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FAIRPORT FUNDS Prospectus Page 1 of 23
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Our Investment Style
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The Fairport Funds
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View From Midwest
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Prospectus & Application
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FAIRPORT FUNDS
CHARTING A COURSE YOU CAN TRUST
Investment Adviser:
ROULSTON & COMPANY, INC.
FAIRPORT FUNDS (the "Trust," formerly The Roulston Family of Funds) provides
a convenient and economical means of investing in professionally managed
portfolios of securities. This Prospectus describes the following portfolios of
the Trust (the "Funds"), each of which is a separate diversified portfolio.
FAIRPORT MIDWEST GROWTH FUND
FAIRPORT GROWTH AND INCOME FUND
FAIRPORT GOVERNMENT SECURITIES FUND
This Prospectus provides the information about the Trust and the Funds that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. Additional information
regarding the Trust and the Funds is included in a Statement of Additional
Information dated February 28, 1997, which has been filed with the Securities
and Exchange Commission and is incorporated into this Prospectus by reference.
You may obtain free copies of the Statement of Additional Information by calling
1-800-332-6459 (1-800-3-FAMILY) or by writing to the Trust at 4000 Chester
Avenue, Cleveland, Ohio 44103.
THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN
INVESTMENT RISKS, 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.
February 28, 1997
TABLE OF CONTENTS
PROSPECTUS HIGHLIGHTS
FUND EXPENSES
FINANCIAL HIGHLIGHTS
THE TRUST AND ITS FUNDS
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT LIMITATIONS OF THE FUNDS
MANAGEMENT OF THE TRUST
HOW SHARES ARE VALUED
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FAIRPORT FUNDS Prospectus Page 2 of 23
HOW TO PURCHASE SHARES
HOW TO REDEEM SHARES
EXCHANGES
PERFORMANCE OF THE FUNDS
HOW THE FUNDS ARE TAXED
DIVIDENDS AND SHAREHOLDER TAXES
GENERAL INFORMATION
DESCRIPTION OF PERMITTED INVESTMENTS AND RELATED RISK FACTORS
PROSPECTUS SUPPLEMENT DATED JULY 25, 1997
APPLICATION
INVESTMENT OBJECTIVES OF THE FUNDS
The MIDWEST GROWTH FUND seeks capital appreciation. The MIDWEST GROWTH FUND
seeks to achieve its objective by investing primarily in equity securities of
companies headquartered in the Midwest region of the United States.
The GROWTH AND INCOME FUND seeks capital appreciation and current income. The
GROWTH AND INCOME FUND seeks to achieve its objective by investing primarily in
common stocks or securities convertible into common stocks.
The GOVERNMENT FUND seeks current income consistent with preservation of
capital. The GOVERNMENT FUND seeks to achieve its objectives by investing
primarily in mid- to intermediate-term fixed income securities in the high end
of the credit spectrum. The GOVERNMENT FUND will invest at least 65% of its
total assets in U.S. Government securities.
RISK FACTORS AND SPECIAL CONSIDERATIONS
You should be aware of certain risks and considerations before investing in
any of the Funds. Each Fund invests in securities that fluctuate in value;
therefore you should expect each Fund's net asset value per share to fluctuate.
Since each of the MIDWEST GROWTH FUND and GROWTH AND INCOME FUND invests
primarily in common stocks, such Funds are subject to stock market risk, i.e.,
the possibility that stock prices in general will decline over short or even
extended periods. Values of fixed income securities and, correspondingly, of
mutual funds invested in such securities, such as the GOVERNMENT FUND, generally
vary inversely with interest rates and may be affected by other market and
economic factors as well. There is no assurance that the investment objective of
any Fund will be achieved. In addition, the Funds, to the extent set forth under
"INVESTMENT OBJECTIVES AND POLICIES" and "DESCRIPTION OF PERMITTED INVESTMENTS
AND RELATED RISK FACTORS," may engage in the following practices: the use of
repurchase agreements, entering into options transactions, purchasing securities
on a when-issued or delayed-delivery basis and purchasing noninvestment grade
convertible debt securities, variable or floating rate securities, securities
restricted as to disposition and foreign securities.
THE INVESTMENT ADVISER
Roulston & Company, Inc. ("Roulston") is the investment adviser ("Adviser" or
"Investment Adviser") for each Fund.
THE DISTRIBUTOR
Roulston Research Corp., a wholly-owned subsidiary of Roulston (the
"Distributor").
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FAIRPORT FUNDS Prospectus Page 3 of 23
PURCHASES AND REDEMPTIONS
Shares of the Funds are sold and redeemed at their net asset value without
any sales load. Each Fund has a minimum initial investment requirement of $250.
Purchases and redemptions may be made on each day the New York Stock Exchange
(the "Exchange") is open for regular business (a "Business Day"). Your purchase
order will be effective as of the Business Day it is received by the Transfer
Agent if the Transfer Agent receives your order and payment by check or wire
transfer of funds prior to the earlier of 4:00 p.m. Eastern Time or the close of
regular trading on the Exchange (the "Valuation Time") on such Business Day.
Redemption orders received by the Transfer Agent prior to the Valuation Time on
any Business Day will be effective as of that Business Day. The Funds also offer
both a Systematic Investment Plan and a Systematic Withdrawal Plan.
DIVIDENDS AND DISTRIBUTIONS
The MIDWEST GROWTH FUND and the GROWTH AND INCOME FUND intend to declare and
pay dividends of net investment income twice per year. The GOVERNMENT FUND'S net
investment income dividends are declared daily and payable monthly. All Funds
will make distributions of capital gains at least annually. You will receive
such dividends and distributions in additional shares unless you otherwise elect
to take those payments in cash.
THE ADMINISTRATOR AND TRANSFER AGENT
FPS Services, Inc. (formerly known as Fund/Plan Services, Inc.) ("FPS")
serves as the Administrator, Transfer Agent, and dividend disbursing agent, and
provides certain Fund Accounting and Custody Administration services for each of
the Funds.
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
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Sales Load on Purchases None
Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None, although a wire redemption charge,
currently $9, is deducted from the amount
of a Federal Reserve wire redemption
payment.
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
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<TABLE>
<CAPTION>
MIDWEST GROWTH GOVERNMENT
GROWTH AND INCOME SECURITIES
FUND FUND FUND
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<S> <C> <C> <C>
Management Fees
After Fee Waiver .44%(1) .42%(1) .00%(1)
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12b-1 Fees .25 .25 .25
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Other Expenses
After Reimbursements .69 .83 .65(1)
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Total Operating Expenses
After Fee Waivers and/or
Expense Reimbursements(1) 1.38% 1.50% .90%
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</TABLE>
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FAIRPORT FUNDS Prospectus Page 4 of 23
(1) The above table reflects a continuation of the agreement Roulston has made
with the Trust to waive all or a portion of its investment advisory fee, and to
reimburse certain Other Expenses. Such waivers and reimbursements shall continue
at least through October 31, 1997, to the extent necessary to cause Total
Operating Expenses not to exceed: 1.38% for the MIDWEST GROWTH FUND; 1.50% for
the GROWTH AND INCOME FUND; and 0.90% for the GOVERNMENT FUND. Absent such fee
waivers and expense reimbursements, Management Fees, Other Expenses, and Total
Operating Expenses for the fiscal year ended October 31, 1996 would have been:
0.75%, 0.69%, and 1.69%, respectively, for the MIDWEST GROWTH FUND; 0.75%,
0.83%, and 1.83%, respectively, for the GROWTH AND INCOME FUND; and 0.25%,
1.55%, and 2.05%, respectively, for the GOVERNMENT FUND.
Such expenses are illustrated by the following examples. You would pay the
following expenses on a $1,000 investment (assuming a 5% annual return and
redemption at the end of each period):
<TABLE>
<CAPTION>
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MIDWEST GROWTH GOVERNMENT
GROWTH AND INCOME SECURITIES
FUND FUND FUND
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<S> <C> <C> <C>
One Year $ 14 $ 15 $ 9
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Three Years $ 44 $ 47 $ 29
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Five Years $ 76 $ 82 $ 50
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Ten Years $166 $179 $111
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</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist you in understanding the various costs and
expenses that you may bear directly or indirectly when you invest in a Fund. As
the result of the payment of Rule 12b-1 fees, long-term shareholders may pay
more than the maximum front-end sales charge permitted by the Rules of the
National Association of Securities Dealers, Inc. Additional information may be
found under "MANAGEMENT OF THE TRUST" and "HOW TO PURCHASE SHARES" below.
FINANCIAL HIGHLIGHTS
The Financial Highlights with respect to the fiscal years ended October 31,
1996 and 1995, have been audited by Ernst & Young LLP, independent auditors of
the Funds. The report of Ernst & Young LLP, together with certain financial
statements, are contained in Appendix "B" to the Trust's Statement of Additional
Information and may be obtained by shareholders and prospective investors at no
cost.
