any third parties furnishing services to the Trust; providing
the necessary office space, equipment and personnel to perform administrative
and clerical functions for the Trust and preparing, filing and distributing
proxy materials, periodic reports to shareholders, registration
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statements and other documents.
As compensation for services performed under the Administration Agreement, The
Bank of New York receives a monthly fee calculated at the annual rate of .04% of
the assets of the Portfolio as determined at each month end, with a maximum fee
of $100,000 per annum.
UNDERWRITER
Midwest Group Financial Services, Inc. (the "Underwriter") serves as statutory
underwriter of the Portfolio's shares pursuant to an Underwriting Agreement with
the Trust, and as the agent of the Trust in connection with the offering of
shares of the Portfolio. The Underwriter is an affiliate of the Trust's transfer
agent. See "Transfer Agent".
The Underwriter is reimbursed for all costs and expenses incurred in this
capacity but receives no further compensation for its services under the
Underwriting Agreement. The Underwriter may enter into arrangements with banks,
broker-dealers or other financial institutions ("Selected Dealers") through
which investors may purchase or redeem shares. The Underwriter may compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Portfolio. Investors purchasing shares of the Portfolio
through another financial institution should read any materials and information
provided by the financial institution to acquaint themselves with its procedures
and any fees that it may charge.
PRIMARY DEALER
Bear, Stearns & Co. Inc. ("Bear Stearns") serves as primary dealer of the
Trust's shares. Bear Stearns is a full-service securities broker-dealer and
investment banking firm with global distribution capability. It is a member of
all major national securities exchanges with its headquarters at 245 Park
Avenue, New York, New York 10167.
Under its Primary Dealer Agreement with the Underwriter, Bear Stearns promotes
and arranges for the sale of shares of the Trust. Orders for the purchase or
redemption of shares of each series of the Trust are directed by Bear Stearns to
the Underwriter for execution. Bear Stearns receives no compensation for its
services under the Primary Dealer Agreement.
DISTRIBUTION PLAN
The Trust has adopted a distribution plan for Service Shares. Pursuant
to this Plan, the Portfolio may incur distribution expenses related to the sale
of Service Shares of up to .50% per annum of the Portfolio's average daily net
assets attributable to such Shares. The Plan provides that the Portfolio may
finance activities which are primarily intended to result in the sale of Service
Shares, including, but not limited to, advertising, printing of prospectuses and
reports for other than existing shareholders, preparation and distribution of
advertising material and sales literature and payments to dealers who enter into
agreements with the Trust or Underwriter. The Plan will only make payments for
expenses actually incurred on a first-in, first-out basis. The Plan may carry
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forward for an unlimited number of years any unreimbursed expenses. If the Plan
is terminated in accordance with its terms, the obligations of the Portfolio to
make payments pursuant to the Plan will cease and the Portfolio will not be
required to make any payments past the date the Plan terminates.
SHAREHOLDER SERVICES
The Trust has adopted a shareholder service plan under which it pays the Adviser
.25% of the average daily net assets of the Service Shares such that the Trust
may obtain the services of the Adviser and other qualified financial
institutions to act as shareholder servicing agents for their customers. Under
this Plan, the Trust has authorized the Adviser to enter into agreements
pursuant to which the shareholder servicing agent performs certain shareholder
services. For these services, the Adviser pays the shareholder servicing agent a
fee based upon the average daily net assets of the Service Shares owned by
investors for which the shareholder servicing agent maintains a servicing
relationship.
Among the services provided by shareholder servicing agents are: answering
customer inquiries regarding account matters; assisting shareholders in
designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Portfolio
shares held beneficially; and providing such other services as the Trust or a
shareholder may request.
The Adviser has entered into a separate Client Services Agreement with Bear
Stearns under which it provides distribution assistance and various services to
those shareholders of the Trust who purchase shares of the Portfolio through
Bear Stearns (the "Bear Stearns Accounts"). Under the Client Services Agreement,
Bear Stearns furnishes such facilities and personnel as are necessary to provide
the Trust and the Bear Stearns Accounts with any information either may need
about the other and to facilitate the processing of orders for the purchase or
redemption of shares. For these services, the Adviser, at its own expense and
from its own resources, pays Bear Stearns a fee. The Adviser may enter into
similar client service agreements with other persons who provide certain
shareholder services. These fees do not increase the amount of any advisory or
shareholder services fees paid to the Adviser.
TRANSFER AGENT
MGF Service Corp., a registered transfer agent, acts as the Trust's transfer
agent and dividend disbursing agent. The Transfer Agent maintains an account for
each shareholder of the Portfolio (unless such accounts are maintained by
sub-transfer agents or processing agents) and performs other transfer agency and
related functions.
The Transfer Agent is authorized to subcontract any or all of its functions to
one or more qualified sub-transfer agents, shareholder servicing agents, or
processing agents, who may be affiliates of the Transfer Agent, and who agree to
comply with the terms of the Transfer
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Agent's agreement with the Trust. Among the services provided by such agents are
answering customer inquiries regarding account matters; assisting shareholders
in designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Portfolio
shares held beneficially; and providing such other services as the Trust or a
shareholder may request. The Transfer Agent may pay these agents for their
services, but no such payment will increase the Transfer Agent's compensation
from the Trust.
HOW TO INVEST IN THE PORTFOLIO
Shares of the Portfolio may be purchased by wire only. Shares are sold at the
net asset value next determined after receipt of a purchase order in the manner
described below. Purchase orders are accepted on any day on which the New York
Stock Exchange and the Federal Reserve Bank of New York are open ("Fund Business
Day") between the hours of 9:00 a.m. and 6:00 p.m. (Eastern Time). The Trust
does not determine net asset value, and purchase orders are not accepted, on the
days those institutions observe the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas.
To purchase shares of the Portfolio by Federal Reserve wire, call the Transfer
Agent, MGF Service Corp., at (800) 363-7660 or call your sales representative.
If the Transfer Agent receives a firm indication of the approximate size of the
intended investment before 2:30 p.m. (Eastern Time) and the completed purchase
order before 4:15 p.m. (Eastern Time), and the Custodian receives Federal Funds
the same day, purchases of shares of the Portfolio begin to earn dividends that
day. Completed orders received after 4:15 p.m. begin to earn dividends the next
Fund Business Day upon receipt of Federal Funds.
To allow the Adviser to manage the Portfolio most effectively, investors are
encouraged to execute as many trades as possible before 2:30 p.m. To protect the
Portfolio's performance and shareholders, the Adviser discourages frequent
trading in response to short-term market fluctuations. The Portfolio reserves
the right to refuse any investment that, in its sole discretion, would disrupt
the Portfolio's management.
If the Public Securities Association recommends that the government securities
markets close early, the Trust may advance the time at which the Transfer Agent
must receive notification of orders for purposes of determining eligibility for
dividends on that day. Investors who notify the Transfer Agent after the
advanced time become entitled to dividends on the following Fund Business Day.
If the Transfer Agent receives notification of a redemption request after the
advanced time, it ordinarily will wire redemption proceeds on the next Fund
Business Day.
If an investor does not remit Federal Funds, such payment must be converted into
Federal Funds. This usually occurs within one Fund Business Day of receipt of a
bank wire. Prior to receipt of Federal Funds, the investor's monies will not be
invested.
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The following procedure will help assure prompt receipt of your Federal Funds
wire:
A. Telephone the Transfer Agent, MGF Service Corp., toll free at
(800) 363-7660 and provide the following information:
Your name
Address
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds.
You will then be provided with a Portfolio account number. (Investors with
existing accounts must also notify the Trust before wiring funds.)
B. Instruct your bank to wire the specified amount to the Trust
as follows:
The Bank of New York, ABA # 021000018
A/C # 8900276541
FBO Milestone Funds Treasury Obligations Portfolio
Operating Account
Ref: Shareholder Name and Account Number
An investor may open an account when placing an initial order by telephone,
provided the investor thereafter submits an Account Registration Form by mail.
An Account Registration Form is included with this Prospectus.
The Trust and the Transfer Agent each reserves the right to reject any purchase
order for any reason.
SHARE CERTIFICATES. The Transfer Agent maintains a share account for each
shareholder. The Trust does not issue share certificates.
ACCOUNT STATEMENTS. Monthly account statements are sent to investors to report
transactions such as purchases and redemptions as well as dividends paid during
the month.
MINIMUM INVESTMENT REQUIRED. The minimum initial investment in the Portfolio is
$o. There is no minimum subsequent investment. The Trust reserves the right to
waive the minimum investment requirement.
HOW TO REDEEM SHARES OF THE PORTFOLIO
Holders of shares of the Portfolio may redeem their shares without charge at the
net asset value next determined after the Portfolio receives the redemption
request. Redemption requests must be received in proper form and can be made by
telephone request or wire request on any Fund Business Day between the hours of
9:00 a.m. and 6:00 p.m. (Eastern Time).
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BY TELEPHONE. Redemption requests may be made by telephoning the Transfer Agent,
MGF Service Corp., at (800) 363-7660. Shareholders must provide the Transfer
Agent with the shareholder's account number, the exact name in which the shares
are registered and some additional form of identification such as a password. A
redemption by telephone may be made only if the telephone redemption
authorization has been completed on the Account Registration Form included with
this Prospectus. In an effort to prevent unauthorized or fraudulent redemption
requests by telephone, the Transfer Agent will follow reasonable procedures to
confirm that such instructions are genuine. If such procedures are followed,
neither the Transfer Agent nor the Trust will be liable for any losses due to
unauthorized or fraudulent redemption requests.
In times of drastic economic or market changes, it may be difficult to make
redemptions by telephone. If a shareholder cannot reach the Transfer Agent by
telephone, redemption requests may be mailed or hand-delivered to the Transfer
Agent.
WRITTEN REQUESTS. Redemption requests may be made by writing to The Milestone
Funds, c/o MGF Service Corp., P. O. Box 5354, Cincinnati, Ohio 45201-5354.
Written requests must be in proper form. The shareholder will need to provide
the exact name in which the shares are registered, the Portfolio name, account
number, and the share or dollar amount requested.
A signature guarantee is required for any written redemption request and for any
instruction to change the shareholder's record name or address, a designated
bank account, the dividend election, or the telephone redemption or other option
elected on an account. Signature guarantees may be provided by any eligible
institution acceptable to the Transfer Agent, including a bank, a broker, a
dealer, national securities exchange, a credit union, or a savings association
which is authorized to guarantee signatures. Other procedures may be implemented
from time to time.
The Transfer Agent may request additional documentation to establish that a
redemption request has been authorized properly. A redemption request will not
be considered to have been received in proper form until such additional
documentation has been submitted to the Transfer Agent.
FIRM INDICATION OF
REDEMPTION REQUEST Completed Redemption
AND APPROXIMATE SIZE Redemption Proceeds
OF REDEMPTION RECEIVED Order Received Ordinarily Dividends
- --------------------------------------------------------------------------------
By 2:30 p.m. Eastern Time By 4:00 p.m. Wired same Not earned on
Eastern Time Business Day the day request
received
After 2:30 p.m. Eastern Time After 4:00 p.m. Wired next Earned on day
Eastern Time Business Day request received
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to
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redeem, upon 60 days written notice, all shares in an account with an aggregate
net asset value of less than $o unless an investment is made to restore the
minimum value. The Trust will not redeem accounts that fall below this amount
solely as a result of a reduction in the net asset value of the Portfolio's
shares.
DIVIDENDS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS. Dividends are declared daily and paid monthly, following the close of
the last Fund Business Day of the month. Shares purchased by wire before 4:15
p.m. (Eastern Time) begin earning dividends that day. Dividends are
automatically reinvested on payment dates in additional shares of the Portfolio
unless cash payments are requested by contacting the Trust. The election to
reinvest dividends and distributions or receive them in cash may be changed at
any time upon written notice to the Transfer Agent. All dividends and other
distributions are treated in the same manner for Federal income tax purposes
whether received in cash or reinvested in shares of the Portfolio. If no
election is made, all dividends and distributions will be reinvested.
CAPITAL GAINS DISTRIBUTIONS. Net realized short-term capital gains, if any, will
be distributed whenever the Trustees determine that such distributions would be
in the best interest of the shareholders, which would be at least once per year.
The Trust does not anticipate that the Portfolio would realize any long-term
capital gains, but should they occur, they also will be distributed at least
once every 12 months.
TAX MATTERS
TAX STATUS OF THE PORTFOLIO. The Portfolio intends to qualify and continue to
qualify to be taxed as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the Portfolio will
not be liable for Federal income taxes on the net investment income and capital
gains distributed to its shareholders. Because the Portfolio intends to
distribute all of its net investment income and net capital gains each year in
accordance with the timing requirements of the Code, the Portfolio should also
avoid Federal excise taxes.
DISTRIBUTIONS. Dividends paid by the Portfolio out of its net investment income
(including realized net short-term capital gains) are taxable to the
shareholders of the Portfolio as ordinary income. Distributions of net long-term
capital gains, if any, realized by the Portfolio are taxable to the shareholders
as long-term capital gains, regardless of the length of time the shareholder may
have held shares in the Portfolio at the time of distribution. Distributions are
subject to Federal income tax when they are paid, whether received in cash or
reinvested in shares of the Portfolio. Distributions declared in December and
paid in January, however, are taxable as if paid on December 31st.
The Portfolio is required by Federal law to withhold 31% of reportable payments
(which may include dividends and capital gain distributions) paid to a
non-corporate shareholder unless that
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shareholder certifies in writing that the social security or other tax
identification number provided is correct and that the shareholder is not
subject to backup withholding for prior underreporting to the Internal Revenue
Service.
Some states and localities do not tax dividends paid on shares of the Portfolio
that are attributable to interest from U.S. Treasury obligations (but not
necessarily interest earned on repurchase agreements).
Reports containing appropriate information with respect to the Federal income
tax status of dividends, distributions and redemptions, including the
proportions attributable to capital gains and interest on U.S. Treasury
obligations, paid during the year by the Portfolio will be mailed to
shareholders shortly after the close of each calendar year.
The foregoing is only a summary of some of the tax considerations generally
affecting the Portfolio and its shareholders. The Statement of Additional
Information contains a further discussion. Because other Federal, state or local
tax considerations may apply, investors are urged to consult their tax advisors.
OTHER INFORMATION
PORTFOLIO PERFORMANCE. The Portfolio may advertise its yield, which is based on
historical results and is not intended to indicate future performance. Yield
shows the rate of income the Portfolio has earned on its investments as a
percentage of the Portfolio's share price. To calculate yield, the Portfolio
takes the interest income it earned from its portfolio of investments for a
seven-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Portfolio's share price at the end of the seven-day
period. The Portfolio's compounded annualized yield assumes the reinvestment of
dividends paid by the Portfolio, and therefore will be somewhat higher than the
annualized yield for the same period.
The Portfolio's advertisements may refer to ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical Services,
Inc. or IBC/Donoghue, Inc. In addition, the performance of the Portfolio may be
compared to recognized indices of market performance. The comparative material
found in the Portfolio's advertisements, sales literature, or reports to
shareholders may contain performance ratings. This material is not to be
considered representative or indicative of future performance.
