<PAGE> 1
As filed with the Securities and Exchange Commission on February 27, 1997
1933 Act Registration No. 33-84186
1940 Act File No. 811-8774
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
FAIRPORT FUNDS
Formerly known as The Roulston Family of Funds
(Exact Name of Registrant as Specified in Charter)
4000 Chester Avenue, Cleveland, Ohio 44103
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 216/431-3000
Scott D. Roulston, 4000 Chester Avenue, Cleveland, Ohio 44103
(Name and Address of Agent for Service)
Copy to: Kristin H. Ives, Esq., Baker & Hostetler LLP
65 East State Street, Columbus, Ohio 43215
Approximate Date of Proposed Public Offering:
Immediately, upon effectiveness
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
X on February 28, 1997 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date) pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) of Rule 485
---
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. The Registrant filed its Rule 24f-2
Notice for its fiscal year ended October 31, 1996, on December 24, 1996.
<PAGE> 2
CROSS REFERENCE SHEET
---------------------
FAIRPORT MIDWEST GROWTH FUND
FAIRPORT GROWTH AND INCOME FUND
FAIRPORT GOVERNMENT SECURITIES FUND
Three Funds
of
FAIRPORT FUNDS
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C>
1. Cover page.................. Cover Page
2. Synopsis.................... Prospectus Highlights; Fund Expenses
3. Condensed Financial
Information............... Financial Highlights;
Performance of the Funds
4. General Description of
Registrant................ General Information -- The Trust and
Its Shares; Investment Objectives and
Policies; Investment Limitations of the
Funds; Description of Permitted
Investments and Related Risk Factors
5. Management of the Fund...... Management of the Trust;
General Information
5A. Management's Discussion
of Fund Performance....... Inapplicable
6. Capital Stock and Other
Securities................ How to Purchase Shares; How to Redeem
Shares; How the Funds are Taxed;
Dividends and Shareholder Taxes;
General Information
7. Purchase of Securities
Being Offered............. How Shares are Valued; How to Purchase
Shares; How to Redeem Shares; Exchanges
8. Redemption or Repurchase.... How to Purchase Shares; How to Redeem
Shares; Exchanges
9. Pending Legal Proceedings... Inapplicable
</TABLE>
<PAGE> 3
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
1
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
<S> <C>
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...........................................................
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...................
</TABLE>
<PAGE> 5
PROSPECTUS HIGHLIGHTS
---------------------
The following summary provides basic information about FAIRPORT MIDWEST
GROWTH FUND (the "MIDWEST GROWTH FUND"), FAIRPORT GROWTH AND INCOME FUND (the
"GROWTH AND INCOME FUND") and FAIRPORT GOVERNMENT SECURITIES FUND
(the"GOVERNMENT FUND"), (each, a "Fund" and, collectively, the "Funds").
However, the following is only a summary, so please review carefully the
remainder of the Prospectus for more information.
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 intermediateterm 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.
3
<PAGE> 6
THE DISTRIBUTOR
- ---------------
Roulston Research Corp., a wholly-owned subsidiary of Roulston (the
"Distributor").
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.
4
<PAGE> 7
FUND EXPENSES
-------------
SHAREHOLDER TRANSACTION EXPENSES:
- ---------------------------------
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):
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
MIDWEST GROWTH GOVERNMENT
GROWTH AND INCOME SECURITIES
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
Management Fees
After Fee Waiver .44%(1) .42%(1) .00%(1)
12b-1 Fees .25 .25 .25
Other Expenses
After Reimbursements .69 .83 .65(1)
---- ---- ---
Total Operating Expenses
After Fee Waivers and/or
Expense Reimbursements (1) 1.38% 1.50% .90%
==== ==== ===
</TABLE>
(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>
MIDWEST GROWTH GOVERNMENT
GROWTH AND INCOME SECURITIES
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
One Year $ 14 $ 15 $ 9
Three Years $ 44 $ 47 $ 29
Five Years $ 76 $ 82 $ 50
Ten Years $166 $179 $111
</TABLE>
5
<PAGE> 8
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.
6
<PAGE> 9
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.
7
<PAGE> 10
<TABLE>
<CAPTION>
Fairport
Midwest Growth Fund
-------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
-------- -------- -------- --------
<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
<FN>
- ------------------
* Annualized
** Not Annualized
N/A Not Applicable; disclosure not required
(1) This Fund commenced operations on July 1, 1993.
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
Fairport
Growth and Income Fund
----------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
-------- -------- -------- --------
<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
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
<FN>
- ------------------
* Annualized
** Not Annualized
N/A Not Applicable; disclosure not required
(1) This Fund commenced operations on July 1, 1993.
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
Fairport
Government Securities Fund
--------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
--------- --------- --------- ---------
<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%
<FN>
- ------------------
* Annualized
** Not Annualized
(1) This Fund commenced operations on July 1, 1993.
</TABLE>
10
<PAGE> 13
THE TRUST AND ITS FUNDS
-----------------------
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
----------------------------------
MIDWEST GROWTH FUND
- -------------------
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.
- -------------------------------------------------------------------------------
The MIDWEST GROWTH FUND seeks capital appreciation,
primarily through investments in common stocks.
- -------------------------------------------------------------------------------
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.
[/R]
11
<PAGE> 14
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 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
- ----------------------
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.
- -------------------------------------------------------------------------------
The GROWTH AND INCOME FUND seeks capital appreciation
and current income, primarily through investments in common stocks.
- -------------------------------------------------------------------------------
Any of the GROWTH AND INCOME FUND'S assets not invested in the
securities listed above are invested in Money Market Instruments.
12
<PAGE> 15
GOVERNMENT FUND
- ---------------
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.
- -------------------------------------------------------------------------------
The GOVERNMENT FUND seeks current income
consistent with the preservation of capital.
- -------------------------------------------------------------------------------
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
13
<PAGE> 16
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.
- -------------------------------------------------------------------------------
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 major risk exposures to adverse conditions.
14
<PAGE> 17
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.
15
<PAGE> 18
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 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.
16
<PAGE> 19
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 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.
17
<PAGE> 20
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
- -----------------------------------------------------
18
<PAGE> 21
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 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."
19
<PAGE> 22
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 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.
20
<PAGE> 23
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
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
21
<PAGE> 24
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
22
<PAGE> 25
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; (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.
23
<PAGE> 26
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 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."
24
<PAGE> 27
- -------------------------------------------------------------------------------
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
25
<PAGE> 28
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 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.
26
<PAGE> 29
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
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.
27
<PAGE> 30
- -------------------------------------------------------------------------------
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 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.
28
<PAGE> 31
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.
29
<PAGE> 32
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.
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
30
<PAGE> 33
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.
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
31
<PAGE> 34
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 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
32
<PAGE> 35
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.
33
<PAGE> 36
1-800-332-6459
[FAIRPORT FUNDS LOGO] (1-800-3-FAMILY)
================================================================================
ACCOUNT APPLICATION FORM
================================================================================
<TABLE>
<S> <C> <C> <C> <C> <C>
A. Indicate Amount of Investment (The minimum initial investment is $250)
INITIAL ------------------------------------------------------- ___% and $____________
INVESTMENT -------------------------------------------------------
& FUND [ ] FAIRPORT GROWTH AND INCOME FUND (#133580)
SELECTION ------------------------------------------------------- ___% and $____________
-------------------------------------------------------
[ ] FAIRPORT GOVERNMENT SECURITIES FUND (#133581)
------------------------------------------------------- ___% and $____________
-------------------------------------------------------
[ ] FAIRPORT MIDWEST GROWTH FUND (#133582)
------------------------------------------------------- ___% and $____________
-------------------------------------------------------
[ ] CASH ACCOUNT TRUST MONEY MARKET PORTFOLIO
(a133583)
A prospectus must be obtained from Roulston Research
Corp. before you can purchase this fund.
[ ] Check here if you have already received a
prospectus.
TOTAL 100% $____________
[ ] BY CHECK: Please make payable to appropriate Fund Name
[ ] BY WIRE: An initial purchase of $________________ was wired on ____________ by
Date
_________________________________ to account # _________________________________
Name of your Bank or Broker Number assigned by FPS
</TABLE>
================================================================================
<TABLE>
<S> <C> <C> <C> <C>
FAIRPORT FUNDS PREFERS TO SEND ONE CONSOLIDATED STATEMENT PER HOUSEHOLD.
PLEASE LIST YOUR ACCOUNT NUMBERS TO BE PRINTED ON THE CONSOLIDATED STATEMENT:
A/C #_______________________ A/C #________________________ A/C #_______________________
A/C #_______________________ A/C #________________________ A/C #_______________________
</TABLE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
B. INDIVIDUAL
REGISTRATION
(PLEASE PRINT) ------------------------------------------------------------------- -----------------------
First Name Middle Initial Last Name Social Security Number
------------------------------------------------------------------- -----------------------
Jt. Owner First Name* Middle Initial Last Name Social Security Number
*(Joint ownership with rights of survivorship unless otherwise noted)
</TABLE>
===============================================================================
<TABLE>
<S> <C>
GIFT TO MINORS
---------------------------------------------------------------------------------------
Name of Custodian (name one only) As Custodian for (name one only)
Under the __________________________________(UGMA/UTMA) ________________________________
State Minors Social Security #
</TABLE>
===============================================================================
<TABLE>
<S> <C>
CORPORATION, PARTNERSHIP, OR TRUST
-----------------------------------------------------------------------------------------
Name of Corporation, Partnership or Trust
------------------------- ------------------------------------------------------------
Tax I.D. # Name of Trustee(s) Date of Trust
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
C. ------------------------------------------------------------------------------------------
MAILING Street Address & Apt. # or P.O. Box
ADDRESS &
TELEPHONE ------------------------------------------------------------------------------------------
NUMBER(S) City State Zip Code + 4
( ) ( )
--------------------------------------------- -----------------------------------------
Home Phone Number Business Phone Number
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
D. Check one box only for each; if none are checked all dividend income and capital gains, if any, will
DISTRIBUTION be reinvested. If money is to be reinvested in a different Fairport Fund, please indicate in space
OPTIONS provided.
Income Dividends [ ] Cash [ ] Reinvest [ ] Cash Account Trust ___________________
[ ] Other Fairport Fund Money Market Portfolio name / account #
Capital Gains [ ] Cash [ ] Reinvest [ ] Cash Account Trust ___________________
Distributions [ ] Other Fairport Fund Money Market Portfolio name / account #
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 37
- --------------------------------------------------------------------------------
E. [ ] Check box if you want this service.
SYSTEMATIC To establish a Systematic Withdrawal Plan (SWP),
WITHDRAWAL an account must have a current market value of
PLAN $10,000 or more. Additionally, an account must
have dividends reinvested.
[ ] Check box if you want withdrawal sent
to address of record.
[ ] Check box if you want withdrawal sent
VIA ACH as instructions indicate in
section G.
AMOUNT AND FREQUENCY OF PAYMENTS:
Beginning in ____________________, 19____, Please make
Month
payments in the amount of $_____________________
Amount $100 minimum
Payments will be processed on the 25th day of the
month frequency indicated below:
[ ] Monthly [ ] Quarterly
[ ] Semi-annually [ ] Annually
- --------------------------------------------------------------------------------
F. [ ] Check box if you want this service.
TELEPHONE I (We) authorize FPS Services and/or Fairport
PRIVILEGE Funds to act upon instructions received by
REDEMPTIONS; telephone from me (us) to redeem shares or to
EXCHANGES BETWEEN exchange for shares of other Fairport Funds. I
PORTFOLIOS (we) understand an exchange is made by redeeming
shares of one portfolio and using the proceeds to
buy shares of another portfolio. Exchanges must be
made into identically registered accounts.
Redemption proceeds will be sent as indicated in
Section G.
* If not otherwise indicated below, only exchanges
will be allowed.
[ ] Redemptions [ ] Exchanges [ ] Both
- --------------------------------------------------------------------------------
G. Check one only, if none are checked all redemptions
REDEMPTION will be sent by check.
& ACH
INFORMATION [ ] All redemption proceeds will be executed BY AN ACH
TRANSACTION unless FPS Services is notified
otherwise in writing. There is no charge for ACH
transactions. Allow 3 business days.
[ ] All redemption proceeds will be executed BY A FED
WIRE TRANSACTION unless FPS Services is notified
otherwise in writing. There is a $9 charge for FED
Wire transactions.
[ ] All redemption proceeds will be sent BY CHECK TO
THE MAILING ADDRESS STATED IN SECTION C ABOVE
unless FPS Services is notified otherwise in
writing.
All FED Wire and ACH transactions will be sent as
indicated below. There will be no charge for ACH
transactions. Any changes in ACH transactions must be
made in writing to FPS Services, Inc., 3200 Horizon
Drive, King of Prussia, PA 19406-0903. Please allow
one month for ACH instructions to be effective.
(Notify your bank of your intent to establish this
option on your bank account.)
<TABLE>
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Bank Name Branch Office (if applicable)
---------------------------------------------------------------------------------------
Bank Address (Do not use P.O. Box) City State Zip Code
---------------------------------------------------------------------------------------
VOIDED PERSONAL Bank Wire Routing Number Name(s) on Your Bank Account Your Bank Account Number
CHECK OR DEPOSIT SLIP
MUST BE ATTACHED ---------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
H. TAXPAYER IDENTIFICATION NUMBER CERTIFICATION. UNDER
SIGNATURE & THE PENALTIES OF PERJURY, I (WE) CERTIFY THE
CERTIFICATION FOLLOWING:
AND BACK-UP 1. I (WE) CERTIFY THAT THE NUMBER SHOWN ON THIS FORM
WITHHOLDING IS MY (OUR) CORRECT TAX IDENTIFICATION NUMBER.
CERTIFICATION 2. I (WE) AM NOT (ARE NOT) SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL
INTEREST AND DIVIDENDS, OR THE INTERNAL REVENUE
SERVICE HAS NOTIFIED ME (US) THAT I (WE) AM (ARE)
NO LONGER SUBJECT TO BACKUP WITHHOLDING.
CITIZEN OF: [ ] UNITED STATES [ ] OTHER (PLEASE INDICATE)
_______________________
"THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR
CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING".
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------- ---------------------
SIGNATURE [ ] OWNER [ ] CUSTODIAN [ ] TRUSTEE DATE
----------------------------------------------------------------- ---------------------
SIGNATURE JOINT OWNER (IF APPLICABLE) DATE
</TABLE>
[ ] CHECK BOX IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT
YOU ARE SUBJECT TO BACKUP WITHHOLDING.
- --------------------------------------------------------------------------------
FOR INVESTMENT DEALER ONLY
<TABLE>
<S> <C> <C>
/
------------------------------------------------------------------------------------- ---------------------------
Firm Name / Dealer # Branch/Branch #
---------------------------------------------------------------------------------------
Branch Address
------------------------------------------------------------ --------------- ---------------------
City State Zip Code
-------------------- ---------------------------------------
Rep # Rep's Last Name
</TABLE>
===============================================================================
MAIL COMPLETED APPLICATION TO: FPS SERVICES, INC., 3200 HORIZON DRIVE, KING OF
PRUSSIA, PA 19406-0903
================================================================================
MAKE CHECK PAYABLE TO: "FAIRPORT FUNDS" OR APPROPRIATE FUND NAME
================================================================================
<PAGE> 38
STATEMENT OF ADDITIONAL INFORMATION
===================================
FAIRPORT MIDWEST GROWTH FUND
(formerly known as Roulston Midwest Growth Fund)
FAIRPORT GROWTH AND INCOME FUND
(formerly known as Roulston Growth and Income Fund)
FAIRPORT GOVERNMENT SECURITIES FUND
(formerly known as Roulston Government Securities Fund)
Three Funds of
FAIRPORT FUNDS
Investment Adviser:
ROULSTON & COMPANY, INC.
This Statement of Additional Information is not a prospectus and
relates to FAIRPORT MIDWEST GROWTH FUND (the "MIDWEST GROWTH FUND"), FAIRPORT
GROWTH AND INCOME FUND (the "GROWTH AND INCOME FUND"), and FAIRPORT GOVERNMENT
SECURITIES FUND (the "GOVERNMENT FUND"). The MIDWEST GROWTH FUND, GROWTH AND
INCOME FUND, and GOVERNMENT FUND are sometimes referred to individually as a
"Fund" and collectively as the "Funds".
The name changes for FAIRPORT FUNDS (the "Trust"), and its Funds, were
approved by unanimous vote of the Board of Trustees, in accordance with the
Trust's Declaration of Trust and By-Laws, on February 22, 1996, and became
effective on March 1, 1996.
This Statement of Additional Information is intended to provide
additional information regarding the activities and operations of the Trust and
should be read in conjunction with the Funds' Prospectus dated February 28,
1997. The Prospectus may be obtained through the Trust's Distributor, Roulston
Research Corp., 4000 Chester Avenue, Cleveland, Ohio 44103 (the "Distributor").
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION OR
IN THE PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THE PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
February 28, 1997
B-1
<PAGE> 39
TABLE OF CONTENTS
-----------------
THE TRUST......................................................................
ADDITIONAL INFORMATION ON
PERMITTED INVESTMENTS AND RELATED RISK FACTORS..............................
ADDITIONAL INVESTMENT LIMITATIONS..............................................
MANAGEMENT OF THE TRUST........................................................
PRINCIPAL HOLDERS OF SECURITIES................................................
INVESTMENT ADVISORY AND OTHER SERVICES.........................................
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS...............................
NET ASSET VALUE................................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.................................
TAXES..........................................................................
PERFORMANCE INFORMATION........................................................
OTHER INFORMATION..............................................................
APPENDIX "A"
------------
DESCRIPTIONS OF SECURITIES RATINGS
APPENDIX "B"
------------
ANNUAL REPORT TO SHAREHOLDERS
OCTOBER 31, 1996
B-2
<PAGE> 40
THE TRUST
---------
FAIRPORT FUNDS (formerly THE ROULSTON FAMILY OF FUNDS) (the "Trust") is
an open-end management investment company established under Ohio law as an Ohio
business trust under a Declaration of Trust dated September 16, 1994.
On April 28, 1995, pursuant to an Agreement and Plan of Reorganization
and Liquidation with The Advisors' Inner Circle Fund, a Massachusetts business
trust ("Advisors"), FAIRPORT MIDWEST GROWTH FUND (formerly Roulston Midwest
Growth Fund), FAIRPORT GROWTH AND INCOME FUND (formerly Roulston Growth and
Income Fund) and FAIRPORT GOVERNMENT SECURITIES FUND (formerly Roulston
Government Securities Fund) of the Trust acquired all of the assets of each of
the Roulston Midwest Growth Fund, the Roulston Growth and Income Fund, and the
Roulston Government Securities Fund of Advisors (collectively, the "Acquired
Funds"), 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 performance and financial information
included in this Statement of Additional Information relates to both the
operations of the Acquired Funds prior to the Reorganization and to the Funds of
the Trust since the Reorganization.
The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest ("shares"). Each share of each Fund represents an
equal proportionate interest in that Fund. See "OTHER INFORMATION--Description
of Shares" below. This Statement of Additional Information relates to the
Trust's FAIRPORT MIDWEST GROWTH FUND (the "MIDWEST GROWTH FUND"), FAIRPORT
GROWTH AND INCOME FUND (the "GROWTH AND INCOME FUND"), and FAIRPORT GOVERNMENT
SECURITIES FUND (the "GOVERNMENT FUND"). The MIDWEST GROWTH FUND, GROWTH AND
INCOME FUND, and GOVERNMENT FUND are sometimes referred to individually as a
"Fund" and collectively as the "Funds".
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in shares of a Fund should be made without first reading the
Prospectus.
B-3
<PAGE> 41
ADDITIONAL INFORMATION ON PERMITTED INVESTMENTS
AND RELATED RISK FACTORS
------------------------
BANKERS' ACCEPTANCES
- --------------------
Negotiable bills of exchange or time drafts drawn on and accepted by a
commercial bank, meaning, in effect, that the bank unconditionally agrees to pay
the face value of the instrument on maturity. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods and to furnish dollar
exchanges. Maturities are generally six months or less. All Funds are permitted
to invest in bankers' acceptances.
CERTIFICATES OF DEPOSIT
- -----------------------
A negotiable interest bearing instrument with a specific maturity.
Certificates of deposit are issued by U.S. commercial banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit generally carry
penalties for early withdrawal. All Funds are permitted to invest in
certificates of deposit.
TIME DEPOSITS
- -------------
A non-negotiable receipt issued by a bank in exchange for the deposit
of funds. Like a certificate of deposit, it earns a specified rate of interest
over a definite period of time; however, it cannot be traded in the secondary
market. Time deposits in excess of seven days with a withdrawal penalty are
considered to be illiquid securities; a Fund will not invest more than 15% of
its net assets in illiquid securities, including such time deposits. All Funds
are permitted to invest in time deposits.
U.S. GOVERNMENT SECURITIES
- --------------------------
The GOVERNMENT FUND invests in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Such agencies and
instrumentalities include the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC"), and the Student Loan Marketing Association
("SLMA"). Obligations of agencies such as GNMA are backed by the full faith and
credit of the U.S. Government. Others, such as the obligations of FNMA, are not
backed by the full faith and credit of the U.S. Government but are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those
of SLMA, are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and still others, such as the Federal Farm
Credit Banks, are supported only by the credit of the agency. No assurance can
be given that the U.S. Government would provide financial assistance to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law.
B-4
<PAGE> 42
Some of these securities are considered to be "mortgage-related
securities" because they represent ownership in a pool of federally insured
mortgage loans with maturities of up to 30 years. However, due to scheduled and
unscheduled principal payments, such securities have a shorter average maturity
and, therefore, less principal volatility than a bond with a comparable
maturity. Since prepayment rates vary widely, it is not possible to accurately
predict the average maturity of a particular pool of mortgages. The scheduled
monthly interest and principal payments relating to mortgages in the pool will
be "passed through" to investors. Such mortgage-related securities differ from
conventional bonds in that principal is paid back to the certificate holders
over the life of the loan rather than at maturity. As a result, there will be
monthly scheduled payments of principal and interest. In addition, there may be
unscheduled principal payments representing prepayments on the underlying
mortgages. Although mortgage-related securities may offer yields higher than
those available from other types of U.S. Government securities, such securities
may be less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a mortgage-related security likely will not
rise as much as comparable debt securities due to the prepayment feature. In
addition, these prepayments can cause the price of a mortgage-related security
originally purchased at a premium to decline in price to its par value, which
may result in a loss. The market value and interest yield of these securities
can vary due to market interest rate fluctuations and early prepayments of
underlying mortgages.
Each Fund may invest in Separately Traded Interest and Principal
Securities ("STRIPs"), which are component parts of U.S. Treasury securities
traded through the Federal Reserve Book-Entry System. Roulston will purchase
only those STRIPs that it determines are liquid or, if illiquid, do not violate
the Fund's investment policy concerning investments in illiquid securities.
While there is no limitation on the percentage of a Fund's assets that may be
comprised of STRIPs, Roulston will monitor the level of such holdings to avoid
the risk of impairing shareholders' redemption rights.