On April 29, 1995, pursuant to an Agreement and Plan of Reorganization and
Liquidation, each of the FAIRPORT MIDWEST GROWTH FUND (formerly the Roulston
Midwest Growth Fund), the FAIRPORT GROWTH AND INCOME FUND (formerly the Roulston
Growth and Income Fund) and the FAIRPORT GOVERNMENT SECURITIES FUND (formerly
the Roulston Government Securities Fund) of the Trust acquired in a tax-free
reorganization all of the assets of each of the Roulston Midwest Growth Fund,
the Roulston Growth and Income Fund and the Roulston Government Securities Fund
(collectively the "Acquired Funds") of The Advisors' Inner Circle Fund, a
Massachusetts business trust, respectively, in exchange for the assumption of
such Acquired Fund's liabilities and a number of full and fractional shares of
the corresponding Fund of the Trust having an aggregate net asset value equal to
such Acquired Fund's net assets (the "Reorganization").
The Financial Highlights with respect to the fiscal year ended October 31,
1994 and the period from July 1, 1993 (commencement of operations) through
October 31, 1993, were audited by the independent auditors of the Acquired Funds
prior to the Reorganization.
The following tables should be read in conjunction with the financial
statements and related notes also included as Appendix "B" in the Statement of
Additional Information.
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FAIRPORT FUNDS Prospectus Page 5 of 23
Fairport Midwest Growth Fund
<TABLE>
<CAPTION>
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Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
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<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 13.55 $ 12.27 $ 11.07 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.04 0.02 0.01
Net realized and unrealized
gain(loss) on investments 2.16 2.04 1.19 1.07
Total from investment operations 2.18 2.08 1.21 1.08
LESS DISTRIBUTIONS:
From net investment income (0.03) (0.04) (0.01) (0.01)
From realized capital gains (0.20) (0.76) 0.00 0.00
TOTAL DISTRIBUTIONS (0.23) (0.80) (0.01) (0.01)
Net Asset Value, end of period $ 15.50 $ 13.55 $ 12.27 $ 11.07
TOTAL RETURN 16.28% 18.17% 10.89% 10.90%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 57,198 $ 49,408 $ 29,688 $ 9,870
Ratio of expenses
to average net assets before
reimbursement of expenses by Adviser 1.69% 1.57% 1.54% 2.89%*
Ratio of expenses
to average net assets after
reimbursement of expenses by Adviser 1.38% 1.41% 1.45% 1.50%*
Ratio of net investment income
to average net assets before
reimbursement of expenses by Adviser (0.16%) 0.14% 0.08% (1.11%)*
Ratio of net investment income
to average net assets after
reimbursement of expenses by Adviser 0.15% 0.29% 0.17% 0.28%*
Portfolio turnover 58.01% 46.51% 77.57% 0.00%
Average commission rate paid $ 0.0600 N/A N/A N/A
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</TABLE>
* Annualized
** Not Annualized
N/A Not Applicable; disclosure not required
(1) This Fund commenced operations on July 1, 1993.
Fairport Growth and Income Fund
<TABLE>
<CAPTION>
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Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
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<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 12.29 $ 10.68 $ 10.36 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.13 0.15 0.14 0.04
Net realized and unrealized
gain(loss) on investments 2.04 1.68 0.35 0.36
Total from investment operations 2.17 1.83 0.49 0.40
LESS DISTRIBUTIONS:
From net investment income (0.14) (0.12) (0.14) (0.04)
From realized capital gains (0.10) (0.10) (0.03) 0.00
Total distributions (0.24) (0.22) (0.17) (0.04)
Net Asset Value, end of period $ 14.22 $ 12.29 $ 10.68 $ 10.36
TOTAL RETURN 17.77% 17.36% 4.72% 3.98%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 23,071 $ 23,082 $ 18,177 $ 8,716
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</TABLE>
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FAIRPORT FUNDS Prospectus Page 6 of 23
<TABLE>
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<S> <C> <C> <C> <C>
Ratio of expenses
to average net assets before
reimbursement of expenses by Adviser 1.83% 1.79% 1.72% 2.79%*
Ratio of expenses
to average net assets after
reimbursement of expenses by Adviser 1.50% 1.50% 1.50% 1.50%*
Ratio of net investment income
to average net assets before
reimbursement of expenses by Adviser 0.58% 0.98% 1.20% 0.10%*
Ratio of net investment income
to average net assets after
reimbursement of expenses by Adviser 0.91% 1.26% 1.42% 1.39%*
Portfolio turnover 34.02% 13.36% 35.16% 4.18%
Average commission rate paid $ 0.0591 N/A N/A N/A
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</TABLE>
* Annualized
** Not Annualized
N/A Not Applicable; disclosure not required
(1) This Fund commenced operations on July 1, 1993.
Fairport Government Securities Fund
<TABLE>
<CAPTION>
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Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
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<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 9.84 $ 9.03 $ 10.20 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.49 0.49 0.43 0.15
Net realized and unrealized
gain(loss) on investments (0.05) 0.81 (1.17) 0.16
Total from investment operations 0.44 1.30 (0.74) 0.31
LESS DISTRIBUTIONS:
From net investment income (0.53) (0.49) (0.42) (0.11)
From realized capital gains 0.00 0.00 (0.01) 0.00
Total distributions (0.53) (0.49) (0.43) (0.11)
Net Asset Value, end of period $ 9.75 $ 9.84 $ 9.03 $ 10.20
TOTAL RETURN 4.58% 14.76% (7.24%) 3.04%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 5,752 $ 8,647 $ 7,614 $ 5,829
Ratio of expenses
to average net assets before
reimbursement of expenses by Adviser 2.05% 2.16% 1.80% 2.78%*
Ratio of expenses
to average net assets after
reimbursement of expenses by Adviser 0.90% 0.90% 0.90% 0.90%*
Ratio of net investment income
to average net assets before
reimbursement of expenses by Adviser 3.78% 3.89% 3.88% 2.29%*
Ratio of net investment income
to average net assets after
reimbursement of expenses by Adviser 4.93% 5.16% 4.78% 4.17%*
Portfolio turnover 21.23% 1.28% 24.14% 24.53%
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</TABLE>
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FAIRPORT FUNDS Prospectus Page 7 of 23
* Annualized
** Not Annualized
(1) This Fund commenced operations on July 1, 1993.
THE TRUST AND ITS FUNDS
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In order to provide you with a variety of mutual funds with different
investment objectives, the Trust offers shares of the MIDWEST GROWTH FUND, the
GROWTH AND INCOME FUND and the GOVERNMENT FUND, each of which is a diversified
Fund of the Trust, and which may be referred to individually as a "Fund" and
collectively as the "Funds." Of course, there can be no guarantee that any Fund
will achieve its investment objectives.
INVESTMENT OBJECTIVES AND POLICIES
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MIDWEST GROWTH FUND
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The MIDWEST GROWTH FUND seeks, as its investment objective, capital
appreciation.
Under normal circumstances, the Fund invests as fully as practicable in
common stocks, but may also invest in rights and debt securities and preferred
stocks convertible into common stocks (together with common stocks, "equity
securities") and in warrants to acquire such equity securities. Under normal
market conditions, the Fund invests at least 65% of its total assets in equity
securities of companies headquartered in the states or areas bordering the Great
Lakes; that is, Ohio, Michigan, Indiana, Illinois, Western New York, Western
Pennsylvania, Wisconsin and Minnesota (the "Midwest"). Roulston, as the Fund's
investment adviser, generally selects for investment by the Fund common stocks
that Roulston's research indicates represent high investment potential and/or
value for the Fund. Roulston does not necessarily consider dividend income when
selecting common stocks for the Fund.
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THE MIDWEST GROWTH FUND SEEKS CAPITAL APPRECIATION, PRIMARILY THROUGH
INVESTMENTS IN COMMON STOCKS.
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Roulston, as investment adviser to the MIDWEST GROWTH FUND, selects
convertible securities primarily upon its evaluation that the underlying common
stocks meet the criteria for selection of common stocks as described above. The
Fund intends to invest in convertible debt securities which are primarily
investment grade (i.e., rated within the four highest rating categories of a
nationally recognized statistical rating organization ("NRSRO"), e.g., Standard
& Poor's Corporation ("S&P") or Moody's Investors Service, Inc., ("Moody's") or,
if unrated, are deemed to be of comparable quality to securities so rated). The
Fund, however, may invest up to 5% of its net assets in noninvestment grade
convertible debt securities rated no lower than B by an appropriate NRSRO or in
unrated securities which are deemed by Roulston to be of comparable quality.
Noninvestment grade securities are commonly referred to as high yield or high
risk securities. High yield, high risk securities generally have more risk than
higher quality securities and are subject to more credit risk, including risk of
default, and volatility than higher quality securities. In addition, such
securities may have less liquidity and experience more price fluctuation than
higher quality securities. For a further discussion of convertible debt
securities rated B by an NRSRO, please see "Risk Factors" below.