DETERMINATION OF NET ASSET VALUE. The net asset value per share of the Portfolio
is determined at 4:15 p.m. (Eastern Time) on each Fund Business Day. The net
asset value is determined by subtracting total liabilities from total assets and
dividing the remainder by the number of shares outstanding. The Portfolio's
securities are valued at their amortized cost which does not take into account
unrealized gains or losses on securities. This method involves initially valuing
an instrument at its cost and thereafter assuming a constant amortization to
maturity of any premium paid or accreting discount received. The amortized cost
method minimizes changes in the market value of the securities held by the
Portfolio and helps it maintain a stable price of
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$1.00 per share.
CUSTODIAN AND ACCOUNTING AGENT. The Bank of New York, New York, New York, is
custodian for the securities and cash of the Trust. The Bank of New York is also
the accounting agent for the Portfolio, with responsibility for calculating the
net asset value of the Service Shares and for maintaining its books and records.
LEGAL COUNSEL. Legal counsel to the Trust is provided by Kramer, Levin, Naftalis
& Frankel, New York, New York.
INDEPENDENT PUBLIC ACCOUNTANT. The independent public accountant for the Trust
is McGladrey & Pullen, LLP, New York, New York.
THE TRUST, ITS SHARES AND CLASSES. The Trust is registered with the SEC as an
open-end management investment company and was organized as a business trust
under the laws of the State of Delaware on July 14, 1994. The Board has the
authority to issue an unlimited number of shares of beneficial interest of
separate series with no par value per share and to create classes of shares
within each series. If shares of separate series are issued, each share of each
series would be entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation of that series. Voting rights
would not be cumulative and the shares of each series of the Trust would be
voted separately except when an aggregate vote is required by law.
In addition to Service Shares, the Portfolio offers Institutional Shares and
Investor Shares by separate prospectus. Each class of shares has a different
distribution arrangement. Also, to the extent one class bears expenses different
from the other class, the amount of dividends and other distributions it
receives, and its performance, will differ. Shareholders of one class have the
same voting rights as shareholders of the other class, except that separate
votes are taken by each class of the Portfolio if the interests of one class
differ from the interests of the other. For information about Institutional
Shares and Investor Shares, please call (800) 941-MILE, or ask your sales
representative whether this class would be a suitable investment.
Delaware law does not require a registered investment company to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically required by Federal or state law. Shareholders
have available procedures for requiring the Trustees to call a meeting and for
removing Trustees. Shares issued by the Trust have no conversion, subscription
or preemptive rights. See "OTHER INFORMATION - The Trust and its Shareholders"
in the Statement of Additional Information.
As of November 30, 1995, the Trustees and officers of the Portfolio in the
aggregate owned less than one percent of the outstanding shares of the
Portfolio.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement of
Additional Information and the Portfolio's official sales literature in
connection with the offering of the Portfolio's shares, and if given or made,
such information or representations must not be relied upon as having been
authorized by
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<PAGE>
the Trust. This Prospectus does not constitute an offer in any state in which,
or to any person to whom, such offer may not lawfully be made.
THE MILESTONE FUNDS
ADVISER
MILESTONE CAPITAL MANAGEMENT, L.P.
One Odell Plaza
Yonkers, NY 10701
ADMINISTRATOR / CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
UNDERWRITER / TRANSFER AGENT
Midwest Group Financial Services, Inc. / MGF Service Corp.
P. O. Box 5354
Cincinnati, OH 45201-5354
PRIMARY DEALER
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
INDEPENDENT PUBLIC ACCOUNTANT
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
THE MILESTONE FUNDS
800-941-MILE
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<PAGE>
THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO - SERVICE SHARES
ONE ODELL PLAZA
YONKERS, NEW YORK 10701
TEL. (800) 941-MILE
STATEMENT OF ADDITIONAL INFORMATION
JUNE __, 1996
The Milestone Funds (the "Trust") is an open-end investment management company.
This Statement of Additional Information supplements the Prospectus that offers
the Service Shares of the Treasury Obligations Portfolio (the "Portfolio"), a
diversified, no-load money market portfolio of the Trust, and should be read
only in conjunction with the Prospectus, copies of which may be obtained without
charge by writing to The Milestone Funds, One Odell Plaza, Yonkers, New York
10701, or by calling (800) 941-MILE (941-6453).
TABLE OF CONTENTS
Page
----
1. Investment Policies.................. 2
2. Investment Limitations............... 3
3. Advertising.......................... 5
4. Management........................... 7
5. Determination of Net Asset Value..... 14
6. Portfolio Transactions............... 14
7. Additional Purchase and
Redemption Information............. 15
8. Taxation............................. 16
9. Distribution Plan.................... 22
10. Other Information.................... 22
This Statement of Additional Information is not a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by a
current prospectus.
<PAGE>
1. INVESTMENT POLICIES
The following discussion is intended to supplement the disclosure in the
Prospectus concerning the Portfolio's investments and investment techniques and
the risks associated therewith.
DEFINITIONS
As used in this Statement of Additional Information, the following terms shall
have the meanings listed:
"Board" shall mean the Board of Trustees of the Trust.
"U.S. Treasury obligations" shall mean securities issued by the United
States Treasury, such as Treasury bills, notes and bonds, that are
fully guaranteed as to payment of principal and interest by the United
States.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
"Fully Collateralized" shall mean that the value of the underlying
securities used to collateralize a repurchase agreement is at least
102% of the maturity date.
REPURCHASE AGREEMENTS. The Portfolio may purchase repurchase agreements fully
collateralized by U.S. Treasury obligations. In a repurchase agreement, the
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at an agreed-upon price on an agreed-upon future date,
normally one-to-seven days later. The repurchase price reflects a market rate of
interest unrelated to the coupon rate or maturity of the purchased security. The
obligation of the seller to pay the repurchase price is in effect secured by the
value of the underlying security (as determined daily by the Adviser). This
value must be equal to, or greater than, the repurchase price plus the
transaction costs (including loss of interest) that the Portfolio could expect
to incur upon liquidation of the collateral if the counterparty defaults. If a
counterparty defaults on its repurchase obligation, the Portfolio might suffer a
loss to the extent that the proceeds from the sale of the collateral were less
than the repurchase price. In the event of a counterparty's bankruptcy, the
Portfolio might be delayed in, or prevented from, selling the collateral for the
Portfolio's benefit.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. In order to assure itself of
being able to obtain securities at prices which the Adviser believes might not
be available at a future time, the Portfolio may purchase securities on a
when-issued or delayed delivery basis (forward commitments). When these
transactions are negotiated, the price (generally expressed in terms of yield)
and the interest rate payable on the securities are fixed on the transaction
date. Delivery and payment may take place a month or more after the date of the
transaction is fixed, however. When the Portfolio makes the forward commitment,
it will record the transactions as a purchase and thereafter reflect the value
each day of such securities in determining its net asset value. During the
period between a commitment and settlement, no payment is made for the
securities purchased and no interest on the security accrues to the purchaser.
At the time the Portfolio
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makes a commitment to purchase securities in this manner, the Portfolio
immediately assumes the risk of ownership, including price fluctuation.
Accordingly, the value of the securities on the delivery date may be more or
less than the purchase price. Although the Portfolio will only enter into a
forward commitment if it intends to actually acquire the securities, if the
Portfolio later chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it could, as with the disposition of any
other portfolio obligation, incur a gain or loss due to market fluctuation. When
the Portfolio agrees to purchase a security on a when-issued or delayed delivery
basis, the Trust's custodian will set aside and maintain a segregated account of
sufficient liquid assets (such as cash or U.S. Treasury obligations) which will
be available to make payment for the securities purchased. Failure by the other
party to deliver a security purchased by the Portfolio may result in a loss or a
missed opportunity to make an alternative investment. Although there is no limit
on the amount of these commitments that the Portfolio may make, under normal
circumstances it will not commit more than 30% of its total assets to such
purchases.
ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
repurchase agreements having a maturity of more than seven days and not
entitling the holder to payment of principal within seven days. In addition, the
Portfolio will not invest in repurchase agreements having a maturity in excess
of one year. Certain repurchase agreements which provide for settlement in more
than seven days can be liquidated before the nominal fixed term on seven days or
less notice. Such repurchase agreements will be regarded as liquid instruments.
The Board has ultimate responsibility for determining whether specific
securities are liquid or illiquid. The Adviser monitors the liquidity of
securities held by the Portfolio and reports periodically to the Board.
CASH POSITION. Although the Portfolio intends to be invested fully in U.S.
Treasury obligations or repurchase agreements, it may hold a de minimus amount
of cash for a short period prior to investment or payment of the proceeds of
redemption. The amount of this cash should not exceed 5% of the Portfolio's
assets, and in most cases will be significantly less.
2. INVESTMENT LIMITATIONS
The Portfolio has adopted the following fundamental investment limitations that
cannot be changed without the affirmative vote of the lesser of (i) more than
50% of the outstanding shares of the Portfolio or (ii) 67% of the shares of the
Portfolio present or represented at a shareholders meeting at which the holders
of more than 50% of the outstanding shares of the Portfolio are present or
represented. The Portfolio may not:
(1) Invest in variable, adjustable or floating rate instruments of
any kind;
(2) Invest in securities issued by agencies or instrumentalities
of the United States Government, such as the Federal National Mortgage
Association ("FNMA"), Government National Mortgage Association ("GNMA"), Federal
Home Loan Mortgage Corp. ("Freddie Mac"), or the Small Business Administration
("SBA"); or,
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(3) Invest in zero coupon bonds.
(4) Invest in structured notes or instruments commonly known as
derivatives.
(5) Enter into reverse repurchase agreements.
(6) With respect to 100% of its assets, purchase a security other
than a U.S. Treasury obligation if, as a result, more than 5% of the Fund's
total assets would be invested in the securities of a single issuer.
(7) Purchase securities if, immediately after the purchase, 25% or
more of the value of the Portfolio's total assets would be invested in the
securities of issuers having their principal business activities in the same
industry; except that there is no limit on investments in U.S. Treasury
obligations and repurchase agreements fully collateralized by U.S. Treasury
obligations.
(8) Purchase restricted securities, or underwrite securities of
other issuers, except to the extent that the Portfolio may be considered to be
acting as an underwriter in connection with the disposition of portfolio
securities.
(9) Purchase or sell real estate or any other interest therein, or
real estate limited partnerships or invest in securities issued by companies
that invest in real estate or interests therein.
(10) Purchase or sell physical commodities or contracts relating to
physical commodities, provided that currencies and currency-related contracts
will not be deemed to be physical commodities.
(11) Borrow money, except for temporary or emergency purposes (not
for leveraging or investment), including the meeting of redemption requests,
provided that borrowings do not exceed 33 1/3% of the value of the Portfolio's
total assets.
(12) Issue senior securities except as appropriate to evidence
indebtedness that the Portfolio is permitted to incur, and provided that the
Portfolio may issue shares of additional series or classes that the Trustees may
establish.
(13) Make loans (except through the use of repurchase agreements,
and through the purchase of debt securities that are otherwise permitted
investments).
(14) Purchase securities on margin, or make short sales of
securities, except for the use of short-term credit necessary for the clearance
of purchases and sales of portfolio securities.
(15) Write options or acquire instruments with put or demand
features, except that the Portfolio may enter into repurchase agreements
terminable upon demand.
(16) Invest in oil, gas or other mineral exploration or development
programs.
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<PAGE>
The Portfolio has adopted the following nonfundamental investment limitations
that may be changed by the Board without shareholder approval. The Portfolio may
not:
(a) Purchase securities for investment while any borrowing equaling 5%
or more of the Portfolio's total assets is outstanding; and if at any time the
Portfolio's borrowings exceed the Portfolio's investment limitations due to a
decline in net assets, such borrowings will be promptly (within three days)
reduced to the extent necessary to comply with the limitations.
(b) Invest in or hold securities of any issuer other than the Portfolio
if those Trustees and officers of the Trust or the Portfolio's investment
adviser, individually owning beneficially more than 1/2 of 1% of the securities
of the issuer, in the aggregate own more than 5% of the issuer's securities.
(c) Acquire securities or invest in repurchase agreements with respect
to any securities if, as a result, more than 10% of the Portfolio's net assets
(taken at current value) would be invested in repurchase agreements having a
maturity of more than seven days and not entitling the holder to payment of
principal within seven days and in securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market.
Except as required by the 1940 Act, if a percentage restriction on investment or
utilization of assets is adhered to at the time an investment is made a later
change in percentage resulting from a change in the market values of the
Portfolio's assets, the change in status of a security or purchases and
redemptions of shares will not be considered a violation of the limitation.
3. ADVERTISING
PERFORMANCE DATA
The Portfolio may provide current annualized and effective annualized yield
quotations for each class based on its daily dividends. These quotations may
from time to time be used in advertisements, shareholder reports or other
communications to shareholders. All performance information supplied by the
Portfolio is historical and is not intended to indicate future returns.
In performance advertising the Portfolio may compare any of its performance
information with data published by independent evaluators including Morningstar,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc., CDA/Wiesenberger and other
companies that track the investment performance of investment companies ("Fund
Tracking Companies"). The Portfolio may also compare any of its performance
information with the performance of recognized stock, bond and other indices.
The Portfolio may also refer in such materials to mutual fund performance
rankings and other data published by Fund Tracking Companies. Performance
advertising may also refer to discussions of the Portfolio and comparative
mutual fund data and ratings reported in independent periodicals, such as
newspapers and financial magazines.
Any current yield quotation of a class of the Portfolio which is used in such a
manner as to be subject to the provisions of Rule 482(d) under the Securities
Act of 1933, as amended, shall
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<PAGE>
consist of an annualized historical yield, carried at least to the nearest
hundredth of one percent, based on a specific seven-calendar-day period and
shall be calculated by dividing the net change during the seven-day period in
the value of an account having a balance of one share at the beginning of the
period by the value of the account at the beginning of the period, and
multiplying the quotient by 365/7. For this purpose, the net change in account
value would reflect the value of additional shares purchased with dividends
declared on the original share and dividends declared on both the original share
and any such additional shares, but would not reflect any realized gains or
losses from the sale of securities or any unrealized appreciation or
depreciation on portfolio securities. In addition, any effective annualized
yield quotation used by the Portfolio shall be calculated by compounding the
current yield quotation for such period by adding 1 to the product, raising the
sum to a power equal to 365/7, and subtracting 1 from the result.
The current and effective seven day yields at November 30, 1995 were 5.76% and
5.93% for the Institutional Class and 5.56% and 5.72% for the Investor Class,
respectively.
Although published yield information is useful to investors in reviewing a
class's performance, investors should be aware that the Portfolio's yield
fluctuates from day to day and that its yield for any given period is not an
indication or representation by the Portfolio of future yields or rates of
return on its shares. The yields of a class are neither fixed nor guaranteed,
and an investment in the Portfolio is not insured or guaranteed. Accordingly,
yield information may not necessarily be used to compare shares of the Portfolio
with investment alternatives which, like money market instruments or bank
accounts, may provide a fixed rate of interest. Also, it may not be appropriate
to compare directly the Portfolio's yield information to similar information of
investment alternatives which are insured or guaranteed.
Income calculated for the purpose of determining the yield of a class differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for a class may differ from the rate of
distribution the class paid over the same period or the rate of income reported
in the Portfolio's financial statements.
The Funds may advertise other forms of performance. For example, the Funds may
quote unaveraged or cumulative total returns reflecting the change in the value
of an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Any performance information may be presented
numerically or in a table, graph or similar illustration.