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
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 such notes are not typically
rated by credit rating agencies, issuers of variable amount master demand notes
(which are normally manufacturing, retail, financial and other business
concerns), must satisfy, for purchase by a Fund, the same criteria as set forth
in the Prospectus for commercial paper for such Fund. 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 longer of the period of time remaining until the next interest rate
adjustment or the period of time remaining until the principal amount can be
recovered from the issuer through demand.
B-5
<PAGE> 43
VARIABLE AND FLOATING RATE NOTES
- --------------------------------
Each Fund may acquire variable and floating rate notes, subject to such
Fund's investment objectives, policies and restrictions. A variable rate note is
one whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate note is one whose terms provide
for the adjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Such notes are frequently not rated by
credit rating agencies; however, unrated variable and floating rate notes
purchased by a Fund will be determined by Roulston to be of comparable quality
at the time of purchase to rated instruments eligible for purchase under that
Fund's investment policies. In making such determinations, Roulston will
consider the earning power, cash flow and other liquidity ratios of the issuers
of such notes (such issuers include governmental agencies, and financial,
merchandising, bank holding and other companies) and will continuously monitor
their financial condition. Although there may be no active secondary market with
respect to a particular variable or floating rate note purchased by a Fund, the
Fund may resell the note at any time to a third party. The absence of an active
secondary market, however, could make it difficult for the Fund to dispose of a
variable or floating rate note in the event the issuer of the note defaulted on
its payment obligations and the Fund could, as a result or for other reasons,
suffer a loss to the extent of the default. To the extent that a Fund is not
entitled to receive the principal amount of a note within seven days and there
is no established market for such note, such a note will be treated as an
illiquid security for purposes of calculation of the 15% limitation on such
Fund's investment in illiquid securities.
REPURCHASE AGREEMENTS
- ---------------------
Securities held by each of the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund would acquire
securities from member banks of the Federal Reserve System and registered
broker-dealers which Roulston deems creditworthy under guidelines approved by
the Trust's Board of Trustees, subject to the seller's agreement to repurchase
such securities at a mutually agreed-upon date and price. The repurchase price
would generally equal the price paid by the Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. The seller under a repurchase agreement
will be required to maintain at all times the value of collateral held pursuant
to the agreement at not less than the repurchase price (including accrued
interest). If the seller were to default on its repurchase obligation or become
insolvent, the Fund would suffer a loss to the extent that the proceeds from a
sale of the underlying portfolio securities were less than the repurchase price
under the agreement, or to the extent that the disposition of such securities by
the Fund were delayed pending court action. Additionally, there is no
controlling legal precedent confirming that the Fund would be entitled, as
against a claim by such seller or its receiver or trustee in bankruptcy, to
retain the underlying securities, although the Board of Trustees of the Trust
believes that, under the regular procedures normally in effect for custody of
the Fund's securities subject to repurchase agreements and under Federal laws, a
court of competent jurisdiction would rule in favor of the Trust if presented
with the question. Securities subject to repurchase agreements will be held by
the Trust's Custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
B-6
<PAGE> 44
FOREIGN INVESTMENT
- ------------------
Investment in foreign securities is subject to special investment risks
that differ in some respects from those related to investments in securities of
U.S. domestic issuers. Since investments in the securities of foreign issuers
may involve currencies of foreign countries, a Fund may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations and
may incur costs in connection with conversions between various currencies.
Since foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a U.S. company. Securities of
many foreign companies are less liquid and more volatile than securities of
comparable U.S. companies.
In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect a Fund's investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
A Fund will acquire such securities only when Roulston believes the
risks associated with such investments are minimal.
OPTIONS TRADING
- ---------------
Each of the Funds may purchase put and call options. A call option
gives the purchaser of the option the right to buy, and a writer has the
obligation to sell, the underlying security at the stated exercise price at any
time prior to the expiration of the option, regardless of the market price of
the security. A put option gives the purchaser the right to sell the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. The premium paid
to the writer is consideration for undertaking the obligations under the option
contract. Put and call options purchased by the Funds will be valued at the last
sale price, or in the absence of such a price, at the mean between bid and asked
price.
When a Fund writes a call option, an amount equal to the net premium
(the premium less the commission) received by the Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or a loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option is
exercised, the Fund may deliver the underlying security in the open market. In
either event, the proceeds of the sale will be increased by the net premium
originally received and the Fund will realize a gain or loss.
B-7
<PAGE> 45
In addition, when a Fund writes a covered call option and such option
is exercised, that Fund will forego the appreciation, if any, on the underlying
security in excess of the exercise price. In order to close out a call option it
has written, a Fund will enter into a "closing purchase transaction" -- the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which that Fund previously wrote on any
particular securities. When a portfolio security subject to a call option is
sold, the Fund which wrote the call will effect a closing purchase transaction
to close out any existing call option on that security. There is no assurance of
liquidity in the secondary market for purposes of closing out options positions.
If that Fund is unable to effect a closing purchase transaction, it will not be
able to sell the underlying security until the option expires or such Fund
delivers the underlying security upon exercise.
Although a Fund will engage in option transactions only as hedging
transactions and not for speculative purposes, there are risks associated with
such investment including the following: (i) the success of a hedging strategy
may depend on the ability of Roulston to predict movements in the prices of the
individual securities, fluctuations in markets and movements in interest rates;
(ii) there may be an imperfect correlation between the changes in market value
of the securities held by a Fund and the prices of options; (iii) there may not
be a liquid secondary market for options; and (iv) while a Fund will receive a
premium when it writes covered call options, it may not participate fully in a
rise in the market value of the underlying security.
The Funds may also purchase or sell index options. Index options (or
options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
- -------------------------------------------
As discussed in the Prospectus, each Fund may purchase securities on a
"when-issued" or "delayed-delivery" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a "when-issued" or "delayed-delivery" basis, the Custodian will
set aside in a separate account cash or high quality liquid debt securities
equal to the amount of the commitment. Normally, the Custodian will set aside
portfolio securities to satisfy the purchase commitment, and in such a case, the
Fund may be required subsequently to place additional assets in the separate
account in order to assure that the value of the account remains equal to the
amount of such Fund's commitment. It may be expected that a Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. In addition,
because the Fund will set aside cash or high quality liquid debt securities to
satisfy its purchase commitments in the manner described above, such Fund's
liquidity and the ability of Roulston to manage it might be affected in the
event its commitments to purchase "when-issued" or "delayed delivery" securities
ever exceeded 25% of the value of its assets. Under normal market conditions,
however, a Fund's commitments to purchase "when-issued" or "delayed-delivery"
securities will not exceed 25% of the value of its assets.
B-8
<PAGE> 46
When a Fund engages in "when-issued" or "delayed-delivery"
transactions, it relies on the seller to consummate the trade. Failure of the
seller to do so may result in such Fund's incurring a loss or missing the
opportunity to obtain a price considered to be advantageous. A Fund will engage
in "when-issued" or "delayed-delivery" transactions only for the purpose of
acquiring portfolio securities consistent with such Fund's investment objectives
and policies and not for investment leverage.
INVESTMENT COMPANY SHARES
- -------------------------
Each Fund may invest in securities of other investment companies,
including shares of money market mutual funds. Since such funds pay management
fees and other expenses, shareholders of a Fund would indirectly pay both Fund
expenses and the expenses of underlying funds with respect to Fund assets
invested therein. Applicable regulations prohibit a Fund from acquiring the
securities of other investment companies if, as a result of such acquisition,
the Fund owns more than 3% of the total voting stock of the acquired investment
company; more than 5% of the Fund's total assets are invested in securities
issued by any one investment company; or more than 10% of the total assets of
the Fund in the aggregate are invested in securities of investment companies as
a group.
ADDITIONAL INVESTMENT LIMITATIONS
---------------------------------
Each Fund's investment objective is a fundamental policy and may not be
changed without a vote of the holders of a majority of such Fund's outstanding
shares.
FUNDAMENTAL RESTRICTIONS
- ------------------------
The following investment restrictions may be changed with respect to a
Fund only by a vote of the majority of the outstanding Shares of that Fund (as
defined below under "ADDITIONAL INFORMATION - Vote of a Majority of the
Outstanding Shares"). In addition to the investment restrictions set forth in
the Prospectus, each Fund may not:
1. Make loans, except that the Fund may purchase or hold debt instruments
and make time deposits with financial institutions in accordance with
its investment objectives and policies, and the Fund may enter into
repurchase agreements and engage in securities lending, as described in
the Prospectus and this Statement of Additional Information;
2. Purchase or sell real estate (although investment in marketable
securities of issuers which can invest in real estate or engage in such
activities, securities backed or secured by interests in real estate,
institutions that issue mortgages, or real estate investment trusts
which deal in real estate or interests therein are not prohibited by
this restriction);
3. Purchase securities on margin, except that a Fund may obtain short-term
credit as necessary for the clearance of securities transactions and
except as may be necessary to make margin payments in connection with
derivative securities transactions;
B-9
<PAGE> 47
4. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter under Federal securities laws in selling a
portfolio security; and
5. Purchase or sell commodities or commodities contracts (including future
contracts), except to the extent disclosed in the current Prospectus of
the Fund.
NON-FUNDAMENTAL RESTRICTIONS
- ----------------------------
The following additional investment restrictions of the Funds are
non-fundamental and may be changed by the Trust's Board of Trustees without
shareholder approval. A Fund may not:
1. Purchase or otherwise acquire any securities, if as a result, more than
15% of that Fund's net assets would be invested in securities that are
illiquid;
2. Engage in any short sales;
3. Invest more than 10% of its total assets in the securities of issuers
which, together with any predecessors, have a record of less than three
years of continuous operation;
4. Purchase or retain securities of an issuer if an officer, trustee,
partner or director of the Trust or of any investment adviser of the
Fund owns beneficially more than 1/2 of 1% of the shares or securities
of such issuer and all such officers, trustees, partners and directors
owning more than 1/2 of 1% of such shares or securities together own
more than 5% of such shares or securities;
5. Pledge, mortgage or hypothecate assets in excess of one third of the
Fund's total assets;
6. Purchase securities of other investment companies except (a) in
connection with a merger, consolidation, acquisition or reorganization,
and (b) to the extent permitted by the 1940 Act and the rules and
regulations thereunder or pursuant to any exemptions therefrom;
7. Invest in interests in oil, gas or other mineral exploration or
development programs or in oil, gas or mineral leases; and
8. Invest more than 5% of its net assets in warrants valued at the lower
of cost or market, provided, that included within that amount, but not
to exceed 2% of net assets, may be warrants which are not listed on the
New York or American Stock Exchanges. For purposes of this restriction,
warrants acquired in units or attached to securities are deemed to be
without value.
If any percentage restriction or requirement described above is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction or requirement. However, should a change in net
asset value or other external events cause a Fund's investments in illiquid
securities, including repurchase agreements with maturities in excess of seven
days, to exceed the limit set forth above for such Fund's investment in illiquid
securities, the Fund will act to cause the aggregate amount of such securities
to come within such limit as soon as reasonably practicable. In such an event,
however, such Fund would not be required to liquidate
B-10
<PAGE> 48
any portfolio securities where the Fund would suffer a loss on the sale of such
securities.
None of the Funds currently intends to enter into reverse repurchase
agreements during the current fiscal year.
B-11
<PAGE> 49
MANAGEMENT OF THE TRUST
-----------------------
TRUSTEES AND OFFICERS OF THE TRUST
- ----------------------------------
The management and affairs of the Trust are supervised by the Trustees
under the laws of the State of Ohio. The Trustees and executive officers of the
Trust and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Each Trustee who is an "interested person" of the Trust, as that term is
defined in the 1940 Act, is indicated by an asterisk. Certain officers of the
Trust also serve as Directors and/or officers of Roulston or the Distributor.
B-12
<PAGE> 50
<TABLE>
<CAPTION>
NAME, BUSINESS POSITIONS(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS AND AGE WITH THE TRUST DURING PAST FIVE YEARS
--------------- -------------- ----------------------
<S> <C> <C>
Scott D. Roulston Trustee President and Director of Roulston
4000 Chester Avenue and President & Company, Inc. and Roulston
Cleveland, Ohio 44103 Research Corp since 1990.
Age: 39
Thomas V. Chema Trustee Partner, Arter & Hadden
1100 Huntington Building (law firm) since April, 1989; since
Cleveland, Ohio 44115 June, 1995, President, Gateway
Consultants Group, Inc. (sports and
Age: 50 related public facilities consulting);
from June, 1990, to June, 1995,
Executive Director of Gateway
Economic Development Corp. of
Greater Cleveland (sports and related
facilities public development
company).
David H. Gunning Trustee Chairman, President and
1001 Lakeside Avenue Chief Executive Officer of Capitol
Cleveland, Ohio 44114 American Financial Corporation
(insurance company) since February,
Age: 54 1993; prior thereto, partner of Jones,
Day, Reavis & Pogue (law firm).
Ivan J. Winfield Trustee Associate Professor, Baldwin
30901 Ainsworth Drive Wallace College since 1995; from
Pepperpike, Ohio 44124 1980 to 1994, Managing Partner,
Coopers & Lybrand, Northeast Ohio
Age: 62 (certified public accounting firm).
</TABLE>
B-13
<PAGE> 51
<TABLE>
<CAPTION>
NAME, BUSINESS POSITIONS(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS AND AGE WITH THE TRUST DURING PAST FIVE YEARS
--------------- -------------- ----------------------
<S> <C> <C>
Michele R. Fogarty Treasurer and Since May, 1996, Chief Financial
4000 Chester Avenue Secretary Officer of Roulston & Company,
Cleveland, Ohio 44103 Inc.; February 1996 to May 1996,
Director of Finance, Controller and
Age: 35 Treasurer of Roulston & Company,
Inc.; January, 1994 to February,
1996, Vice President/Accounting &
Operations for Carnegie Capital
Management Co. and Treasurer of
Carnegie Funds Group; prior thereto,
Assistant Vice President and
Assistant Treasurer for Carnegie
Capital Management Co. (financial
services/mutual fund companies).
</TABLE>
B-14
<PAGE> 52
<TABLE>
<CAPTION>
NAME, BUSINESS POSITIONS(S) HELD PRINCIPAL OCCUPATION(S)
ADDRESS AND AGE WITH THE TRUST DURING PAST FIVE YEARS
--------------- -------------- ----------------------
<S> <C> <C>
Kristin Hay Ives, Esq. Assistant Secretary Partner of the law firm of Baker
Capitol Square, Suite 2100 & Hostetler LLP, counsel to the
65 East State Street Trust.
Columbus, Ohio 43215
Age: 36
Charles A. Kiraly Assistant Treasurer Since April, 1996, an employee of
4000 Chester Avenue Roulston & Company, Inc.; prior
Cleveland, OH 44130 thereto, Senior Dealer Services
Representative at BISYS Fund
Age 28 Services, Ohio, Inc.; Employee at
BISYS Fund Services, Ohio, Inc.
since May, 1993. 1992 Graduate of
Ohio University, BBA in Business
Administration.
</TABLE>
The Trust pays the fees for unaffiliated Trustees (currently $1,000 per
Board meeting attended and $4,000 per year retainer). The officers and
affiliated Trustee of the Trust receive no compensation for such services, but
those officers who are employees of Roulston receive compensation from Roulston.
The following table sets forth information regarding the total
compensation paid by the Trust to its Trustees for their services as Trustees
during the fiscal year ended October 31, 1996. The Trust has no pension or
retirement plans.
B-15
<PAGE> 53
COMPENSATION TABLE:
<TABLE>
<CAPTION>
NAME AND POSITION AGGREGATE ESTIMATED TOTAL COMPENSATION
WITH THE TRUST COMPENSATION FROM THE TRUST AND
----------------- FROM THE TRUST THE FUND COMPLEX *
-------------- ------------------
<S> <C> <C>
Scott D. Roulston,
Chairman $ 0 $ 0
Thomas V. Chema,
Trustee $8,000 $8,000
David H. Gunning,
Trustee $8,000 $8,000
Ivan J. Winfield,
Trustee $8,000 $8,000
</TABLE>
* For purposes of this Table, Fund Complex means one or more mutual funds,
including the Funds, which have a common investment adviser or affiliated
investment advisers or which hold themselves out to the public as being related.
The Funds are currently the only members of their Fund Complex.
As of the date hereof, all Trustees and Officers of the Trust, as a
group, owned fewer than one percent of the shares of each of the Funds.
PRINCIPAL HOLDERS OF SECURITIES
-------------------------------
Listed below are the names and addresses of those shareholders and
accounts who, as of January 31, 1997, owned 5% or more of the shares of each
Fund.
FAIRPORT MIDWEST GROWTH FUND:
- -----------------------------
<TABLE>
<CAPTION>
Shareholder(s) Percentage Owned
-------------- ----------------
<S> <C>
Charles Schwab & Co., Inc. 10.07%
Special Custody Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
B-16
<PAGE> 54
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND:
- --------------------------------
Shareholder(s) Percentage Owned
-------------- ----------------
<S> <C>
Liqui Box Corp. EMP PSP 6.55%
William McBee Trustee
c/o The Hampton Company
320 Springside Drive
Suite 350
Akron, Ohio 44333
FAIRPORT GOVERNMENT SECURITIES FUND:
Shareholder(s) Percentage Owned
-------------- ----------------
Liqui Box Corp. EMP PSP 24.47%
William McBee Trustee
c/o The Hampton Company
320 Springside Drive
Suite 350
Akron, Ohio 44333
Charles Schwab & Co., Inc. 22.33%
Special Custody A/C for BNFT CUST
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
B-17
<PAGE> 55
INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------
THE INVESTMENT ADVISER
- ----------------------
The Trust and Roulston have entered into an Investment Advisory
Agreement (the "Advisory Agreement") dated as of January 20, 1995, amended as of
November 30, 1996. Pursuant to the Advisory Agreement, Roulston has agreed to
provide investment advisory services to the Funds as described in the
Prospectus.
The Advisory Agreement provides that if, for any fiscal year, the ratio
of expenses of any Fund (including amounts payable to Roulston but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state in which the shares of such Fund
are registered, Roulston will bear the amount of such excess. Roulston will not
be required to bear expenses of the Fund to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code of 1986, as amended (the "Code").
Unless sooner terminated, the Advisory Agreement with respect to a Fund
continues in effect for successive one-year periods ending January 20 of each
year if such continuance is approved at least annually by the Trust's Board of
Trustees or by vote of a majority of the outstanding shares of that Fund (as
defined under "ADDITIONAL INFORMATION -Vote of a Majority of the Outstanding
Shares" below), and a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons (as defined in the 1940 Act) of any
party to the Advisory Agreement by votes cast in person at a meeting called for
such purpose. The Advisory Agreement is terminable as to a Fund at any time on
60 days' written notice without penalty by the Trustees, by vote of a majority
of the outstanding shares of that Fund, or by Roulston. The Advisory Agreement
also terminates automatically in the event of any assignment, as defined in the
1940 Act.
The Advisory Agreement provides that Roulston 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 performance by Roulston of its obligations under the
Advisory Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith, or negligence on the part of Roulston in the
performance of its duties, or from negligent disregard by Roulston of its duties
and obligations thereunder. Roulston from time to time may defray certain of the
administrative costs of retirement accounts in connection with such accounts'
investment in the Funds and may also pay certain costs associated with the
distribution of the Funds' shares. Such costs will not be borne by the Funds.
B-18
<PAGE> 56
For the fiscal year ended October 31, 1996, Roulston earned and
voluntarily waived the amounts indicated below with respect to its investment
advisory services to the Funds.
<TABLE>
<CAPTION>
GROSS ADVISORY NET
FUND ADVISORY FEES ADVISORY
---- FEES EARNED WAIVED FEES RECEIVED
---- ----------- ------ -------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $417,458 $169,950 $247,508
GROWTH AND INCOME FUND $184,723 $ 81,095 $103,628
GOVERNMENT SECURITIES FUND $ 18,674 $ 18,674 $ 0
TOTALS $620,855 $269,719 $351,136
</TABLE>
For the fiscal year ended October 31, 1995, Roulston earned and
voluntarily waived the amounts indicated below with respect to its investment
advisory services to the Funds, including advisory services provided to the
Acquired Funds during the first six months of such year.
<TABLE>
<CAPTION>
GROSS ADVISORY NET
FUND ADVISORY FEES ADVISORY
---- FEES EARNED WAIVED FEES RECEIVED
----------- ------ -------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $341,934 $ 61,126 $280,808
GROWTH AND INCOME FUND $175,714 $ 58,630 $117,084
GOVERNMENT SECURITIES FUND $ 29,634 $ 29,634 $ 0
TOTALS $547,282 $149,390 $397,892
</TABLE>
Roulston earned and waived the following fees for investment advisory
services provided to the Acquired Funds during the fiscal year ended October 31,
1994:
<TABLE>
<CAPTION>
GROSS ADVISORY NET
FUND ADVISORY FEES ADVISORY
---- FEES EARNED WAIVED FEES RECEIVED
----------- ------ -------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $188,000 $ 16,000 $172,000
GROWTH AND INCOME FUND $127,000 $ 28,000 $ 99,000
GOVERNMENT SECURITIES FUND $ 32,000 $ 32,000 $ 0
TOTALS $347,000 $ 76,000 $271,000
</TABLE>
B-19
<PAGE> 57
THE ADMINISTRATOR
- -----------------
The Trust and FPS Services, Inc. ("FPS"), the Administrator, 3200
Horizon Drive, King of Prussia, Pennsylvania 19406, have entered into an
administration agreement dated January 20, 1995, as amended as of January 1,
1997 (the "Administration Agreement"). The Administration Agreement provides
that the Administrator 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 the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Administration Agreement remained in effect for a
period of two years after its effective date and shall continue in effect for
successive periods of two years thereafter unless terminated by either party on
not less than 180 days' prior written notice to the other party.
The Administrator assists in supervising all operations of each Fund
(other than those performed by Roulston under the Advisory Agreement, by UMB
Bank, N.A. under the Custodian Agreement and by the Administrator under the
Accounting Services Agreement, the Transfer Agent Services Agreement and the
Custody Administration and Agency Agreement).
Under the Administration Agreement, the Administrator has agreed to
furnish statistical and research data, clerical, and certain bookkeeping
services; prepare the periodic reports to the Securities and Exchange Commission
(the "Commission") on Form N-SAR or any replacement forms therefor; prepare
compliance filings pursuant to state securities laws with the advice of the
Trust's counsel; assist to the extent requested by the Trust with the Trust's
preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statement (on Form N-1A or any replacement therefor); compile data
for, prepare and file timely Notices to the Commission required pursuant to Rule
24f-2 under the 1940 Act; keep and maintain the financial accounts and records
of each Fund, including calculation of daily expense accruals; and generally
assist in all aspects of the Funds' operations other than those performed by
Roulston under the Advisory Agreement, by UMB Bank, N.A. under the Custodian
Agreement and by the Administrator under the Accounting Services Agreement, the
Transfer Agent Services Agreement and the
B-20
<PAGE> 58
Custody Administration and Agency Agreement.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement
equal to a fee, calculated daily and paid monthly, at the annual rate, subject
to a minimum annual fee of $55,000 for the first series and $12,000 for each
additional domestic series, calculated as follows:
.15% On the First $50 Million of Total Average Net Assets; .10% On the
Next $50 Million of Total Average Net Assets; and .05% Of Total Average
Net Assets in Excess of $100 Million of Average Net Assets.