Any of the MIDWEST GROWTH FUND'S assets not invested in equity securities
are invested in certain money market instruments ("Money Market
Instruments") which consist of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; certificates of deposit,
time deposits, and bankers' acceptances issued by domestic and foreign
branches of U.S. commercial banks or savings and loan associations and
domestic branches of foreign banks, having net assets of at least $10
billion as stated on their most recently published financial statements;
commercial paper rated in one of the two highest rating categories assigned
by at least one
<PAGE> 8
FAIRPORT FUNDS Prospectus Page 8 of 23
NRSRO or, if unrated, are of comparable quality at the time of purchase as
determined by Roulston; variable amount master demand notes; repurchase
agreements involving such securities; and (as permitted by applicable law)
shares of other investment companies holding themselves out as money market
funds. Please see Appendix "A" to the Statement of Additional Information for a
description of the applicable NRSRO ratings.
GROWTH AND INCOME FUND
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THE GROWTH AND INCOME FUND SEEKS, AS ITS INVESTMENT OBJECTIVES, CAPITAL
APPRECIATION AND CURRENT INCOME.
Under normal market conditions, the Fund invests as fully as practicable in
common stocks of U.S. issuers but may also invest in warrants, rights and debt
securities and preferred stocks convertible into common stocks, which are rated
at the time of purchase in one of the four highest rating categories by an NRSRO
(or if not rated, deemed by Roulston to be of comparable quality to securities
so rated), and U.S. dollar denominated securities of foreign issuers, including
American Depository Receipts ("ADRs"). In addition, up to 5% of the Fund's net
assets may be invested in noninvestment grade convertible debt securities rated
no lower than B by an appropriate NRSRO or in unrated securities which are
deemed by Roulston to be of comparable quality. The risks of investment in such
securities are described above under "MIDWEST GROWTH FUND."
Roulston, as the GROWTH AND INCOME FUND'S investment adviser, generally
selects for investment by the Fund common stocks that pay dividends and that
Roulston's research indicates represent potential value upon consideration of
relative price/earnings multiples, price to book value and/or price/earnings
ratios.
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THE GROWTH AND INCOME FUND SEEKS CAPITAL APPRECIATION AND CURRENT INCOME,
PRIMARILY THROUGH INVESTMENTS IN COMMON STOCKS.
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Any of the GROWTH AND INCOME FUND'S assets not invested in the securities
listed above are invested in Money Market Instruments.
GOVERNMENT FUND
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The GOVERNMENT FUND seeks, as its investment objective, current income
consistent with preservation of capital.
The Fund invests at least 65% of its total assets in direct obligations
issued by the U.S. Treasury; separately traded component parts of U.S. Treasury
obligations, transferable only through the Federal Reserve's book entry system
and which are a part of the U.S. Government's STRIPs program; obligations issued
or guaranteed as to principal and interest by the U.S. Government or its
agencies or instrumentalities; and repurchase agreements involving any of the
foregoing securities. The Fund may also invest up to 5% of its net assets in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities which are "mortgage-related" securities, meaning that they
represent an interest in an underlying pool of mortgages.
The remaining assets of the GOVERNMENT FUND may be invested in any of the
following: domestic corporate fixed income securities rated in one of the two
highest rating categories by at least one NRSRO or, if unrated, are of
comparable quality at the time of purchase as determined by Roulston; variable
amount master demand notes; short-term bank obligations, including certificates
of deposit, time deposits and bankers' acceptances, of domestic and foreign
branches of U.S. commercial banks or savings and loan institutions and domestic
branches of foreign banks, with assets of at least $10 billion as stated on
their most recently published financial statements; U.S. dollar denominated
securities issued or guaranteed by supranational entities, foreign governments,
their political subdivisions, agencies or instrumentalities; and repurchase
agreements involving such securities.
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<PAGE> 9
FAIRPORT FUNDS Prospectus Page 9 of 23
THE GOVERNMENT FUND SEEKS CURRENT INCOME CONSISTENT WITH THE PRESERVATION
OF CAPITAL.
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The GOVERNMENT FUND expects to maintain a dollar-weighted average portfolio
maturity of three to ten years. Within this range, Roulston will maintain a
relatively even distribution of maturities among the Fund's holdings.
IN GENERAL
-------
Each Fund generally will purchase only those securities that are traded in
the United States or Canada on registered exchanges or the over-the-counter
markets, including established dealer markets. Each of the MIDWEST GROWTH FUND
and the GROWTH AND INCOME FUND, however, may invest up to 5% of their respective
net assets in equity securities that are restricted as to their resale as
described more fully below.
Each of the Funds may purchase securities on a when-issued or
delayed-delivery basis, may invest in variable and floating rate instruments,
may purchase securities of other investment companies, and may purchase and sell
options on securities or market indices and may write covered-call options (for
hedging purposes only). For more information regarding such investment
techniques, please see "Risk Factors" and "DESCRIPTION OF PERMITTED INVESTMENTS
AND RELATED RISK FACTORS" below.
For temporary defensive purposes, when Roulston determines that market
conditions warrant, each Fund may invest up to 100% of its assets in cash and
Money Market Instruments. To the extent a Fund is so invested, that Fund may not
achieve its investment objective or objectives.
RISK FACTORS
-------
Each Fund's shares will fluctuate in value. An investment in any of the Funds
may be more suitable for long-term investors who can bear the risk of short-term
fluctuations in value.
Investments in common stocks in general are subject to market risks that may
cause their prices to fluctuate over time, and therefore the net asset value of
a Fund investing in such securities to fluctuate. There is the risk that stock
prices in general will decline over short or even extended periods of time. The
value of convertible securities is also affected by prevailing interest rates,
the credit quality of the issuer and any call provisions.
The market value of a Fund's fixed income investments will also change in
response to interest rate changes and other factors. During periods of falling
interest rates, the values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the price of longer maturity securities are also
subject to greater price fluctuations as a result of changes in interest rates.
Changes by an NRSRO in the rating of any fixed income security and in the
ability of an issuer to make payments of interest and principal also affect the
value of these investments. Changes in the value of portfolio securities will
not necessarily affect cash income derived from these securities but will affect
a Fund's net asset value.
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AN INVESTMENT IN ANY OF THE FUNDS MAY BE MORE SUITABLE FOR LONGER-TERM INVESTORS
WHO CAN BEAR THE RISK OF SHORT-TERM FLUCTUATIONS IN VALUE.
-------
Convertible debt securities which are rated B by Moody's generally lack
characteristics of a desirable investment, since the assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small. Debt rated B by S&P is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or
<PAGE> 10
FAIRPORT FUNDS Prospectus Page 10 of 23
major risk exposures to adverse conditions.
Investments in securities of foreign issuers by the GROWTH AND INCOME FUND
and the GOVERNMENT FUND may subject them to risks which differ in some respects
from those associated with investments in securities of U.S. issuers. Such risks
include differences in accounting, auditing and financial reporting standards,
trade balances and imbalances and related economic policies, fluctuations in
currency exchange rates, the possibility of expropriation or confiscatory
taxation, nationalization or expropriation of foreign investments or deposits,
less stringent disclosure requirements, the possible establishment of exchange
controls and political instability. There may also be less publicly available
information with regard to foreign issuers than domestic issuers.
Each of the Funds may purchase put and call options and may write covered
call options for hedging purposes only and will limit its investment in options
such that no more than 5% of such Fund's net assets will be invested in or
subject to such options. Each Fund may also enter into repurchase agreements and
may purchase securities on a when-issued or delayed-delivery basis. Although the
Funds will not use any such investment techniques for purposes of leveraging a
Fund's portfolio or for speculative purposes, such investment techniques involve
certain risks of which investors should be aware, including the risk that the
other party to the transaction will default in its obligations.
Each of the Funds may also invest in variable or floating instruments. Such
instruments involve the risk that the interest rate or index on which such
instrument's interest rate is based will not closely follow or match current
interest rates.
The MIDWEST GROWTH FUND and the GROWTH AND INCOME FUND may each invest in
restricted, or Section 4(2), securities. These securities are issued by
corporations without registration under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance on an exemption from registration which is
afforded by Section 4(2) of the 1933 Act. Section 4(2) securities are generally
sold to institutional investors rather than the general public and therefore may
not be as readily saleable, or liquid, as securities that are registered under
the 1933 Act.
The MIDWEST GROWTH FUND and the GROWTH AND INCOME FUND may also invest from
time to time in the securities of selected new issuers, or initial public
offerings (IPOs). Investments in relatively new issuers, i.e., those having
continuous operating histories of less than three years, may carry special risks
and may be more speculative because such companies are relatively unseasoned.