OTHER INFORMATION
The Funds may include other information in their advertisements including, but
not limited to (i) portfolio holdings and portfolio allocation as of certain
dates, such as portfolio diversification by
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instrument type, by instrument, by location of issuer or by maturity; (ii)
statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed by an investor to meet
specific financial goals; (iii) descriptions of the Funds' portfolio managers
and the portfolio management staff of the Adviser or summaries of the views of
the portfolio managers with respect to the financial markets; (iv) information
regarding the background, experience or areas of expertise of the Funds'
trustees; (v) ratings assigned the Fund by ratings organizations such as
Standard & Poor's Ratings Group, Moody's Investors Service, or Fitch Investors
Service, Inc.; (vi) the results of a hypothetical investment in a Fund over a
given number of years, including the amount that the investment would be at the
end of the period; and, (ix) the net asset value, net assets or number of
shareholders of a Fund as of one or more dates. The Fund may also compare the
Fund's operations to the operations of other funds or similar investment
products. Such comparisons may refer to such aspects of operations as the nature
and scope of regulation of the products and the products' weighted average
maturity, liquidity, investment policies, and the manner of calculating and
reporting performance.
In connection with its advertisements each Fund may provide "shareholders'
letters" to provide shareholders or investors an introduction to the Fund's, the
Trust's or any of the Trust's service provider's policies or business practices.
The Fund may also include in sales materials information regarding the Adviser
including the nature of its management techniques and its status as an entity
wholly owned by women.
4. MANAGEMENT
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust and their principal occupations during
the past five years are set forth below. Trustee deemed to be "interested
person" of the Trust as defined in the 1940 Act are marked with an asterisk.
*Janet Tiebout Hanson, Chairman and President.
President and Chief Executive Officer of Milestone Capital Management,
L.P., the Adviser to the Portfolio and President and Chief Executive
Officer of Milestone Capital Management Corp., the general partner of
the Adviser. Ms. Hanson was Managing Director of the Hanson Consulting
Group, Inc., a management consulting firm, from September 1993 to May
1994. From October 1991 to August 1993, she was VicePresident of the
Asset Management Division of Goldman, Sachs & Co., an investment
banking firm. Ms. Hanson was also with Goldman, Sachs & Co. from 1977
to 1987. During that period, she became Vice-President of Fixed Income
Sales and served as comanager of money market sales in New York. Her
address is 38 Forest Lane, Bronxville, New York 10708.
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*Dort A. Cameron III, Trustee.
Chairman of the Board of Milestone Capital Management Corp. Since 1984,
he has been the General Partner of BMA L.P., which is the General
Partner of Investment Limited Partnership, an investment partnership.
Since 1988, Mr. Cameron has been a General Partner of EBD L.P., which
is the General Partner of The Airlie Group, L.P., an investment
partnership. He has been Chairman of Entex Information Services, a
computer resale and service corporation, since August 1993. Mr. Cameron
is a Trustee and Chairman of the Finance Committee of Middlebury
College. His address is Airlie Farm, Old Post Road, Bedford, New York
10506.
*John D. Gilliam, Trustee.
Chief Financial Officer, Robert Wood Johnson Foundation, Princeton, New
Jersey. Former Limited Partner, Goldman, Sachs & Co. from 1987 to 1991.
From 1991 to 1994, Mr. Gilliam was Deputy Comptroller, Bureau of Asset
Management, in the Office of the Comptroller for the City of New York.
He was a Partner at Goldman, Sachs & Co. from 1973 to 1987. His address
is 700 Park Avenue, New York, New York 10021. Mr. Gilliam is currently
a Limited Partner at Goldman, Sachs & Co.
Karen S. Cook, Trustee.
Director of Client Services, Steinhardt Management Co., an investment
partnership. Trustee and Chair of the Investment Committee of Wheaton
College. Ms. Cook is also Vice-President of the Board of Trustees and
Chair of the Development Committee of the Episcopal School in New York
City. From 1989 until 1992, she was Managing Director of Alterna-Track,
a professional placement and consulting firm specializing in the
financial services industry. From 1975 until 1987, Ms. Cook was with
the Equity Division of Goldman, Sachs & Co., where she became a
Vice-President and senior block trader. Her address is 125 East 72nd
Street, New York, New York 10021.
Anne Brown Farrell, Trustee.
Former Vice-President, Fixed Income Division, Goldman, Sachs & Co. From
1973 through November 1994, Ms. Farrell was associated with Goldman
Sachs in various capacities including Money Market Sales and Trading,
and Fixed Income Administration. Her address is 34 Midwood Road,
Greenwich, Connecticut 06830.
Magna L. Dodge, Trustee.
Financial Consultant, Magna Dodge & Company, Inc. Ms. Dodge is also
Vice Chairman of the Board of Trustees of Middlebury College, and Vice
Chairman of the Budget and Finance Committee. She is also a member of
the Board of Directors of Planned Parenthood of Westchester and
Rockland, Inc. From June 1975 until June 1994, she was with Chemical
Bank and Manufacturers Hanover Trust Company, New York, prior to its
merger with Chemical. Ms. Dodge was a Managing Director in charge of
the Media and
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Entertainment Group. Her address is 20 Wood End Lane, Bronxville, New
York 10708.
*Michael Minikes, Trustee.
Senior Managing Director and Treasurer of The Bear Stearns Companies,
Inc. Mr. Minikes is also a member of the Board of Directors of the
Depository Trust Company, past chairman of the Securities Industry
Association Capital Committee, a former member of the NASD District 12
Business Conduct Committee, and a former director of the Securities
Industry Automation Corp.
Mr. Minikes joined Bear Stearns in 1978. Mr. Minikes became a general
partner and then a senior managing director when Bear Stearns
incorporated and went public in 1986. He is a member of the Firm's
Board of Directors, and Operations Committee. His address is 245 Park
Avenue, New York, New York, 10167.
Philip F. Strassler, Treasurer.
Chief Financial Officer of Milestone Capital Management, L.P., and
Partner of Marcum & Kliegman LLP. Mr. Strassler was formally President
of Philip F. Strassler CPA, P.C., an accounting firm. Before that, Mr.
Strassler was a Limited Partner of EBD L.P., an investment partnership
that is the General Partner of The Airlie Group, L.P., an investment
partnership. His address is 485 Underhill Boulevard, Syosset, New York
11791.
Jeffrey R. Hanson, Secretary.
Chief Operating Officer, Milestone Capital Management, L.P., and
Managing Director of the Hanson Consulting Group, Inc. Mr. Hanson's
address is 38 Forest Lane, Bronxville, New York 10708.
Janet Tiebout Hanson, Dort A. Cameron III, John D. Gilliam and Michael Minikes
are interested persons of the Trust as that term is defined in the 1940 Act.
Janet Tiebout Hanson and Jeffrey R. Hanson are married.
The following table sets forth the fees paid to each Trustee of the Company for
the period from November 30, 1994 to November 30, 1995.
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Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
From Company Benefits Benefits From Company
Accrued Upon And Fund
As Part Retirement Complex Paid
of Fund To Directors
Expenses
- --------------------------------------------------------------------------------
Janet T. Hanson $0 $0 $0 $0
Dort A. Cameron III $0 $0 $0 $0
John D. Gilliam $1,000 $0 $0 $1,000
Karen S. Cook $1,000 $0 $0 $1,000
Anne Brown Farrell $1,000 $0 $0 $1,000
Magna L. Dodge $1,000 $0 $0 $1,000
Michael Minikes $0 $0 $0 $0
INVESTMENT ADVISER
The Portfolio's investment adviser, Milestone Capital Management, L.P. (the
"Adviser") furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
portfolio transactions for the Portfolio. The Investment Advisory Agreement
between the Trust and the Adviser will remain in effect with respect to the
Portfolio for a period of 24 months and will continue in effect thereafter only
if its continuance is specifically approved at least annually by the Board or by
vote of the shareholders, and in either case, by a majority of the Trustees who
are not parties to the Investment Advisory Agreement or interested persons of
any such party at a meeting called for the purpose of voting on the Investment
Advisory Agreement.
The Investment Advisory Agreement is terminable without penalty by the Trust
with respect to the Portfolio on 60 days' written notice when authorized either
by vote of the Portfolio's shareholders or by a vote of a majority of the Board,
or by the Adviser on 60 days' written notice, and will automatically terminate
in the event of its assignment. The Investment Advisory Agreement also provides
that, with respect to the Portfolio, the Adviser shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
performance of its duties to the Portfolio, except for willful misfeasance, bad
faith or gross negligence in the performance of the Adviser's duties or by
reason of reckless disregard of the Adviser's obligations and duties under the
Investment Advisory Agreement.
For the services provided by the Adviser, the Trust pays the Adviser, with
respect to the Portfolio, an annual fee of 0.10% of the total average daily net
assets of the Portfolio. This fee is accrued by the Trust daily. The Adviser has
voluntarily agreed to waive up to 100% of the
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advisory fee of the Portfolio. In addition, the Adviser may waive up to 100% of
the shareholder servicing fee of each class. At any time, however, the Adviser
may rescind a voluntary fee waiver.
Under the Investment Advisory Agreement, the Adviser has agreed to reimburse the
Trust for certain of the Portfolio's operating expenses (exclusive of interest,
taxes, brokerage fees, distribution fees and organization and extraordinary
expenses, all to the extent such exclusions are permitted by applicable state
law) which in any year exceed the limits prescribed by any state in which the
Portfolio's shares are qualified for sale. The Adviser believes that currently
the most restrictive expense limitation imposed by any state is 2-1/2% of the
first $30 million of the Portfolio's average net assets, 2% of the next $70
million of its average net assets and 1-1/2% of its average net assets in excess
of $100 million. For the purpose of this obligation to reimburse expenses, the
Portfolio's annual expenses are estimated and accrued daily, and any appropriate
estimated payments will be made by the Adviser monthly.
For the period December 30, 1994 (commencement of operations) to November 30,
1995, the Adviser received advisory fees of $100,353, reflecting waivers of
$231,894.
Subject to the obligations of the Adviser to reimburse the Trust for its excess
expenses, the Trust has confirmed its obligation to pay all of its expenses,
including: interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; premiums of insurance for the Trust,
its Trustees and officers and fidelity bond premiums; applicable fees, interest
charges and expenses of third parties, including the Trust's manager, investment
adviser, investment subadviser, custodian, transfer agent and fund accountant;
fees of pricing, interest, dividend, credit and other reporting services; costs
of membership in trade associations; telecommunications expenses; funds
transmission expenses, auditing, legal and compliance expenses; cost of forming
the Trust and maintaining its existence; costs of preparing and printing the
Trust's prospectuses, statements of additional information and shareholder
reports and delivering them to existing shareholders; expenses of meetings of
shareholders and proxy solicitations therefor; costs of maintaining books and
accounts and preparing tax returns; costs of reproduction, stationery and
supplies; fees and expenses of the Trustees; compensation of the Trust's
officers and employees who are not employees of the Adviser, and costs of other
personnel (who may be employees of the Adviser) performing services for the
Trust; costs of Trustee meetings; Securities and Exchange Commission
registration fees and related expenses; and state or foreign securities laws
registration fees and related expenses.
The Adviser may carry out any of its obligations under the Investment Advisory
Agreement by employing, subject to the Board's supervision, one or more persons
who are registered as investment advisers or who are exempt from registration.
The Investment Advisory Agreement provides that the Adviser shall not be liable
for any act or omission of any subadviser except with respect to matters as to
which the Adviser specifically assumes responsibility in writing.
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ADMINISTRATOR
The Bank of New York acts as administrator to the Trust pursuant to an
Administration Agreement with the Trust. As administrator, The Bank of New York
provides management and administrative services necessary to the operation of
the Trust (which include, among other responsibilities, negotiation of contracts
and fees with, and monitoring of performance and billing of, the transfer agent
and custodian and arranging for maintenance of books and records of the Trust),
and provides the Trust with general office facilities. The Administration
Agreement will remain in effect for a period of eighteen months with respect to
the Portfolio and thereafter is automatically renewed each year for an
additional term of one year.
The Administration Agreement terminates automatically if it is assigned and may
be terminated without penalty with respect to the Portfolio by vote of the
Portfolio's shareholders or by either party on not more than 60 days' written
notice. The Administration Agreement also provides that The Bank of New York
shall not be liable for any error of judgment or mistake of law or for any act
or omission in the administration or management of the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of The Bank of New
York's duties or by reason of reckless disregard of its obligations and duties
under the Administration Agreement.
UNDERWRITER
Midwest Group Financial Services, Inc. (the "Underwriter") serves as the Trust's
statutory underwriter and acts as the agent of the Trust in connection with the
offering of shares of the Portfolio pursuant to an Underwriting Agreement. The
Underwriting Agreement will continue in effect for two years and will continue
in effect thereafter only if its continuance is specifically approved at least
annually by the Board or by vote of the shareholders entitled to vote thereon,
and in either case, by a majority of the Trustees who (i) are not parties to the
Underwriting Agreement, (ii) are not interested persons of any such party or of
the Trust and (iii) with respect to any class for which the Trust has adopted an
underwriting plan, have no direct or indirect financial interest in the
operation of that underwriting plan or in the Underwriting Agreement, at a
meeting called for the purpose of voting on the Underwriting Agreement. All
subscriptions for shares obtained by the Underwriter are directed to the Trust
for acceptance and are not binding on the Trust until accepted by it. The
Underwriter is reimbursed for all costs and expenses incurred in this capacity
but receives no further compensation under the Underwriting Agreement and is
under no obligation to sell any specific amount of Portfolio shares. The
Underwriter is an affiliate of MGF Service Corp., the Trust's transfer agent.
See "Transfer Agent".
The Underwriting Agreement provides that the Underwriter shall not be liable for
any error of judgment or mistake of law or in any event whatsoever, except for
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of reckless disregard of its obligations and duties under
the Underwriting Agreement.
The Underwriting Agreement is terminable with respect to the Portfolio without
penalty by the Trust on 60 days' written notice when authorized either by vote
of the Portfolio's shareholders
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or by a vote of a majority of the Board, or by the Underwriter on 60 days'
written notice. The Underwriting Agreement will automatically terminate in the
event of its assignment.
The Underwriter may enter into agreements with selected broker-dealers, banks,
or other financial institutions for distribution of shares of the Portfolio.
These financial institutions may charge a fee for their services and may receive
shareholders service fees even though shares of the Portfolio are sold without
sales charges or underwriting fees. These financial institutions may otherwise
act as processing agents, and will be responsible for promptly transmitting
purchase, redemption and other requests to the Portfolio.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through whom they purchase shares, which may include charges,
investment minimums, cutoff times and other restrictions in addition to, or
different from, those listed herein. Information concerning any charges or
services will be provided to customers by the financial institution. Investors
purchasing shares of the Portfolio in this manner should acquaint themselves
with their institution's procedures and should read this Prospectus in
conjunction with any materials and information provided by their institution.
The financial institution and not its customers will be the shareholder of
record, although customers may have the right to vote shares depending upon
their arrangement with the institution.