The Administrator also receives certain out-of-pocket expenses.
For the fiscal year ended October 31, 1996, the Administrator earned
the following amounts with respect to administrative services provided to the
Funds:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEES PAID
---- TO FPS
------
<S> <C>
MIDWEST GROWTH FUND $ 75,644
GROWTH AND INCOME FUND $ 33,436
GOVERNMENT SECURITIES FUND $ 10,062
TOTAL $119,142
</TABLE>
For the fiscal period of May 1, 1995 through October 31, 1995, the
Administrator earned the following amounts with respect to administrative
services provided to the Funds:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEES PAID
---- TO FPS
------
<S> <C>
MIDWEST GROWTH FUND $33,600
GROWTH AND INCOME FUND $16,895
GOVERNMENT SECURITIES FUND $ 7,516
TOTAL $58,011
</TABLE>
B-21
<PAGE> 59
TRANSFER AGENT AND FUND ACCOUNTANT
- ----------------------------------
The Trust has entered into a Transfer Agent Services Agreement dated as
of January 20, 1995, amended as of January 1, 1997 (the "Transfer Agent
Agreement"), with FPS (the "Transfer Agent"), pursuant to which FPS has agreed
to act as the transfer and dividend disbursing agent for each Fund. Pursuant to
the Transfer Agent Agreement, the Transfer Agent, among other things, performs
the following services in connection with each Fund's shareholders of record:
maintenance of shareholder records for each of the Trust's shareholders of
record; processing shareholder purchase, redemption and exchange orders;
processing transfers of shares of the Trust on the shareholder files and
records; processing dividend payments and reinvestments; generating account
statements; and assistance in the mailing of shareholder reports and proxy
solicitation materials. In consideration for such services, each Fund has agreed
to pay the Transfer Agent a fee, computed daily and paid periodically, according
to the following schedule:
For account maintenance: $15.00 per Account per year Annual Maintenance
Fee subject to a minimum monthly fee of $2,500 for Fairport Midwest
Growth Fund, $2,500 for Fairport Growth and Income Fund and $2,000 for
Fairport Government Securities Fund. For IRA's, 403(b) Plans, Defined
Contribution/Benefit Plans: $12.00 per Account per Year Annual
Maintenance Fee. Out of pocket expenses are reimbursed to FPS monthly.
Additional fees may apply in the event that FPS performs special
projects as Transfer Agent.
In addition, the Transfer Agent provides certain fund accounting
services to each of the Funds pursuant to an Accounting Services Agreement dated
as of January 20, 1995, amended as of January 1, 1997. Such services include
maintaining the accounting books and records for each Fund, including journals
containing an itemized daily record of all purchases and sales of portfolio
securities, all receipts and disbursements of cash and all other debits and
credits, general and auxiliary ledgers reflecting all asset, liability, reserve,
capital, income and expense accounts, including interest accrued and interest
received, and other required separate ledger accounts; maintaining a monthly
trial balance of all ledger accounts; performing certain accounting services for
each Fund, including calculation of the net asset value per share, calculation
of the dividend and capital gain distributions, if any, and of yield,
reconciliation of cash movements with such Fund's Custodian, affirmation to that
Fund's Custodian of all portfolio trades and cash settlements, verification and
reconciliation with that Fund's Custodian of all daily trade activity; providing
certain reports; obtaining dealer quotations, prices from a pricing service or
matrix prices on all portfolio securities in order to mark the portfolio to the
market; and preparing an interim balance sheet, statement of income and expense,
and statement of changes in net assets for each Fund. In consideration for such
services, each Fund has agreed to pay the Transfer Agent a fee, computed daily
and paid periodically, at an annual rate calculated as follows:
$24,000 Minimum to $20 Million of Average Net Assets; .04% On the Next
$30 Million of Average Net Assets; .03% On the Next $50 Million of
Average Net Assets; .01% Over $100 Million of Average Net Assets.
B-22
<PAGE> 60
THE DISTRIBUTOR
- ---------------
Roulston Research Corp., a wholly owned subsidiary of Roulston (the
"Distributor"), and the Trust are parties to a distribution agreement dated
January 20, 1995, amended as of June 3, 1996 (the "Distribution Agreement"). The
Distributor receives no compensation under the Distribution Agreement for
distribution of shares of the Funds, but receives payments under the Trust's
Distribution and Shareholder Service Plan described below.
The Distribution Agreement remains in effect for successive one-year
periods ending January 20th if approved at least annually (i) by the Trust's
Board of Trustees or by the vote of a majority of the outstanding shares of the
Trust, and (ii) by the vote of a majority of the Trustees of the Trust who are
not parties to the Distribution Agreement or interested persons (as defined in
the 1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated in the event of any assignment, as defined in the
1940 Act.
In its capacity as Distributor, the Distributor solicits orders for the
sale of shares, advertises and pays the costs of advertising, office space and
the personnel involved in such activities.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
- -----------------------------------------
As described in the Prospectus, the Trust has adopted a Distribution
and Shareholder Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act under which each Fund is authorized to pay the Distributor for payments it
makes to broker-dealers, banks and other institutions (collectively,
"Participating Organizations") for providing distribution or shareholder service
assistance or for distribution assistance and/or shareholder service provided by
the Distributor. Payments to such Participating Organizations may be made
pursuant to agreements entered into with the Distributor. The Plan authorizes
each Fund to make payments to the Distributor in an amount not in excess, on an
annual basis, of 0.25% of the average daily net asset value of that Fund.
As required by Rule 12b-1, the Plan was approved by the initial sole
shareholder of each Fund and by the Board of Trustees, including a majority of
the Trustees who are not interested persons of that Fund and who have no direct
or indirect financial interest in the operation of the Plan (the "Independent
Trustees"). The Plan may be terminated as to a Fund by vote of a majority of the
Independent Trustees, or by vote of majority of the outstanding shares of that
Fund. Any change in the Plan that would materially increase the distribution
cost to a Fund requires shareholder approval. The Trustees review quarterly a
written report of such costs and the purposes for which such costs have been
incurred. The Plan may be amended by vote of the Trustees, including a majority
of the Independent Trustees, cast in person at a meeting called for that
purpose. For so long as the Plan is in effect, selection and nomination of those
Trustees who are not interested persons of the Trust shall be committed to the
discretion of such disinterested persons. All agreements with any person
relating to the implementation of the Plan with respect to a Fund may be
terminated at any time on 60 days' written notice without payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of the
majority of the outstanding shares of such Fund.
B-23
<PAGE> 61
The Plan continues in effect for successive one-year periods, provided
that each such continuance is specifically approved (i) by the vote of a
majority of the Independent Trustees, and (ii) by a vote of a majority of the
entire Board of Trustees cast in person at a meeting called for that purpose.
The Board of Trustees has a duty to request and evaluate such information as may
be reasonably necessary for them to make an informed determination of whether
the Plan should be implemented or continued. In addition the Trustees in
approving the Plan must determine that there is a reasonable likelihood that the
Plan will benefit the Funds and their shareholders.
The Board of Trustees of the Trust believes that the Plan is in the
best interests of the Funds since it encourages Fund growth and retention of
Fund assets. As a Fund grows in size, certain expenses, and therefore total
expenses per share, may be reduced and overall performance per share may be
improved.
As authorized by the Plan, the Distributor has agreed to provide
certain distribution and share holder services in connection with shares
purchased and held by the Distributor for the accounts of its customers and
shares 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, on behalf of each Fund, 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 of that Fund held during the period in customer accounts for which the
Distributor has provided services under the Plan.
For the fiscal year ended October 31, 1996, such fees totaled $219,481.
The amounts incurred with respect to each Fund during such period are set forth
below:
<TABLE>
<CAPTION>
AMOUNTS
FUND INCURRED
PURSUANT
TO 12B-1 PLAN
<S> <C>
MIDWEST GROWTH FUND $139,214
GROWTH AND INCOME FUND $ 61,603
GOVERNMENT SECURITIES FUND $ 18,664
TOTAL $219,481
</TABLE>
B-24
<PAGE> 62
In addition, the Distributor has entered into Rule 12b-1 Agreements
with selected dealers pursuant to which such dealers agree to provide certain
shareholder services and distribution assistance including, but not limited to,
those discussed above.
THE CUSTODIAN
- -------------
UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri 64141, serves
as the Funds' Custodian pursuant to the Custody Agreement dated January 20,
1995. In such capacity the Custodian holds or arranges for the holding of all
portfolio securities and other assets of the Funds.
LEGAL COUNSEL AND INDEPENDENT AUDITORS
- --------------------------------------
Baker & Hostetler LLP, 65 East State Street, Columbus, Ohio 43215, is
counsel to the Trust and will pass upon the legality of the shares offered
thereby. The Trust has selected Ernst & Young LLP, 1300 Huntington Building, 925
Euclid Avenue, Cleveland, Ohio 44115-1405, as independent auditors for the
Funds. The financial statements for the Funds for the fiscal year ended October
31, 1996, appearing as Appendix "B" in this Statement of Additional Information
have been audited by Ernst & Young LLP as set forth in their report attached
thereto and are included in reliance upon such report and on the authority of
such firm as experts in auditing and accounting.
B-25
<PAGE> 63
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
------------------------------------------------
PORTFOLIO TRANSACTIONS
- ----------------------
Roulston is authorized to select brokers and dealers to effect
securities transactions for the Funds. Roulston will seek to obtain the most
favorable net results by taking into account various factors, including price,
commission, if any, size of the transactions and difficulty of executions, the
firm's general execution and operational facilities and the firm's risk in
positioning the securities involved. While Roulston generally seeks reasonably
competitive spreads or commissions, a Fund will not necessarily be paying the
lowest spread or commission available. Roulston seeks to select brokers or
dealers that offer a Fund best price and execution or other services which are
of benefit to the Fund.
BROKERAGE COMMISSIONS
- ---------------------
Roulston may, consistent with the interests of the Funds, select
brokers on the basis of the research services they provide to Roulston. Such
services may include analyses of the business or prospects of a company,
industry or economic sector, or statistical and pricing services. Information so
received by Roulston will be in addition to and not in lieu of the services
required to be performed by Roulston under the Advisory Agreement. If, in the
judgment of Roulston, a Fund or other accounts managed by Roulston will be
benefitted by supplemental research services, Roulston is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of Roulston
will not necessarily be reduced as a result of the receipt of such supplemental
information, such services may not be used exclusively, or at all, with respect
to the Fund or account generating the brokerage, and there can be no guarantee
that Roulston will find all of such services of value in advising the Funds.
Roulston has an arrangement with Thompson Institutional Services, Inc.
("Thompson") whereby Roulston receives specific research products known as First
Call, ALERT, Research Direct, Baseline, HOLT, STOCK VAL, and Muller Data in
exchange for placing an agreed upon amount of trades on behalf of privately
managed accounts and the Funds. There have to date been no trades placed with
Thompson by Roulston on behalf of any Fund. Currently, Roulston has no written
or verbal agreement with any broker to receive forms of compensation in
exchange for placing trades on behalf of
B-26
<PAGE> 64
any portfolio of the Trust.
Under the provisions of the 1940 Act, the Securities Exchange Act of
1934 and rules promulgated by the Commission thereunder, the Distributor is
permitted to receive and retain compensation for effecting portfolio
transactions for a Fund on an exchange if written procedures approved by the
Trust's Board of Trustees are in effect expressly permitting the Distributor to
receive and retain such compensation. The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and have reviewed these
procedures periodically. The rules of the Commission and such procedures require
that commissions paid to the Distributor by a Fund for exchange transactions not
exceed "usual and customary" brokerage commissions. "Usual and customary"
commissions are defined to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time."
Since the Funds' inception, the Distributor had so effected portfolio
transactions for the Funds; however, the Distributor has not done so since
February, 1996 and does not expect to do so in the future. In addition, a Fund
may direct commission business to one or more designated broker/dealers,
including the Distributor, in connection with such broker/dealer's payment of
certain of a Fund's or the Trust's expenses.
For the fiscal year ended October 31, 1996, brokerage commissions paid
by the Trust on behalf of the Funds amounted to $156,078. The total brokerage
commissions attributable to each Fund are set forth below.
<TABLE>
<CAPTION>
11/01/95
FUND TO
---- 10/31/96
--------
<S> <C>
MIDWEST GROWTH FUND $122,870
GROWTH AND INCOME FUND $ 33,208
GOVERNMENT SECURITIES FUND $ 0
TOTALS $156,078*
<FN>
* Of this amount, $42,316 was paid to the Distributor, which represents
27% of the total commissions paid by the Trust to all brokers through
whom trades were placed during the period. In addition, 19% of the
Trust's aggregate dollar amount of transactions were effected through
the Distributor.
</TABLE>
B-27
<PAGE> 65
For the fiscal period of May 1, 1995 through October 31, 1995,
brokerage commissions paid by the Trust on behalf of the Funds amounted to
$71,140. The total brokerage commissions attributable to each Fund are set forth
below.
<TABLE>
<CAPTION>
11/01/95
FUND TO
---- 10/31/96
--------
<S> <C>
MIDWEST GROWTH FUND $63,257
GROWTH AND INCOME FUND $ 7,883
GOVERNMENT SECURITIES FUND $ 0
TOTALS $71,140*
</TABLE>
* Of this amount, $68,731 was paid to the Distributor, which represents
97% of the total commissions paid by the Trust to all brokers through
whom trades were placed during the period. In addition, 96% of the
Trust's aggregate dollar amount of transactions were effected through
the Distributor .
Prior to the Reorganization, Advisors paid the following brokerage
commissions on behalf of the Acquired Funds during the periods shown:
<TABLE>
<CAPTION>
11/01/93 11/01/94
FUND TO TO
---- 10/31/94 4/30/95
-------- -------
<S> <C> <C>
MIDWEST GROWTH FUND $83,351 $78,378
GROWTH AND INCOME FUND $12,948 $ 6,877
GOVERNMENT SECURITIES FUND $ 0 $ 0
TOTALS $96,299 $85,255*
<FN>
* Prior to the Reorganization, a portion of the above-referenced
brokerage commissions was paid on behalf of the Acquired Funds to
the Distributor.
</TABLE>
It is not the Funds' practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, Roulston may place portfolio orders with qualified
broker/dealers who recommend such Funds' shares to clients, and may, when a
number of brokers and dealers can provide best net results on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker/dealers.
B-28
<PAGE> 66
PORTFOLIO TURNOVER
- ------------------
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of that Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose remaining maturities at the time of acquisition were one
year or less.
The portfolio turnover rates for the fiscal years ended October 31,
1996, 1995 and 1994, for the MIDWEST GROWTH FUND were 58.01%, 46.51% and 77.57%,
respectively; for the GROWTH AND INCOME FUND were 34.02%, 13.36% and 35.16%,
respectively; and for the GOVERNMENT FUND were 21.23%, 1.28% and 24.14%,
respectively. The portfolio turnover rate for a Fund may vary greatly from year
to year as well as within a particular year, and may also be affected by cash
requirements for redemptions of Shares. Portfolio turnover will not be a
limiting factor in making investment decisions.
NET ASSET VALUE
---------------
As indicated in the Prospectus, the net asset value of each Fund is
determined and the shares of each Fund are priced as of the earlier of 4:00
p.m., Eastern Time, or the close of regular trading on the New York Stock
Exchange (the "Exchange"), on each Business Day. A "Business Day" is any day the
Exchange is open for regular business. Currently the Exchange is closed in
observance of the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.
Valuations of securities purchased by the Funds are supplied by
independent pricing services used by FPS, as administrator, which have been
approved by the Trustees of the Trust. 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. Equity securities for which there is no sale on that day and
equity securities traded only in the over-the-counter market will be valued at
their closing bid prices obtained from one or more dealers making markets for
such securities or, if market quotations are not readily available, at their
fair value as determined in good faith by the Board of Trustees.
Valuations of fixed and variable income securities ("debt securities")
are based upon a consideration of yields or prices of obligations of comparable
quality, coupon, maturity and type, indications at to value from recognized
dealers, and general market conditions. The pricing services may use electronic
data processing techniques and/or a computerized matrix system to determine
valuations. Debt securities for which market quotations are readily available
are valued based upon those quotations. The procedures used by the pricing
service are reviewed by the officers of the Trust under the general supervision
of the Trustees. The Trustees may deviate from the valuation provided by the
pricing service whenever, in their judgment, such valuation is not indicative of
the fair value of the debt security. In such instances the debt security will be
valued at fair value as determined in good faith by or under the direction of
the Trustees.
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<PAGE> 67
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
The Funds' shares may be purchased at the public offering price, which
is the net asset value next computed, and are sold on a continuous basis through
the Distributor, principal underwriter of the Funds' shares, at its address and
number set forth under the heading "The Distributor", and through other
broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with the Distributor.
The Trust may suspend the right of redemption or postpone the date of
payment for shares during any period when (a) trading on the Exchange is
restricted by applicable rules and regulations of the Commission, (b) the
Exchange is closed for other than customary weekend and holiday closings, (c)
the Commission has by order permitted such suspension, or (d) an emergency
exists as a result of which (i) disposal by the Trust of securities owned by it
is not reasonably practical or (ii) it is not reasonably practical for the Trust
to determine the fair value of its net assets.
TAXES
-----
Each Fund intends to qualify as a "regulated investment company" under
the Code for so long as such qualification is in the best interest of that
Fund's shareholders. In order to qualify as a regulated investment company, a
Fund must, among other things: derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies; derive less than 30% of its gross income from the
sale or other disposition of stock, securities, options, future contracts or
foreign currencies held less than three months; and diversify its investments
within certain prescribed limits. In addition, to utilize the tax provisions
specially applicable to regulated investment companies, a Fund must distribute
to its shareholders at least 90% of its investment company taxable income for
the year. In general, a Fund's investment company taxable income will be its
taxable income subject to certain adjustments and excluding the excess of any
net long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar 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. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, such
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.
Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, a Fund
may be subject to the tax laws of such states or localities. In addition, if for
any taxable year a Fund does not qualify for the special tax treatment afforded
regulated investment companies, all of its taxable income will be subject to
Federal tax
B-30
<PAGE> 68
at regular corporate rates (without any deduction for distributions to its
shareholders). In such event, dividend distributions would be taxable to
shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
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
realized capital gains will be taxable income to shareholders for Federal income
tax purposes, even if paid in additional shares of the Fund and not in cash.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to shareholders as long-term capital gain
in the year in which it is received, regardless of how long the shareholder has
held the shares. Such distributions are not eligible for the dividends-received
deduction.
Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess
of 39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on long-term capital gains
of individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss each
year to offset ordinary income. Excess net capital loss may be carried forward
to future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's Federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by that
Fund for its taxable year that qualifies for the dividends received deduction.
Foreign taxes may be imposed on a Fund by foreign countries with
respect to its income from foreign securities. Since less than 50% in value of
any one Fund's total assets at the end of its fiscal year are expected to be
invested in stocks or securities of foreign corporations, such Fund will not be
entitled under the Code to pass through to its shareholders their pro-rata share
of the foreign taxes paid by the
B-31
<PAGE> 69
Fund. These taxes will be taken as a deduction by such Fund.
Each Fund may be required by Federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
paid to any shareholder, and the proceeds of redemption or the values of any
exchanges of shares of a Fund, if such shareholder (1) fails to furnish the
Trust with a correct tax identification number, (2) under-reports dividend or
interest income, or (3) fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her Social Security Number.
Information set forth in the Prospectus and this Statement of
Additional Information which relates to Federal taxation is only a summary of
some of the important Federal tax considerations generally affecting purchasers
of shares of a Fund. No attempt has been made to present a detailed explanation
of the Federal income tax treatment of a Fund or its shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation. In addition,
the tax discussion in the Prospectus and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the date
of the Prospectus and this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
PERFORMANCE INFORMATION
-----------------------
YIELD
- -----
As summarized in the Prospectus under the heading "PERFORMANCE OF THE
FUNDS," the yield of a Fund will be computed by annualizing net investment
income per share for a recent 30-day period and dividing that amount by a
share's maximum offering price (reduced by any undeclared earned income expected
to be paid shortly as a dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market value premium or
discount of fixed income securities (except for obligations backed by mortgages
or other assets) and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The yield of a Fund will
vary from time to time depending upon market conditions, the composition of the
Fund's portfolio and operating expenses of the Trust allocated to the Fund.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of a Fund's shares and to the
relative risks associated with the investment objective and policies of such
Fund.
For the 30-day period ended October 31, 1996, the yields for FAIRPORT
MIDWEST GROWTH FUND, FAIRPORT GROWTH AND INCOME FUND and FAIRPORT GOVERNMENT
SECURITIES FUND were 0.00%, 0.78%, and 5.34%, respectively.
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<PAGE> 70
CALCULATION OF TOTAL RETURN
- ---------------------------
Each quotation of average annual total return will be computed by
finding the average annual compounded rate of return over that period which
would equate the value of an initial amount of $1,000 invested in a Fund equal
to the ending redeemable value, according to the following formula:
P(T + 1)n (exponent) = ERV
Where: P = a hypothetical initial payment of $1,000, T = average annual
total return, n = number of years, and ERV = ending redeemable value of a
hypothetical $1,000 payment at the beginning of the period at the end of the
period for which average annual total return is being calculated assuming a
complete redemption. The calculation of average annual total return assumes the
deduction of the maximum sales charge, if any, from the initial investment of
$1,000, assumes the reinvestment of all dividends and distributions at the price
stated in the then effective Prospectus on the reinvestment dates during the
period and includes all recurring fees that are charged to all shareholder
accounts assuming such Fund's average account size.
For the one year period ended October 31, 1996, and the period from
July 1, 1993 (commencement of operations) through October 31, 1996, the average
annual total returns for the Funds were as follows:
<TABLE>
<CAPTION>
7/01/93 11/01/95
FUND TO TO
---- 10/31/96 10/31/96
-------- --------
<S> <C> <C>
MIDWEST GROWTH FUND 17.01% 16.28%
GROWTH AND INCOME FUND 13.02% 17.77%
GOVERNMENT SECURITIES FUND 4.19% 4.58%
</TABLE>
At any time in the future, yields and total return may be higher or
lower than past yields and total return and there can be no assurance that any
historical results will continue. Investors in the Funds are specifically
advised that share prices, expressed as the net asset values per share, will
vary just as yields and total return will vary.
PERFORMANCE COMPARISONS
- -----------------------
Investors may also judge the performance of a Fund by comparing its
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices and to data prepared by Lipper Analytical
B-33
<PAGE> 71
Services, Inc., Morningstar, Inc. and Ibbotson Associates of Chicago, Illinois.
Comparison may also be made to indices or data published in various financial
and business publications and periodicals. In addition to performance
information, general information about the Funds that appears in a publication
such as those mentioned above may be included in advertisements and in reports
to shareholders.