For additional information regarding additional risks associated with these
permitted investments of the Funds, please see "DESCRIPTION OF PERMITTED
INVESTMENTS AND RELATED RISK FACTORS" below and the Statement of Additional
Information.
INVESTMENT LIMITATIONS OF THE FUNDS
-------
The investment objective or objectives of each Fund described above and the
investment limitations described below and in the Statement of Additional
Information are fundamental policies of that Fund. Fundamental policies cannot
be changed with respect to a Fund without the consent of the holders of a
"majority of the outstanding shares" of that Fund as that term is defined below
under "GENERAL INFORMATION -- Voting Rights."
No Fund may:
1. Purchase securities of any one issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements involving such securities) if as a result
more than 5% of the value of the total assets of the Fund would be
invested in the securities of such issuer or the Fund would hold more
than 10% of the outstanding voting securities of such issuer. This
restriction applies to 75% of a Fund's total assets.
2. Purchase any securities which would cause 25% or more of the total
assets of a Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry; provided that this limitation does not apply to investments
in obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities and repurchase agreements involving such
securities. For purposes of this limitation, (i) utility companies will
be divided according to their services; for example, gas distribution,
gas transmission, electric and telephone will each be considered a
separate industry, and (ii) financial service
<PAGE> 11
FAIRPORT FUNDS Prospectus Page 11 of 23
companies will be classified according to the end users of their services;
for example, automobile finance, bank finance and diversified finance will
each be considered a separate industry.
3. Borrow money or issue senior securities, except that a Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts not exceeding 10% of the value of its total assets
and except as permitted by rule, regulation or order of the Securities
and Exchange Commission. A Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) exceed 5% of its
total assets.
MANAGEMENT OF THE TRUST
-------
Overall responsibility for the management of the Trust and the Funds is
vested in the Board of Trustees of the Trust, who will manage the Trust in
accordance with the laws of Ohio governing business trusts. Unless so required
by the Trust's Declaration of Trust or By-Laws or by Ohio law, at any given time
all of the Trustees may not have been elected by the shareholders of the Trust.
Trustees may be removed by the Board of Trustees or shareholders in accordance
with the provisions of the Declaration of Trust and By-Laws of the Trust and
Ohio law. The Board of Trustees elects officers and contracts with and provides
for the compensation of agents, consultants and other professionals to assist
and advise it in the day-to-day operations of the Trust and the Funds. See
"GENERAL INFORMATION -- The Trust and its Shares" below for further information.
THE ADVISER
-------
Roulston, 4000 Chester Avenue, Cleveland, Ohio 44103, which serves as the
investment adviser for each Fund, is a professional investment management firm
and registered investment adviser that was founded in 1963. Roulston is
controlled, directly and indirectly, by Thomas H. Roulston and members of his
immediate family. As of December 31, 1996, Roulston had discretionary management
authority with respect to approximately $572 million of assets. In addition to
advising the Funds, Roulston provides advisory services to pension plans,
corporations, 401(k) plans, profit sharing plans, individual investors, trusts
and estates.
Roulston serves as the investment adviser for each Fund under an investment
advisory agreement (the "Advisory Agreement") with the Trust. Under the terms of
the Advisory Agreement, Roulston makes the investment decisions for the assets
of the Funds and continuously reviews, supervises and administers the investment
program of the Funds, subject to the supervision of, and policies established
by, the Trustees of the Trust.
Joseph A. Harrison, C.F.A., Executive Vice President and Director of
Investments for Roulston since 1991, and D. Keith Lockyer, Vice President and
Portfolio Manager for Roulston, manage the portfolio of the GOVERNMENT FUND.
Prior to 1991, Mr. Harrison was the Director of Portfolio Management for
Roulston. Mr. Harrison also manages the GROWTH AND INCOME FUND. Norman F. Klopp,
C.F.A., Executive Vice President of Roulston since 1991, manages the portfolio
of the MIDWEST GROWTH FUND. Since 1964, Mr. Klopp has been an analyst with
Roulston.
For its services as investment adviser, Roulston receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.75% of the average
daily net assets of each of the MIDWEST GROWTH FUND and the GROWTH AND INCOME
FUND up to $100 million, and 0.50% of each such Fund's assets of $100 million or
more. With respect to the GOVERNMENT FUND, Roulston receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.25% of the average
daily net assets of the Government Fund up to $100 million, and .125% of such
assets of $100 million or more.
-------
The Funds' investment adviser, Roulston & Company, Inc.,
is a professional investment management firm founded in 1963.
-------
The advisory fee with respect to the MIDWEST GROWTH FUND and the GROWTH AND
INCOME FUND is
<PAGE> 12
FAIRPORT FUNDS Prospectus Page 12 of 23
higher, in the opinion of the Securities and Exchange Commission (the
"Commission"), than that paid by most investment companies, but Roulston
believes the fee to be comparable to that paid by investment companies with
similar objectives and policies. Roulston has voluntarily agreed, until October
31, 1997, to waive such portion of its advisory fee from the Funds in order to
limit total operating expenses to an annual rate of 1.38% of the MIDWEST GROWTH
FUND'S average daily net assets, 1.50% of the GROWTH AND INCOME FUND'S average
daily net assets and .90% of the GOVERNMENT FUND'S average daily net assets.
Such voluntary fee waivers will cause the yield and total return of a Fund to be
higher than they otherwise would be absent such waivers.
Mr. Scott D. Roulston, President and a Trustee of the Trust, is the president
and a director of both Roulston and the Distributor. Ms. Michele R. Fogarty is
Secretary and Treasurer of the Trust, and Chief Financial Officer of Roulston
and the Distributor.
THE DISTRIBUTOR
-------
The Distributor, whose business address is 4000 Chester Avenue, Cleveland, OH
44103, is a wholly owned subsidiary of Roulston and has entered into a
distribution agreement with the Trust. Pursuant to the Distribution Agreement,
the Distributor acts as agent for the Funds in the distribution of their shares
on a continuous basis and, in such capacity, solicits orders for the sale of
shares, advertises and pays the costs and expenses associated with such
advertising. The Distributor receives no compensation from the Funds for its
services under the Distribution Agreement, but receives compensation under the
Trust's Distribution and Shareholder Service Plan as described in the next
section.
THE DISTRIBUTION PLAN
-------
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which each Fund is
authorized to pay the Distributor, as the Funds' principal underwriter, a
periodic amount calculated at an annual rate not to exceed .25% of the average
daily net asset value of such Fund. Such amount may be used by the Distributor
to pay broker-dealers, banks and other institutions (a "Participating
Organization") for distribution and/or shareholder service assistance pursuant
to an agreement between the Distributor and the Participating Organization or
for distribution assistance and/or shareholder service provided by the
Distributor. Under the Plan, a Participating Organization may include the
Distributor and the Distributor's affiliates.
As authorized by the Plan, the Distributor has agreed to provide distribution
services and certain shareholder services in connection with shares of the Funds
purchased and held by the Distributor for the accounts of its customers and
shares of the Funds purchased and held by customers of the Distributor directly,
including, but not limited to, answering shareholder questions concerning the
Funds, providing information to shareholders on their investments in the Funds
and providing such personnel and communication equipment as is necessary and
appropriate to accomplish such matters. In consideration of such services the
Trust has agreed to pay the Distributor a monthly fee, computed at the annual
rate of .25% of the average aggregate net asset value of shares held during the
period in customer accounts for which the Distributor has provided services
under this Agreement. Such fees paid by the Trust will be borne solely by the
applicable Fund. Such fee may exceed the actual costs incurred by the
Distributor in providing such services.
In addition, the Distributor may enter into, from time to time, other Rule
12b-1 Agreements with selected dealers pursuant to which such dealers will
provide certain shareholder services such as those described above.
THE ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
-------
FPS Services, Inc., 3200 Horizon Drive, King of Prussia, PA 19406 ("FPS"),
provides each Fund with administrative services, including regulatory reporting
and all necessary office space, equipment, personnel and facilities, and serves
as the transfer agent and dividend disbursing agent and provides certain fund
accounting and
<PAGE> 13
FAIRPORT FUNDS Prospectus Page 13 of 23
custody administration services for each of the Funds. For its administrative
services, FPS is entitled to receive a fee from each Fund calculated at an
annual rate of 0.15% of the value of such Fund's first $50 million of total
average net assets, 0.10% of the value of such Fund's next $50 million of total
average net assets and 0.05% of the value of such Fund's total average net
assets in excess of $100 million, subject to an annual minimum fee of $55,000
for the first series and $12,000 for each additional domestic series. For its
fund accounting services, FPS is entitled to receive an annual fee from each
Fund equal to $24,000 for such Fund's first $20 million of average net assets,
.04% on such Fund's next $30 million of average net assets, .03% on such Fund's
next $50 million of average net assets and .01% on such Fund's average net
assets in excess of $100 million.