TRANSFER AGENT
MGF Service Corp. (the "Transfer Agent") acts as transfer agent and dividend
disbursing agent for the Trust pursuant to a Transfer Agency Agreement. The
Transfer Agency Agreement will remain in effect for a period of eighteen months
with respect to the Portfolio and thereafter is automatically renewed each year
for an additional term of one year.
Among the responsibilities of the Transfer Agent are, with respect to
shareholders of record: (1) answering shareholder inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Portfolio may be effected and certain other matters pertaining to the
Portfolio; (2) assisting shareholders in initiating and changing account
designations and addresses; (3) providing necessary personnel and facilities to
establish and maintain shareholder accounts and records, assisting in processing
purchase and redemption transactions and receiving wired funds; (4) transmitting
and receiving funds in connection with customer orders to purchase or redeem
shares; (5) verifying shareholder signatures in connection with changes in the
registration of shareholder accounts; (6) furnishing periodic statements and
confirmations of purchases and redemptions; (7) arranging for the transmission
of proxy statements, annual reports, prospectuses and other communications from
the Trust to its shareholders; (8) arranging for the receipt, tabulation and
transmission to the Trust of proxies executed by shareholders with respect to
meetings of shareholders of the Trust; and (9) providing such other related
services as the Trust or a shareholder may reasonably request.
The Transfer Agent or any sub-transfer agent or processing agent may also act
and receive compensation for acting as custodian, investment manager, nominee,
agent or fiduciary for its customers or clients who are shareholders of the
Portfolio with respect to assets invested in the
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Portfolio. The Transfer Agent or any sub-transfer agent or other processing
agent may elect to credit against the fees payable to it by its clients or
customers all or a portion of any fee received from the Trust or from the
Transfer Agent with respect to assets of those customers or clients invested in
the Portfolio. The sub-transfer agents or processing agents retained by the
Transfer Agent may be affiliated persons of the Transfer Agent
5. DETERMINATION OF NET ASSET VALUE
Pursuant to the rules of the Securities and Exchange Commission, the Board has
established procedures to stabilize the Portfolio's net asset value at $1.00 per
share. These procedures include a review of the extent of any deviation of net
asset value per share as a result of fluctuating interest rates, based on
available market rates, from the Portfolio's $1.00 amortized cost price per
share. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling Portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Trust has also established procedures to ensure
that portfolio securities meet the Portfolio's quality criteria.
In determining the approximate market value of Portfolio investments, the
Portfolio may employ outside organizations which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value.
6. PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities for the Portfolio usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities.
Purchases from underwriters of portfolio securities include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers include the spread between the bid and asked price.
There usually are no brokerage commissions paid for any purchases. While the
Trust does not anticipate that the Portfolio will pay any amounts of commission,
in the event the Portfolio pays brokerage commissions or other
transaction-related compensation, the payments may be made to broker-dealers who
pay expenses of the Portfolio that it would otherwise be obligated to pay
itself. Any transaction for which the Portfolio pays commissions or
transaction-related compensation will be effected at the best price and
execution available, taking into account the value of any research services
provided, or the amount of any payments for other services made on behalf of the
Portfolio, by the broker-dealer effecting the transaction.
Allocations of transactions to dealers and the frequency of transactions are
determined for the Portfolio by the Adviser in its best judgment and in a manner
deemed to be in the best interest of shareholders of the Portfolio rather than
by any formula. The primary consideration is prompt
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execution of orders in an effective manner and at the most favorable price
available to the Portfolio.
Investment decisions for the Portfolio will be made independently from those for
any other portfolio, account or investment company that is or may in the future
become managed by the Adviser or its affiliates. If, however, the Portfolio and
other portfolios, accounts, or investment companies managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each entity.
In some cases, this policy might adversely affect the price paid or received by
the Portfolio or the size of the position obtainable for the Portfolio. In
addition, when purchases or sales of the same security for the Portfolio and for
other investment companies managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large denomination purchases or sales.
7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Portfolio are sold on a continuous basis by the underwriter
without any sales charge. Shareholders may effect purchases or redemptions or
request any shareholder privilege in person at the Transfer Agent's offices
located at P. O. Box 5354, 312 Walnut Street, Cincinnati, Ohio 45202.
The Trust accepts orders for the purchase or redemption of shares on any day
that the New York Stock Exchange and the Federal Reserve Bank of New York are
open ("Fund Business Day") between the hours of 9:00 a.m. and 6:00 p.m. (Eastern
Time). The Trust does not determine net asset value, and does not accept orders,
on the days those institutions observe the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.
If the Public Securities Association recommends that the government securities
markets close early, the Trust reserves the right to advance the time at which
purchase and redemption offers must be received. In this event, a purchase or
redemption order will be executed at the net asset value next determined after
receipt. Investors who place purchase orders after the advanced time become
entitled to dividends on the following Fund Business Day. If a redemption
request is received after the advanced time, the Transfer Agent ordinarily will
wire redemption proceeds on the next Fund Business Day. In addition, the Trust
reserves the right to advance the time by which purchase and redemption orders
must be received for same day credit as otherwise permitted by the Securities
and Exchange Commission.
ADDITIONAL REDEMPTION MATTERS
The Trust may redeem shares involuntarily to reimburse the Portfolio for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to
transactions effected for the benefit of a shareholder which is applicable to
the Portfolio's shares as provided in the Prospectus from time
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to time.
Redemptions may be made wholly or partially in portfolio securities if the Board
determines that payment in cash would be detrimental to the best interests of
the Portfolio. The Trust has filed an election with the Securities and Exchange
Commission pursuant to which the Portfolio will only consider effecting a
redemption in portfolio securities if the particular shareholder is redeeming
more than $250,000 or 1% of the Portfolio's net asset value, whichever is less,
during any 90-day period.
8. TAXATION
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussions here and in
the Prospectus are not intended as substitutes for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Portfolio is not subject to federal income tax
on the portion of its net investment income (i.e., taxable interest, dividends
and other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Portfolio made during
the taxable year or, under specified circumstances, within twelve months after
the close of the taxable year, will be considered distributions of income and
gains of the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment
company must: (1) derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and 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, securities or
currencies (the "Income Requirement"); and (2) derive less that 30% of its gross
income (exclusive of certain gains on designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from the sale
or other disposition of stock, securities or foreign currencies (or options,
futures or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the regulated
investment company's investments in stock or securities (or options or futures
thereon). Because
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of the Short-Short Gain Test, the Portfolio may have to limit the sale of
appreciated securities that it has held for less than three months. However, the
Short-Short Gain Test will not prevent the Portfolio from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded for this purpose. Interest
(including original issue discount) received by the Portfolio at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by the Portfolio on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Portfolio at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Portfolio held the debt obligation.
Treasury Regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Portfolio must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of the Portfolio's assets
must consist of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as to
which the Portfolio has not invested more than 5% of the value of the
Portfolio's total assets in securities of such issuer and as to which the
Portfolio does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which the Portfolio controls and which are engaged in the same or
similar trades or businesses.
If for any taxable year the Portfolio does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Portfolio's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
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EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to 98% of ordinary
taxable income for the calendar year and 98% of capital gain net income for the
one-year period ended on October 31 of such calendar year (or, at the election
of a regulated investment company having a taxable year ending November 30 or
December 31, for its taxable year (a "taxable year election")). The balance of
such income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.
For purposes of the excise tax, a regulated investment company shall: (1) reduce
its capital gain net income (but not below its net capital gain) by the amount
of any net ordinary loss for the calendar year; and (2) exclude foreign currency
gains and losses incurred after October 31 of any year (or after the end of its
taxable year if it has made a taxable year election) in determining the amount
of ordinary taxable income for the current calendar year (and, instead, include
such gains and losses in determining ordinary taxable income for the succeeding
calendar year).
The Portfolio intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Portfolio may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will not qualify for the 70% dividends-received deduction
for corporate shareholders.
The Portfolio may either retain or distribute to shareholders its net capital
gain for each taxable year. The Portfolio currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Portfolio prior to the date on which the
shareholder acquired his shares.
Conversely, if the Portfolio elects to retain its net capital gain, the
Portfolio will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If the Portfolio elects to
retain its net capital gain, it is expected that the Portfolio also will elect
to have shareholders of record on the last day of its taxable year treated as if
each received a distribution of his pro rata share of such gain, with the result
that each shareholder will be required to report his pro rata share of such gain
on his tax return as long-term capital gain, will receive a refundable tax
credit for his pro rata share of tax paid by the Portfolio on the gain, and
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<PAGE>
will increase the tax basis for his shares by an amount equal to the deemed
distribution less the tax credit.
Distributions by the Portfolio that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio (or of another fund). Shareholders receiving
a distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Portfolio reflects undistributed
net investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Portfolio, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the Portfolio
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Portfolio) on December
31 of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Portfolio will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Portfolio that it is not subject to backup withholding or that it
is a corporation or other "exempt recipient".
SALE OR REDEMPTION OF SHARES
The Portfolio seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that the Portfolio will do this. In such a
case, a shareholder will recognize gain or loss on the sale or redemption of
shares of the Portfolio in an amount equal to the difference between the
proceeds of the sale or redemption and the shareholder's adjusted tax basis in
the shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Portfolio within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of the Portfolio will
be considered capital gain or loss and will be long-term capital gain or loss if
the shares were held for longer than one year. However, any capital loss arising
from the sale or redemption of shares held for six months or less will be
treated as a long-term capital loss to the
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<PAGE>
extent of the amount of capital gain dividends received on such shares. For this
purpose, the special holding period rules of Code Section 246(c)(3) and (4)
generally will apply in determining the holding period of shares. Long-term
capital gains of noncorporate taxpayers are currently taxed at a maximum rate
11.6% lower than the maximum rate applicable to ordinary income. Capital losses
in any year are deductible only to the extent of capital gains plus, in the case
of a noncorporate taxpayer, $3,000 of ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder"), depends on whether the income from the Portfolio is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Portfolio is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Portfolio, capital gain dividends and
amounts retained by the Portfolio that are designated as undistributed capital
gains.
If the income from the Portfolio is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Portfolio will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Portfolio may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Portfolio with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Portfolio, including
the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. Federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from
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<PAGE>
regulated investment companies often differ from the rules for U.S. Federal
income taxation described above. Shareholders are urged to consult their tax
advisers as to the consequences of these and other state and local tax rules
affecting investment in the Portfolio.
9. DISTRIBUTION PLAN
The Trust has adopted a distribution plan for the Service Shares. This Plan
provides that the Portfolio may incur distribution expenses related to the sale
of Service Shares of up to .50% per annum of the Portfolio's average daily net
assets attributable to such Shares. The Plan provides that the Portfolio may
finance activities which are primarily intended to result in the sale of Service
Shares, including, but not limited to, advertising, printing of prospectuses and
reports for other than existing shareholders, preparation and distribution of
advertising material and sales literature and payments to dealers and
shareholder servicing agents who enter into agreements with the Trust or its
distributor.
In approving the Plan in accordance with the requirements of Rule 12b-1 under
the 1940 Act, the Trustees (including the Qualified Trustees, being Trustees who
are not "interested persons", as defined by the 1940 Act, of the Trust and have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan) considered various factors and determined that
there is a reasonable likelihood that the Plan will benefit the Service Shares
of the Portfolio and its shareholders. The Plan will continue in effect from
year to year if specifically approved annually (a) by the majority of such
Portfolio's outstanding Service voting Service Shares or by the Board of
Trustees and (b) by the vote of a majority of the Qualified Trustees. While the
Plan remains in effect, the Trust's Principal Financial Officer shall prepare
and furnish to the Board of Trustees a written report setting forth the amounts
spent by the Portfolio under the Plan and the purposes for which such
expenditures were made. The Plan may not be amended to increase materially the
amount to be spent for distribution without shareholder approval and all
material amendments to the Plan must be approved by the Board of Trustees and by
the Qualified Trustees cast in person at a meeting called specifically for that
purpose. While the Plan is in effect, the selection and nomination of the
Qualified Trustees shall be made by those Qualified Trustees then in office.
10. OTHER INFORMATION
CUSTODIAN AND ACCOUNTING AGENT
Pursuant to a Custodian Contract with the Trust, The Bank of New York, New York,
New York, acts as the custodian of the Portfolio's assets. The custodian's
responsibilities include safeguarding and controlling the Portfolio's cash and
securities and determining income payable on and collecting interest on
Portfolio investments.
The Bank of New York also serves as the accounting agent for the Trust. As the
accounting agent, The Bank of New York is responsible for calculating the net
asset value of each class of shares of the Portfolio and for maintaining the
Trust's books and records.
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<PAGE>
AUDITORS
McGladrey & Pullen, LLP, New York, New York, independent auditors, acts as
auditors for the Trust.
THE TRUST AND ITS SHAREHOLDERS
The Trust was originally organized as a Delaware business trust on July 14,
1994, under the name Learning Assets(TM). By Certificate of Amendment filed with
the Secretary of State in Delaware on December 1, 1994, and amendment to its
Trust Instrument and Bylaws, the Trust changed its name to The Milestone Funds.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. The Trust Instrument contains an express disclaimer of
shareholder liability for the debts, liabilities, obligations, and expenses of
the Trust and requires that a disclaimer be given in each contract entered into
or executed by the Trust or the Trustees. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply, no contractual limitation of
liability was in effect and the portfolio is unable to meet its obligations.
The Trust Instrument further provides that the Trustees shall not be liable to
any person other than the Trust or its shareholders; moreover, the Trustees
shall not be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Portfolio capital consists of shares of beneficial interest. Shares are fully
paid and nonassessable, except as set forth above with respect to Trustee and
shareholder liability. Shareholders representing 10% or more of the Trust or a
series may, as set forth in the Trust Instrument, call meetings of the Trust or
series for any purpose related to the Trust or series, as the case may be,
including, in the case of a meeting of the entire Trust, the purpose of voting
on removal of one or more Trustees. The Trust or any series may be terminated
upon the sale of its assets to, or merger with, another open-end management
investment company or series thereof, or upon liquidation and distribution of
its assets. Generally such terminations must be approved by the vote of the
holders of a majority of the outstanding shares of the Trust or the series;
however, the Trustees may, without prior shareholder approval, change the form
of organization of the Trust by merger, consolidation or incorporation. If not
so terminated or reorganized, the Trust and its series will continue
indefinitely. Under the Trust Instrument, the Trustees may, without shareholder
vote, cause the Trust to merge or consolidate into one or more trusts,
partnerships
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<PAGE>
or corporations or cause the Trust to be incorporated under Delaware law, so
long as the surviving entity is an open-end management investment company that
will succeed to or assume the Trust's registration statement.
OWNERSHIP OF SHARES OF THE PORTFOLIO
As of April o, 1996, the Trustees and officers of the Portfolio in the aggregate
owned less than one percent of the outstanding shares of the Portfolio. Also, as
of that date, the shareholders listed below owned of record more than five
percent of the Portfolio:
% of
Shares of Portfolio
Shareholder Portfolio Owned Owned
----------- --------------- ----------
Bear, Stearns & Co. 56,792,000 8.00%
One Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns & Co. 37,533,848 5.00%
One Metrotech Center North
Brooklyn, NY 11201-3859
Louisiana Teachers Retirement Plan 100,000,000 14.00%
101 Carnegie Center
Princeton, NJ 08540
CNA Insurance 50,191,753 7.00%
Trustee for Continental Short-Term Investment
41 South
Chicago, Illinois 60685
FINANCIAL STATEMENTS
The audited financial statement of the Trust for the fiscal year ended November
30, 1995 are incorporated herein by reference from the Audited Annual Report.