OTHER INFORMATION
-----------------
DESCRIPTION OF SHARES
- ---------------------
The Trust is an Ohio business trust. The Trust was organized on
September 16, 1994, and the Trust's Declaration of Trust was filed with the
Secretary of State of Ohio on September 19, 1994. The Declaration of Trust
authorizes the Board of Trustees to issue an unlimited number of shares, which
are units of beneficial interest, without par value. The Trust presently has
three series of shares, which represent interests in the Funds. The Trust's
Declaration of Trust authorizes the Board of Trustees to divide or redivide any
unissued shares of the Trust into one or more additional series by setting or
changing in any one or more respects their respective preferences, conversion or
other rights, voting power, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, a Fund's shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Fund, of any general assets not
belonging to any particular Fund which are available for distribution. As used
in the Prospectus and in this Statement of Additional Information, "assets
belonging to a Fund" means the consideration received by a Fund upon the
issuance or sale of shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
asset of the Trust not readily identified as belonging to a particular Fund that
is allocated to the Fund by the Trust's Board of Trustees. The Board of Trustees
may allocate such general assets in any manner it deems fair and equitable.
Determinations by the Board of Trustees of the Trust as to the timing of the
allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to the Funds are
conclusive.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a series will be required in
connection with a matter, a series will be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical, or that the matter does not affect any interest of the series. Under
Rule 18f-2, the approval of any amendment to the Advisory Agreement or any
change in investment policy submitted to shareholders would be effectively acted
upon with respect to a series only if approved by a majority of the outstanding
shares of such series.
B-34
<PAGE> 72
However, Rule 18f-2 also provides that the ratification of independent public
accountants, the approval of principal underwriting contracts, and the election
of Trustees may be effectively acted upon by shareholders of the Trust voting
without regard to series.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
- --------------------------------------------
As used in the Prospectus and this Statement of Additional Information,
"vote of a majority of the outstanding shares" of the Trust or a Fund, means the
affirmative vote, at an annual or special meeting of shareholders duly called,
of the lesser of (a) 67% or more of the votes of shareholders of the Trust or
that Fund present at such meeting at which the holders of more than 50% of the
votes attributable to the shareholders of record of the Trust or that Fund are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of shareholders of the Trust or such Fund.
MISCELLANEOUS
- -------------
Individual Trustees are elected by the shareholders and, subject to
removal by the vote of two-thirds of the Board of Trustees, serve for a term
lasting until the next meeting of shareholders at which Trustees are elected.
Such meetings are not required to be held at any specific intervals. Generally,
shareholders owning not less than 20% of the outstanding shares of the Trust
entitled to vote may cause the Trustees to call a special meeting. However, the
Trust has represented to the Commission that the Trustees will call a special
meeting for the purpose of considering the removal of one or more Trustees upon
written request therefor from shareholders owning not less than 10% of the
outstanding votes of the Trust entitled to vote and that the Trust will assist
in communications with other shareholders as required by ss.16(c) of the 1940
Act. At such a 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.
The Trust is registered with the Commission as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of the Trust.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Commission. Copies of such information may be obtained from the Commission
upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
B-35
<PAGE> 73
APPENDIX "A"
RATINGS OF SECURITIES
---------------------
COMMERCIAL PAPER RATINGS
------------------------
STANDARD & POOR'S CORPORATION:
Commercial paper ratings of Standard & Poor's Corporation ("S&P") are current
assessments of the likelihood of timely payment of debts having original
maturities of no more than 365 days. Commercial paper rated "A-1" by S&P
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted "A-1+." Commercial paper rated "A-2" by S&P
indicates that capacity for timely payment on issues is strong. However, the
relative degree of safety is not as high as for issues designated "A-1."
MOODY'S INVESTORS SERVICE, INC.:
The rating "Prime-1" is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated "Prime-2" (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of "Prime-1" rated issuers, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variations.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
FITCH INVESTORS SERVICE, INC.:
Commercial paper rated "F-1" by Fitch Investors Service, Inc. ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated "F-2" by Fitch is regarded as having an assurance of
timely payment only slightly less than the strongest rating, i.e., "F-1." The
plus (+) sign is used after a rating symbol to designate the relative position
of an issuer within the rating category.
CORPORATE DEBT RATINGS
----------------------
STANDARD & POOR'S CORPORATION:
An S&P corporate debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. Debt rated "AAA" has the
highest rating assigned by S&P. Capacity to pay interest and repay principal is
extremely strong. Debt rated "AA" has a very strong capacity to pay interest and
to repay principal and differs from the highest rated issues only in small
degree. Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories. Debt
rated "BBB" is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing
B-36
<PAGE> 74
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories. Debt
rated "BB" and "B" is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal.
"BB" indicates the least degree of speculation. While such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Debt rated "BB" has less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The "BB" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BBB" rating.
Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
MOODY'S INVESTORS SERVICE, INC.:
The following summarizes the six highest ratings used by Moody's for corporate
debt. Bonds that are rated "Aaa" by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Bonds
that are rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in "Aaa" securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities. Bonds that
are rated "A" by Moody's possess many favorable investment attributes and are to
be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Bonds that
are rated "Baa" by Moody's are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds that are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bond
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Moody's applies
numerical modifiers (1, 2, and 3) with respect to bonds rated "Aa" through "B."
The modifier 1 indicates that the bond being rated ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the bond ranks in the lower end of its generic
rating category.
B-37
<PAGE> 75
Duff & Phelps, Inc.:
The following summarizes the six highest long-term debt ratings by Duff &
Phelps, Inc. ("Duff"). Debt rated "AAA" has the highest credit quality. The
risk factors are negligible being only slightly more than for risk-free U.S.
Treasury debt. Debt rated "AA" has a high credit quality and protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions. Debt rated "A" has protection factors that are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress. Debt rated "BBB" has below average protection factors but is
still considered sufficient for prudent investment. However, there is
considerable variability in risk during economic cycles. Debt rated "BB" is
below investment-grade but deemed likely to meet obligations when due. Present
or prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within this category. Debt rated "B" is below investment-grade and possesses
risk that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade. To provide more detailed
indications of credit quality, the ratings from "AA" to "B" may be modified by
the addition of a plus (+) or minus (-) sign to show relative standing within
this major rating category.
Fitch:
The following summarizes the six highest long-term debt ratings by Fitch (except
for "AAA" ratings, plus(+) or minus (-) signs are used with a rating symbol to
indicate the relative position of the credit within the rating category). Bonds
rated "AAA" are considered to be investment-grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated "AA" are considered to be investment-grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issues is generally
rated "F-1+." Bonds rated as "A" are considered to be investment-grade and of
high credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated "BBB" are considered to be investment-grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings for these bonds will fall
below investment-grade is higher than for bonds with higher ratings. Bonds rated
"BB" are considered speculative. The obligor's ability to pay interest and repay
principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements. Bonds rated "B" are
considered highly speculative. While bonds in this class are currently meeting
debt service requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of safety and the
need for reasonable business and economic activity throughout the life of the
issue.
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<PAGE> 76
IBCA Limited and its affiliate IBCA, Inc.:
The following summarizes the six highest long-term debt ratings by IBCA Limited
and its affiliate IBCA, Inc. (collectively "IBCA"). Obligations rated "AAA" are
those for which there is the lowest expectation of investment risk. Capacity for
timely repayment of principal and interest is substantial, such that adverse
changes in business, economic or financial conditions are unlikely to increase
investment risk significantly. Obligations rated "AA" are those for which there
is a very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic, or
financial conditions may increase investment risk albeit not very significantly.
Obligations rated "A" are those for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk. Obligations rated "BBB" are those for
which there is currently a low expectation of investment risk. Capacity for
timely repayment of principal and interest is adequate, although adverse changes
in business, economic, or financial conditions are more likely to lead to
increased investment risk than for obligations in other categories. Obligations
rated "BB" are those for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists, but
is susceptible over time to adverse changes in business, economic or financial
conditions. Obligations rated "B" are those for which investment risk exists.
Timely repayment of principal and interest is not sufficiently protected against
adverse changes in business, economic or financial conditions.
Thompson BankWatch, Inc.:
The following summarizes the six highest long-term debt ratings by Thomson Bank
Watch, Inc. ("Thompson"). "AAA" is the highest category and indicates that the
ability to repay principal and interest on a timely basis is very high. "AA" is
the second highest category and indicates a superior ability to repay principal
and interest on a timely basis with limited incremental risk versus issues rated
in the highest category. "A" is the third highest category and indicates the
ability to repay principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings. "BBB" is the lowest investment-grade category
and indicates an acceptable capacity to repay principal and interest. Issues
rated "BBB" are, however, more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings. While not investment-grade,
the "BB" rating suggests that the likelihood of default is considerably less
than for lower-rated issues. However, there are significant uncertainties that
could affect the ability to adequately service debt obligations. Issuer rated
"B" show a higher degree of uncertainty and therefore greater likelihood of
default that higher rated issuers. Adverse developments could well negatively
affect the payment of interest and principal on a timely basis.
B-39
<PAGE> 77
APPENDIX "B"
------
ANNUAL REPORT TO SHAREHOLDERS
------
FISCAL YEAR ENDED
OCTOBER 31, 1996
B-40
<PAGE> 78
FAIRPORT FUNDS
CHARTING A COURSE YOU CAN TRUST(SM)
ANNUAL REPORT TO
SHAREHOLDERS
- FAIRPORT MIDWEST GROWTH FUND
- FAIRPORT GROWTH AND INCOME FUND
- FAIRPORT GOVERNMENT SECURITIES FUND
October 31, 1996
Advised by
ROULSTON & COMPANY, INC.
<PAGE> 79
FAIRPORT FUNDS ANNUAL REPORT TO SHAREHOLDERS
November 27, 1996
Dear Shareholder:
We are pleased to issue the financial report on the Fairport Funds for the year
ended October 31, 1996.
The Fairport Midwest Growth Fund gained 16.28% during the period, while the
Fairport Growth and Income Fund gained 17.77%. These returns were earned in a
period when the market, as measured by the Standard & Poor's 500 Stock Index,
gained by 23.98%. The Fairport Government Securities Fund gained 4.58% during
the period while the Lehman Brothers Intermediate Treasury Bond Index increased
by 5.62%.
Economic activity continued at the slower pace set in the preceding year.
Capital spending and export growth remain the driving engines of this expansion,
while consumer and public sector spending remain the restraining elements. Some
price increases among a few commodities were worrisome early in the year, but
this concern evaporated over the summer. Productivity, wage restraint, better
than anticipated agricultural production, and moderate growth kept a tight rein
on inflation.
Continued moderate economic growth approaching 3% with inflation under control
remains a favorable setting for both the bond and stock markets.
In the commentary that follows on each of the Funds, you will note a common
theme that has long been a hallmark of our investment management. Research is
the cornerstone of our investment process. Our research efforts for the Fairport
Funds continue to give us confidence in the future of the economy and the
portfolios we manage on your behalf.
/s/ Scott D. Roulston /s/ Joseph A. Harrison
Scott D. Roulston Joseph A. Harrison
President Director of Investments
<PAGE> 80
FAIRPORT FUNDS INVESTMENT ADVISER'S REPORT
FAIRPORT MIDWEST GROWTH FUND
The graph below compares the increase in value of a $10,000 investment in
Fairport Midwest Growth Fund with the performance of the Standard & Poor's 500
Stock and Lipper Growth Fund indices.
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN*
1 Year ..............16.28%
Since Inception......17.01%
*For period ending 10/31/96
7/1/93 7/93 10/93 1/94 4/94 7/94 10/94 1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund
Lipper Growth Fund Index
Standard & Poor's 500 Stock Index
<FN>
Past performance is not indicative of future results.
</TABLE>
Fairport Midwest Growth Fund was established to achieve capital appreciation
through the investment in equity securities of companies that are headquartered
in the eight-state area contiguous to the Great Lakes.
While the Fund's objective is capital appreciation, investments are not limited
to growth stocks. We seek opportunities in a broad spectrum of investments from
traditional growth companies to highly cyclical companies.
Investment decisions are driven by intense and continuous fundamental research.
This research focus attempts to uncover a combination of internal and external
change at a company that presents an unusual appreciation potential.
Internal changes that would be significant might include:
- - An internal change in management
- - A strategic decision to change the business focus of the company or a sector
of the company that could include an acquisition or divestiture
- - The development of an important new product or service
- - Adoption of new operating methods or systems that could positively impact
profitability and cash flow.
Significant external changes might include:
- - A new CEO or other important manager brought in from outside the company
- - A structural change such as a consolidation or bankruptcy in an important
customer industry
- - A significant change in the competitive environment caused by a new entrant
into the market, a new product introduced by a competitor or a dramatic
change in product pricing or costs
- - The development of a new technology that could impact the industry.
While the above lists are far from exclusive, they provide some examples of the
type of changes our research process attempts to identify and analyze.
Continued steady domestic economic growth and the potential for improving
international economies provide a positive backdrop for the Midwest in the year
ahead. The combination of modest growth and low inflation, while generally
positive, will present operating challenges to many company managements. Our
research-driven stock selection process will continue to focus on each
management's ability to prosper in this environment. To date, this disciplined
approach is still able to identify attractive investments in the Midwest.
<PAGE> 81
FAIRORT FUNDS
FAIRPORT GROWTH AND INCOME FUND
The graph below compares the increase in value of a $10,000 investment in
Fairport Growth and Income Fund with the performance of the Standard & Poor's
500 Stock and Lipper Growth & Income Fund indices.
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN*
1 Year...............17.77%
Since Inception.......13.02%
*For period ending 10/31/96
7/1/93 7/93 10/93 1/94 4/94 7/94 10/94 1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund
Lipper Growth and Income Fund Index
Standard & Poor's 500 Stock Index
<FN>
Past performance is not indicative of future results.
</TABLE>
Fairport Growth and Income Fund was established to achieve capital appreciation
and current income primarily through investment in common stocks or securities
convertible into common stocks.
The investment policy is to invest in a diversified portfolio of dividend-paying
common stocks which have been researched by our own staff and offer reasonable
valuation based on price to earnings, book value and cash flows.
Our investment strategy is to seek out companies that meet the demanding
fundamental analysis of our research staff. Visits with management, suppliers,
customers, distributors and unions are among the sources utilized by our
analysts to form judgments about the outlook for each company. The results of
this analysis are joined with rigorous valuation for each investment in the
portfolio.
Two firms that typify our investment approach are AVX Corp. and Avnet, Inc. Both
companies, one a manufacturer of electronic components and the other a
distributor of components and computer equipment, were adversely affected by an
inventory correction that began one year ago. In mid-summer, both issues were
very attractively valued. Our research contacts at a number of manufacturing and
distribution companies were able to confirm that excess inventories in some
lines had already been eliminated and others had but a short time until they
would be in balance as well. Two fine companies, with prospects for solid
earnings growth ahead confirmed, made excellent additions to the portfolio.
Currently, the fund is diversified among 32 investments representing most
sectors of our economy. Our broad-based research effort is focused on companies
that are taking requisite action to improve profitability. Conversations with a
broad cross-section of managements indicate a favorable outlook for continued
moderate economic growth with low inflation. We will continue to seek out those
companies that present a favorable earnings outlook at prices that offer good
value.
2
<PAGE> 82
INVESTMENT ADVISER'S REPORT
FAIRPORT GOVERNMENT SECURITIES FUND
The graph below compares the increase in value of a $10,000 investment in
Fairport Government Securities Fund with the performance of the Lehman Brothers
Intermediate Treasury Bond Index.
<TABLE>
<CAPTION>
FAIRPORT GOVERNMENT SECURITIES FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Fairport Government Securities Fund
Lehman Brothers Intermediate Treasury Bond Index
AVERAGE ANNUAL TOTAL RETURN*
1 Year...............4.58%
Since Inception......4.19%
*For period ending 10/31/96
7/1/93 7/93 10/93 1/94 4/94 7/94 10/94 1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<FN>
Past performance is not indicative of future results.
</TABLE>
In order to meet its objective of current income with preservation of capital,
Fairport Government Securities Fund seeks to minimize credit risk by investment
in securities issued directly by the U.S. Government. Because changes in
interest rates affect the value of the Fund's holdings, investment in issues
maturing in less than ten years are the primary focus of the portfolio.
Since our last report, many of the concerns about commodity prices and wage
increases have been put to rest. Inflation remained in check and interest rates
receded from the interim highs reached in June. Our outlook calls for continued
moderate growth and low inflation which should be a favorable environment for
the bond market.
3
<PAGE> 83
FAIRPORT FUNDS
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND October 31, 1996
==============================================================
Shares Value
- --------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 93.08%
CAPITAL GOODS-22.80%
AMP, Inc. ........................ 36,700 $ 1,243,212
GATX Corp. ....................... 41,000 1,957,750
Harnischfeger Industries, Inc. ... 50,000 2,000,000
Kennametal, Inc. ................. 50,000 1,700,000
Myers Industries, Inc. ........... 120,000 1,860,000
Nordson Corp. .................... 24,700 1,358,500
Park-Ohio Industries, Inc.* ...... 100,509 1,507,635
Trinova Corp. .................... 43,000 1,413,625
---------
13,040,722
- --------------------------------------------------------------
COMMUNICATION EQUIPMENT-3.05%
Allen Group, Inc.* ............... 110,000 1,746,250
- --------------------------------------------------------------
CONSUMER DURABLES-6.84%
Masco Corp. ...................... 65,000 2,039,375
Royal Appliance Manufacturing Co.* 300,000 1,875,000
---------
3,914,375
- --------------------------------------------------------------
CONSUMER NON-DURABLES-21.57%
Consolidated Stores Corp.* ....... 54,700 2,112,788
Patterson Dental Co.* ............ 75,000 2,100,000
Rite Aid Corp. ................... 72,000 2,448,000
Stryker Corp. .................... 100,000 2,975,000
Worthington Foods, Inc. .......... 120,000 2,700,000
---------
12,335,788
- --------------------------------------------------------------
ENERGY-5.33%
Belden & Blake Corp.* ............ 115,100 3,050,150
- --------------------------------------------------------------
FINANCE-16.25%
First Bank System, Inc. .......... 33,000 2,178,000
First Empire State Corp. ......... 8,000 2,054,000
Norwest Corp. .................... 60,000 2,632,500
Star Banc Corp. .................. 27,000 2,430,000
---------
9,294,500
- --------------------------------------------------------------
</TABLE>
4
<PAGE> 84
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
Shares Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
MATERIALS/SERVICES-17.24%
Bearings, Inc. ............................................ 78,750 $2,047,500
Duriron Co., Inc. ......................................... 55,800 1,492,650
Figgie International, Inc. Class A* ....................... 180,000 1,912,500
Libbey, Inc. .............................................. 70,000 1,680,000
Owens Corning Fiberglass Corp. ............................ 29,700 1,150,875
Pioneer Standard Electronics, Inc. ........................ 150,000 1,575,000
-----------
9,858,525
- ------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS-(COST $43,100,008) .................... 53,240,310
- ------------------------------------------------------------------------------------------
Principal
Amount
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.47%
United Missouri Bank, U.S. Treasury Note,
$2,585,000 par, 5.125% coupon,
due 06/30/98, dated 10/31/96,
to be sold on 11/01/96 at $2,555,380 (Cost $2,555,000) $ 2,555,000 2,555,000
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.55% (COST $45,655,008)** ............. 55,795,310
-----------
CASH AND OTHER ASSETS NET OF LIABILITIES-2.45% ............ 1,402,607
-----------
NET ASSETS-100.00% ........................................ $57,197,917
===========
===========================================================================================
<FN>
* Non-income producing security.
**Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
</TABLE>
5
<PAGE> 85
FAIRPORT FUNDS
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND October 31, 1996
============================================================
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 91.34%
AEROSPACE DEFENSE-2.89%
Boeing Co. ....................... 7,000 $ 667,625
- ------------------------------------------------------------
CAPITAL GOODS-18.84%
Emerson Electric Co. ............. 8,000 712,000
GATX Corp. ....................... 14,000 668,500
General Electric Co. ............. 7,100 686,925
Harnischfeger Industries, Inc. ... 20,000 800,000
Johnson Controls, Inc. ........... 10,000 730,000
Kennametal, Inc. ................. 22,000 748,000
---------
4,345,425
- ------------------------------------------------------------
CONSUMER DURABLES-9.23%
Leggett & Platt, Inc. ............ 26,000 776,750
TRW, Inc. ........................ 7,000 633,500
Tupperware Corp. ................. 14,000 719,250
---------
2,129,500
- ------------------------------------------------------------
CONSUMER NON-DURABLES-16.71%
Banta Corp. ...................... 24,000 507,000
Baxter International, Inc. ....... 10,000 416,250
Beckman Instruments, Inc. ........ 20,000 735,000
Dial Corp. ....................... 26,000 357,500
Rite Aid Corp. ................... 20,000 680,000
Sara Lee Corp. ................... 22,000 781,000
Viad Corp. ....................... 26,000 377,000
---------
3,853,750
- ------------------------------------------------------------
ENERGY-3.07%
Exxon Corp. ...................... 8,000 709,000
- ------------------------------------------------------------
FINANCE-17.70%
American International Group, Inc. 8,000 869,000
First Empire State Corp. ......... 3,000 770,250
KeyCorp .......................... 15,000 699,375
National City Corp. .............. 20,000 867,500
Norwest Corp. .................... 20,000 877,500
---------
4,083,625
- ------------------------------------------------------------
</TABLE>
6
<PAGE> 86
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
MATERIALS/SERVICES-9.98%
Avnet, Inc. ............................. 13,000 $ 654,875
Cabot Corp. ............................. 18,000 434,250
Ferro Corp. ............................. 20,000 540,000
Teleflex, Inc. .......................... 14,000 673,750
-----------
2,302,875
- ------------------------------------------------------------------------
TECHNOLOGY-9.63%
AVX Corp. ............................... 32,000 592,000
Frontier Corp. .......................... 24,000 696,000
Harris Corp. ............................ 12,000 751,500
Lucent Technologies, Inc. ............... 3,889 182,783
-----------
2,222,283
- ------------------------------------------------------------------------
UTILITIES-3.29%
GTE Corp. ............................... 18,000 758,250
- ------------------------------------------------------------------------
TOTAL COMMON STOCKS-(COST $16,006,261) .. 21,072,333
- ------------------------------------------------------------------------
Principal
Amount
- ------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.68%
United Missouri Bank, U.S. Treasury Note,
$1,792,000 par, 5.125% coupon, due
06/30/98, dated 10/31/96, to be sold
on 11/01/96 at $1,771,263
(Cost $1,771,000) .................... $ 1,771,000 1,771,000
- ------------------------------------------------------------------------
TOTAL INVESTMENTS-99.02%
(COST $17,777,261)** ................ 22,843,333
-----------
CASH AND OTHER ASSETS NET OF
LIABILITIES-0.98% ................... 227,520
-----------
NET ASSETS-100.00% ...................... $23,070,853
===========
=========================================================================
<FN>
**Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
</TABLE>
7
<PAGE> 87
<TABLE>
<CAPTION>
FAIRPORT FUNDS SCHEDULE OF INVESTMENTS
FAIRPORT GOVERNMENT SECURITIES FUND October 31, 1996
============================================================================
Principal
Amount Value
- ----------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTES -- 96.69%
U.S. TREASURY NOTES
6.875%, 08/31/99 ............................. $1,000,000 $1,024,720
5.500%, 04/15/00 ............................. 1,000,000 985,480
5.625%, 02/28/01 ............................. 1,000,000 983,690
6.250%, 02/15/03 ............................. 1,000,000 1,003,880
5.875%, 02/15/04 ............................. 1,600,000 1,564,112
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS-96.69% (COST $5,561,814)** . 5,561,882
----------
CASH AND OTHER ASSETS NET OF LIABILITIES-3.31% 190,418
----------
NET ASSETS-100.00% ........................... $5,752,300
==========
<FN>
**Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
</TABLE>
8
<PAGE> 88
<TABLE>
<CAPTION>
FAIRPORT FUNDS STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1996
======================================================================================================================
FAIRPORT MIDWEST FAIRPORT GROWTH FAIRPORT GOVERNMENT
GROWTH FUND AND INCOME FUND SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities at value
(cost $45,655,008,
$17,777,261 and $5,561,814, respectively) ...... $ 55,795,310 $ 22,843,333 $ 5,561,882
Cash .............................................. 754 833 117,328
Receivable for capital stock sold ................. 97,227 5,517 2,678
Receivable for securities sold .................... 1,412,285 685,000 0
Dividends and interest receivable ................. 27,368 17,725 57,646
Reimbursement due from adviser .................... 11,559 7,992 11,248
Deferred organization costs (Note A) .............. 10,868 10,868 10,868
Other assets ...................................... 1,368 627 197
------------ ----------- -----------
Total assets ............................... 57,356,739 23,571,895 5,761,847
------------ ----------- -----------
LIABILITIES
Payable for capital stock redeemed ................ 103,698 54,383 0
Payable for securities purchased .................. 0 421,530 0
Accrued expenses .................................. 55,124 25,129 9,269
Distributions payable ............................. 0 0 278
------------ ----------- -----------
Total liabilities ........................... 158,822 501,042 9,547
------------ ----------- -----------
NET ASSETS
Applicable to 3,689,148, 1,622,062
and 589,863 shares outstanding,
respectively ................................... $ 57,197,917 $ 23,070,853 $ 5,752,300
============ =========== ===========
NET ASSETS CONSIST OF
Capital paid-in ................................... $ 42,806,548 $ 16,110,573 $ 5,861,145
Undistributed net investment income (loss) ........ (10,427) 35,717 0
Accumulated net realized gain (loss) on investments 4,261,494 1,858,491 (108,913)
Net unrealized appreciation on investments ........ 10,140,302 5,066,072 68
------------ ----------- -----------
$ 57,197,917 $ 23,070,853 $ 5,752,300
============ =========== ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE ..................... $ 15.50 $ 14.22 $ 9.75
======================================================================================================================
<FN>
See accompanying notes to financial statements.