CUSTODIAN
-------
UMB Bank, n.a. (the "Custodian") acts as the custodian for each of the Funds.
The Custodian holds cash, securities and other assets of the Funds as required
by the 1940 Act.
HOW SHARES ARE VALUED
-------
The net asset value per share of each Fund is determined by dividing the
total market value of that Fund's investments and other assets, less any
liabilities, by the total outstanding shares of that Fund. Net asset value per
share for each Fund is determined as of the Valuation Time on each Business Day.
The portfolio securities of each Fund will be valued at market value. Each
Fund uses one or more pricing services to provide market quotations for equity,
fixed income and variable income securities. If market quotations are not
available, securities will be valued by a method which the Board of Trustees
believes accurately reflects fair value. Equity securities which are listed or
admitted to trading on a national securities exchange or other market trading
system which reports actual transaction prices on a contemporaneous basis will
be valued at the last sales price on the exchange on which the security is
principally traded. For fixed and variable income securities, the pricing
service may use a matrix system of valuation which considers factors such as
securities prices, yield features, call features, ratings and developments
related to a specific security. For further information regarding the pricing of
securities, please see the "STATEMENT OF ADDITIONAL INFORMATION."
HOW TO PURCHASE SHARES
-------
You may purchase shares of any Fund directly by mail or by wire on any
Business Day. You will buy shares at the next net asset value computed after the
Transfer Agent or a broker-dealer with whom the Distributor has a sales
agreement receives your order in proper form as described below. An Account
Application form may be obtained by calling the Distributor at 1-800-332-6459
(1-800-3-FAMILY). If a broker-dealer assists you in the purchase of shares of a
Fund, they may charge a fee for this service in addition to a Fund's public
offering price.
-------
The minimal initial investment is $250,
and any subsequent purchase must be at least $50.
-------
The minimum initial investment in any Fund is $250, and any subsequent
purchase must be at least $50. No minimum applies to subsequent purchases
effected by dividend reinvestment. The Distributor may waive minimums at its
discretion.
Your purchase order will be effective as of the Business Day received by the
Transfer Agent or a broker-dealer with whom the Distributor has a sales
agreement if the order in proper form and payment is received before the
Valuation Time. Payment may be made by check or readily available funds (e.g.,
by Federal funds wire). Purchases will be made in full and fractional shares of
a Fund calculated to three decimal places. Your account statement from the Trust
will be your record of shares of the Funds owned by you. The Trust will not
issue certificates representing
<PAGE> 14
FAIRPORT FUNDS Prospectus Page 14 of 23
shares of any Fund.
If a check received from you for the purchase of shares does not clear, the
purchase will be canceled, and you could be liable for any losses or fees
incurred, including a $20 returned check fee.
The Trust reserves the right to reject any purchase order when the Trust
determines that it is not in the best interest of the Trust or its shareholders
to accept such order.
PURCHASES BY MAIL
-------
You may open an account by mailing to the Transfer Agent, Fairport Funds, c/o
FPS Services, Inc., 3200 Horizon Drive, King of Prussia, PA 19406, an account
application and a check or other negotiable bank draft (payable to the name of
the appropriate Fund) for $250 or more. For your initial order to be in good
form, your account application must be completed properly and mailed with your
check or other negotiable instrument in the proper amount.
-------
You may open an account
and make subsequent investments by mail.
-------
For subsequent investments, you may send by regular U.S. mail your check or
other negotiable bank draft (payable to the name of the appropriate Fund), along
with the subsequent investment stub from your account statement, to FAIRPORT
FUNDS, c/o FPS Services, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. If you wish to send your subsequent investments by other than
regular U.S. mail (e.g., overnight or certified mail), please send such items
directly to the Transfer Agent at 3200 Horizon Drive, King of Prussia, PA 19406.
PURCHASES BY WIRE
-------
INITIAL PURCHASES: Before making an initial investment by wire and for your
order to be in proper form, you must first telephone the Transfer Agent at
1-800-332-6459 (1-800-3-FAMILY) to give the name(s) under which the account
is to be registered, tax identification number and the name of the bank
sending the wire, and to be assigned an account number. You may then
purchase Shares by requesting your bank to transmit immediately available
funds by Federal funds wire to the Transfer Agent at: UMB Bank, n.a., ABA
#10-10-00695/Attention: FPS Services, Inc., A/C 98-7037-071-9/FBO [Fund
Name], along with your name and account number as specified on your account
registration. In addition, an Account Application should be completed with
such information and promptly forwarded to the Transfer Agent at its
address set forth above under "Purchases by Mail."
SUBSEQUENT PURCHASES: You may make additional investments at any time
through the wire procedures described above, which must include your name
and account number, after notifying the Transfer Agent by telephone as
noted above. Your bank may impose a fee for investments by wire.
SYSTEMATIC INVESTMENT PLAN
-------
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") transactions from your
checking or savings account by completing the appropriate section of the Account
Application form.
-------
You may arrange to have additional investments
automatically deducted from your checking or savings account.
-------
<PAGE> 15
FAIRPORT FUNDS Prospectus Page 15 of 23
In order to use this Systematic Investment Plan, you must still have an
initial purchase of at least $250 but minimum preauthorized subsequent
investments may be as low as $50 per month. The automatic deductions may be made
on the 10th, 15th or 20th of the month and may be made monthly, quarterly,
semi-annually or annually.
TAX DEFERRED INVESTMENT
-------
The Funds are eligible for investment by tax-deferred retirement programs
such as 401(k) plans and IRAs. The minimum initial investment amount for an
account established under such programs is $250, and subsequent purchases must
be at least $50. All accounts established in a Fund under such programs must
elect to have all dividends reinvested in the Fund. For more information about
prototype 401(k) plans and IRAs, please call the Distributor at 1-800-332-6459
(1-800-3-FAMILY).
HOW TO REDEEM SHARES
-------
You may redeem shares by mail by writing to the Transfer Agent at its address
set forth above under "HOW TO PURCHASE SHARES -- Purchases by Mail." You may
also redeem shares by telephone by calling the Transfer Agent at 1-800-332-6459
(1-800-3-FAMILY). Redemption orders received by the Transfer Agent prior to the
Valuation Time on any Business Day will be effective that day, and the
redemption price of your shares will be the net asset value per share of that
Fund next determined after your redemption order, in proper order, is received
by the Transfer Agent. If a broker-dealer assists you in the redemption of
shares of a Fund, they may charge a fee for this service.
The Trust will make your redemption proceeds available as promptly as
possible and, in any event, within seven days after your redemption order, in
proper order, is received. For your redemption order to be in proper order, your
order must include your name as it appears on your account, your account number
and a signature guarantee as required and described below. However, your
redemption proceeds may be delayed if you purchased the shares to be redeemed by
check (including certified or cashier checks) until such check has cleared and
the Trust has collected good funds for your purchase. Such collection may take
15 days or more. Pursuant to the Trust's Declaration of Trust, payment for
shares redeemed may be made either in cash or in-kind, or partly in cash and
partly in-kind. However, the Trust has elected pursuant to Rule 18f-1 under the
1940 Act to redeem its shares solely in cash up to the lesser of $250,000 or 1%
of the net asset value of the Fund, during any ninety-day period for any one
shareholder. Payments in excess of this limit by any of the Funds will also be
made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of any such Fund. Any portfolio securities paid or distributed in-kind
would be valued as described under "HOW SHARES ARE VALUED". In the event that an
in-kind distribution is made, you may incur additional expenses, such as the
Payment of brokerage commissions, on the sale or other disposition of the
securities received from a Fund. In-kind payments need not constitute a
cross-section of the Fund's portfolio.
You may receive your redemption payments in the form of a check, or by
Federal Reserve wire transfer or ACH transfer to the bank account previously
designated by you. Just notify the Transfer Agent in your redemption order of
your preference. There is no charge for having a check for redemption proceeds
mailed or for ACH transfers. The Trust's Custodian will deduct a wire charge,
currently $9, from the amount of a Federal Reserve wire redemption payment made
at your request. You will not be able to redeem shares of any Fund by Federal
Reserve wire on federal holidays restricting wire transfers. Payment by ACH
transfer will not be posted to your bank account until at least the second
Business Day following the transaction.
-------
You may redeem shares
by mail or by telephone at 1-800-332-6459.
-------
The Transfer Agent will require a signature guarantee for (1) any written
redemption request of $25,000 or more;
<PAGE> 16
FAIRPORT FUNDS Prospectus Page 16 of 23
(2) a change in address or payee to where redemption proceeds may be mailed as
shown on your account application; or (3) a change in the bank account to which
redemption payments are made by either Federal Reserve wire transfer or ACH
transfer. You may have your signature guaranteed by any bank, broker, dealer,
credit union, savings and loan association or other eligible institution as may
be designated by the Transfer Agent from time to time. Notarization of your
signature does not constitute a signature guarantee.