Shareholders will receive a copy of the Audited Annual Report at no additional
charge when requesting a copy of the Statement of Additional Information.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS.
Included in the Prospectus (Part A):
None
Included in the Statement of Additional Information (Part B):
Financial Statements and the Reports thereon for The Milestone
Funds filed herein for the fiscal year ended November 30, 1995
are incorporated into Part B from the Trust's 1995 Annual
Report to Shareholders as filed with the Securities and
Exchange Commission by the Registrant on Form N-30D on
February 13, 1996, accession number 0000950717-96-000096.
Included in Part C:
None
(B) EXHIBITS:
EX-99.B1. Copy of Trust Instrument dated July 14, 1994, as amended and
restated December 1, 1994 (filed as Exhibit 1 to Pre-effective
Amendment No. 3 dated December 5, 1994 ("Pre-effective 3"), to
Registrant's Registration Statement on Form N-1A filed on July
14, 1994 (File No. 33-81574) ("Registration Statement") and
incorporated herein by reference).*
EX-99.B2. Copy of Bylaws dated July 14, 1994, as amended and restated
December 1, 1994 (filed as Exhibit 2 to Pre-effective 3 and
incorporated herein by reference).*
EX-99.B3. Inapplicable.
EX-99.B4. Inapplicable.
EX-99.B5. Form of Investment Advisory Agreement to be between Registrant
and Milestone Capital Management L.P.*
EX-99.B6. (a) Revised Form of Distribution Agreement to be between
Registrant and Forum Financial Services, Inc. (filed
as Exhibit 6(a) to Pre-effective Amendment No. 1,
dated September 16, 1994 ("Pre-effective 1"), to
Registration Statement and incorporated herein by
reference).*
<PAGE>
(b) Form of Co-distribution Agreement to be between
Registrant and Bear, Stearns & Co. Inc. (filed as
Exhibit 6(b) to Pre-effective Amendment No. 2 to
Registration Statement ("Pre-effective 2") and
incorporated herein by reference).*
(c) Form of Primary Dealer Agreement to be between Forum
Financial Services, Inc. and Bear, Stearns & Co. Inc.*
(d) Form of Underwriting Agreement to be between
Registrant and Fund/Plan Broker Services, Inc. (filed
as Exhibit 6(d) to Post-Effecitive Amendment No. 3
dated February 23, 1996 ("Post-Effecitve 3"), to
Registration Statement).*
(e) Form of Underwriting Agreement to be between
Registrant and Midwest Group Financial Services, Inc.
(filed herewith).
(f) Form of Selected Dealer Agreement to be between
Midwest Group Financial Services, Inc. and selected
dealers (filed herewith).
EX-99.B7. Inapplicable.
EX-99.B8. (a) Form of Custodian Agreement (filed as Exhibit 8 to
Pre-effective 2 and incorporated herein by
reference).*
(b) Form of Custodian Agreement to be between Registrant
and The Bank of New York (filed as Exhibit 8(b) to
Post-Effecitive 3).*
EX-99.B9. (a) Revised Form of Administration Agreement to be between
Registrant and Forum Financial Services, Inc. (filed
as Exhibit 9(a) to Pre-effective 1 and incorporated
herein by reference).*
(b) Revised Form of Transfer Agency Agreement to be
between Registrant and Forum Financial Corp. (filed as
Exhibit 9(b) to Pre-effective 1 and incorporated
herein by reference).*
(c) Revised Form of Fund Accounting Agreement with Forum
Financial Corp. (filed as Exhibit 9(c) to
Pre-effective 1 and incorporated herein by
reference).*
(d) Form of Client Services Agreement to be between
Milestone Capital Management, L.P. and Bear, Stearns &
Co. Inc. (filed as Exhibit 9(d) to Pre-effective 2 and
incorporated herein by reference).*
(e) Form of Administration Agreement to be between
Registrant and The Bank of New York (filed as Exhibit
9(e) to Post-Effecitive 3).*
(f) Form of Transfer Agency Agreement to be between
Registrant and Fund/Plan Services, Inc. (filed as
Exhibit 9(f) to Post-Effecitive 3).*
(g) Form of Accounting Agreement to be between Registrant
and The Bank of New York (filed as Exhibit 9(g) to
Post-Effecitive 3).*
<PAGE>
(h) Form of Cash Management Agreement to be between
Registrant and The Bank of New York (filed as Exhibit
9(h) to Post-Effecitive 3).*
(i) Form of Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement to be between the
Registrant and MGF Service Corp. (filed herewith).
EX-99.B10. Opinion of Counsel, Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel (filed as Exhibit 10 to Pre-effective 3 and
incorporated herein by reference).*
EX-99.B11. (a) Consent of Independent Auditors, McGladrey & Pullen
(filed herewith).
(b) Consent of Legal Counsel, Kramer Levin Naftalis Nessen
Kamin & Frankel (filed herewith).
EX-99.B12. Rule 12b-1 Plan for the Service Shares of the Registrant
(filed herewith).
EX-99.B13. Investment Representation letter (filed as Exhibit 13 to
Pre-effective 3 and incorporated herein by reference).*
EX-99.B14. Inapplicable.
EX-99.B15. Inapplicable.
EX-99.B16. Inapplicable.
EX-27.B17. (a) Financial Data Schedule - Treasury Obligations
Portfolio - Institututional Shares.
(b) Financial Data Schedule - Treasury Obligations
Portfolio - Investor Shares.
EX-99.B18. Multiclass Plan adopted June 14, 1995 pursuant to Rule 18f-3
under the 1940 Act.*
Other Exhibits:
EX-99.B(A) Power of Attorney, Janet Tiebout Hanson, Chairman and
President (filed as
Exhibit
A to Pre-effective 2 and incorporated herein by reference).*
EX-99.B(B) Power of Attorney, Dort A. Cameron III, Trustee (filed as
Exhibit B to Pre- effective 2 and incorporated herein by
reference).*
EX-99.B(C) Power of Attorney, Phylis M. Esposito, Trustee (filed as
Exhibit C to Pre-
effective
2 and incorporated herein by reference).*
EX-99.B(D) Power of Attorney, Karen S. Cook, Trustee (filed as Exhibit D
to Pre- effective 3
and incorporated herein by reference).*
<PAGE>
EX-99.B(E) Power of Attorney, Anne Brown Farrell, Trustee (filed as
Exhibit E to Pre- effective
3 and incorporated herein by reference).*
EX-99.B(F) Power of Attorney, John D. Gilliam, Trustee (filed as Exhibit
F to Pre- effective 3
and incorporated herein by reference).*
EX-99.B(G) Power of Attorney, Magna L. Dodge, Trustee.*
* Previously filed.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF FEBRUARY 13, 1996.
Title of Class of Shares
of Beneficial Interest Number of Holders
---------------------- -----------------
The Milestone Funds
Treasury Obligations Portfolio 180
ITEM 27. INDEMNIFICATION.
Section 10.01 of the Registrant's Trust Instrument provides that a
Trustee, when acting in such capacity, will not be personally liable to any
person other than the Trust or Shareholders for any act, omission or obligation
of the Trust or any Trustee. Section 10.01 also provides that a Trustee, when
acting in such capacity, will not be liable to the Trust or to Shareholder
except for acts or omissions constituting willful misfeasance, bad faith, gross
negligence or reckless disregard of the Trustee's duties under the Trust
Instrument.
The general effect of Section 10.02 of the Registrant's Trust
Instrument is to indemnify existing or former trustees and officers of the Trust
to the fullest extent permitted by law against liability and expenses. There is
no indemnification if, among other things, any such person is adjudicated liable
to the Registrant or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office, Section 10.02 also provides that the Trust may obtain
insurance coverage for the indemnification rights provided for Section 10.02.
The foregoing description of the limitation of liability,
indemnification and insurance provisions of the Trust Instrument is modified in
its entirety by the provisions of Article X of the Trust Instrument contained in
this Registration Statement as Exhibit 1 and incorporated herein by reference.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in
<PAGE>
the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
The description of Milestone Capital Management L.P. under the caption
"Management of the Trust - The Adviser" and "Management - Investment Adviser" in
the Prospectus and Statement of Additional Information, constituting certain of
Parts A and B, respectively, of this Registration Statement, are incorporated by
reference herein.
The address of Milestone Capital Management L.P. is One Odell Plaza,
Yonkers, New York 10701. The General Partner of Milestone Capital Management
L.P. is Milestone Capital Management Corp. The principal shareholder of
Milestone Capital Management Corp. is Janet Tiebout Hanson. The following are
the partners and executive officers of Milestone Capital Management L.P.,
including any business connections of a substantial nature which they have had
in the past two years.
Janet Tiebout Hanson, President, Chief Executive Officer, and Chief
Investment Officer
President and Chief Executive Officer of Milestone Capital
Management Corp., One Odell Plaza, Yonkers, New York 10701.
From September 1993 to May 1994, Ms. Hanson was Managing
Director of the Hanson Consulting Group, Ltd., 38 Forest Lane,
Bronxville, New York 10708. From October 1991 to August 1993,
she was Vice President of Goldman Sachs & Co., 85 Broad
Street, New York, New York 10004.
Dort A. Cameron III, Limited Partner
Chairman of the Board of Milestone Capital Management Corp.;
General Partner of BMA L.P., 201 Main Street, Fort Worth,
Texas 76102; General Partner of EBD L.P., 201 Main Street,
Fort Worth, Texas 76102; Chairman of Entex Information
Services, 6 International Drive, Rye Brook, New York 10573.
Mary Dillon Reynolds, Limited Partner
Member, Trustees' Advisory Council, Fairfield College,
Fairfield, Connecticut. Since leaving Prudential Capital
Management Group in 1991, Ms. Reynolds has not been actively
employed, but has pursued personal interests.
Jeffrey R. Hanson, Chief Operating Officer
Managing Director of the Hanson Consulting Group, 38 Forest
Lane, Bronxville, New York 10708.
Michael Minikes, Trustee
<PAGE>
Senior Managing Director and Treasurer of The Bear Stearns
Companies, Inc., 245 Park Avenue, New York, New York, 10167.
Philip F. Strassler, Chief Financial Officer
President of Philip F. Strassler CPA, P.C., an accounting
firm, located at 305 Northern Blvd., Suite 202, Great Neck,
New York, 11021.
Marc H. Pfeffer, Chief Investment Officer
Senior Portfolio Manager, Milestone Capital Management, L.P.
From 1993 to December 1994, Mr. Pfeffer was a vice-president
in the Asset Management Division of Goldman Sachs & Co., 85
Broad Street, New York, New York 10004.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Fund/Plan Broker Services, Inc., the Registrant's underwriter,
serves as underwriter to the Registrant.
(b) Not applicable.
(c) Not applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 (the "1940
Act") and the Rules thereunder are maintained at the offices of The Bank of New
York, 90 Washington Street, New York, New York 10286. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts and
deliveries of securities and receipts and disbursements of cash are maintained
at the offices of the Registrant's custodian, as listed under "Other Information
Custodian" in Part B to this Registration Statement.
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to:
(i) contain in its Trust Instrument or Bylaws provisions for assisting
shareholder communications and for the removal of trustees
substantially similar to those provided for in Section 16(c) of the
1940 Act, except to the extent such provisions are mandatory or
prohibited under applicable Delaware law;
(ii) furnish each person to whom a prospectus is delivered with a copy
of Registrant's latest annual report to shareholders relating to the
portfolio or class thereof to which the prospectus relates upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant pursuant to Rule 485(a) under
the Securities Act of 1933 has duly caused this amendment to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York on the 29th day
of April, 1996.
THE MILESTONE FUNDS
By:/s/Janet Tiebout Hanson
---------------------------------
Janet Tiebout Hanson, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons on the 29th day of April, 1996.
Name Title Date
---- ----- ----
/s/Philip F. Strassler Treasurer 4/29/96
(Philip F. Strassler)
/s/Dort A. Cameron III Trustee 4/29/96
(Dort A. Cameron III)
________________________________________ Trustee 4/29/96
(Michael Minikes)
/s/Karen S. Cook Trustee 4/29/96
(Karen S. Cook)
/s/Anne Brown Farrell Trustee 4/29/96
(Anne Brown Farrell)
/s/John D. Gilliam Trustee 4/29/96
(John D. Gilliam)
/s/Magna L. Dodge Trustee
(Magna L. Dodge)
/s/Jeffrey R. Hanson Secretary
(Jeffrey R. Hanson)
<PAGE>
INDEX TO EXHIBITS
Exhibit
EX-99.B6(e) Form of Underwriting Agreement to be between Registrant
and Midwest Group Financial Services, Inc.
EX-99.B6(f) Form of Selected Dealer Agreement to be between Midwest
Group Financial Services, Inc. and selected dealers.
EX-99.B9(i) Form of Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement to be between the
Registrant and MGF Service Corp.
EX-99.B11(a) Consent of Independent Auditors, McGladrey & Pullen.
EX-99.B11(b) Consent of Legal Counsel, Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel.
EX-99.B12 Rule 12b-1 Plan for the Service Shares of the
Registrant.
EX-27.B17(a) Financial Data Schedule - Treasury Obligations
Portfolio - Institutional Shares.
EX-27.B17(b) Financial Data Schedule - Treasury Obligations
Portfolio - Investor Shares.
EX-99.B6(e)
FORM OF UNDERWRITING AGREEMENT TO BE BETWEEN
REGISTRANT AND MIDWEST GROUP FINANCIAL SERVICES, INC.
<PAGE>
UNDERWRITING AGREEMENT
This Agreement made as of _______, 1996 by and between The Milestone
Funds, a Delaware business trust (the "Trust"), and Midwest Group Financial
Services, Inc., an Ohio corporation ("Underwriter").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities
and Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of each series of shares of the Trust (the "Series");
NOW THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
The Trust hereby appoints Underwriter as its exclusive agent
for the distribution of the Shares, and Underwriter hereby accepts such
appointment under the terms of this Agreement. While this Agreement is in force,
the Trust shall not sell any Shares except on the terms set forth in this
Agreement. Notwithstanding any other provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares whenever, in its sole discretion, it
seems such action to be desirable.
2. Sale and Repurchase of Shares
(a) Underwriter will have the right, as agent for the Trust,
to enter into dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public offering
price (as defined in subparagraph 2(e) hereof) stated in the Trust's effective
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, included the then current prospectus and statement of additional
information (the "Registration Statement"). Upon receipt of an order to purchase
Shares from a dealer with whom Underwriter has a dealer agreement, Underwriter
will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
<PAGE>
(c) Underwriter will also have the right to take, as agent for
the Trust, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
(d) The public offering price for the Shares of each Series
shall be the respective net asset value of the Shares of that Series then in
effect, plus any applicable sales charge determined in the manner set forth in
the Registration Statement or as permitted by the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder. In
no event shall any applicable sales charge exceed the maximum sales charge
permitted by the Rules of Fair Practice of the NASD.
(e) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Trust or by another entity on behalf of the Trust.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
(f) On every sale, the Trust shall receive the applicable net
asset value of the Shares promptly, but in no event later than the third
business day following the date on which Underwriter shall have received an
order for the purchase of the Shares.