</TABLE>
9
<PAGE> 89
<TABLE>
<CAPTION>
FAIRPORT FUNDS STATEMENTS OF OPERATIONS
Year Ended October 31, 1996
===========================================================================================================================
FAIRPORT MIDWEST FAIRPORT GROWTH FAIRPORT GOVERNMENT
GROWTH FUND AND INCOME FUND SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ........................................ $ 716,743 $ 551,308 $ 0
Interest ......................................... 134,338 43,022 434,855
--------- --------- ---------
Total investment income .................... 851,081 594,330 434,855
--------- --------- ---------
EXPENSES
Investment advisory fees (Note B) ................ 417,458 184,723 18,674
Transfer agent fees .............................. 55,050 38,160 27,891
Administration fees .............................. 75,644 33,436 10,062
Distribution expenses (Note B) ................... 139,214 61,603 18,664
Pricing fees ..................................... 39,023 26,857 25,267
Printing fees .................................... 30,611 12,105 3,417
Custodian fees ................................... 28,152 19,365 9,428
Auditing fees .................................... 24,785 9,944 3,204
Legal fees ....................................... 45,627 18,291 6,445
Insurance fees ................................... 19,597 9,631 4,164
Amortization of organization costs (Note A) ...... 3,115 3,115 3,115
Registration expenses ............................ 40,663 27,016 19,867
Trustees fees .................................... 15,381 4,927 1,969
Miscellaneous expenses ........................... 4,093 1,541 777
--------- --------- ---------
Total expenses ............................. 938,413 450,714 152,944
Expenses reimbursed (Note B) ..................... (169,950) (81,095) (85,718)
--------- --------- ---------
Net expenses ............................... 768,463 369,619 67,226
--------- --------- ---------
NET INVESTMENT INCOME ............................ 82,618 224,711 367,629
--------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments .......... 4,515,778 1,856,970 (97,666)
Net change in unrealized
appreciation (depreciation) on investments .... 3,805,220 1,863,728 (3,304)
--------- --------- ---------
Net realized and unrealized
gain (loss) on investments .................... 8,320,998 3,720,698 (100,970)
--------- --------- ---------
INCREASE IN NET ASSETS FROM OPERATIONS ........... $ 8,403,616 $ 3,945,409 $ 266,659
===================================================================================================
<FN>
See accompanying notes to financial statements.
</TABLE>
10
<PAGE> 90
FAIRPORT FUNDS STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
====================================================================================================================================
FAIRPORT MIDWEST FAIRPORT GROWTH FAIRPORT GOVERNMENT
GROWTH FUND AND INCOME FUND SECURITIES FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income ..................... $ 82,618 $ 116,744 $ 224,711 $ 257,163 $ 367,629 $ 412,546
Net realized gain (loss) on investments ... 4,515,778 1,329,274 1,856,970 280,894 (97,666) (1,571)
Net change in unrealized appreciation
(depreciation) on investments .......... 3,805,220 5,112,366 1,863,728 2,751,712 (3,304) 698,738
------------ ------------ ------------ ------------ ----------- -----------
Increase in net assets .................... 8,403,616 6,558,384 3,945,409 3,289,769 266,659 1,109,713
------------ ------------ ------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................ (91,013) (130,340) (254,673) (207,044) (405,004) (411,089)
From net realized gains ................... (774,801) (2,076,604) (178,762) (167,462) 0 0
------------ ------------ ------------ ------------ ----------- -----------
Total distributions ....................... (865,814) (2,206,944) (433,435) (374,506) (405,004) (411,089)
------------ ------------ ------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................. 11,742,064 17,023,299 4,811,561 5,619,642 1,737,076 1,562,174
Reinvestment of dividends ................. 857,142 2,182,580 383,496 309,030 309,367 265,604
Amount paid for repurchase of shares ...... (12,346,785) (3,838,535) (8,718,184) (3,939,188) (4,802,614) (1,493,055)
------------ ------------ ------------ ------------ ----------- -----------
Net increase (decrease) from capital
transactions ........................... 252,421 15,367,344 (3,523,127) 1,989,484 (2,756,171) 334,723
------------ ------------ ------------ ------------ ----------- -----------
Total increase (decrease) in net assets ... 7,790,223 19,718,784 (11,153) 4,904,747 (2,894,516) 1,033,347
NET ASSETS
Beginning of year ......................... 49,407,694 29,688,910 23,082,006 18,177,259 8,646,816 7,613,469
------------ ------------ ------------ ------------ ----------- -----------
End of year ............................... $ 57,197,917 $ 49,407,694 $ 23,070,853 $ 23,082,006 $ 5,752,300 $ 8,646,816
------------ ------------ ------------ ------------ ----------- -----------
Accumulated undistributed (overdistributed)
net investment income included in
net assets at end of year .............. $ (10,427) $ (2,032) $ 35,717 $ 65,679 $ 0 $ 37,375
------------ ------------ ------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS
Shares sold ............................... 815,058 1,339,632 361,212 502,408 177,063 166,952
Shares issued on reinvestment
of dividends ........................... 62,134 187,547 28,972 28,130 31,864 28,472
Shares repurchased ........................ (835,517) (299,578) (646,096) (355,019) (498,079) (159,651)
------------ ------------ ------------ ------------ ----------- -----------
Net increase (decrease) from capital
transactions ........................... 41,675 1,227,601 (255,912) 175,519 (289,152) 35,773
============ ============ ============ ============ =========== ===========
===================================================================================================================================
<FN>
See accompanying notes to financial statements.
</TABLE>
11
<PAGE> 91
<TABLE>
<CAPTION>
FAIRPORT FUNDS
- -----------------------------------------------------------------------------------------------------------------------
The tables below set forth financial data for a share of beneficial interest
outstanding throughout the periods presented.
FAIRPORT MIDWEST GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
- ------------------------------------------------------------------------------------------------------------------------
<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 (000) ...................... $ 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%*
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%)*
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
================================================================================================================
<FN>
* Annualized
** Not annualized
N/A Not applicable; disclosure not required
(1) The Fairport Midwest Growth Fund, Fairport Growth and Income Fund and
Fairport Government Securities Fund commenced operations on July 1, 1993.
See accompanying notes to financial statements.
</TABLE>
12
<PAGE> 92
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
- ------------------------------------------------------------------------------------------------------------------------
<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 (000) .................... $ 23,071 $ 23,082 $ 18,177 $ 8,716
Ratio of expenses to average net assets
before reimbursement of expenses by Adviser ........ 1.83% 1.79% 1.72% 2.79%*
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%*
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
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FAIRPORT GOVERNMENT SECURITIES FUND
- ------------------------------------------------------------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
- ------------------------------------------------------------------------------------------------------------------------
<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 (000) ...................... $ 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%*
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%*
after reimbursement of expenses by Adviser ......... 4.93% 5.16% 4.78% 4.17%*
Portfolio turnover ................................... 21.23% 1.28% 24.14% 24.53%
Average commission rate paid ......................... N/A N/A N/A N/A
========================================================================================================================
</TABLE>
13
<PAGE> 93
FAIRPORT FUNDS October 31, 1996
- ------------------------------------------------------------------------------
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES:
Fairport Funds (the "Trust"), formerly known as Roulston Family of Funds, 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. On March
1, 1996, the Trust changed its name from The Roulston Family of Funds to
Fairport Funds. The Trust currently consists of three Funds (the "Funds"):
Fairport Midwest Growth Fund (the "Midwest Growth Fund"), Fairport Growth and
Income Fund (the "Growth and Income Fund") and Fairport Government Securities
Fund (the "Government Fund"). The Trust is registered under the Investment
Company Act of 1940, as amended (the "Act"). On April 29, 1995, pursuant to an
Agreement and Plan of Reorganization and Liquidation, the Midwest Growth Fund,
the Growth and Income Fund and the Government 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
Reorganization was approved by the shareholders of the Acquired Funds on March
24, 1995. For accounting purposes, the Reorganization was accounted for in a
manner similar to a pooling of interest and the financial highlights have been
presented since the Funds' inception, July 1, 1993.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.The following is a summary of
significant accounting policies consistently followed by the Trust.
(1) SECURITY VALUATION: Equity securities which are listed or admitted to
trading on a national securities exchange or in the over-the-counter market will
be valued at the last sale price on the exchange on which the security is
principally traded. Equity securities for which there is no sale on that day
will be valued at their closing bid prices obtained from one or more dealers
making markets for such securities or, if market quotations are not readily
available, at their fair values as determined in good faith by the Board of
Trustees.
Valuations of fixed and variable income securities ("debt securities") are
supplied by independent pricing services used by FPS Services, Inc., as
administrator, which have been approved by the Trustees of the Trust. Valuations
are based upon a consideration of yields or prices of obligations of comparable
quality, coupon, maturity and type, indications as to value from recognized
dealers, and general market conditions. Debt securities for which market
quotations are readily available are valued based upon these quotations. The
Trustees may deviate from the valuation provided by the pricing service
whenever, in their judgment, such valuation is not indicative of the fair value
of the debt security. Short-term investments with a maturity of 60 days or less
are valued at amortized cost, which approximates market value.
(2) REPURCHASE AGREEMENTS: All Funds may enter into repurchase agreements with
financial institutions deemed to be credit worthy by Roulston & Company, Inc.
("Roulston"), the Funds' investment adviser, under guidelines approved by the
Trust's Board of Trustees, subject to the seller's agreement to repurchase and
the Funds' agreement to resell such securities at a mutually agreed-upon date
and price. Securities purchased subject to repurchase agreements are deposited
with the Funds' custodian and, pursuant to the terms of the repurchase
agreement, must have an aggregate market value greater than
14
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS
or equal to the repurchase price plus accrued interest at all times. If the
seller were to default on its repurchase obligation or become insolvent, the
Fund would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
was delayed pending court action.
(3) FEDERAL INCOME TAXES: The Funds intend to be treated as "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and to
distribute substantially all of their net taxable income. Accordingly, no
provisions for Federal income taxes have been made in the accompanying
financial statements.
(4) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is recorded
on the ex-dividend date. Interest income is accrued daily. Security
transactions are accounted for on the date securities are purchased or sold.
Security gains and losses are determined on the identified cost basis.
(5) 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. Net investment
income (exclusive of capital gains) of the Government Fund is declared daily and
distributed in the form of monthly dividends. Substantially all of the capital
gains realized by the Funds will be distributed annually.
(6) DEFERRED ORGANIZATION COSTS: Organizational costs are being amortized on a
straight-line basis over five years commencing April 29, 1995.
NOTE (B) RELATED PARTY TRANSACTIONS:
The Trust and Roulston have entered into an Investment Advisory Agreement (the
"Agreement") dated as of January 20, 1995. Under terms of the Agreement,
Roulston makes the investment decisions for the assets of the Funds and
continuously reviews, supervises, and administers the investment program of
the Funds. For its services as investment adviser, Roulston receives a fee, 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 of such assets,
and 0.50% of each such Fund's assets of $100 million or more. With respect to
the Government Fund, Roulston receives a fee at an annual rate of 0.25% of the
average daily net assets of the Government Fund up to $100 million of such
assets, and 0.125% of such assets of $100 million or more. Such fees will be
calculated daily and paid monthly.
Prior to the effective date of the Reorganization, Roulston served as the
investment adviser to each of the Acquired Funds. For such services, Roulston
received an advisory fee from the Acquired Funds at the following annual rates:
1.00% of the value of each of the Midwest Growth Fund's and the Growth and
Income Fund's average daily net assets up to $100 million, 0.75% of each such
Fund's assets over $100 million; and 0.50% of the value of the Government Fund's
average daily net assets up to $100 million, 0.375% of the average daily net
assets from $100 million to $200 million, and 0.25% of the average daily net
assets of such Fund over $200 million.
Pursuant to Rule 12b-1 under the Act, the Trust has adopted a Distribution
Agreement and Shareholder Service Plan dated January 20, 1995 (the "Plan"),
under which each Fund is authorized to pay or reimburse Roulston Research Corp.
(the "Distributor"), ultimately a wholly-owned subsidiary of Roulston, a
periodic amount calculated at an annual rate not to exceed .25% of the average
daily net assets value of such Fund. Such an 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
15
<PAGE> 95
FAIRPORT FUNDS NOTES TO FINANCIAL STATEMENTS CONT.
October 31, 1996
the Distributor. Under the Plan, a Participating Organization may include the
Distributor's affiliates.
In addition, the Board of Trustees of the Trust adopted certain procedures in
accordance with Section 17(e)(2) and Rule 17e-1 under the Act pursuant to which
the Distributor was permitted to execute certain portfolio transactions as
broker on behalf of the Funds. In connection with such brokerage transactions,
Roulston as the investment adviser, could determine to use the Distributor if
such use would likely result in commissions, fees or other renumeration and
prices for and execution of securities transactions at least as favorable to
such Fund as those likely to be derived from other qualified brokers. Such
procedures were in place and used during the year ended October 31, 1996 until
February 12, 1996, and have not been used since that date.
Roulston has agreed with the Trust to waive its investment advisory fee and to
reimburse certain other expenses of the Funds from the effective date of the
Reorganization (April 29, 1995) and such waivers and reimbursements shall
continue at least through April 30, 1997, to the extent necessary to cause total
operating expenses as a percentage of net assets of the Midwest Growth Fund, the
Growth and Income Fund and the Government Fund not to exceed 1.38%, 1.50% and
.90%, respectively.
Information regarding these transactions is as follows for the year ended
October 31, 1996:
<TABLE>
<CAPTION>
Midwest Growth and
Growth Income Government
Fund Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Fees before fee waiver .......... $417,458 $184,723 $18,674
Fees waived ..................... 169,950 81,095 18,674
RULE 12b-1 FEES:
Fees before fee waiver .......... 139,214 61,603 18,664
Fees waived ..................... 0 0 0
Other expenses
reimbursed .................... 0 0 67,044
Brokerage fees paid to the
distributor on portfolio
transactions .................. 37,716 4,600 0
- --------------------------------------------------------------------------------
</TABLE>
Certain of the officers and trustees of the Trust are also officers, directors
and/or employees of Roulston and the Distributor. The officers and such
interested trustees served without direct compensation from the Trust during the
year.
NOTE (C) INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities (excluding short-term securities)
for the year ended October 31, 1996 were:
<TABLE>
<CAPTION>
Proceeds
Purchases from Sales
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Midwest Growth Fund ....... $ 30,566 $ 32,074
Growth and Income Fund .... 8,032 13,272
Government Fund ........... 1,542 4,367
- -------------------------------------------------------------------------------
</TABLE>
NOTE (D) UNREALIZED APPRECIATION
AND DEPRECIATION:
At October 31, 1996, the gross unrealized appreciation and depreciation of
securities for book and Federal income tax purposes consisted of the
following:
<TABLE>
<CAPTION>
Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation/
Appreciation (Depreciation) (Depreciation)
(000) (000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Midwest Growth Fund ....... $ 10,775 $ (635) $ 10,140
Growth and Income Fund .... 5,159 (93) 5,066
Government Fund ........... 43 (43) 0
- -------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 96
FAIRPORT FUNDS REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of
Fairport Midwest Growth Fund,
Fairport Growth and Income Fund
and Fairport Government Securities Fund
of Fairport Funds:
We have audited the accompanying statement of assets and liabilities of Fairport
Midwest Growth Fund, Fairport Growth and Income Fund and Fairport Government
Securities Fund (the three funds constituting the Fairport Funds, formerly The
Roulston Family of Funds), including the schedule of investments, as of October
31, 1996, and the related statements of operations for the year then ended,
changes in net assets and financial highlights for each of the two years in the
period then ended. These financial statements and financial highlights are the
responsibility of Fairport Funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the period from July 1, 1993 (commencement
of operations) to October 31, 1993 and for the year ended October 31, 1994 were
audited by other auditors whose report dated December 14, 1994 expressed an
unqualified opinion on the financial statements (not presented herein) and
related financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Fairport Midwest Growth Fund, Fairport Growth and Income Fund and Fairport
Government Securities Fund of the Fairport Funds at October 31, 1996, the
results of their operations for the year then ended and the changes in their net
assets and financial highlights for each of the two years in the period then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
November 27, 1996
Cleveland, Ohio
<PAGE> 97
FAIRPORT
FUNDS
[LOGO]
CHARTING A COURSE YOU CAN TRUST
4000 Chester Avenue
Cleveland, Ohio 44103
1-800-332-6459
DIRECTORS:
Thomas V. Chema
David H. Gunning
Scott D. Roulston
Ivan Winfield
OFFICERS:
Scott D. Roulston, President
Michele R. Fogarty, Secretary and Treasurer
ADVISER:
Roulston & Company, Inc.
4000 Chester Avenue
Cleveland, Ohio 44103
DISTRIBUTOR:
Roulston Research Corp.
4000 Chester Avenue
Cleveland, Ohio 44103
ADMINISTRATOR & TRANSFER AGENT:
FPS Services, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
LEGAL COUNSEL:
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
INDEPENDENT PUBLIC ACCOUNTANTS:
Ernst & Young, LLP
1300 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115-1405
For information call 1-800-332-6459
Fairport Funds take their name from the historic Fairport Harbor Lighthouse,
located on Lake Erie at the Grand River, just east of the Funds' headquarters
in Cleveland, Ohio. Originally built in 1825, the Fairport Harbor Lighthouse
guided ships safely in and out of the harbor for 100 years. In its early years
the lighthouse was considered the gateway to the Western Reserve and the vast
frontiers of the Northwest Territories and beyond. Later the lighthouse served
as a beacon and supply stop for pioneers and travelers on their way to western
Great Lakes ports and beyond. The original brick structure was rebuilt in 1871
of sandstone blocks, as it remains today.
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in a Fund
unless preceded or accompanied by an effective Prospectus which includes details
regarding the Fund's objectives, policies, expenses and other information.
<PAGE> 98
REGISTRATION STATEMENT
OF
FAIRPORT FUNDS
ON
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A:
-- FINANCIAL HIGHLIGHTS
Included in Part B:
-- Report of Independent Public
Accountants dated November 27, 1996;
Statement of Net Assets as of
October 31,1996;
Statements of Operations for the
year ended October 31,1996;
Statements of Changes in Net Assets
for the years ended October 31,1996
and 1995;
Financial Highlights for the years
ended October 31, 1996, 1995, 1994
and the period ended October 31,
1993; and
Notes to Financial Statements.
All required financial statements are included as
Appendix "B" to Part B hereof. All other financial
statements and schedules are inapplicable.
C-1
<PAGE> 99
(b) Exhibits
(1) Declaration of Trust, dated as of September 16,
1994 and amended as of March 1, 1996 --
incorporated herein by reference to Post-
Effective Amendment No. 2 to Registration
Statement #33-84186 filed via EDGAR on February
29, 1996.
(2) By-Laws as amended March 1, 1996 -- incorporated
herein by reference to Post-Effective Amendment
No. 2 to Registration Statement #33-84186 filed
via EDGAR on February 29, 1996.
(3) None.
(4) Certificates for shares are not issued. Articles
IV, V, VI and VII of the Declaration of Trust,
filed as Exhibit 1 hereto, define the rights of
holders of shares.
(5) Investment Advisory Agreement dated January 20,
1995, as amended as of November 30, 1996,
between Registrant and Roulston & Company, Inc.
-- filed herewith.
(6) (a) Distribution Agreement dated January 20,
1995, as amended as of June 3, 1996, between
Registrant and Roulston Research Corp --
filed herewith.
(b) Form of Selected Dealer Agreement --
incorporated herein by reference to Exhibit
15(b) of Post-Effective Amendment No. 2 to
Registration Statement #33-84186 filed via
EDGAR on February 29, 1996.
As of filing date, Selected Dealer Agreements
are in effect between Roulston Research Corp.
(Principal Underwriter) and each of Bidwell &
Co.; Ameritrade, Inc.; American Capital Corp.;
and Jack White & Company.
(7) None.
C-2
<PAGE> 100
(8) (a) Custody Agreement between Registrant and UMB
Bank, n.a. -- incorporated herein by
reference to Post-Effective Amendment No. 2
to Registration Statement #33-84186 filed
via EDGAR on February 29, 1996.
(b) Custody Administration and Agency Agreement
dated January 20, 1995, as amended January
1, 1997, between Registrant and FPS
Services, Inc. -- filed herewith.
(9) (a) Administration Agreement dated January 20,
1995, as amended January 1, 1997, between
Registrant and FPS Services, Inc. -- filed
herewith.