Neither the Trust, the Funds nor the Transfer Agent will be responsible
for the authenticity of the redemption instructions received by telephone
if it reasonably believes those instructions to be genuine. The Trust and
the Transfer Agent will each employ reasonable procedures to confirm that
telephone instructions are genuine, and may be liable for losses resulting
from unauthorized or fraudulent telephone transactions if it does not
employ those procedures. Such procedures may include taping of telephone
conversations and requesting a shareholder to state correctly his or her
Fund account number, the name in which his or her account is registered,
his or her social security number, banking institution bank account number
and the name in which his or her bank account is registered.
The right of redemption may be suspended or the date of payment of
redemption proceeds postponed by the Trust during certain periods as set
forth more fully in the Statement of Additional Information. In addition,
if the balance of your account in a Fund falls below $250 because of
redemptions by you, the Trust reserves the right to redeem at net asset
value your shares. However, before the Trust exercises this right, you will
be given notice that your account has fallen below this required minimum
amount. You will then be given at least 60 days to make an additional
investment to meet this required minimum.
SYSTEMATIC WITHDRAWAL PLAN
-------
Each Fund offers a Systematic Withdrawal Plan ("SWP") if you wish to
receive regular distributions from your account in that Fund. However,
before you can utilize the SWP, your account in the Fund must have a
current value of $10,000 or more, your dividend and distributions must be
automatically reinvested and your requested distribution must be $100 or
more made on a monthly, quarterly, semi-annual or annual basis.
-------
You can arrange to receive regular distributions
from your account, under certain conditions.
-------
Your automatic payments under the SWP will either be made by check mailed
to your address as shown on the books of the Transfer Agent or via ACH to
your bank account designated on your Account Application form. An
application form for the SWP may be obtained by calling the Distributor or
Transfer Agent at 1-800-332-6459 (1-800-3-FAMILY). You may change or cancel
the SWP at any time, upon written notice to the Transfer Agent at least
five days prior to SWP withdrawal date for which you want such change or
cancellation.
Please note that if your redemptions from a Fund exceed your dividends
from that Fund, your invested principal in the account may decrease. Thus
depending on the frequency and amounts of the withdrawals and/or any
fluctuations in the net asset value per share, your original investment
could be exhausted entirely using the SWP.
EXCHANGES
-------
You may exchange your shares of any Fund for shares of either of the
other Funds at net asset value without the payment of any fee or charge.
You may also exchange your shares of any Fund for shares of Kemper's Cash
Account Trust Money Market Portfolio ("Kemper CAT") at net asset value
without the payment of any fee or charge.
An exchange is considered, however, a sale of shares and may result in
capital gain or loss for federal income tax purposes. Before an exchange
can be made, you must have received the current prospectus for the Fund or
Kemper
<PAGE> 17
FAIRPORT FUNDS Prospectus Page 17 of 23
CAT into which you wish to exchange, and the exchange privilege may
be exercised only in those states where shares of such Fund or Kemper CAT,
as the case may be, may legally be sold. If the Transfer Agent receives
exchange instructions from you in writing or by telephone in good order by
the Valuation Time on any Business Day, the exchange will be effected that
day. For your exchange request to be in good order, your request must
include your name as it appears on your account, your account number, the
amount to be exchanged, the name of the Funds from which and to which the
exchange is to be made and a signature guarantee as may be required. A
written request by you for an exchange in excess of $25,000 must be
accompanied by a signature guarantee as described above under "HOW TO
REDEEM SHARES."
You may exchange your shares of any Fund for shares of either of the other
Funds at net asset value without the payment of any fee or charge.
-------
The liability of the Trust, the Funds or the Transfer Agent for
fraudulent or unauthorized telephone instructions may be limited as
described above under "HOW TO REDEEM SHARES." The Trust reserves the right
to modify or terminate this exchange offer at any time or from time to time
on 60 days' notice.
PERFORMANCE OF THE FUNDS
-------
From time to time, each Fund may advertise its yield and total return.
THESE FIGURES WILL BE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. No representation can be made regarding future
yields or returns. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The
yield is calculated by assuming that the same amount of income generated by
the investment during that period is generated in each 30-day period over
one year and is shown as a percentage of the investment.
The "total return" or "average annual total return" of a Fund reflects
the change in the value of an investment in a Fund over a stated period of
time. Total returns and average annual returns measure both the net
investment income from and any realized or unrealized appreciation or
depreciation of a Fund's holdings for a stated period and assume that the
entire investment is redeemed at the end of each period and the
reinvestment of all dividends and capital gain distributions.
-------
Further information about the performance of
the Funds may be obtained by calling the Funds at 1-800-332-6459.
-------
The performance of a Fund may periodically be compared with that of other
mutual funds or broad groups of comparable mutual funds tracked by mutual
fund rating services (such as Lipper Analytical Services, Inc.) and
financial and business publications and periodicals. In addition, a Fund's
performance may be compared with unmanaged indices of various investments
for which reliable performance data is available. These may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs. The performance of a Fund may also be
compared in various publications to averages, performance rankings or other
information prepared by recognized mutual fund statistical services. A Fund
may quote Morningstar, Inc., a service that ranks mutual funds on the basis
of risk-adjusted performance, or Ibbotson Associates of Chicago, Illinois,
which provides historical returns of the capital markets in the United
States. A Fund may use the long-term performance of these capital markets
to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital
markets. A Fund may also quote financial and business publications and
periodicals, such as SMART MONEY(R), as they relate to Trust management,
investment philosophy, and investment techniques.
A Fund may also quote from time to time various measures of volatility
and benchmark correlations in advertising
<PAGE> 18
FAIRPORT FUNDS Prospectus Page 18 of 23
and may compare these measures with those of other mutual funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
Further information about the performance of the Funds is contained in
the Funds' Annual Report to Shareholders which may be obtained without
charge by calling the Distributor at 1-800-332-6459 (1-800-3-FAMILY).
HOW THE FUNDS ARE TAXED
-------
Each Fund is treated as a separate entity for federal income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies as defined under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), for so long as such qualification is
in the best interests of that Fund's shareholders. Qualification as a
regulated investment company under the Code requires, among other things,
that a Fund distribute to its shareholders at least 90% of its investment
company taxable income. Each Fund contemplates declaring as dividends all
or substantially all of that Fund's investment company taxable income
(before deduction of dividends paid).
A nondeductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of
whether they otherwise have a noncalendar taxable year) an amount equal to
98% of their ordinary income for the calendar year plus 98% of their
capital gain net income for the one-year period ending on October 31 of
such calendar year. If distributions during a calendar year were less than
the required amount, that Fund would be subject to a nondeductible 4%
excise tax on the deficiency.
DIVIDENDS AND SHAREHOLDER TAXES
-------
DIVIDENDS AND DISTRIBUTIONS
-------
Substantially all of the net investment income (exclusive of capital
gains) of the MIDWEST GROWTH FUND and the GROWTH AND INCOME FUND is
distributed in the form of semi-annual dividends. For such Funds,
shareholders of record on the next-to-last Business Day of each month in
which a dividend is declared will be entitled to receive the dividend
distribution which is generally paid on or about the first Business Day of
the following month. Net investment income (exclusive of capital gains) of
the GOVERNMENT FUND is declared daily and distributed in the form of
monthly dividends. If any capital gain is realized by a Fund, substantially
all of it will be distributed at least annually. You will automatically
receive all dividends and capital gain distributions in additional shares
at the net asset value determined on the next Business Day after the record
date, unless you elected to take such payment in cash.
-------
You will automatically receive all dividends and capital gains distributions
in additional shares unless you elect to take such payments in cash.
-------
You may change your election by providing written notice to the Transfer
Agent at least 15 days prior to the distribution. You have the option to
receive payments for cash distributions in the form of a check or by
Federal Reserve wire transfer or ACH.
GENERAL TAX INFORMATION
-------
It is expected that each Fund will distribute annually to shareholders
all or substantially all of that Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
<PAGE> 19
FAIRPORT FUNDS Prospectus Page 19 of 23
realized capital gains will be taxable income to you for federal income tax
purposes, even if paid to you in additional shares of the Fund and not in cash.
The dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends deduction, if any, received by the Fund
bear to its gross income. And, of course, shareholders not subject to tax on
their income will not be required to pay tax on amounts distributed to them.
Since all of the GOVERNMENT FUND'S net investment income is expected to
be derived from earned interest and short-term capital gains, it is
anticipated that no part of any distribution from such Fund will be
eligible for the dividends-received deduction for corporations.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to you as long-term capital gain in
the year in which it is received, regardless of how long you have held the
shares. Such distributions are not eligible for the dividends-received
deduction.
If the net asset value of a share is reduced below your cost of that
share by the distribution of income or gain realized on the sale of
securities, the distribution, from a practical stand point, is a return of
invested principal, although taxable as described above.