(g) Upon receipt of purchase instructions, Underwriter will
transmit such instructions to the Trust or its transfer agent for registration
of the Shares purchased.
(h) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(i) Underwriter, as agent of and for the account of the Trust,
may repurchase the Shares at such prices and upon such terms and conditions as
shall be specified in the Registration Statement.
3. Sale of Shares by the Trust.
The Trust reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell
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<PAGE>
Shares to its Shareholders or to other persons approved by Underwriter at not
less than net asset value and to issue Shares in exchange for substantially all
the assets of any corporation or trust or for the shares of any corporation or
trust.
4. Basis of Sale of Shares.
Underwriter does not agree to sell any specific number of
Shares. Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) Underwriter will conform to the Rules of Fair Practice of
the NASD and the securities laws of any jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter
has a dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or
broker, or otherwise, under all applicable State or federal laws required in
order that Shares may be sold in such States as may be mutually agreed upon by
the parties.
(e) Underwriter shall not make, or permit any representative,
broker or dealer to make, in connection with any sale or solicitation of a sale
of the Shares, any representations concerning the Shares except those contained
in the then current prospectus and statement of additional information covering
the Shares and in printed information approved by the Trust as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all
information, financial statements and other papers which Underwriter may
reasonably request for use in connection with the distribution of the Shares,
and this shall include, but shall not
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<PAGE>
be limited to, one certified copy, upon request by Underwriter, of all financial
statements prepared for the Trust by independent public accountants.
7. Expenses.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Trust or the Trust's
investment adviser (the "Adviser") in accordance with agreements between them as
permitted by applicable law, including the Act and rules and regulations
promulgated thereunder.
8. Indemnification of Trust.
Underwriter agrees to indemnify and hold harmless the Trust,
the Adviser and each person who has been, is, or may hereafter be a trustee,
director, officer, employee, partner, shareholder or control person of the Trust
or the Adviser, against any loss, damage or expense (including the reasonable
costs of investigation) reasonably incurred by any of them in connection with
any claim or in connection with any action, suit or proceeding to which any of
them may be a party, which arises out of or is alleged to arise out of or is
based upon any untrue statement or alleged untrue statement of a material fact,
or the omission or alleged omission to state a material fact necessary to make
the statements not misleading, on the part of Underwriter or any agent or
employee of Underwriter or any other person for whose acts Underwriter is
responsible, unless such statement or omission was made in reliance upon written
information furnished by the Trust or the Adviser. Underwriter likewise agrees
to indemnify and hold harmless the Trust, the Adviser and each such person in
connection with any claim or in connection with any action, suit or proceeding
which arises out of or is alleged to arise out of Underwriter's failure to
exercise reasonable care and diligence with respect to its services, if any,
rendered in connection with investment, reinvestment, automatic withdrawal and
other plans for Shares. The terms "expenses" for purposes of this and the next
paragraph includes amounts paid in satisfaction of judgments or in settlements
which are made with Underwriter's consent. The foregoing rights of
indemnification shall be in addition to any other rights to which the Trust, the
Adviser or each such person may be entitled as a matter of law.
9. Indemnification of Underwriter.
Underwriter, its directors, officers, employees, shareholders
and control persons shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad
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<PAGE>
faith or gross negligence on the part of any of such persons in the performance
of Underwriter's duties or from the reckless disregard by any of such persons of
Underwriter's obligations and duties under this Agreement. The Trust will
advance attorneys' fees or other expenses incurred by any such person in
defending a proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is not
entitled to indemnification. Any person employed by Underwriter who may also be
or become an officer or employee of the Trust shall be deemed, when acting
within the scope of his employment by the Trust, to be acting in such employment
solely for the Trust and not as an employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without the
payment of any penalty, in the event of its assignment. This Agreement may be
amended only if such amendment is approved (i) by Underwriter, (ii) either by
action of the Board of Trustees of the Trust or at a meeting of the Shareholders
of the Trust by the affirmative vote of a majority of the outstanding Shares,
and (iii) by a majority of the Trustees of the Trust who are not interested
persons of the Trust or of Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and shall
remain in full force and effect for a period of two (2) years from the date of
its execution (unless terminated automatically as set forth in Section 10), and
from year to year thereafter, subject to annual approval (i) by Underwriter,
(ii) by the Board of Trustees of the Trust or a vote of a majority of the
outstanding Shares, and (iii) by a majority of the Trustees of the Trust who are
not interested persons of the Trust or of Underwriter by vote cast in person at
a meeting called for the purpose of voting on such approval.
12. Limitation of Liability.
The term "The Milestone Funds" means and refers to the
Trustees from time to time serving under the Trust's Agreement and Declaration
of Trust as the same may subsequently thereto have been, or subsequently hereto
be, amended. 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 bind only the trust property
of the Trust, as provided in the
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<PAGE>
Agreement and Declaration of Trust of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees and Shareholders of the
Trust and signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees and Shareholders 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 its Agreement and Declaration of Trust.
13. New Series.
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust established
during the initial or renewal term of this Agreement.
14. Successor Investment Company.
Unless this Agreement has been terminated in accordance with
Paragraph 10, the terms and provisions of this Agreement shall become
automatically applicable to any investment company which is a successor to the
Trust as a result of reorganization, recapitalization or change of domicile.
15. Severability.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the State
of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretation thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
17. Notices.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party
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<PAGE>
at such address as such other party may designate for the receipt of such
notice. Until further notice to the other party, it is agreed that the address
of the Trust for this purpose shall be One Odell Plaza, Yonkers, New York 10701,
and that the address of Underwriter for this purpose shall be 312 Walnut Street,
Cincinnati, Ohio 45202.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused
this Agreement to be signed in duplicate on their behalf, all as of the day and
year first above written.
ATTEST: THE MILESTONE FUNDS
__________________________ By:_____________________________
Its:____________________________
ATTEST: MISWEST GROUP FINANCIAL
SERVICES, INC.
___________________________ By:_____________________________
Its:____________________________
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EX-99.B6(f)
FORM OF SELECTED DEALER AGREEMENT TO BE BETWEEN MIDWEST GROUP FINANCIAL
SERVICES, INC. AND SELECTED DEALERS
<PAGE>
THE MILESTONE FUNDS
SELECTED DEALER AGREEMENT
AGREEMENT made this ____________ day of ________, 19____, among Midwest
Group Financial Services, Inc. ("Midwest"), a corporation organized under the
laws of the State of Ohio with its principal place of business at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202, MGF Service Corp. ("MGF"), a
corporation organized under the laws of the state of Ohio with its principal
place of business at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202, and
____________________________________, a member of the National Association of
Securities Dealers, Inc. ("Dealer").
WHEREAS, Midwest services as the principal underwriter for current and
future series (each a "Portfolio" and collectively the "Portfolios") of The
Milestone Funds (the "Trust") pursuant to a distribution agreement (the
"Underwriting Agreement") and its affiliate MGF services as the transfer agent
and dividend disbursing agent for each Portfolio pursuant to a Transfer,
Dividend Disbursing, Shareholder Service and Plan Agency Agreement (the
"Transfer Agent Agreement") with the Trust and, as described in the Portfolios'
Prospectus, may subcontract any or all of its functions to one or more qualified
sub-transfer agents or processing agents; and
WHEREAS, Midwest and Dealer, acting as a Selected Dealer as described
in the Portfolios' Prospectus, desire to document their procedures regarding the
purchase, redemption and transfer of Portfolio shares;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained and other valuable consideration, Midwest and Dealer
agree as follows:
SECTION 1. SERVICES; COMPENSATION
Dealer shall perform some or all of the services described in Exhibit A
hereto (the "Services") in connection with its purchase and redemption of shares
of the Portfolios at the direction of, and as agent for, its customers. Dealer
will bear all expenses incurred by it or its agents in performing the Services.
Dealer shall receive no consideration under this agreement in consideration of
these Services. Dealer shall act only as agent for its customers in all purchase
and redemption transactions and in furnishing information regarding the Trust,
the Portfolios or the Trust shares and shall not act as agent for the Trust.
<PAGE>
SECTION 2. RECORDKEEPING
Dealer represents to Midwest and to the Trust that it will comply with
all recordkeeping, reporting, account maintenance and other requirements imposed
upon Dealer or the Trust by applicable state and Federal laws. Dealer also
represents that to the extent required by the Internal Revenue Code of 1986 and
applicable Internal Revenue Service regulation it will (i) obtain and maintain
for each customer for which Dealer maintains an account and, unless otherwise
agreed to, for each customer to whom Dealer otherwise provides service, a
certified taxpayer identification number and (ii) prepare and distribute all
Form 1099s and Individual Retirement Account reporting forms to each of Dealer's
or its affiliates' customers who hold Portfolio shares in "street name" or
through an omnibus account with MGF.
SECTION 3. PURCHASE AND REDEMPTION ORDERS
Dealer shall purchase (with funds to be subsequently delivered as
provided in Section 4) and redeem (which for purposes hereof includes exchange)
shares of a Portfolio by written, including facsimile, or oral order ("Orders")
for the account of Dealer or Dealer's various customers, whether the records of
the customers' holdings of Portfolio shares are maintained by MGF or by Dealer
on behalf of the customers. Dealer represents that it will have appropriate
power to transmit Orders on behalf of its customers. Upon the Trust's request,
to the extent necessary for the parties to comply with applicable securities
laws and not inconsistent with Dealer's agreement with its customers, Dealer
shall provide a list of all Trust shareholder accounts maintained by Dealer,
showing each account name, address and share holding. Dealer shall provide the
Trust with such other information as the Trust may reasonably request concerning
the location (by state) of accounts to which shares are sold and the amounts
thereof.
SECTION 4. ORDER PRICING; DELIVERY OF FUNDS; DIVIDENDS
(a) All Orders will be priced at and effected immediately after the
next determined net asset value of the applicable Portfolio after receipt of the
Order by MGF in proper form and, if necessary, confirmation of the Order. Orders
may be confirmed by telephone call or otherwise as MGF deems appropriate.
(b) With respect to each purchase Order, Dealer shall deliver funds on
deposit at a Federal Reserve Bank ("Fed Funds") by wire or otherwise to the
applicable Portfolio's account as designated in the Portfolio's Prospectus or,
as may be agreed to by MGF, Dealer and the Trust. Proceeds of any redemption
Order will be delivered by MGF (i) to Dealer to the account listed on Exhibit B
or such other account as Dealer may designate in writing (the "Account") on the
day a redemption Order is effected
2
<PAGE>
or (ii) to a shareholder of a Portfolio in accordance with the procedures
contained in the Portfolio's Prospectus.
(c) Shares of a Portfolio purchased by Order will become eligible to
receive dividends on the day that the Order is priced (in accordance with
Section 4(a) or, if applicable, Section 5(c)) so long as MGF, on behalf of the
Trust, has received Fed Funds form Dealer by 4:00 p.m., Eastern Time, on that
day.
SECTION 5. DELAYED PAYMENTS
(a) If MGF, on behalf of the Trust, does not receive a wire by the
times indicated in Section 4 due to errors made by Dealer or any of its
affiliates or agents, Dealer will pay MGF a fee based on and in the same amount
as any overdraft fees and interest charges incurred by MGF or the Trust with
respect to the transaction. If MGF does not receive payment for shares purchased
on the same day as an Order, MGF and Midwest reserve the right, without notice,
either to cancel the sale or to sell the shares purchased back to the Trust, and
in either case, Dealer shall be responsible for any loss, including loss of
profit, suffered by MGF, Midwest or the Trust resulting from Dealer's failure to
make payment.
(b) If Dealer does not receive redemption proceeds by the time
indicated in the then current Prospectors of the Trust, due to errors made by
MGF, the Trust or the Trust's custodian (acting in that capacity) or any of
MGF's affiliates or agents, Midwest will pay Dealer an amount equal to any
overdraft fees and interest charges that would be incurred by the Trust for an
equivalent overdraft at its custodian.
(c) If Dealer delivers Fed Funds with respect to an Order but fails to
notify MGF of the Order prior to the time at which the Order would be priced
(had the Order been placed at the time of receipt of the funds), the purchase
will be priced at the net asset value determined on the Fund Business Day (as
defined in the applicable Prospectus) after the day the funds are received.
SECTION 6. INFORMATION PERTAINING TO THE SHARES
(a) Dealer and its officers, employees and agents are not authorized to
make any representations concerning the Trust, the Portfolios or the Trust
shares except accurate communication of factual information contained in the
then-current prospectus and statement of additional information of the Trust and
in such printed information subsequently issued by the trust or Midwest as
information supplemental to the prospectus and statement of additional
information.
(b) Dealer will not offer or sell any of the shares except under
circumstances that will result in compliance with the
3
<PAGE>
applicable Federal and state securities laws, including any applicable
requirements to deliver confirmations to its customers. In connection with sales
and offers to sell shares, Dealer will furnish to each person to whom any such
sale or offer is made, a copy of the Portfolio's then current prospectus.
Midwest shall advise Dealer as to the states or other jurisdictions in which
shares of the Portfolio have been qualified for sale under, or are exempt from
the requirements of the respective securities laws of such states and
jurisdictions.
(c) Midwest shall be under no liability to Dealer except for lack of
good faith and for obligations expressly assumed by Midwest herein. Nothing
herein contained, however, shall be deemed to be a condition, stipulation or
provision binding any persons acquiring any securities to waive compliance with
any provision of the Securities Act of 1933, the Securities Exchange Act of 1934
or the Rules and Regulations of the Securities and Exchange Commission or to
relieve the parties hereto from any liability arising under the Securities Act
of 1933.
SECTION 7. CERTIFICATION
The person signing below on behalf of Dealer certifies that he has been
duly elected, is now legally holding the offices indicated and is authorized to
execute this Agreement. He further certifies that Dealer is duly organized and
existing and has the power to take the actions referred to herein. He certifies
and agrees that the certifications and authorizations described in this
Agreement will continue in effect until Midwest and MGF receive actual written
notice of any change thereof.
SECTION 8. MISCELLANEOUS
(a) This Agreement shall be construed in accordance with the laws of
the State of Ohio.
(b) This Agreement may be amended in writing at any time by the parties
hereto. In addition, this Agreement may be amended by Midwest from time to time
by the following procedure in order to enable the Trust, Midwest or MGF to
comply with any regulatory requirements or policy positions which may be imposed
or adopted in the future by any governmental authority with jurisdiction over
the Trust, Midwest or MGF. Midwest will mail a copy of the amendment to Dealer
at the address listed above or such other address as Dealer shall in writing
provide to Midwest. The amendment will be effective immediately upon its being
sent.
(c) This Agreement will terminate automatically upon the termination of
either of the Transfer Agent Agreement or the Underwriting Agreement. This
Agreement may be terminated at any time by any party hereto without cause by
giving the other
4
<PAGE>
parties at least sixty (60) days' written notice of its intention to terminate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
____________________________________
By: _______________________________
Name:_______________________________
Title:______________________________
MIDWEST GROUP FINANCIAL SERVICES, INC.
By: _______________________________
Name:_______________________________
Title:______________________________
MGF SERVICE CORP.