(b) Accounting Services Agreement dated January
20, 1995, as amended January 1, 1997,
between Registrant and FPS Services, Inc. --
filed herewith.
(c) Transfer Agent Services Agreement dated
January 20, 1995, as amended January 1,
1997, between Registrant and FPS Services,
Inc. -- filed herewith.
(d) Agreement and Plan of Reorganization and
Liquidation dated November 23, 1994, between
Registrant and The Advisers' Inner Circle
Fund is incorporated by reference to Exhibit
(9)(d) of Pre-Effective Amendment No. 1 to
Registrant's Registration Statement (No.
33-84186) filed on January 19, 1995.
(10) See opinion of Counsel filed as attachment to
Registrant's Rule 24f- 2 Notice filed December 24,
1996 and incorporated herein by reference.
(11) Consent of Ernst & Young LLP -- filed herewith.
(12) None.
(13) None.
(14) IRA Disclosure Statement -- filed herewith.
C-3
<PAGE> 101
(15) (a) Distribution and Shareholder Services Plan
dated January 20, 1995, as amended June 3,
1996 -- filed herewith.
(b) Form of Selected Dealer Agreement (a related
agreement under the Rule 12b-1 Plan) is
incorporated by reference to Exhibit 15(b)
of Post-Effective Amendment No. 2 to
Registration Statement #33-84186 filed via
EDGAR on February 29, 1996. -- see (6)(b)
above.
(c) Omnibus Account Services Agreement dated
July 7, 1996, between Roulston Research
Corp. and Waterhouse Securities, Inc. --
filed herewith.
(d) Shareholder Service Agreement dated December
12, 1996, between Roulston Research Corp.
and First Trust Corporation -- filed
herewith.
(16) Computation of Performance Quotations for
FAIRPORT MIDWEST GROWTH FUND, FAIRPORT
GROWTH AND INCOME FUND and FAIRPORT
GOVERNMENT SECURITIES FUND -- incorporated
by reference to Exhibit 16 of Post-Effective
Amendment No. 1 to Registration Statement
#33-84186 filed on March 31, 1995.
(24) Powers of Attorney of Scott D. Roulston,
Thomas V. Chema, David H. Gunning and Ivan
J. Winfield -- filed herewith.
(27) Financial Data Schedules for the fiscal year
ended October 31, 1996 -- filed herewith.
C-4
<PAGE> 102
Item 25. Persons Controlled Or Under Common Control With Registrant
----------------------------------------------------------
None.
Item 26. Number Of Holders Of Securities
The number of holders of securities for each Series of the
Trust as of January 31, 1997 is set forth below:
<TABLE>
<CAPTION>
FUND NUMBER OF SECURITY HOLDERS
---- --------------------------
================================================================================================
<S> <C>
FAIRPORT MIDWEST GROWTH FUND 1,108
- ------------------------------------------------------------------------------------------------
FAIRPORT GROWTH AND INCOME FUND 426
- ------------------------------------------------------------------------------------------------
FAIRPORT GOVERNMENT SECURITIES FUND 75
- ------------------------------------------------------------------------------------------------
</TABLE>
Item 27. Indemnification
---------------
Article VI, Section 6.4 of the Registrant's Declaration of
Trust, filed as Exhibit 1 hereto, provides for the
indemnification of Registrant's Trustees and officers.
Indemnification of Registrant's principal underwriter,
custodian, investment adviser, administrator, and transfer
agent is provided for, respectively, in Section 1.11 of the
Distribution Agreement filed as Exhibit 6(a) hereto, Section
8(a) of the Custody Agreement filed as Exhibit 8(a) hereto,
Section 4(c) of the Custody Administration and Agency
Agreement filed as Exhibit 8(b) hereto, Section 5 of the
Investment Advisory Agreement filed as Exhibit 5 hereto,
Section 9(d) of the Administration Agreement filed as Exhibit
9(a) hereto, Section 11(c) of the Accounting Services
Agreement filed as Exhibit 9(b) hereto and Section 19(c) of
the Transfer Agent Services Agreement filed as Exhibit 9(c)
hereto. As of the effective date of this Registration
Statement, Registrant will have obtained from a major
insurance carrier a trustees' and officers' liability policy
covering certain types of errors and omissions. In no event
will Registrant indemnify any of its trustees, officers,
employees or agents against any liability to which such person
would otherwise be subject by reason of his willful
misfeasance, bad faith, or gross negligence in the performance
of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his office or under his
agreement with Registrant. Registrant will comply with Rule
484 under the Securities Act of 1933 and Release 11330 under
the Investment Company Act of 1940 in connection with any
indemnification.
C-5
<PAGE> 103
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person
of Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Information with respect to Roulston & Company, Inc. and its
officers and directors as set forth under the captions
"MANAGEMENT OF THE TRUST" contained in Prospectus and in the
Statement of Additional Information which are a part of this
Registration Statement is hereby incorporated herein by
reference. To the knowledge of Registrant, none of the
directors or officers of Roulston & Company, Inc., except
those set forth below, is or has been at any time during the
past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
Set forth below are the names, principal businesses and
addresses of those businesses of the directors and officers of
Roulston & Company, Inc. who are or have been engaged in any
other business, profession, vocation or employment of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS OF POSITION WITH NAME AND ADDRESS OF NATURE OF CONNECTION
ROULSTON & COMPANY, INC. ROULSTON OTHER BUSINESS TO OTHER BUSINESS
------------------------ -------- -------------- -----------------
==================================================================================================================================
<S> <C> <C> <C>
Thomas H. Roulston Chairman; Defiance, Inc. Chairman and Director
Director 1111 Chester Avenue
Suite #750
Cleveland, Ohio 44114
-----------------------------------------------------------------
C-6
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------------------
University Club Chairman and Director
of Cleveland
3813 Euclid Avenue
Cleveland, Ohio 44115
-----------------------------------------------------------------
American Stone Chairman and Director
Industries
900 Keele Street
Toronto, Canada
M6N 3E7
-----------------------------------------------------------------
Continental Managed Chairman and Director
Pharmacy Services
1400 East Schaaf Road
Brooklyn Heights, OH
44131
-----------------------------------------------------------------
Ramwear Inc. Chairman and Director
9302 Progress Parkway
Mentor, OH
44060-1859
-----------------------------------------------------------------
Roulston Investment General Partner
Trust Limited
Partnership
4000 Chester Avenue
Cleveland, OH 44103
-----------------------------------------------------------------
Roulston Ventures General Partner
Limited Partnership
4000 Chester Avenue
Cleveland, OH 44103
-----------------------------------------------------------------
MJM Industries Chairman and Director
1200 East Street
Fairport Harbor, OH
44077
-----------------------------------------------------------------
RB Mfg Co. Chairman and Director
2620 West Monroe
Street
Sandusky, OH 44870
-----------------------------------------------------------------
</TABLE>
C-7
<PAGE> 105
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Scott D. Roulston Director; Defiance, Inc. Director
President; Chief 1111 Chester Avenue
Executive Officer Suite #750
Cleveland, Ohio 44114
- -----------------------------------------------------------------------------------------------------------------------------------
Heather R. Ettinger Director; University Club Director
Executive Vice of Cleveland
President; 3813 Euclid Avenue
Secretary Cleveland, Ohio 44115
-----------------------------------------------------------------
Continental Managed Director
Pharmacy Services
1400 Schaaf Road
Cleveland, Ohio 44113
-----------------------------------------------------------------
RB Manufacturing Director
Company
2620 West Monroe
Sandusky, OH 44870
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NAME AND NATURE OF
OFFICERS AND DIRECTORS OF POSITION WITH ADDRESS OF CONNECTION
ROULSTON & COMPANY, INC. ROULSTON & COMPANY, INC. OTHER BUSINESS TO OTHER BUSINESS
------------------------ ------------------------ -------------- -----------------
==================================================================================================================================
<S> <C> <C> <C>
Norman F. Klopp, Jr. Executive Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Robert J. Yaroma Executive Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Joseph A. Harrison Executive Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Kathryn G. Balazs Senior Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Larry W. Bensinger Senior Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Elmer L. Meszaros Senior Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-8
<PAGE> 106
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michele R. Fogarty Chief Financial Officer
- ----------------------------------------------------------------------------------------------------------------------------------
D. Keith Lockyer Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
George W. Sievila Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Keith A. Vargo Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
J. Mark Wipper Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Cynthia M. Krenz Assistant Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Laurel A. Lawrence Assistant Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Theresa D. Miller Assistant Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Charles E. Nye Assistant Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Nadine E. Trombley Assistant Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 29. Principal Underwriter
---------------------
(a) Roulston Research Corp. acts as principal underwriter
for Registrant.
(b) The Directors and Officers of Roulston Research Corp.
and their positions with Registrant are as follows:
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
==============================================================================================
<S> <C> <C>
Thomas H. Roulston Director
4000 Chester Avenue
Cleveland, Ohio 44103
- ----------------------------------------------------------------------------------------------
</TABLE>
C-9
<PAGE> 107
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
Scott D. Roulston Director; Trustee;
4000 Chester Avenue President President
Cleveland, Ohio 44103
<CAPTION>
=================================================================================================
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
================================================================================================
<S> <C> <C>
Heather R. Ettinger Director;
4000 Chester Avenue Executive Vice
Cleveland, Ohio 44103 President and
Secretary
- ------------------------------------------------------------------------------------------------
Michele R. Fogarty Treasurer; Treasurer;
4000 Chester Avenue Assistant Secretary Secretary
Cleveland, Ohio 44103
- ------------------------------------------------------------------------------------------------
Joseph A. Harrison Executive Vice
4000 Chester Avenue President;
Cleveland, Ohio 44103 Assistant Treasurer
- ------------------------------------------------------------------------------------------------
Norman F. Klopp, Jr. Executive Vice
4000 Chester Avenue President
Cleveland, Ohio 44103
- ------------------------------------------------------------------------------------------------
Robert. J. Yaroma Executive Vice
4000 Chester Avenue President
Cleveland, Ohio 44103
- ------------------------------------------------------------------------------------------------
</TABLE>
C-10
<PAGE> 108
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------
Kathryn G. Balazs Senior Vice President
4000 Chester Avenue
Cleveland, Ohio 44103
- ------------------------------------------------------------------------------------------------
Elmer L. Meszaros Senior Vice President
4000 Chester Avenue
Cleveland, Ohio 44103
<CAPTION>
=================================================================================================
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
---------------- ----------- ----------
=================================================================================================
<S> <C> <C>
Larry W. Bensinger Senior Vice President
4000 Chester Avenue
Cleveland, Ohio 44103
- ------------------------------------------------------------------------------------------------
Mark Wipper Vice President
4000 Chester Avenue
Cleveland, Ohio 44103
- ------------------------------------------------------------------------------------------------
Keith Vargo Vice President
4000 Chester Avenue
Cleveland, Ohio 44103
</TABLE>
(c) None.
Item 30. Location of Accounts and Records
--------------------------------
(1) Roulston & Company, Inc., 4000 Chester Avenue, Cleveland,
Ohio 44103 (records relating to its functions as
investment adviser).
C-11
<PAGE> 109
(2) Roulston Research Corp., 4000 Chester Avenue, Cleveland,
Ohio 44103 (records relating to its function as
distributor).
(3) FPS Services, Inc., 3200 Horizon Drive, King of Prussia,
Pennsylvania, 19406 (records relating to its functions as
administrator, dividend and transfer agent, fund account
and custody administrator and agent, Minute Books,
Declaration of Trust and By-Laws).
(4) UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri
64141 (records relating to its functions as custodian).
Item 31. Management Services
-------------------
None.
Item 32. Undertakings
------------
None.
C-12
<PAGE> 110
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 3 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 4 to its Registration Statement under
the Investment Company Act of 1940 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland and State of
Ohio on the 25th day of February, 1997.
FAIRPORT FUNDS
By /s/ Scott D. Roulston
------------------------------------------
Scott D. Roulston, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Scott D. Roulston President (Principal February 25, 1997
- ------------------------- Executive Officer) and Trustee
Scott D. Roulston
/s/ Michele R. Fogarty Treasurer and Secretary February 25, 1997
- ------------------------- (Principal Financial and Accounting Officer)
Michele R. Fogarty
* Trustee February 25, 1997
- -------------------------
Thomas V. Chema
* Trustee February 25, 1997
- -------------------------
David H. Gunning
* Trustee February 25, 1997
- -------------------------
Ivan J. Winfield
*By /s/ Deborah Ann Potter
- --------------------------
Deborah Ann Potter
Attorney-In-Fact
</TABLE>
C-13
<PAGE> 111
ITEM #24 FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
99.B INDEX TO EXHIBITS FILED PURSUANT TO FORM N-1A:
99.B(5) INVESTMENT ADVISORY AGREEMENT AND AMENDMENT
99.B(6)(a) DISTRIBUTION AGREEMENT
99.B(8)(b) CUSTODY ADMINISTRATION AND AGENCY AGREEMENT AND
AMENDMENT
99.B(9)(a) ADMINISTRATION AGREEMENT AND AMENDMENT
99.B(9)(b) ACCOUNTING SERVICES AGREEMENT AND AMENDMENT
99.B(9)(c) TRANSFER AGENT SERVICES AGREEMENT AND AMENDMENT
99.B(11)(a) CONSENT OF INDEPENDENT AUDITORS
99.B(14) IRA DISCLOSURE STATEMENT
99.B(15)(a) DISTRIBUTION AND SHAREHOLDER SERVICES PLAN AND
AMENDMENT -- SEE 99.B(6)(a)
99.B(15)(c) OMNIBUS ACCOUNT SERVICES AGREEMENT
99.B(15)(d) SHAREHOLDER SERVICE AGREEMENT
(24) POWERS OF ATTORNEY
(27) FINANCIAL DATA SCHEDULES FOR ANNUAL REPORT DATED
10/31/96
C-14
<PAGE> 1
Exhibit 99B(5)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
This Agreement is made as of January 20, 1995, between The Roulston
Family of Funds, an Ohio business trust (the "Trust"), and Roulston & Company,
Inc., an Ohio corporation (the "Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the newly created investment portfolios of the Trust and
may retain the Adviser to serve in such capacity to certain additional
investment portfolios of the Trust, all as now or hereafter may be identified in
Schedule A hereto (such initial investment portfolios and any such additional
investment portfolios together called the "Funds") and the Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained in this Agreement, the parties hereto agree as follows:
Section i. APPOINTMENT. The Trust hereby
appoints the Adviser to act as
investment adviser to the Funds for the
period and on the terms and subject to
the conditions set forth in this
Agreement. The Adviser accepts such
appointment and agrees to furnish the
services herein set forth for the
compensation herein provided. Additional
investment portfolios may from time to
time be added to those covered by this
Agreement by the parties executing a new
Schedule A which shall become effective
upon its execution and shall supersede
any Schedule A having an earlier date.
Section ii. Investment Advisory Services.
Subject to the supervision of the
Trust's Board of Trustees, the Adviser
shall provide a continuous investment
program for the Funds, including
investment, research and management with
respect to all securities and
investments and cash equivalents in the
Funds. The Adviser shall determine from
time to time what securities and other
investments will be purchased, retained
or sold by the Trust with respect to the
Funds. The Adviser shall provide the
services under this Agreement in
accordance with each of the Fund's
investment objectives, policies, and
restrictions as stated in such Fund's
most current Prospectus and Statement of
Additional Information, as then in
effect, and all amendments or
supplements thereto, and resolutions of
the Trust's Board of Trustees as may be
adopted from time to time. The Adviser
further agrees that it:
C-15
<PAGE> 2
(i) will use the same skill and care in
providing such services as it uses in
providing services to any fiduciary
accounts for which it has investment
responsibilities;
(ii) will conform with all applicable
Rules and Regulations of the Securities
and Exchange Commission (the
"Commission") and, in addition, will
conduct its activities under this
Agreement in accordance with any
applicable regulations of any
governmental authority pertaining to the
investment advisory activities of the
Adviser;
(iii) will place orders pursuant to its
investment determinations for the Funds
either directly with the issuer or with
any broker or dealer. In placing orders
with brokers and dealers, the Adviser
will attempt to obtain and is hereby
directed to obtain prompt execution of
orders in an effective manner at the
most favorable price. Consistent with
this obligation, the Adviser may, in its
discretion, purchase and sell portfolio
securities to and from brokers and
dealers who provide the Adviser with
brokerage and research services (within
the meaning of Section 28(e) of the
Securities Exchange Act of 1934).
Subject to the review of the Trust's
Board of Trustees from time-to-time with
respect to the extent and continuation
of this policy, the Adviser is
authorized to pay a broker or dealer who
provides such brokerage and research
services a commission for effecting a
securities transaction for any of the
Funds which is in excess of the amount
of commission another broker or dealer
would have charged for effecting that
transaction if, but only if, the Adviser
determines in good faith that such
commission was reasonable in relation to
the value of the brokerage and research
services provided by such broker or
dealer, viewed in terms of either that
particular transaction or the overall
responsibilities of the Adviser with
respect to the accounts as to which it
exercises investment discretion. In no
_______________________________________________________________________________
FAIRPORT FUNDS-- Post-effective Amendment Number 2 Part C Page 16
<PAGE> 3
instance will portfolio securities be
purchased from or sold to Roulston
Research Corp., the Adviser, or any
affiliated person of the Trust, Roulston
Research Corp. or the Adviser unless
otherwise permitted by the 1940 Act, an
exemption therefrom, or an order
thereunder;
(iv) will maintain all books and records
with respect to the securities
transactions of the Funds and will
furnish the Trust's Board of Trustees
such periodic and special reports as the
Board may request; and
(v) will advise and assist the officers
of the Trust in taking such actions as
may be necessary or appropriate to carry
out the decisions of the Trust's Board
of Trustees and of the appropriate com-
mittees of such Board regarding the
conduct of the business of the Funds;
and
Section iii. EXPENSES. During the term of this Agreement,
the Adviser will pay all expenses incurred by it
in connection with its activities, duties and
obligations under this Agreement, other than the
costs of securities (including brokerage fees, if
any) purchased for the Funds.
Section iv. COMPENSATION. For the services provided and
the expenses assumed pursuant to this Agreement,
each of the Funds will pay the Adviser and the
Adviser will accept as full compensation therefor
a fee set forth on Schedule A hereto. The
obligations of the Funds to pay the
above-described fee to the Adviser will begin as
of the respective dates of the initial public sale
of shares in the Funds, including any shares sold
or exchanged in connection with a merger,
consolidation or reorganization involving one or
more of the Funds.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, the Adviser will
reimburse such Fund for such excess expenses. The obligation of the Adviser to
reimburse the Funds hereunder is limited in any fiscal year to the amount of its
fee hereunder for such fiscal year; provided, however, that notwithstanding the
foregoing, the Adviser shall reimburse the Funds for such excess expenses
regardless of the
_______________________________________________________________________________
FAIRPORT FUNDS-- Post Effective Amendment Number 2 Part C Page 17
<PAGE> 4
amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the Trust so
require. Such expense reimbursement, if any, will be estimated daily and
reconciled and paid on a monthly basis.
Section v. LIMITATION OF LIABILITY. The
Adviser shall not be liable for any error of
judgment or mistake of law or for any loss
suffered by the Funds in connection with the
performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with
respect to the receipt of compensation for
services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its
duties or from reckless disregard by it of its
obligations and duties under this Agreement.
Section vi. DURATION AND TERMINATION. This Agreement will
become effective as of the date first written
above (or, if a particular Fund is not in
existence on that date, on the date a registration
statement relating to that Fund becomes effective
with the Commission), provided that it shall have
been approved by vote of a majority of the
outstanding voting securities of such Fund, in
accordance with the requirements, if any, under
the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect until
January 20, 1997.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive periods of twelve months each ending on
January 20th of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding shares of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to a particular Fund at any time on sixty days' written
notice, without the payment of any penalty, by the Trust (by vote of the Trust's
Board of Trustees or by vote of a majority of the outstanding voting securities
of such Fund) or by the Adviser. This Agreement will immediately terminate in
the event of its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities," "interested persons" and "assignment" shall
have the same meanings as ascribed to such terms in the 1940 Act.)
Section vii. NAME. The Trust hereby acknowledges that the
name "Roulston" is a property right of the Adviser.
The Adviser agrees that the Trust and the Funds
may, so long as this Agreement
______________________________________________________________________________
FAIRPORT FUNDS--Post Effective Amendment Number 2 Part C Page 18
<PAGE> 5
remains in effect, use "Roulston" as part of its
name. The Adviser may permit other persons, firms
or corporations, including other investment
companies, to use such name and may, upon
termination of this Agreement, require the Trust
and the Funds to refrain from using the name
"Roulston" in any form or combination in its name
or in its business or in the name of any of its
Funds, and the Trust shall, as soon as practicable
following its receipt of any such request from the
Adviser, so refrain from using such name.
Section viii. ADVISER'S REPRESENTATIONS. The Adviser
hereby represents and warrants that it is willing
and possesses all requisite legal authority to
provide the services contemplated by this
Agreement without violation of applicable laws and
regulations.
Section ix. AMENDMENT OF THIS AGREEMENT. No provision
of this Agreement may be changed, waived,
discharged or terminated orally, but only by an
instrument in writing signed by the party against
which enforcement of the change, waiver, discharge
or termination is sought.
Section x. MISCELLANEOUS. The captions in this
Agreement are included for convenience of
reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their
construction or effect. If any provision of this
Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto
and their respective successors and shall be
governed by the laws of the State of Ohio.
The Roulston Family of Funds is a business trust organized under
Chapter 1746, Ohio Revised Code and under a Declaration of Trust, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of Ohio as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Roulston Family of
Funds" entered into in the name or on behalf thereof by any of the Trustees,
officers, employees or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, officers, employees, agents or
shareholders of the Trust personally, but bind only the assets of the Trust, as
set forth in Section 1746.13(A), Ohio Revised Code, and all persons dealing with
any of the Funds of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
_______________________________________________________________________________
FAIRPORT FUNDS-- Post Effective Amendment Number 2 Part C Page 19
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE ROULSTON FAMILY OF FUNDS
By: /s/ Scott D. Roulston
-----------------------------
Name: Scott D. Roulston
-----------------------------
Title: President
-----------------------------
ROULSTON & COMPANY, INC.
By: /s/ Ronald G. Fountain
-----------------------------
Name: Ronald G. Fountain
-----------------------------
Title\: Sr. Exec. V.P.
-----------------------------
_______________________________________________________________________________
FAIRPORT FUNDS--Post Effective Amendment Number 2 Part C Page 20
<PAGE> 7
Dated as of: January 20, 1995
Amended as of: November 30, 1996
SCHEDULE "A"
------------
Investment Advisory Agreement
between
FAIRPORT FUNDS
and
ROULSTON & COMPANY, INC.
Name of Fund Compensation*
- ------------ -------------
FAIRPORT MIDWEST GROWTH FUND Annual rate of seventy-five one
hundredths of one percent (0.75%) of the
average daily net assets of such Fund up
to $100 Million and fifty one-hundredths
of one percent (0.50%) of the average
daily net assets of such Fund of $100
Million or more.
FAIRPORT GROWTH AND INCOME FUND Annual rate of seventy-five one
hundredths of one percent (0.75%) of the
average daily net assets of such Fund up
to $100 Million and fifty one-hundredths
of one percent (0.50%) of the average
daily net assets of such Fund of $100
Million or more.