Prior to purchasing shares, you should carefully consider the impact of
dividends or capital gains distributions which are expected to be declared
or have been declared, but have not been paid. Any such dividends or
capital gains distributions paid shortly after a purchase of shares prior
to the record date will have the effect of reducing the per share net asset
value of the shares purchased by you by the amount of the dividends or
distributions. All or a portion of such dividends or distributions,
although in effect a return of capital, is subject to tax.
-------
Prior to purchasing shares, consider the impact of dividends or capital gains
distributions expected to be declared or declared but not yet paid.
-------
Additional information regarding federal taxes is contained in the
Statement of Additional Information under the heading "TAXES." However, the
information contained in this Prospectus and the additional material in the
Statement of Additional Information are only brief summaries of some of the
important tax considerations generally affecting the Funds and their
shareholders. Accordingly, you are urged to consult your tax adviser
concerning the application of federal, state and local taxes as such laws
and regulations affect your own tax situation.
You will be advised at least annually as to the federal income tax
consequences of distributions made to you during the year.
GENERAL INFORMATION
-------
THE TRUST AND ITS SHARES
-------
The Trust is an open-end management investment company and is organized
under Ohio law as a business trust under a Declaration of Trust dated
September 16, 1994. The Trust currently consists of the three Funds, each
of which is diversified and each having its own class of shares. Each share
represents an equal proportional interest in a Fund with other shares of
the same Fund, and is entitled to such dividends and distributions out of
the income earned on the assets belonging to that Fund as are declared at
the discretion of the Trustees. When issued, the shares are fully paid,
nonassessable and freely transferable.
VOTING RIGHTS
-------
You, as a shareholder, are entitled to one vote for each dollar of value
invested and a proportionate fractional vote for any fraction of a dollar
invested, and will vote in the aggregate with other shareholders of the
Trust and not by
<PAGE> 20
FAIRPORT FUNDS Prospectus Page 20 of 23
Fund except as otherwise expressly required by law. For example,
shareholders of the Midwest Growth Fund will vote in the aggregate with
other shareholders of the Trust with respect to the election of Trustees
and ratification of the selection of independent accountants. However,
shareholders of a Fund will vote as a portfolio, and not in the aggregate
with other shareholders of the Trust, for purposes of approval of
amendments to that Fund's investment advisory agreement or any of that
Fund's fundamental policies.
The Trust does not expect to have an annual or special meeting of
shareholders except, under certain circumstances, when the Declaration of
Trust, the 1940 Act or other authority requires such a meeting, such as the
election or removal of Trustees or certain amendments to the Declaration of
Trust or the investment advisory agreement.
The Trust has represented to the Commission that the Trustees will call a
special meeting of shareholders for purposes of considering the removal of
one or more Trustees upon written request thereof from shareholders holding
not less than 10% of the outstanding votes of the Trust and that the Trust
will assist in communications with other shareholders as required by
Section 16(c) of the 1940 Act. At such meeting, a quorum of shareholders
(constituting a majority of votes attributable to all outstanding shares of
the Trust), by majority vote, has the power to remove one or more Trustees.
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding shares" of a Fund
means the affirmative vote, at a meeting of shareholders duly called, of
the lesser of (a) 67% or more of the votes of shareholders of that Fund
present at a meeting at which the holders of more than 50% of the votes
attributable to shareholders of record of that Fund are represented in
person or by proxy, or (b) the holders of more than 50% of the outstanding
votes of shareholders of that Fund.
REPORTING
-------
The Trust issues unaudited financial information semi-annually and
audited financial statements annually for each Fund. The Trust also
furnishes periodic reports and, as necessary, proxy statements to
shareholders of record.
SHAREHOLDER INQUIRIES
-------
Shareholder inquiries should be made by calling 1-800-332-6459
(1-800-3-FAMILY), or by writing to Fairport Funds, c/o FPS Services, Inc.,
3200 Horizon Drive, King of Prussia, PA 19406.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
-------
Baker & Hostetler LLP serves as counsel to the Trust. Ernst & Young LLP
serves as the independent public accountants of the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS AND RELATED RISK FACTORS
-------
The following is a description of permitted investments for the Funds:
AMERICAN DEPOSITORY RECEIPTS ("ADRS") - ADRs are typically issued by a U.S.
financial institution and evidence ownership of underlying securities
issued by a foreign issuer. Sponsored ADRs are a joint arrangement between
the foreign issuer and the depositary and tend to be more liquid than
unsponsored ADRs. The GROWTH AND INCOME FUND is permitted to invest in
sponsored ADRs.
COMMERCIAL PAPER - Unsecured short-term promissory notes issued by
corporations and other entities. Maturities on these issues typically vary
from a few days to nine months. All Funds are permitted to invest in
commercial paper.
<PAGE> 21
FAIRPORT FUNDS Prospectus Page 21 of 23
CONVERTIBLE SECURITIES - Securities such as rights, bonds, notes and
preferred stocks which are convertible into or exchangeable for common
stocks. Convertible securities have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market
value of the underlying common stock. As a result, a Fund's selection of
convertible securities is based, to a great extent, on the potential for
capital appreciation that may exist in the underlying stock. The value of
convertible securities is also affected by prevailing interest rates, the
credit quality of the issuer, and any call provisions. The MIDWEST GROWTH
and GROWTH AND INCOME FUNDS are permitted to invest in convertible
securities. As described above, such Funds will invest in convertible
securities based primarily upon Roulston's evaluation of the underlying
common stocks. Roulston may invest up to 5% of such a Fund's net assets in
convertible debt securities which are not investment grade but are rated
not lower than B by an NRSRO. Such noninvestment grade securities are
considered to be high risk securities.
INITIAL PUBLIC OFFERINGS - The MIDWEST GROWTH and GROWTH AND INCOME FUNDS
may each invest from time to time in the securities of selected new
issuers, or initial public offerings (IPOs). If the Fund is to invest in
securities of relatively new issuers, it will only be in those securities
which Roulston believes present an acceptable amount of risk. Investments
in relatively new issuers, i.e., those having continuous operating
histories of less than three years, may carry special risks and may be more
speculative because such companies are relatively unseasoned. Such
companies may also lack sufficient resources, may be unable to generate
internally the funds necessary for growth and may find external financing
to be unavailable on favorable terms or even totally unavailable. Those
companies will often be involved in the development or marketing of a new
product with no established market, which could lead to significant losses.
In addition, the securities of such issuers may have limited marketability,
which may affect or limit their liquidity and therefore the ability of the
Fund to sell such securities at the time and price it deems advisable. Such
securities may also be subject to more abrupt or erratic market movements
over time than securities of more seasoned companies or the market as a
whole.
OPTIONS - Each Fund may invest in put and call options for various
securities and securities indices that are traded on national securities
exchanges, from time to time, as Roulston deems to be appropriate. Each of
the Funds may also engage in writing call options from time to time as
Roulston deems appropriate. A Fund will write only covered call options
(options on securities owned by that Fund). A put option gives the
purchaser of the option the right to sell, and the writer the obligation to
buy, the underlying security at any time during the option period. A call
option gives the purchaser of the option the right to buy, and the writer
of the option the obligation to sell, the underlying security at any time
during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract.
The MIDWEST GROWTH and GROWTH AND INCOME FUNDS may invest in options on
stocks and stock indices, while the GOVERNMENT FUND may invest in options
on fixed income securities and fixed income securities indices. OPTIONS
WILL BE USED ONLY FOR HEDGING PURPOSES AND WILL NOT BE ENGAGED IN FOR
SPECULATIVE PURPOSES. Currently, no Fund anticipates entering into options
transactions to the extent that the aggregate value of portfolio securities
subject to options or invested in options positions will exceed 5% of a
Fund's net assets as of the time the Fund purchases or enters into such
options.
For further information regarding a Fund's investment in options, see the
Statement of Additional Information.
REPURCHASE AGREEMENTS - Agreements by which a Fund obtains securities from
an established financial institution and simultaneously commits to return
the securities to the seller at an agreed upon price and date. The agreed
upon price of the securities reflects the purchase price plus an agreed
upon market rate of interest which is unrelated to the coupon rate or
maturity of the underlying securities. The Custodian or its agent will hold
the security as collateral for the repurchase agreement. Such collateral
must be maintained at all times at a value at least equal to 102% of the
purchase price. A Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from
exercising its rights with respect to the underlying securities or if the
Fund realizes a loss on the sale of the underlying securities. Roulston
will enter into repurchase agreements on behalf of a Fund only with
financial institutions, including banks and broker-dealers, deemed to be
creditworthy and present minimal risk of bankruptcy during the term of the
agreement based on guidelines established and periodically reviewed by the
Trustees. Repurchase agreements are considered loans by a Fund under the
1940 Act. All Funds are permitted to invest in repurchase agreements.
<PAGE> 22
FAIRPORT FUNDS Prospectus Page 22 of 23
SECTION 4(2) SECURITIES - The MIDWEST GROWTH and GROWTH AND INCOME FUNDS
may each invest in restricted, or Section 4(2), securities. These
securities are issued by corporations without registration under the 1933
Act in reliance on an exemption from registration which is afforded by
Section 4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2)
securities are restricted as to disposition under Federal securities laws,
and generally are sold to institutional investors who agree that they are
purchasing the securities for investment and not with a view to public
distribution. Any resale may also generally be made in an exempt
transaction. Section 4(2) securities are normally resold, if at all, to
other institutional investors through or with the assistance of the issuer
or investment dealers who facilitate the resale of such Section 4(2)
securities, thus providing some liquidity.