By: _______________________________
Name:_______________________________
Title:______________________________
5
<PAGE>
THE MILESTONE FUNDS
SELECTED DEALER AGREEMENT
EXHIBIT A
SERVICE PERFORMED BY DEALER
a. Maintain customer account detail for shares held for customers.
b. Issue and deliver periodic statements to customers.
c. Receive from the Trust and break down and remit to customers monies
associated with their redemption of Trust shares.
d. Answer customer inquiries regarding account status and history.
e. Fill customer requests for prospectuses and statements of additional
information.
f. Receive and process customer registration forms.
g. Receive records regarding the services to be performed, as required by
applicable law and regulations.
h. For any omnibus or similar account maintained with MGF, perform all
subaccounting for subaccounts, including:
(i) Break down daily dividend accruals and apply them to customer
account records.
(ii) Receive, break down and pay or, at customer's direction,
consolidate and reinvest customer dividends on payment dates.
(iii) Maintain all proof procedures between customer subaccounts and
the central account with the Trust.
(iv) Perform all special mailings to customers required by the
Trust, such as annual prospectus mailings, proxy
solicitations, and semi-annual and annual reports.
6
<PAGE>
THE MILESTONE FUNDS
SELECTED DEALER AGREEMENT
EXHIBIT B
WIRE RECEIPT ACCOUNT
Name of Bank ____________________________________________________________
Street Address ____________________________________________________________
City/State/Zip ____________________________________________________________
ABA Routing No. ____________________________________________________________
Account No. ____________________________________________________________
Title of Account ____________________________________________________________
Instructions ____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
7
EX-99.B9(i)
FORM OF TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE AND PLAN AGENCY
AGREEMENT TO BE BETWEEN THE REGISTRANT AND MGF SERVICE CORP.
<PAGE>
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of ______________________ 1996 by and
between, THE MILESTONE FUNDS, a Delaware business trust (the "Funds"), and MGF
SERVICE CORP., an Ohio corporation (the "T/A").
WITNESSETH THAT:
WHEREAS, the Funds have been organized to operate as series of an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Funds desire to appoint the T/A as their transfer agent,
dividend disbursing agent, shareholder service agent, plan agent and shareholder
purchase and redemption agent, and the T/A is willing to act in such capacities
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT OF TRANSFER AGENT.
The T/A is hereby appointed transfer agent for the shares of
the Funds and dividend disbursing agent for the Funds and shall also act as plan
agent, shareholder service agent and purchase and redemption agent for
shareholders of the Funds, and the T/A accepts such appointment and agrees to
act in such capacities under the terms and conditions set forth herein.
2. DOCUMENTATION.
The Funds will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the
Funds authorizing the original issue of its
shares;
B. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
thereof;
C. A certified copy of each amendment to the
Agreement and Declaration of Trust and the Bylaws
of the Funds;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
the T/A;
<PAGE>
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions
approving such forms;
F. Such other certificates, documents or opinions which
the T/A may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special
investment or withdrawal plans which are offered or
may be offered in the future by the Funds and for
which the T/A is to act as plan agent.
3. T/A TO RECORD SHARES.
The T/A shall record the issuance of shares of the Funds and
maintain pursuant to applicable rules of the Securities and Exchange Commission
a record of the total number of shares of the Funds which are authorized, issued
and outstanding, based upon data provided to it by the Funds. The T/A shall also
provide the Funds on a regular basis or upon reasonable request the total number
of shares which are authorized, issued and outstanding, based upon data provided
to it by the Funds. The T/A shall also provide the Funds on a regular basis or
upon reasonable request the total number of shares which are authorized, issued
and outstanding, but shall have no obligation when recording the issuance of the
Funds' shares, except as otherwise set forth herein, to monitor the issuance of
such shares or to take cognizance of any laws relating to the issue or sale of
such shares, which functions shall be the sole responsibility of the Funds.
4. T/A TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to the T/A of certificates, if any, in proper form for transfer, the
T/A shall approve such transfer and shall take all necessary steps to effectuate
the transfer as indicated in the transfer request. Upon approval of the
transfer, the T/A shall notify the Funds in writing of each such transaction and
shall make appropriate entries on the shareholder records maintained by the T/A.
5. SHARE CERTIFICATES.
If the Funds authorize the issuance of share certificates and
an investor requests a share certificate, the T/A will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Funds, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has been
collected and credited to the account of the Funds maintained by the Custodian.
The Funds shall supply the T/A with a sufficient supply of blank share
certificates and from time to time shall renew such supply upon request of the
T/A. Such blank share certificates shall be
2
<PAGE>
properly signed, manually or, if authorized by the Funds, by facsimile; and
notwithstanding the death, resignation or removal of any officers of the Funds
authorized to sign share certificates, the T/A may continue to countersign
certificates which bear the manual or facsimile signature of such officer until
otherwise directed by the Funds. In case of the alleged loss or destruction of
any share certificate, no new certificate shall be issued in lieu thereof,
unless there shall first be furnished an appropriate bond satisfactory to the
T/A and the Funds, and issued by a surety company satisfactory to the T/A and
the Funds.
6. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Funds or Midwest Group Financial Services, Inc., as underwriter of the Funds
(the "Underwriter"), the T/A shall stamp the check or instrument with the date
of receipt, determine the amount thereof due the Funds and the Underwriter,
respectively, and shall forthwith process the same for collection. Upon receipt
of notification of receipt of funds eligible for share purchases and payment of
sales charges in accordance with the Funds' then current prospectus and
statement of additional information, the T/A shall notify the Funds, at the
close of each business day, in writing of the amount of said funds credited to
the Funds and deposited in its account with the Custodian, and shall similarly
notify the Underwriter of the amount of said funds credited to the Underwriter
and deposited in its account with its designated bank.
7. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of
shares of the Funds, accompanied by sufficient information to enable the T/A to
establish a shareholder account, the T/A shall, as of the next determination of
net asset value after receipt of such order in accordance with the Funds' then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Funds in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Funds.
8. RETURNED CHECKS.
In the event that the T/A is notified by the Funds' Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, the T/A will:
A. Give prompt notification to the Funds and the
Underwriter of the non-payment of said check;
B. In the absence of other instructions from the
Funds or the Underwriter, take such steps as may be
necessary to redeem any shares purchased on the basis
of such returned check and cause the proceeds of such
redemption plus any dividends declared with respect
to such shares to be credited to the account of the
Funds
3
<PAGE>
and to request the Funds' Custodian to forward such
returned check to the person who originally submitted
the check; and
C. Notify the Funds of such actions and correct the
Funds' records maintained by the T/A pursuant to this
Agreement.
9. SALES CHARGE.
In computing the number of shares to credit to the account of
a shareholder, the T/A will calculate the total of the applicable Underwriter
and dealer of record sales charges with respect to each purchase as set forth in
the Funds' current prospectus and statement of additional information and in
accordance with any notification filed with respect to combined and accumulated
purchases. The T/A will also determine the portion of each sales charge payable
by the Underwriter to the dealer of record participating in the sale in
accordance with such schedules as are from time to time delivered by the
Underwriter to the T/A; provided, however, the T/A shall have no liability
hereunder arising from the incorrect selection by the T/A of the gross rate of
sales charges except that this exculpation shall not apply in the event the rate
is specified by the Underwriter or the Funds and the T/A fails to select the
rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
The Funds shall furnish the T/A with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
The T/A shall establish procedures in accordance with the Funds' then current
prospectus and statement of additional information and with other authorized
actions of the Funds' Board of Trustees under which it will have available from
the Custodian of the Funds or the Funds any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, the T/A shall, as agent for each shareholder
who so requests, invest the dividends and other distributions in full and
fractional shares in accordance with the Funds' then current prospectus and
statement of additional information. If a shareholder has elected to receive
dividends or other distributions in cash, then the T/A shall disburse dividends
to shareholders of record in accordance with the Funds' then current prospectus
and statement of additional information. The T/A shall, on or before the mailing
date of such checks, notify the Funds and the Custodian of the estimated amount
of cash required to pay such dividend or distribution, and the Funds shall
instruct the Custodian to make available sufficient funds therefor in the
appropriate account of the Funds. The T/A shall mail to the shareholders
periodic statements, as requested by the Funds, showing the number of full and
fractional shares and the net asset value per share of shares so credited. When
requested by the Funds, the T/A shall prepare and file with the Internal Revenue
Service, and when required, shall address and mail to shareholders, such returns
and information relating to dividends and distributions paid by the Funds as are
required to be so prepared, filed and mailed by applicable laws, rules and
regulations.
4
<PAGE>
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
The T/A shall, at least annually, furnish in writing to the
Funds the names and addresses, as shown in the shareholder accounts maintained
by the T/A, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which checks
or share certificates mailed in payment of distributions have been returned. The
T/A shall use its best efforts to contact the shareholders affected and to
follow any other written instructions received from the Funds concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
12. REDEMPTIONS AND EXCHANGES.
A. The T/A shall process, in accordance with the Funds' then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by the T/A. Upon its approval of such redemption
transactions, the T/A, if requested by the Funds, shall mail to the shareholder
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For such redemption, the T/A shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Funds and signature by
an authorized officer of the T/A and mail the checks to the appropriate person,
or (b) in the event redemption proceeds are to be wired through the Federal
Reserve Wire system or by bank wire, cause such proceeds to be wired in federal
funds to the bank account designated by the shareholder, or (c) effectuate such
other redemption procedures which are authorized by the Funds' Board of Trustees
or its then current prospectus and statement of additional information. The
requirements as to instruments of transfer and other documentation, the
applicable redemption price and the time of payment shall be as provided in the
then current prospectus and statement of additional information, subject to such
supplemental instructions as may be furnished by the Funds and accepted by the
T/A. If the T/A or the Funds determine that a request for redemption does not
comply with the requirements for redemptions, the T/A shall promptly notify the
shareholder and/or dealer of record indicating the reason therefor.
B. If shares of the Funds are eligible for exchange with
shares of any other investment company, the T/A, in accordance with the then
current prospectus and statement of additional information and exchange rules of
the Funds and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Funds' shareholders, process such approved exchange requests.
C. The T/A shall notify the Funds, the Custodian and the
Underwriter on each business day of the amount of cash required to meet payments
made pursuant to the provisions of this Paragraph 12, and, on the basis of such
notice, the Funds shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Funds.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by telephone or other methods shall be established by mutual agreement
between the T/A and the Funds consistent with the then current prospectus and
statement of additional information.
5
<PAGE>
D. The authority of the T/A to perform its responsibilities
under Paragraph 7, Paragraph 10 and this Paragraph 12 shall be suspended upon
receipt of notification by it of the suspension of the determination of a Fund's
net asset value.
13. AUTOMATIC WITHDRAWAL PLANS.
The T/A will process automatic withdrawal orders pursuant to
the provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Funds.
Payments upon such withdrawal order shall be made by the T/A from the
appropriate account maintained by the Funds with the Custodian on approximately
the last business day of each month in which a payment has been requested, and
the T/A, on or after the seventh day prior to the payment date, will withdraw
from a shareholder's account and present for repurchase or redemption as many
shares as shall be sufficient to make such withdrawal payment pursuant to the
provisions of the shareholder's withdrawal plan and the current prospectus and
statement of additional information of the Funds. From time to time on new
automatic withdrawal plans a check for payment date already past may be issued
upon request by the shareholder.
14. LETTERS OF INTENT.
The T/A will process such letters of intent for investing in
shares of the Funds as are provided for in the Funds' current prospectus and
statement of additional information. The T/A will make appropriate deposits to
the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
15. WIRE-ORDER PURCHASES.
The T/A will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by each such
dealer by the close of business on the business day following receipt of such
orders by the T/A or the Underwriter, with copies to the Underwriter. Upon
receipt of any check drawn or endorsed to the Funds (or the T/A, as agent) or
otherwise identified as being payment of an outstanding wireorder, the T/A will
stamp said check with the date of its receipt and deposit the amount represented
by such check to the T/A's deposit accounts maintained with the Custodian. The
T/A will compute the respective portions of such deposit which represent the
sales charge and the net asset value of the shares so purchased, will cause the
Custodian to transfer federal funds in an amount equal to the net asset value of
the shares so purchased to the Funds' account with the Custodian, and will
notify the Funds and the Underwriter before noon of each business day of the
total amount deposited in the Funds' deposit accounts, and in the event that
payment for a purchase order is not received by the T/A or the Custodian on the
tenth business day following receipt of the order, prepare an NASD "notice of
failure of dealer to make payment" and forward such notification to the
Underwriter.
16. OTHER PLANS.
The T/A will process such accumulation plans, group programs
and other plans or programs for investing in shares
6
<PAGE>
of the Funds as are now provided for in the Funds' current prospectus and
statement of additional information and will act as plan agent for shareholders
pursuant to the terms of such plans and programs duly executed by such
shareholders.
17. BOOKS AND RECORDS.
The T/A shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series;
D. Historical information regarding the account
of each shareholder, including dividends and
distributions in cash or invested in shares;
E. Information with respect to the source of all
dividends and distributions allocated among income,
realized short-term gains and realized long-term
gains;
F. Any instructions from a shareholder including all
forms furnished by the Funds and executed by a
shareholder with respect to (i) dividend or
distribution elections and (ii) elections with
respect to payment options in connection with the
redemption of shares;
G. Any correspondence relating to the current
maintenance of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case
of a foreign account or any other account for which
withholding is required by the Internal Revenue Code
of 1986, as amended; and
K. Any information required in order for the T/A to
perform the calculations contemplated under this
Agreement.
All of the records prepared and maintained by the T/A pursuant
to this Agreement will be the property of the Funds. In the event this Agreement
is terminated, all records shall be delivered to the Funds or to any person
designated by the Funds at the Funds' expense, and the T/A shall be relieved of
responsibility for the preparation and maintenance of any such records delivered
to the Funds or any such person.
7
<PAGE>
18. TAX RETURNS AND REPORTS.
The T/A will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Funds such returns for reporting dividends and
distributions paid by the Funds as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
19. OTHER INFORMATION TO THE FUNDS.
Subject to such instructions, verification and approval of the
Custodian and the Funds as shall be required by any agreement or applicable law,
the T/A will also maintain such records as shall be necessary to furnish to the
Funds the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations and checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements.
20. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, the T/A shall arrange for the Funds' investment
adviser to have direct access to shareholder information contained in the T/A's
computer system, including account balances, performance information and such
other information which is available to the T/A with respect to shareholder
accounts.
21. COOPERATION WITH ACCOUNTANTS.
The T/A shall cooperate with the Funds' independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Funds.
22. SHAREHOLDER SERVICE AND CORRESPONDENCE.
The T/A will provide and maintain adequate personnel, records
and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to shareholders of the Funds. The T/A will answer
written correspondence from shareholders relating to their share accounts and
such other written or oral inquiries as may from time to time be mutually agreed
upon, and the T/A will notify the Funds of any correspondence or inquiries which
may require an answer from the Funds.
23. PROXIES.
The T/A shall assist the Funds in the mailing of proxy cards
and other material in connection with shareholder meetings of the Funds, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Funds, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Funds.
8
<PAGE>
24. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
25. FEES AND CHARGES.
For performing its services under this Agreement, each of the
Funds shall pay the T/A in accordance with the schedule attached hereto as
Schedule A. Fees shall be paid monthly. The Funds shall promptly reimburse the
T/A for any out of pocket expenses and advances which are to be paid by the
Funds in accordance with Paragraph 26.