FAIRPORT GOVERNMENT SECURITIES FUND Annual rate of twenty-five
one-hundredths of one percent (.25%) of
the average daily net assets of such
Fund up to $100 Million and one hundred
twenty-five one thousandths of one
percent (0.125%) of the average daily
net assets of such Fund of $100 Million
or more.
ROULSTON & COMPANY, INC. FAIRPORT FUNDS
________________________________________________________________________________
FAIRPORT FUNDS--Post Effective Amendment Number 2 Part C Page 21
<PAGE> 8
By: By:
--------------------------- ----------------------------
Name: Name: Scott D. Roulston
--------------------------- ----------------------------
Title: Title: President
--------------------------- ----------------------------
* All fees are computed and paid monthly.
______________________________________________________________________________
FAIRPORT FUNDS--Post Effective Amendment Number 2 Part C Page 22
<PAGE> 1
Exhibit 99B(6)(a)
DISTRIBUTION AGREEMENT
January 20, 1995
as amended as of June 4, 1996
Roulston Research Corp.
4000 Chester Avenue
Cleveland, Ohio 44103
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Fairport Funds, an Ohio business trust (the
"Trust"), has agreed that Roulston Research Corp., an Ohio corporation
("Distributor"), shall be, for the period of this Distribution Agreement (the
"Agreement"), the principal underwriter and distributor of the shares of
beneficial interest of each currently constituted investment portfolio and any
additional investment portfolios of the Trust, as each is or will be identified
on Schedule A hereto (such current investment portfolios and any additional
investment portfolios together called the "Funds"). Such shares of beneficial
interest are hereinafter called "Shares."
1. SERVICES AS DISTRIBUTOR.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "1933 Act").
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust understands
that Distributor is now and, in the future, may be the distributor of the shares
of other investment companies or series (together, "Companies") including
Companies having investment objectives similar to those of the Funds of the
Trust. The Trust further understands that investors and potential investors in
the Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
Except as provided in Section 2 herein, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
<PAGE> 2
1.3 All activities by Distributor and its shareholders, directors,
agents, and employees as distributor of the Shares shall comply with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended ("1940 Act"), and the Securities Exchange Act of 1934, as amended
(the "1934 Act"), by the Securities and Exchange Commission (the "Commission")
or any securities association registered under the 1934 Act.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust and
the Funds.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) quarterly earnings statements prepared by
the Trust, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional information regarding the financial
condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that all registration
statements and prospectuses filed by the Trust with the Commission under the
1933 Act with respect to the Shares have been carefully
-2-
<PAGE> 3
prepared in conformity with the requirements of the 1933 Act and rules and
regulations of the Commission thereunder. As used in this agreement the terms
"registration statement" and "prospectus" shall mean any registration statement
and any prospectus and statement of additional information relating to the Funds
filed with the Commission and any amendments and supplements thereto which at
any time shall have been filed with the Commission. The Trust represents and
warrants to Distributor that any registration statement and prospectus, when
such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with the 1933 Act and the rules and
regulations of the Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of the Shares. The Trust may but shall not be
obligated to propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus as,
in the light of future developments, may, in the opinion of the Trust's counsel,
be necessary or advisable. If the Trust shall not propose such amendment or
amendments and/or supplement or supplements within fifteen days after receipt by
the Trust of a written request from Distributor to do so, Distributor may, at
its option, terminate this agreement. The Trust shall not file any amendment to
any registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus
in the form most recently furnished in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its directors,
shareholders and employees, and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its shareholders,
directors and employees, or any such controlling person, may incur under the
1933 Act or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or
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<PAGE> 4
any prospectus or necessary to make the statements in either thereof not
misleading; provided, however, that the Trust's agreement to indemnify
Distributor, its shareholders, directors or employees, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any statements or representations as are contained in any
prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
agreement. The Trust's agreement to indemnify Distributor, its shareholders,
directors and employees, and any such controlling person, as aforesaid, is
expressly conditioned upon the Trust's being notified of any action brought
against Distributor, its shareholders, directors or employees, or any such
controlling person, such notification to be given by letter or by telegram
addressed to the Trust at its principal office in Cleveland, Ohio and sent to
the Trust by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served. The
failure to so notify the Trust of any such action shall not relieve the Trust
from any liability which the Trust may have to the person against whom such
action is brought by reason of any such untrue, or allegedly untrue, statement
or omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 1.11. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the Trust and approved by Distributor, which approval shall
not be unreasonably withheld. In the event the Trust elects to assume the
defense of any such suit and retain counsel of good standing approved by
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its shareholders, directors and employees, or
the controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Distributor or them. The
Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations
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<PAGE> 5
and warranties in this agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of Distributor, its
shareholders, directors and employees, or any controlling person, and shall
survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to Distributor's benefit, to the benefit of its several
shareholders, directors and employees, and their respective estates, and to the
benefit of the controlling persons and their successors. The Trust agrees
promptly to notify Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees in connection
with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the 1933 Act or under common law
or otherwise, but only to the extent that such liability or expense incurred by
the Trust, its officers or Trustees or such controlling person resulting from
such claims or demands, shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by Distributor to the Trust and used in the answers to any of the
items of the registration statement or in the corresponding statements made in
the prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Distributor's being notified of any
action brought against the Trust, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Cleveland, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than
-5-
<PAGE> 6
on account of Distributor's indemnity agreement contained in this paragraph
1.12.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10(a) of
the 1933 Act is not on file with the Commission; provided, however, that nothing
contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Declaration of Trust, or By-Laws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or
prospectus then in effect or the initiation by service of process on
the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a change in
such registration statement or prospectus in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus which may from
time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be
-6-
<PAGE> 7
withheld where Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State
of Ohio.
2. FEE.
Distributor shall receive from the Funds identified on Schedule B
hereto a distribution fee at the rate and upon the terms and conditions set
forth in the Distribution and Shareholder Service Plan attached as Schedule C
hereto, and as amended from time to time. The distribution fee described above
shall be accrued daily and shall be paid on the first business day of each
month, or at such time(s) as Distributor shall reasonably request.
3. SALE AND PAYMENT.
(a) Distributor shall, as agent for the Trust, sell
Shares of the Funds to the public and to dealers against
orders therefor at their net asset value.
(b) Prior to the time of delivery of any Shares by a Fund to,
or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Fund or to its order an amount in federal funds equal to
the applicable net asset value of such Shares.
4. TERM AND MATTERS RELATING TO THE TRUST AS AN OHIO
BUSINESS TRUST.
This Agreement became effective on January 20, 1995, and, as amended,
shall become effective as of June 3, 1996, and, unless sooner terminated as
provided herein, shall continue until January 20, 1997, and thereafter shall
continue automatically for successive annual periods ending on January 20 of
each year with respect to each of the Funds, provided such continuance is
specifically approved at least annually by (i) the Trust's Board of Trustees or
(ii) by "vote of a majority of the outstanding voting securities" (as defined
below) of the Trust, provided, however, that in either event the continuance is
also approved by the majority of the Trust's Trustees who are not parties to the
agreement or interested persons (as defined in the 1940 Act) of any party to
this agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This agreement is terminable without penalty, on not
less than sixty days' notice, by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Trust or by Distributor. This agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).
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<PAGE> 8
Fairport Funds is a business trust organized under Chapter 1746, Ohio
Revised Code, and under a Declaration of Trust to which reference is hereby made
and a copy of which is on file at the office of the Secretary of the State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "Fairport Funds" entered into in the name or
on behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders, officers, employees or agents of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
Yours very truly,
FAIRPORT FUNDS
By /s/ Scott D. Roulston
--------------------------------
Scott D. Roulston, President
Accepted:
ROULSTON RESEARCH CORP.
By /s/ Heather R. Ettinger
------------------------------
-8-
<PAGE> 9
Dated: June 3, 1996
Schedule A
to the
Distribution Agreement
between Fairport Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 3, 1996
Name of Fund Date
- ------------ ----
Fairport Midwest Growth Fund January 20, 1995
Fairport Growth and Income January 20, 1995
Fund
Fairport Government Securities January 20, 1995
Fund
FAIRPORT FUNDS
By /s/ Scott D. Roulston
-------------------------------------
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By /s/ Heather R. Ettinger, Secret.
-------------------------------------
(Name) (Title)
A-1
<PAGE> 10
Dated: June 3, 1996
Schedule B
to the
Distribution Agreement
between Fairport Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 3, 1996
Name of Plan Fund Date
- ----------------- ----
Fairport Midwest Growth Fund January 20, 1995
Fairport Growth and Income January 20, 1995
Fund
Fairport Government Securities January 20, 1995
Fund
FAIRPORT FUNDS
By /s/ Scott D. Roulston
-----------------------------------
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By /s/ Heather R. Ettinger, Secret.
-----------------------------------
(Name) (Title)
B-1
<PAGE> 11
Schedule C
to the
Distribution Agreement
between Fairport Funds and
Roulston Research Corp.
January 20, 1995
As amended as of March 1, 1996
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
-----------------------------------------
This Plan (the "Plan") constitutes a distribution and shareholder
service plan of Fairport Funds, an Ohio business trust (the "Trust"), adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Plan relates to shares of those investment portfolios
identified on Schedule B to the Trust's Distribution Agreement, as such schedule
may be amended from time to time (the "Plan Funds").
SECTION 1. Each Plan Fund shall pay to the principal underwriter
("Distributor") of the Trust's shares of beneficial interest (the "Shares"),
currently Roulston Research Corp., an Ohio corporation, or its designee, a fee
in an amount not to exceed on an annual basis .25% of the average daily net
asset value of such Plan Fund (the "Plan Fee") for: (a) payments Distributor
makes or agrees to have made to broker/dealers, banks and other institutions (a
"Participating Organization") for distribution assistance and/or Shareholder
service pursuant to an agreement with the Participating Organization or for
distribution assistance and/or Shareholder service provided by Distributor
pursuant to the Plan; or (b) reimbursement of expenses incurred by a
Participating Organization pursuant to an agreement in connection with
distribution assistance and/or Shareholder service including, but not limited
to, the reimbursement of expenses relating to printing and distributing
prospectuses to persons other than Shareholders of a Plan Fund, printing and
distributing advertising and sales literature and reports to Shareholders used
in connection with the sale of Shares, and personnel and communication equipment
used in servicing Shareholder accounts and prospective shareholder inquiries.
For purposes of the Plan, a Participating Organization may include Distributor
and Distributor's affiliates and subsidiaries.
SECTION 2. The Plan Fee shall be paid by the Plan Funds to Distributor
only to compensate Distributor for assistance or services provided, or to
reimburse Distributor for payments or expenses incurred, pursuant to Section 1.
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<PAGE> 12
SECTION 3. The Plan shall not take effect with respect to a Plan Fund
until it has been approved by the vote of the initial Shareholder of such Fund.
SECTION 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
1940 Act or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust cast in person at a
meeting called for the purpose of voting on the Plan or such agreement.
SECTION 5. The Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Plan Funds pursuant to the Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
SECTION 7. The Plan may be terminated as to a Plan Fund at any time,
without the payment of any penalty, by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding Shares of a Plan Fund.
SECTION 8. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities
of the Plan Fund, on not more than 60 days' written notice to any other
party to the agreement; and
(b) That such agreement shall terminate automatically in
the event of its assignment.
SECTION 9. The Plan may not be amended to increase materially the
amount of distribution expenses of a Plan Fund permitted pursuant to Section 1
hereof without approval by a vote of at least a majority of the outstanding
voting securities of such Plan Fund, and all material amendments to the Plan
shall be approved in the manner provided for approval of the Plan in Section 4.
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<PAGE> 13
SECTION 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
Effective: January 20, 1995, as amended as of
March 1, 1996.
C-3
<PAGE> 14
C-4
<PAGE> 1
Exhibit 99B(8)(b)
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This AGREEMENT, dated as of the 20th day of January, 1995 made by and
between THE ROULSTON FAMILY OF FUNDS, an Ohio Business Trust (the "Trust")
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Ohio, and FUND/PLAN SERVICES, INC. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Declaration of Trust ("Trust
Instrument") to issue separate series of shares representing interests in
separate investment portfolios (the "Series"), which Series are identified on
Schedule "B" attached hereto and which Schedule "B" may be amended from time to
time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform certain
custody administration services; and
WHEREAS, the Trust desires that Fund/Plan act as its agent for the
specific purpose of taking receipt of, and making payment for, custody services
performed on the Trust's behalf by United Missouri Bank, N.A. ("UMB") pursuant
to an agreement between UMB and the Trust; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
SECTION 1. The Trust hereby appoints Fund/Plan as an agent of the
Trust, and Fund/Plan hereby accepts such appointment, for the limited purpose
of: (i) accepting invoices charged to the Trust for custody services performed
by UMB on the Trust's behalf, and (ii) remitting payment to UMB for such
services performed in amounts as set forth in Schedule "A" attached hereto.
C-24
<PAGE> 2
CUSTODY ADMINISTRATION SERVICES
SECTION 2. As Custody Administrator, Fund/Plan shall:
a) coordinate and process portfolio trades through client terminal
links with UMB.
b) input and verify portfolio trades
c) monitor pending and failed security trades
d) coordinate communications between brokers and banks to resolve any
operational problems
e) advise the Trust of any corporate action information, address and
follow up on any dividend or interest discrepancies
f) process the Trusts' expenses
g) interface with the accounting services provider and the transfer
agent to research and resolve custody cash problems
h) provide daily and monthly reports
TERM and FEES
SECTION 3.
(a) The initial term of this Agreement shall be for a period
commencing on the date of this Agreement and ending on a date two (2) years
following the Exchange Date of the reorganization described in the Agreement and
Plan of Reorganization and Liquidation between the Trust and The Advisors' Inner
Circle Fund ("Initial Term").
(b) The fee schedule set forth in Schedule "A" attached shall
be fixed for the Initial Term of this Agreement. Thereafter, the fee schedule
will be subject to annual review and adjustment.
(c) For any period after the Initial Term of this Agreement,
the Trust or Fund/Plan may give written notice to the other of the termination
of this Agreement, such termination to take effect at the time specified in the
notice, which date shall not be less than one hundred eighty (180) days after
the date of giving notice. Upon the effective termination date, the Trust shall
pay to Fund/Plan such compensation as may be due as of the date of termination
and shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
C-25
<PAGE> 3
disbursements reasonably incurred by Fund/Plan to such date.
(d) This Agreement also may be terminated at any time for
"cause," after the giving of not less than sixty (60) days' notice.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, negligence or reckless disregard on the part of the
party to be terminated with respect to its obligations and duties set forth
herein; (b) the commencement of a judicial, regulatory or administrative
proceeding by either state or federal authorities in which criminal, illegal or
unethical behavior in the conduct of its business has been alleged against the
party to be terminated; (c) financial difficulties on the part of the party to
be terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors; (d) any assignment (as
that term is defined in the 1940 Act) of this Agreement by Fund/Plan, including
any direct or indirect transfer or hypothecation of a controlling block of
Fund/Plan's voting securities by a security holder thereof, shall permit the
Trust to terminate for cause; or (e) any circumstance which substantially
impairs the performance of the obligations and duties of the party to be
terminated, or the ability to perform those obligations and duties, as
contemplated herein.
(e) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Fund/Plan in connection with the termination of this Agreement,
Fund/Plan shall promptly upon such termination and at the expense of the Trust,
transfer all records and shall cooperate in the transfer of such duties and
responsibilities.
For the purpose of determining fees payable to Fund/Plan, the value of
a Series' net assets shall be computed at the times and in the manner specified
in Trust's then current Prospectus and Statement of Additional Information.
During the term of this Agreement, should the Trust seek services or
functions in
C-26
<PAGE> 4
addition to those stated, a written amendment to this Agreement
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
SECTION 4.
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall only be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement that results from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of Fund/Plan in the
performance of its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer,
employee, shareholder or agent of Fund/Plan, who may be or become an officer,
trustee, employee, or agent of the Trust, shall be deemed, when rendering
services to such entity or acting on any business of the Trust, (other than
services or business in connection with Fund/Plan's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the control or
direction of Fund/Plan even though that person is being paid salary by
Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, 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 Fund/Plan may sustain or incur or which may be asserted
against Fund/Plan by any person by reason of, or as a result of (i) any action
taken or omitted to be taken by Fund/Plan in good faith hereunder or (ii) any
action taken or omitted to be taken by Fund/Plan in connection with its
appointment under this Agreement, which action or omission was taken 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. Indemnification under this subparagraph, however, shall not apply to
actions or omissions of Fund/Plan or its directors, officers, employees,
shareholders, or agents in cases of its or their willful misfeasance, bad faith,
gross negligence
C-27
<PAGE> 5
or reckless disregard of its or their duties hereunder.
(d) Fund/Plan shall give written notice to the Trust within
thirty (30) business days of receipt by Fund/Plan of a written assertion or
claim of any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, except to the
extent that failure to give notice prejudices the Trust.
(e) For any legal proceeding giving rise to this
indemnification, the Trust shall be entitled to defend or prosecute any claim in
the name of Fund/Plan at its own expense and through counsel of its own choosing
if it gives written notice to Fund/Plan within thirty (30) business days of
receiving notice of such claim. Notwithstanding the foregoing, Fund/Plan may
participate in the litigation at its own expense through counsel of its own
choosing. In the event the Trust chooses to defend or prosecute such claim, the
parties shall cooperate in the defense or prosecution thereof and shall furnish
such records and other information as are reasonably necessary.
(f) The Trust shall not settle any claim under (d) and (e)
above without Fund/Plan's express written consent, which consent shall not be
unreasonably withheld. Fund/Plan shall not settle any such claim under (d) and
(e) above without the Trust's express written consent which likewise shall not
be unreasonably withheld.
SECTION 5. This Agreement may be amended from time to time by a
supplemental agreement executed by the Trust and Fund/Plan.
SECTION 6. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid, to the respective parties as follows: The
Roulston Family of Funds: Fund/Plan:
THE ROULSTON FAMILY OF FUNDS FUND/PLAN:
---------------------------- ------------------------
The Roulston Family of Funds Fund/Plan Services, Inc.
C-28
<PAGE> 6
4000 Chester Avenue 2 West Elm Street
Cleveland, OH 44103 Conshohocken, PA 19428
Attention: Scott D. Roulston, Attention: Kenneth J. Kempf,
President President
SECTION 7. The Trust represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Board of
Trustees of the Trust.
SECTION 8. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 9. This Agreement shall extend to and shall be binding upon the
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of their respective Board of Directors or
Board of Trustees.
SECTION 10. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
SECTION 11. No provision of this Agreement may be amended or modified,
in any manner except in writing, properly authorized and executed by Fund/Plan
and the Trust.
SECTION 12. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid PROVIDED that the basic Agreement is not thereby
substantially impaired.
SECTION 13. The Trust is a business trust organized under Chapter 1746,
Ohio Revised Code, and under its Trust Instrument, to which reference is hereby
made and a copy of which
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<PAGE> 7
is on file at the office of the Secretary of State of Ohio as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of "The Roulston Family of Funds" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Series of the Trust must
look solely to the assets of the Trust belonging to such Series for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
consisting in its entirety of six typewritten pages, together with Schedules
"A" and "B" to be signed by their duly authorized officers, as of the day and
year first above written.
The Roulston Family of Funds Fund/Plan Services, Inc.
- -------------------------------- --------------------------------
By: Scott D. Roulston, President By: Kenneth J. Kempf, President
C-30
<PAGE> 8
AMENDMENT TO CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This AGREEMENT, dated as of the 1st day of January, 1997, made by and
between Fairport Funds (formerly known as The Roulston Family of Funds), a
business trust (the "Trust") operating as an open-end management investment
company registered under the Investment Company Act of 1940, as amended, duly
organized and existing under the laws of the State of Ohio and FPS Services,
Inc. ("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into an Custody Administration and
Agency Agreement dated January 20, 1995, wherein FPS agreed to provide certain
agency services concerning the custody of the assets of the Trust (the
"Agreement"); and
WHEREAS, the Parties wish to amend the Agreement to reflect (i) the
respective change in names of the Parties; (ii) amendments to the fees as set
forth on the attached Schedule "A" of the Agreement; and (iii) the respective
change of the names of the Trust's separate series of shares as set forth on the
attached Schedule "B."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. That Schedule "A" of the Agreement be replaced in its entirety with
Schedule "A" attached hereto; and
2. That Schedule "B" of the Agreement be replaced in its entirety with
Schedule "B" attached hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "A" and "B" to be
signed by their duly authorized officers as of the day and year first above
written.
Fairport Funds FPS Services, Inc.
- -------------- ------------------
- -------------------------------- -----------------------------
Scott D. Roulston, Chairman Kenneth J. Kempf, President
<PAGE> 9
SCHEDULE "A"
============
DATED JANUARY 1, 1997
=====================
CUSTODY ADMINISTRATION AND AGENCY FEE SCHEDULE
FOR
FAIRPORT FUNDS
This Fee Schedule is fixed for a period of two years from January 1,
1997 and shall not increase greater than 10% during the one year period
beginning January 1, 1999.
I. ANNUAL CUSTODY FEES PER PORTFOLIO: Subject to a minimum monthly fee of
$500 for each separate series of single class shares, Custody Agency
and Administration Fees shall be calculated as follows:
A) Domestic Securities and ADRs (1/12th payable monthly)
----------------------------
.0002 On First $ 50 Million of Average Net Assets
.00015 On the Next $150 Million of Average Net Assets
.000125 Over $200 Million of Average Net Assets
B) Custody Domestic Securities Transactions Charge
-----------------------------------------------
Book Entry DTC, Federal Book Entry $14.00
NOW Accounts $2.50
Physical/Options/Physical GNMA's/RICs $24.50
Mortgage Backed Securities - Principal Pay Down Per Pool $10.00
C) When Issued, Securities Lending, Index Futures:
-----------------------------------------------
Should any of these investment vehicles require a separate
segregated custody account, a fee of $250 per account per
month will apply.
II. CUSTODY MISCELLANEOUS FEES
Administrative fees incurred in certain local markets will be passed
onto the customer with a detailed description of the fees. Fees include
income collection, corporate action handling, funds transfer, special
local taxes, stamp duties, registration fees, messenger and courier
services and other out-of-pocket expenses.
III. OUT-OF-POCKET EXPENSES
The Funds will reimburse FPS Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, overdraft
charges, telecommunications, special reports, record retention, special
transportation costs, copying sending materials to auditors and/or
regulatory agencies as incurred and approved.