Pursuant to procedures adopted by the Board of Trustees of the Trust,
Roulston may determine Section 4(2) securities to be liquid if such
securities are eligible for resale under Rule 144A under the 1933 Act and
are readily saleable. Rule 144A permits the Funds to purchase securities
which have been privately placed and resell securities to certain qualified
institutional buyers without restriction. For purposes of determining
whether a Rule 144A security is readily saleable, and therefore liquid,
Roulston must consider, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to purchase or sell
the security and the number of potential purchasers, dealer undertakings to
make a market in the security, and the nature of the security and
marketplace trades of such security. However, investing in Rule 144A
securities, even if such securities are initially determined to be liquid,
could have the effect of increasing the level of the Fund's illiquidity to
the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.
U.S. GOVERNMENT SECURITIES - U.S. Government direct obligations consist of
bills, notes and bonds issued by the U.S. Treasury and separately traded
interest and principal component parts of such obligations that are
transferable only through the Federal Reserve's book entry system known as
Separately Traded Registered Interest and Principal Securities ("STRIPs").
All Funds are permitted to invest in U.S. Government direct obligations,
including STRIPs. The Funds intend to invest in STRIPs that are only traded
through the U.S. Government-sponsored program.
STRIPS are sold as zero coupon securities, that is, fixed income
securities that have been stripped of their unmatured interest coupons.
Zero coupon securities are sold at a (usually substantial) discount and
redeemed at face value at their maturity date without interim cash payments
of interest or principal. The amount of this discount is accreted over the
life of the security, and the accretion constitutes the income earned on
the security for both accounting and tax purposes. Because of these
features, the market prices of zero coupon securities are generally more
volatile than the market prices of securities that have a similar maturity
but pay interest periodically. Zero coupon securities are likely to respond
to a greater degree to interest rate changes than are nonzero coupon
securities with similar maturity and credit qualities.
U.S. Government agency securities are issued by certain federal agencies
that have been established as instrumentalities of the U.S. Government to
supervise and finance certain types of activities. Issues of these
agencies, while not direct obligations of the U.S. Government, are either
backed by the full faith and credit of the United States, guaranteed by the
Treasury or supported by the issuing agency's right to borrow from the
Treasury or supported only by the credit of the instrumentality. All Funds
are permitted to invest in U.S. Government agency securities.
VARIABLE AMOUNT MASTER DEMAND NOTES - Variable amount master demand notes
in which the Funds may invest are unsecured demand notes that permit the
indebtedness thereunder to vary and that provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because
master demand notes are direct lending arrangements between a Fund and the
issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest
at any time within 30 days. While the notes are not typically rated by
NRSROs, issuers of variable amount master demand notes (which are normally
manufacturing, retail, financial, and other business concerns) must satisfy
the same criteria as set forth above for commercial paper. Roulston will
consider the earning power, cash flow, and other liquidity ratios of the
issuers of such notes and will continuously monitor their financial status
and ability to meet payment on demand. In determining average weighted
portfolio maturity, a variable amount master demand note will be deemed to
have a maturity equal to the period of time remaining until the principal
amount can be recovered from the issuer through demand. In the event that
the period of time remaining until the principal amount can be recovered
under a variable
<PAGE> 23
FAIRPORT FUNDS Prospectus Page 23 of 23
master demand note exceeds seven days, a Fund will treat such note as
illiquid for purposes of its limitations on investments in illiquid
securities.
VARIABLE AND FLOATING RATE INSTRUMENTS - Certain of the obligations
purchased by the Funds may carry variable or floating rates of interest and
may involve a conditional or unconditional demand feature. Such instruments
bear interest at rates which are not fixed, but which vary with changes in
specified market rates or indices, such as a Federal Reserve composite
index. The interest rates on these securities may be reset daily, weekly,
quarterly or some other reset period. The Funds intend to invest in
variable and floating rate instruments whose market value upon reset of the
interest rate will approximate par value because their interest rates will
be tied to short-term rates. However, there is a risk that the current
interest rate on such obligations may not accurately reflect existing
market rates, and therefore that upon such interest rate reset, the
instrument may decline in value. All Funds are permitted to invest in
variable and floating rate instruments. A demand instrument with a demand
notice exceeding seven days will be considered illiquid if there is no
secondary market for such securities.
WARRANTS - These instruments give holders the right, but not the
obligation, to buy shares of a company at a given price during a specified
period. The MIDWEST GROWTH and GROWTH AND INCOME FUNDS are permitted to
invest in warrants.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS - These transactions involve
the purchase of securities subject to settlement and delivery beyond the
normal settlement date. The price and yield on these securities is fixed as
of the purchase date, and no interest accrues to the Fund before
settlement. These securities are therefore subject to market fluctuation
due to changes in market interest rates, and, although the purchase of
securities on a when-issued basis is not considered leveraging, it has the
effect of leveraging a Fund's assets. Segregated accounts will be
established with the Custodian, and a Fund will maintain in such account,
high quality liquid assets in an amount at least equal in value to that
Fund's commitments to purchase when-issued securities.
The purchase of securities on a when-issued or delayed-delivery basis
involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date or if the seller fails to complete
the transaction and the Fund, as a result, misses a price or yield
considered to be advantageous. Although each Fund will purchase securities
on a when-issued or delayed delivery basis only with the intention of
actually acquiring securities for its portfolio, a Fund may dispose of a
when-issued security prior to settlement if Roulston deems it appropriate
to do so. No Fund's commitments to purchase when-issued or delayed-delivery
securities will exceed 25% of the value of its total assets. All Funds may
purchase securities on a when-issued basis or delayed- delivery for
investment purposes only and not for leveraging purposes.
INVESTMENT COMPANY SECURITIES - Each Fund may also invest up to 10% of the
value of its total assets in the securities of other investment companies
subject to the limitations set forth in the 1940 Act. Each Fund intends to
invest in the securities of other investment companies to the extent that
Roulston believes that such investment will assist that Fund in meeting its
investment objectives and in money market mutual funds for purposes of
short-term cash management. A Fund's investment in such other investment
companies will result in the duplication of fees and expenses, particularly
investment advisory fees. For a further discussion of the limitations on
the Funds' investments in other investment companies, see "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio Instruments
- -- Securities of Other Investment Companies" in the Trust's Statement of
Additional Information.
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<PAGE> 24
Fairport Funds Supplement
[FAIRPORT FUNDS LOGO] Our Investment Style
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The Fairport Funds
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View From Midwest
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Prospectus & Application
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Filed Pursuant to Rule 497(e) under the Securities Act of 1933. Registration
No.811-8774
FAIRPORT FUNDS
SUPPLEMENT DATED JULY 25, 1997 TO PROSPECTUS DATED FEBRUARY 28, 1997
Capitalized terms used in this Supplement have the meaning assigned to them in
the Prospectus.
The third paragraph under the heading "THE ADVISER" on page 10 of the Prospectus
is deleted and is hereby replaced with the following:
Joseph A. Harrison, C.F.A., Executive Vice President and Director of
Investments for Roulston since 1991, D. Keith Lockyer, Vice President and
Portfolio Manager of Roulston, manage the portfolio of the Government
Securities Fund. Mr. Harrison and Elmer L. Meszaros manage the portfolio of
the Growth and Income Fund. Mr. Meszaros has been an analyst with Roulston
since July, 1975, and began managing the portfolio of the Growth and Income
Fund with Mr. Harrison as of July, 1997. Norman F. Klopp, C.F.A., Executive
Vice President of Roulston since 1991, manages the portfolio of the Midwest
Growth Fund. Since 1964, Mr. Klopp has been an analyst with Roulston.
The sixth paragraph under the heading "The Adviser" on page 10 of the Prospectus
is deleted and is hereby replaced with the following:
Scott D. Roulston, President and a Trustee of the Trust, is the President
and a Director of both Roulston and the Distributor. Mr. Kevin M. Crotty is
Treasurer of the Trust, and Director of Finance of Roulston and the
Distributor. Mr. Charles A. Kiraly, Manager of Mutual Fund Administration
of Roulston, is the Secretary and Assistant Treasurer of the Trust.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS FOR FUTURE
REFERENCE
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