26. EXPENSES.
The T/A shall furnish, at its expense and without cost to the
Funds (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by the T/A
under this Paragraph 26 shall be paid by the Funds, including, but not limited
to costs and expenses for postage, envelopes, checks, drafts, continuous forms,
reports, communications, statements and other materials, telephone, telegraph
and remote transmission lines, use of outside mailing firms, necessary outside
record storage, media for storage of records (e.g., microfilm, microfiche,
computer tapes), printing, confirmations and any other shareholder
correspondence and any and all assessments, taxes or levies assessed on the T/A
for services provided under this Agreement. Postage for mailings of dividends,
proxies, reports and other mailings to all shareholders shall be advanced to the
T/A three business days prior to the mailing date of such materials.
27. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require the T/A to perform any services
for the Funds which services could cause MGF to be deemed an "investment
adviser" of the Funds within the meaning of Section 2(a)(20) of the 1940 Act or
to supersede or contravene the prospectus or statement of additional information
of the Funds or any provisions of the 1940 Act and the rules thereunder. Except
as otherwise provided in this Agreement and except for the accuracy of
information furnished to it by the T/A, the Funds assume full responsibility for
complying with all applicable requirements of the 1940 Act, the Securities Act
of 1933, as amended, and any other laws, rules and regulations of governmental
authorities having jurisdiction.
28. REFERENCES TO THE T/A.
The Funds shall not circulate any printed matter which
contains any reference to the T/A without the prior written approval of the T/A,
excepting solely such printed matter as merely identifies the T/A as Transfer,
Shareholder Servicing and Dividend Disbursing Agent. The Funds will submit
printed matter requiring approval to the T/A in draft form, allowing sufficient
time for review by the T/A and its counsel prior to any deadline for printing.
9
<PAGE>
29. EQUIPMENT FAILURES.
In the event of equipment failures beyond the T/A's control,
the T/A shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. The T/A shall endeavor to enter
into one or more agreements making provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
30. INDEMNIFICATION OF THE T/A.
A. The T/A may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be required by the 1940 Act
and the rules thereunder, neither the T/A nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Funds in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
the T/A under this Agreement or by reason of reckless disregard by any of such
persons of the obligations and duties of the T/A under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of the T/A, or any of its affiliates, who may be or become
an officer, trustee, employee or agent of the Funds, shall be deemed, when
rendering services to the Funds or acting on any business of the Funds, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Funds and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of the T/A or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the
Funds shall indemnify and hold harmless the T/A, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the T/A may sustain or incur or which may be asserted
against the T/A by any person by reason of, or as a result of: (i) any action
taken or omitted to be taken by the T/A in good faith in reliance upon any
certificate, instrument, order or share certificate believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Funds or upon the opinion of legal counsel for the Funds or its own counsel; or
(ii) any action taken or omitted to be taken by the T/A in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the T/A or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
10
<PAGE>
31. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by the T/A, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Funds' trustees who are not
parties to this Agreement or interested persons (as defined in the 1940 Act) of
any such party, and (3) by vote of a majority of the Funds' Board of Trustees or
a majority of the Funds' outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Funds shall pay to the T/A such compensation as may be due as of
the date of such termination, and shall likewise reimburse the T/A for any
out-of-pocket expenses and disbursements reasonably incurred by the T/A to such
date.
C. in the event that in connection with the termination of
this Agreement a successor to any of the T/A's duties or responsibilities under
this Agreement is designated by the Funds by written notice to the T/A, the T/A
shall, promptly upon such termination and at the expense of the Funds, transfer
all records maintained by the T/A under this Agreement and shall cooperate in
the transfer of such duties and responsibilities, including provision for
assistance from the T/A's cognizant personnel in the establishment of books,
records and other data by such successor.
32. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent the T/A or any
affiliated person (as defined in the 1940 Act) of the T/A from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that the T/A expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Funds under this Agreement.
33. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of, the provisions hereof or
otherwise affect their construction or effect.
34. LIMITATION OF LIABILITY.
The term "The Milestone Funds" means and refers to the
trustees from time to time serving under the Funds' Agreement and Declaration of
Trust as the same may subsequently thereto have been, or subsequently hereto may
be, amended. It is expressly agreed that the obligations of the Funds hereunder
shall not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Funds, personally, but bind only the trust property
of the Funds. The execution and delivery of this Agreement have been authorized
by the trustees of the Funds and signed by an officer of the Funds, acting as
such, and neither such authorization by such trustees nor such execution and
delivery by such officer shall be
11
<PAGE>
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 Funds.
35. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said 1940
Act. In addition, where the effect of a requirement of the 1940 Act, reflected
in any provision of this Agreement, is revised by rule, regulation or order of
the Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
37. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Funds
for this purpose shall be One Odell Plaza, Yonkers, New York 10701, and that the
address of the T/A for this purpose shall be 312 Walnut Street, Cincinnati, Ohio
45202.
38. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
39. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
40. FORCE MAJEURE.
If the T/A shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or
12
<PAGE>
regulation, of shortages of suitable parts, materials, labor or transportation,
such delay or non-performance shall be excused and a reasonable time for
performance in connection with this Agreement shall be extended to include the
period of such delay or non-performance.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
THE MILESTONE FUNDS
By:______________________
Its:_____________________
MGF SERVICE CORP.
By:______________________
Its:_____________________
13
EX-99.B11(a)
CONSENT OF INDEPENDENT AUDITORS, MCGLADREY & PULLEN
<PAGE>
[MCGLADREY & PULLEN, LLP LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated December 22, 1995, on
the financial statements referred to therein, in the Pose Effective Amendment
No. 4 to the Registration Statement on Form N-1A File No. 33-81574 of The
Milestone Funds as filed with the Securities and Exchange Commission.
We also consent to the reference to our Firm in the Statement of
Additional Information under the caption "Auditors" and in the Prospectus under
the caption "Independent Public Accountant."
/s/McGladrey & Pullen, LLP
New York, New York
April 30, 1996
EX-99.B11(b)
CONSENT OF LEGAL COUNSEL, KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL
<PAGE>
KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3852
(212) 715-9100
ARTHUR H. AUFSES III Richard Marlin Sherwin Kamin
THOMAS D. BALLIETT Thomas E. Molner Arthur B. Kramer
JAY G. BARIS Thomas H. Moreland Maurice N. Nessen
SAUL E. BURIAN Ellen R. Nadler Founding Partners
BARRY MICHAEL CASS Gary P. Naftali Counsel
THOMAS E. CONSTANCE Michael J. Nassa --------
MICHAEL J. DELL Michael S. Nelson Martin Balsam
KENNETH H. ECKSTEIN Jay A. Neveloff Joshua M. Berman
CHARLOTTE M. FISCHMAN Michael S.Oberman Jules Buchwald
DAVID S. FRANKEL Paul S. Pearlman Rudolph De Winter
MARVIN E. FRANKEL Susan J. Penry-Williams Meyer Eisenberg
ALAN R. FRIEDMAN Bruce Rabb Arthur D. Emil
CARL FRISCHLING Allan E. Reznick Maxwell M. Rabb
MARK J. HEADLEY Scott S. Rosenblum James Schreiber
ROBERT M. HELLER Michele D. Ross Counsel
PHILIP S. KAUFMAN Max J. Schwartz -------
PETER S. KOLEVZON Mark B. Segall M. Frances Buchinsky
KENNETH P. KOPELMAN Judith Singer Debora K. Grobman
MICHAEL PAUL KOROTKIN Howard A. Sobel Christian S. Herzeca
KEVIN B. LEBLANG Steven C. Todrys Pinchas Mendelson
DAVID P. LEVIN Jeffrey S. Trachtman Lynn R. Saidenberg
EZRA G. LEVIN D. Grant Vingoe Jonathan M. Wagner
LARRY M. LOEB Harold P. Weinberger Special Counsel
MONICA C. LORD E. Lisk Wyckoff, Jr. -------
FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------
April 29, 1996
The Milestone Funds
One Odell Plaza
Yonkers, New York 10701
Re: The Milestone Funds
Registration No. 33-81574
Post-Effective Amendment No. 4
------------------------------
Gentlemen:
We consent to the reference to our Firm in the prospectus and
statement of additional information portions of the above-mentioned Registration
Statement.
Very truly yours,
/s/Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
EX-99.B12
RULE 12B-1 PLAN FOR THE SERVICE SHARES OF THE REGISTRANT
<PAGE>
RULE 12B-1 DISTRIBUTION PLAN
<PAGE>
PLAN FOR PAYMENT OF CERTAIN EXPENSES FOR
DISTRIBUTION OF O SHARES
A Plan (the "Plan") pertaining to the o shares of Treasury
Obligations Portfolio (the "Fund"), a series of The Milestone Funds, a Delaware
business trust (the "Trust") and an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"Act"), adopted pursuant to Section 12(b) of the Act and Rule 12b-1 promulgated
thereunder ("Rule 12b-1").
1. Principal Underwriter. Midwest Group Financial
Services, Inc. ("the Distributor"), acts as the principal underwriter of the
Fund's o shares pursuant to a Distribution Agreement with the Trust. Milestone
Capital Management L.P. (the "Investment Advisor"), acts as the Fund's
investment adviser pursuant to an Investment Advisory Agreement with the Trust.
2. Distribution Payments. (a) The Fund either directly
or through the Investment Advisor, may make payments periodically (i) to the
Distributor or to any broker-dealer (a "Broker") who is registered under the
Securities Exchange Act of 1934 and a member in good standing of the National
Association of Securities Dealers, Inc. and who has entered into a selected
dealer agreement with the Distributor, or (ii) to other persons or organizations
("Servicing Agents") who have entered into shareholder processing and service
agreements with the Trust on behalf of the Fund, the Investment Advisor or the
Distributor, regarding o shares of the Fund owned by shareholders for which such
broker is the dealer or holder of record or such servicing agent has a servicing
relationship, or (iii) for expenses
<PAGE>
associated with distribution of Fund o shares, including the compensation of the
sales personnel of the Distributor.
(b) The schedule of such fees and the basis upon which such
fees will be paid shall be determined from time to time by the Distributor and
the Investment Advisor, subject to approval by the Board of Trustees of the
Trust.
(c) Payments may also be made for any advertising and
promotional expenses relating to selling efforts, including but not limited to
the incremental costs of printing prospectuses, statements of additional
information, annual reports and other periodic reports for distribution to
persons who are not o shareholders of the Fund; the costs of preparing and
distributing any other supplemental sales literature; costs of radio,
television, newspaper and other advertising; telecommunications expenses,
including the cost of telephones, telephone lines and other communications
equipment, incurred by or for the Distributor in carrying out its obligations
under the Distribution Agreement.
(d) The aggregate amount of all payments by the Fund in any
fiscal year, to the Distributor, Brokers, Servicing Agents and for advertising
and promotional expenses pursuant to paragraphs (a), (b), (c) of this Section 2
shall not exceed 0.50% of the average daily net asset value attributable to o
shares of the Fund on an annual basis for such fiscal year, or such lesser
amounts as determined appropriate. The Plan will only make payments for expenses
actually incurred on a first-in, first-out basis. The amount of expenses
incurred in any year may not exceed the rate of reimbursement set forth in the
Plan. The unreimbursed amounts may be recovered through future payments under
the Plan. Carry-over amounts are not limited in the number of years they may be
carried forward. If
-2-
<PAGE>
the Plan is terminated in accordance with its terms, the obligations of the Fund
to make payments pursuant to the Plan will cease and the Fund will not be
required to make any payments past the date the Plan terminates.
3. Reports. Quarterly, in each year that this Plan remains in
effect, the Trust's Principal Financial Officer shall prepare and furnish to the
Board of Trustees of the Trust a written report, complying with the requirements
of Rule 12b-l, setting forth the amounts expended by the Fund under the Plan and
purposes for which such expenditures were made.
4. Approval of Plan. This Plan shall become effective upon
approval of the Plan, the form of Selected Dealer Agreement and the form of
Shareholder Servicing Agreement, by the majority votes of both (a) the Board of
Trustees and the Qualified Trustees (as defined in Section 6), cast in person at
a meeting called for the purpose of voting on the Plan and (b) the outstanding o
voting securities of the Fund, as defined in Section 2(a)(42) of the Act.
5. Term. This Plan shall remain in effect for one year from
its adoption date and may be continued thereafter if this Plan and all related
agreements are approved at least annually by a majority vote of the Trustees,
including a majority of the Qualified Trustees, cast in person at a meeting
called for the purpose of voting on such Plan and agreements. This Plan may not
be amended in order to increase materially the amount to be spent for
distribution assistance without o shareholder approval in accordance with
Section 4 hereof. All material amendments to this Plan must be approved by a
vote of the Board of
-3-
<PAGE>
Trustees, and of the Qualified Trustees (as hereinafter defined), cast in person
at a meeting called for the purpose of voting thereon.
6. Termination. This Plan may be terminated at any time by a
majority vote of the Trustees who are not interested persons (as defined in
section 2(a)(19) of the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan (the "Qualified Trustees") or by vote of a majority of the outstanding
o voting securities of the Fund, as defined in section 2(a)(42) of the Act.
7. Nomination of "Disinterested" Trustees. While this Plan
shall be in effect, the selection and nomination of the "disinterested" Trustees
of the Trust shall be committed to the discretion of the Qualified Trustees then
in office.
8. Miscellaneous. (a) Any termination or noncontinuance of (i)
a Selected Dealer Agreement between the Distributor and a particular Broker or
(ii) a Shareholder Service Agreement between the Investment Advisor or the Trust
on behalf of the Fund and a particular person or organization; shall have no
effect on any similar agreements between Brokers or other persons and the Fund,
the Investment Advisor or the Distributor pursuant to this Plan.
(b) Neither the Distributor, the Investment Advisor nor the
Fund shall be under any obligation because of this Plan to execute any Selected
Dealer Agreement with any Broker or any Shareholder Service Agreement with any
person or organization.
(c) All agreements with any person or organization relating to
the implementation of this Plan shall be in writing and any agreement related to
this Plan shall be subject to termination, without penalty, pursuant to the
provisions of Section 6 hereof.
-4-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
INVESTEMENTS DATED 11/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<CIK> 0000926898
<NAME> THE MILESTONE FUNDS
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<NUMBER> 1
<NAME> MILESTONE TREASURY OBLIGATIONS-INSTITUTIONAL
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<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> OCT-31-1994
<PERIOD-END> NOV-30-1995
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<SHARES-COMMON-STOCK> 229158586
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<ACCUMULATED-NET-GAINS> 0
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<NET-INVESTMENT-INCOME> 6718971
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6721685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6718971
<DISTRIBUTIONS-OF-GAINS> 2723
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1520992027
<NUMBER-OF-SHARES-REDEEMED> 1295866337
<SHARES-REINVESTED> 4032896
<NET-CHANGE-IN-ASSETS> 229158577
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 934572
<AVERAGE-NET-ASSETS> 271359090
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
INVESTEMENTS DATED 11/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<CIK> 0000926898
<NAME> THE MILESTONE FUNDS
<SERIES>
<NUMBER> 2
<NAME> MILESTONE TREASURY OBLIGATIONS-INVESTOR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> OCT-31-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 312848969
<INVESTMENTS-AT-VALUE> 312848969
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