<PAGE> 10
SCHEDULE "B"
============
JANUARY 1, 1997
===============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
Fairport Funds
1. Fairport Midwest Growth Fund
2. Fairport Growth and Income Fund
3. Fairport Government Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE> 1
EXHIBIT 99.B(9)(a)
ADMINISTRATION AGREEMENT
========================
This Agreement, dated as of the 20th day of January, 1995, made by and
between THE ROULSTON FAMILY OF FUNDS, an Ohio Business Trust (the "Trust")
operating as a registered investment company under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Ohio and FUND/PLAN SERVICES, INC. ("Fund/Plan"), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Declaration of Trust ("Trust
Instrument") to issue separate series of shares representing interests in
separate investment portfolios (the "Series"), which Series are identified on
Schedule "C" attached hereto, and which Schedule "C" may be amended from time to
time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby
Fund/Plan will provide certain administration services to each of the Series on
the terms and conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust on behalf of each of the Series, will provide
certain information concerning the Series to Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. APPOINTMENT The Trust hereby appoints Fund/Plan as
administrator to each Series of the Trust and Fund/Plan hereby accepts such
appointment. Also, the Trust agrees to appoint Fund/Plan as administrator to any
additional series which, from time to time may be added to the Trust, upon
amendment of Schedule "C" attached hereto.
SECTION 2. CONVERSION The Trust shall promptly turn over to Fund/Plan
such of the Series' accounts and records previously maintained by or for it as
are requested by Fund/Plan to perform its functions under this Agreement. The
Trust authorizes Fund/Plan to rely on such accounts and records turned over to
it and hereby indemnifies and holds Fund/Plan, its successors and assigns,
harmless of and from any and all expenses demands and losses
<PAGE> 2
whatsoever arising out of or in connection with any error, omission, inaccuracy
or other deficiency of such accounts and records.
Fund/Plan shall make reasonable efforts to isolate and correct any
inaccuracies, omissions, discrepancies, or other deficiencies in the Accountants
and Records delivered to Fund/Plan, to the extent such matters are disclosed to
Fund/Plan or are discovered by it and are relevant to its performance of its
functions under this Agreement; however, Fund/Plan expressly makes no warranty
or representation that any error, omission or deficiency can be satisfactorily
corrected. The Trust shall provide Fund/Plan with such assistance as it may
reasonably request in connection with its efforts to correct such matters. The
Trust agrees to pay Fund/Plan on a current and ongoing basis for its reasonable
time and costs expended on the correction of such matters at an hourly rate of
$50.00, said payment to be in addition to the fees and charges agreed to for the
normal services rendered under this Agreement.
SECTION 3. DUTIES AND OBLIGATIONS OF FUND/PLAN
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, Fund/Plan shall
provide to each of the Series all administrative services as set forth in
Schedule "A" attached hereto and incorporated by reference into this Agreement.
In addition to the obligations set forth in Schedule "A", Fund/Plan shall (i)
provide its own office space, facilities and equipment and personnel for the
performance of its duties under this Agreement; and (ii) take all actions it
deems necessary to properly execute administration services on behalf of the
Series.
(b) So that Fund/Plan may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment adviser, distributor, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with Fund/Plan and to provide such
information, documents and advice relating to the Series as is within the
possession or knowledge of such persons provided that no such person need
provide any information to Fund/Plan if to do so would result in the loss of any
privilege or confidential treatment with respect to such information. In
connection with its duties, Fund/Plan shall be entitled to rely, and shall be
held harmless by the Trust when acting in reasonable reliance upon the
instruction, advice or any documents relating to the Series as provided by the
Trust to Fund/Plan by any of the aforementioned persons. All fees charged
<PAGE> 3
by any such persons shall be deemed an expense of the Trust.
(c) Any activities performed by Fund/Plan under this Agreement shall
conform to the requirements of:
(1) the provisions of the Act, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and of any rules or
regulations in force thereunder;
(2) any other applicable provision of state and federal law,
including any applicable state blue sky law;
(3) the provisions of the Trust Instrument and By-Laws of the
Trust as amended from time to time;
(4) any policies and determinations of the Board of Trustees
of the Trust; and
(5) the fundamental and other policies of the Series as
reflected in the Trust's registration statement under the Act.
Fund/Plan agrees that all records that it maintains for the Trust are
the property of the Trust and will be surrendered promptly to the Trust upon
written request. Fund/Plan will preserve, for the periods prescribed under Rule
31a-2 under the Act, all such records required to be maintained under Rule 31a-1
of the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any officer
thereof from acting as administrator for or with any other person, firm or
corporation. While the administrative services supplied to the Trust may be
different than those supplied to other persons, firms or corporations, Fund/Plan
shall provide the Trust equitable treatment in supplying services. The Trust
recognizes that it will not receive preferential treatment from Fund/Plan as
compared with the treatment provided to other Fund/Plan clients. Fund/Plan
agrees to maintain the records and all other information of the Trust in a
confidential manner and shall not use such information for any purpose other
than the performance of Fund/Plan's duties under this Agreement.
SECTION 4. ALLOCATION OF EXPENSES All costs and expenses of the Trust
shall be paid by the Trust including, but not limited to:
(a) fees paid to an investment adviser ("Adviser");
<PAGE> 4
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are not
affiliated persons of the Adviser;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder servicing
agent, fees and expenses;
(h) fees and expenses incident to the registration of the
shares of the Trust under Federal or state securities
laws;
(i) expenses related to preparing, setting in type, printing
and mailing prospectuses, statements of additional
information, reports and notices and proxy material to
shareholders of the Trust;
(j) all expenses incidental to holding meetings of
shareholders and Trustees of the Trust;
(k) such extraordinary expenses as may arise, including
litigation, affecting the Trust and the legal
obligations which the Trust may have regarding
indemnification of its officers and trustees; and
(l) fees and out-of-pocket expenses paid on behalf of the
Trust by Fund/Plan.
SECTION 5. COMPENSATION OF FUND/PLAN The Trust agrees to pay Fund/Plan
compensation for its services and to reimburse it for expenses, at the rates and
amounts as set forth in Schedule "B" attached hereto, and as shall be set forth
in any amendments to such Schedule "B" approved by the Trust and Fund/Plan. The
Trust agrees and understands that Fund/Plan's compensation be comprised of two
components, payable on a monthly basis, as follows:
(i) A combined asset-based fee subject to a minimum amount that the
Trust hereby authorizes Fund/Plan to collect by debiting the Trust's custody
account for invoices which are rendered for the services performed. The invoices
for the services performed will be sent to the Trust after such debiting with
the indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by Fund/Plan on
behalf of the Trust, which out-of-pocket expenses will be billed to the Trust
within the first ten calendar days of the month following the month in which
such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value a
of Series' net
<PAGE> 5
assets shall be computed at the times and in the manner specified
in the Series' Prospectus and Statement of Additional Information then in
effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to Schedule "A" and Schedule "B", as necessary, specifying the
additional services and corresponding compensation shall be executed by both
Fund/Plan and the Trust.
SECTION 6. DURATION
(a) The initial term of this Agreement shall be for a period commencing
on the date of this Agreement and ending on a date two (2) years following the
Exchange Date of the reorganization described in the Agreement and Plan of
Reorganization and Liquidation between the Trust and The Advisors' Inner Circle
Fund ("Initial Term").
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for the Initial Term of this Agreement. Thereafter, the fee schedule will be
subject to review and adjustment, not to exceed 10% of those fees set forth in
Schedule "B."
(c) For any period after the Initial Term of this Agreement, the Trust
or Fund/Plan may give written notice to the other of the termination of this
Agreement, such termination to take effect at the time specified in the notice,
which date shall not be less than one hundred eighty (180) days after the date
of giving notice. Upon the effective termination date, the Trust shall pay to
Fund/Plan such compensation as may be due as of the date of termination and
shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) This Agreement also may be terminated at any time for "cause,"
after the giving of not less than sixty (60) days' notice.
For purposes of this Agreement, "Cause" shall mean (a) willful
misfeasance, bad faith, negligence or reckless disregard on the part of the
party to be terminated with respect to its obligations and duties set forth
herein; (b) the commencement of a judicial, regulatory or administrative
proceeding by either state or federal authorities in which criminal, illegal or
unethical behavior in the conduct of its business has been alleged against the
party to be terminated; (c) financial difficulties on the part of the party to
be terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading,
<PAGE> 6
answer, consent, or acquiescence in, a voluntary or involuntary case under Title
11 of the United States Code, as from time to time is in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors; (d) any assignment (as that term is defined in the 1940
Act) of this Agreement by Fund/Plan, including any direct or indirect transfer
or hypothecation of a controlling block of Fund/Plan's voting securities by a
security holder thereof, shall permit the Trust to terminate for cause; or (e)
any circumstance which substantially impairs the performance of the obligations
and duties of the party to be terminated, or the ability to perform those
obligations and duties, as contemplated herein.
(e) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by the Trust by written notice to Fund/Plan
in connection with the termination of this Agreement, Fund/Plan shall promptly
upon such termination and at the expense of the Trust, transfer all records and
shall cooperate in the transfer of such duties and responsibilities.
SECTION 7. AMENDMENT No provision of this Agreement may be amended or
modified, in any manner except by a written agreement properly authorized and
executed by Fund/Plan and the Trust.
SECTION 8. APPLICABLE LAW This Agreement shall be governed by the laws
of the Commonwealth of Pennsylvania and the venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
SECTION 9. LIMITATION OF LIABILITY
(a) The Trust is a business trust organized under Chapter 1746, Ohio
Revised Code, and under its Trust Instrument, to which reference is hereby made
and a copy of which is on file at the office of the Secretary of State of Ohio
as required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Roulston Family of Funds" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Series
of the Trust must look solely to the assets of the
<PAGE> 7
Trust belonging to such Series for the enforcement of any claims against the
Trust.
(b) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(c) Any person, even though a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, trustee, employee or
agent of the Trust, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or under the control or direction of
Fund/Plan even though such person may receive compensation from Fund/Plan.
(d) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, 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 Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instruction of an
authorized person of the Trust or upon the opinion of legal counsel for the
Trust; or (iii) any action taken in good faith or omitted to be taken by
Fund/Plan in connection with its appointment 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. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders or agents in cases of its or
their willful misfeasance, bad faith, gross negligence or reckless disregard of
its or their duties hereunder.
<PAGE> 8
(e) Fund/Plan shall give written notice to the Trust within thirty (30)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, unless such failure
prejudices the Trust.
(f) For any legal proceeding giving rise to this indemnification, the
Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it
gives written notice to Fund/Plan within thirty (30) business days of receiving
notice of such claim. Notwithstanding the foregoing, Fund/Plan may participate
in the litigation at its own expense through counsel of its own choosing. If
the Trust does choose to defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
(g) The terms of this Section 9 shall survive the termination of this
Agreement.
SECTION 10. NOTICES Except as otherwise provided in this Agreement, any
notice or other communication required by or permitted to be given in connection
with this Agreement shall be in writing, and shall be delivered in person or
sent by first class mail, postage prepaid to the respective parties as follows:
If to the Trust: If to Fund/Plan:
---------------- ----------------
The Roulston Family of Funds Fund/Plan Services, Inc.
4000 Chester Avenue 2 West Elm Street
Cleveland, OH 44103 Conshohocken, PA 19428
Attention: Scott D. Roulston, Attention: Kenneth J. Kempf,
President President
SECTION 11. SEVERABILITY If any part, term or provision of this
Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be considered
severable and not affected, and the rights and obligations of the parties shall
be construed and enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
<PAGE> 9
SECTION 12. SECTION HEADINGS Section and Paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eight typewritten pages, together with Schedules "A", "B" and "C",
to be signed by their duly authorized officers as of the day and year first
above written.
The Roulston Family of Funds Fund/Plan Services, Inc.
- -------------------------------- ------------------------------
By: Scott D. Roulston, President By: Kenneth J. Kempf, President
<PAGE> 10
AMENDMENT TO ADMINISTRATION AGREEMENT
This AGREEMENT, dated as of the 1st day of January, 1997, made by and
between Fairport Funds (formerly known as The Roulston Family of Funds), a
business trust (the "Trust") operating as an open-end management investment
company registered under the Investment Company Act of 1940, as amended, duly
organized and existing under the laws of the State of Ohio and FPS Services,
Inc. ("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into an Administration Agreement
dated January 20, 1995, wherein FPS agreed to provide certain administrative
services to the Trust (the "Agreement"); and
WHEREAS, the Parties wish to amend the Agreement to reflect (i) the
respective change in names of the Parties; (ii) amendments to the services and
fees as set forth on the attached Schedules "A" and "B" respectively of the
Agreement; and (iii) the respective change of the names of the Trust's separate
series of shares as set forth on the attached Schedule "C."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. That Schedule "A" of the Agreement be replaced in its entirety with
Schedule "A" attached hereto;
2. That Schedule "B" of the Agreement be replaced in its entirety with
Schedule "B" attached hereto; and
3. That Schedule "C" of the Agreement be replaced in its entirety with
Schedule "C" attached hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "A," "B" and "C,"
to be signed by their duly authorized officers as of the day and year first
above written.
Fairport Funds FPS Services, Inc.
- -------------- ------------------
- -------------------------------- ---------------------------------
Scott D. Roulston, Chairman Kenneth J. Kempf, President
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Page 1
<PAGE> 11
SCHEDULE "A"
DATED JANUARY 1, 1997
FUND ADMINISTRATION SERVICES
FOR
FAIRPORT FUNDS
I. REGULATORY COMPLIANCE
A. Compliance - Investment Company Act of 1940, as amended
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and shareholder services
2. Filings.
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective amendments and
supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under 30b2-1
3. Annual up-dates of biographical information
and questionnaires for Trustees and Officers
B. Compliance - State "Blue Sky"
1. Blue Sky (state registration)
a. registration of shares
b. registration of issuer/dealer/agent (no loads)
c. monitor of sale shares [over/under]
d. report shares sold
e. filing of required prospectus and reports to
states
II. Corporate Business and Shareholder/Public Information
A. Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Part 1
<PAGE> 12
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
1. General
2. Blue sky
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
E. Communications to Shareholders
1. Coordinate printing and distribution of annual, semi-
annual and prospectuses.
III. FINANCIAL AND MANAGEMENT REPORTING
A. Income and Expenses
1. Monitoring of expense accruals, expense payments and
expense caps
2. Approve and coordinate payment of expenses
3. Establish Funds' operating expense checking account and
perform monthly reconciliation of checking account
4. Calculation of advisory fee, 12b-1 fee and reimbursements
to fund, (if applicable)
5. Authorize the recording and amortization of organizational
costs and pre-paid expenses (supplied by advisor), for
start-up funds and reorganizations
6. Calculation of average net assets
7. Expense ratios calculated
B. Distributions to Shareholders
1. Calculations of dividends and capital gain distributions
(in conjunction with the fund and their auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
2. Book/Tax identification and adjustments at required
distribution periods (in conjunction with the fund and
their auditors)
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 2
<PAGE> 13
C. Financial Reporting
1. Liaison between fund management, independent auditors and
printers for semi-annual and annual shareholder reports
2. Preparation of semi-annual and annual reports to
shareholders
3. Preparation of semi-annual and annual NSAR's (Financial
Data)
4. Preparation of Financial Statements for required SEC Pos
Effective filings (if applicable)
5. Preparation of required performance graph (annually)
(based on advisor supplied indices)
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and
analyses can be constructed to meet a fund's specific
needs (additional fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on return of
capital presentation, excise tax calculation
4. Performance (total return) calculation (monthly)
5. 1099 Miscellaneous - prepared and filed for Directors/
Trustees (annual)
6. Analysis of interest derived from various Government
obligations (annual) (if interest income was distributed
in a calendar year)
7. Review and characterize 1099-Dividend Forms
8. Prepare and coordinate with printer and FPS Services
Account Management the printing and mailing of 1099-
Dividend Insert Cards
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure
proper update
2. Perform various reviews to ensure accuracy of Accounting
(the monthly expense analysis) and Custody (review of
daily bank statements to ensure accurate money movement
for expense payments)
3. Review accruals and expenditures (where applicable)
G. Preparation and distribution of monthly operational reports to
management by 10th business day
1. Management Statistics (Recap)
a. portfolio summary
b. book gains/losses/per share
c. net income, book income/per share
d. capital stock activity
e. distributions
2. Performance Analysis
a. total return
b. monthly, quarterly, year to date, average annual
3. Expense Analysis
a. schedule
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 3
<PAGE> 14
b. summary of due to/from advisor
c. expenses paid
d. expense cap
e. accrual monitoring
f. advisory fee
4. Short-Short Analysis
a. short-short income
b. gross income (components)
5. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
6. Asset Diversification Test
a. gross assets
b. non-qualifying assets
7. Activity Summary
a. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requested (monthly/
quarterly)
I. Standard schedules for Board Package (Quarterly)
1. Activity Summary (III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided (additional fees may
apply)
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 4
<PAGE> 15
SCHEDULE "B"
DATED JANUARY 1, 1997
ADMINISTRATION SERVICES FEE SCHEDULE
FOR
FAIRPORT FUNDS
This Fee Schedule is fixed for a period of two years from January
1, 1997 and shall not increase greater than 10% during the one
year period beginning January 1, 1999.
I. BASE FEE FOR SINGLE CLASS OF SHARES (calculated using average monthly total
net assets and payable monthly)
Subject to the minimum annual fee of $55,000 for the first series, $12,000
for each additional domestic series, the asset based administration fees
shall be calculated at:
.0015 On the First $50 Million of Total Average Net Assets .0010 On the
Next $50 Million of Total Average Net Assets; and .0005 Of Total Average
Net Assets in Excess of $100 Million of Average Net Assets
II. OUT OF POCKET EXPENSES:
The Trust will reimburse FPS monthly for all reasonable out-of-pocket
expenses, including telephone, postage (including overnight services),
overdraft charges, EDGAR filings, telecommunications (fax etc.), special
reports, record retention, transportation costs as incurred and copying and
sending materials to auditors and/or regulatory agencies as incurred and
approved.
III. OTHER SERVICES NOT COVERED BY THIS AGREEMENT
Activities of a non-recurring nature, including but not limited to, fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be quoted separately. To the extent the Trust should
decide to issue multiple/separate classes of shares, additional fees may
apply. Any additional/enhanced services or reports will be quoted upon
request.
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule B
<PAGE> 16
SCHEDULE "C"
JANUARY 1, 1997
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
Fairport Funds
1. Fairport Midwest Growth Fund
2. Fairport Growth and Income Fund
3. Fairport Government Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
================================================================================
Amendment to Administration Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule C
<PAGE> 1
Exhibit 99.B(9)(b)
ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the 20TH day of JANUARY , 1995 made by and
between THE ROULSTON FAMILY OF FUNDS, an Ohio Business Trust (the "Trust")
operating as an open-end management investment company registered under the
Investment Company Act of 1940, as amended, duly organized and existing under
the laws of the State of Ohio, and FUND/PLAN SERVICES, INC. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Declaration of Trust ("Trust
Instrument") to issue separate series of shares representing interests in
separate investment portfolios (the "Series"), which Series are identified on
Schedule "C" attached hereto and which Schedule "C" may be amended from time to
time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Trust (the
"Accounts and Records") and to perform certain other functions in connection
with such Accounts and Records; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions upon the terms and conditions set forth below; and
WHEREAS, the Trust will provide certain information concerning the
Series to Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. The Trust shall promptly turn over to Fund/Plan such of the
Series' accounts and records previously maintained by or for it as are requested
by Fund/Plan to perform its functions under this Agreement. The Trust authorizes
Fund/Plan to rely on such accounts and records turned over to it and hereby
indemnifies and holds Fund/Plan, its successors and assigns, harmless of and
from any and all expenses, damages, claims, suits, liabilities, actions, demands
and losses whatsoever arising out of or in connection with any error, omission,
inaccuracy or other deficiency of such accounts and records.
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 1 OF 12
<PAGE> 2
Fund/Plan shall make reasonable efforts to isolate and correct any
inaccuracies, omissions, discrepancies, or other deficiencies in the accounts
and records delivered to Fund/Plan, to the extent such matters are disclosed to
Fund/Plan or are discovered by it and are relevant to its performance of its
functions under this Agreement; however, Fund/Plan expressly makes no warranty
or representation that any error, omission or deficiency can be satisfactorily
corrected. The Trust shall provide Fund/Plan with such assistance as it may
reasonably request in connection with its efforts to correct such matters. The
Trust agrees to pay Fund/Plan on a current and ongoing basis for its reasonable
time and costs expended on the correction of such matters at an hourly rate of
$50.00, said payment to be in addition to the fees and charges agreed to for the
normal services rendered under this Agreement.
For purposes of this Agreement:
ORAL INSTRUCTIONS shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to Fund/Plan in
person or by telephone, telegram, telecopy, or other mechanical or documentary
means lacking a signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons authorized by a resolution of the Board of
Trustees of the Trust, to give such oral instructions on behalf of the Trust.
WRITTEN INSTRUCTIONS shall mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted to
Fund/Plan in original writing containing original signatures or a copy of such
document transmitted by telecopy including transmission of such signature
reasonably identified to Fund/Plan to be the signature of a person authorized by
a resolution of the Board of Trustees of the Trust to give written instructions
on behalf of the Trust.
The Trust shall file with Fund/Plan a certified copy of each resolution
of its Board of Trustees authorizing execution and transmittal of Written
Instructions or the transmittal of Oral Instructions as provided above.
SECTION 2. To the extent Fund/Plan receives the necessary information
from the Trust or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records relating to the
business of the Trust in such form as may be mutually agreed upon between the
Trust and Fund/Plan:
(a) Cash Receipts Journal
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 2 OF 12
<PAGE> 3
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings
Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
(m) Listing of Portfolio Holdings - showing cost, market value
and percentage of
portfolio comprised of each security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of the net asset value of each Series as provided below, is to be
furnished by Written or Oral Instructions to Fund/Plan daily (in accordance with
the time frame identified in Section 7) prior to the close of regular trading on
the New York Stock Exchange.
SECTION 3. Fund/Plan shall perform the ministerial calculations
necessary to calculate each of the Series' net asset value each day that the New
York Stock Exchange is open for business, in accordance with (i) each Series'
current Prospectus and Statement of Additional Information and (ii) procedures
with respect thereto approved by the Board of Trustees of the Trust and supplied
in writing to Fund/Plan's Accounting Services Unit. Portfolio items for which
market quotations are available by Fund/Plan's use of an automated financial
information service (the "Service") shall be based on the closing prices of such
Service except where the Trust has given or caused to be given specific Written
or Oral Instructions to utilize a different value. All of the other portfolio
securities shall be given such values as the Trust provides by Written or Oral
Instructions including all restricted securities and other securities requiring
valuation not readily ascertainable solely by such Service. Fund/Plan shall not
have any responsibility or liability for the accuracy of prices quoted by such
Service; for the accuracy of the information supplied by the Trust; or for any
loss, liability, damage, or cost
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 3 OF 12
<PAGE> 4
arising out of any inaccuracy of such data. Fund/Plan shall have no
responsibility or duty to include information or valuations to be provided by
the Trust in any computation unless and until it is timely supplied to Fund/Plan
in usable form. Fund/Plan shall record corporate action information as received
from the Custodian, the Service, or the Trust. Fund/Plan shall not have any duty
to gather or record corporate action information not supplied by these sources.
Fund/Plan will not assume any liability for price changes caused by:
the investment adviser(s), custodian, suppliers of security prices, corporate
action and dividend information, or any party other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price
change, consideration must be given to the effect of the price change as
described below. Notwithstanding the provisions of Section 11, the following
provisions govern Fund/Plan's liability for errors in calculating the net asset
value ("NAV") of the Series:
If the NAV should have been higher for a date or dates in the
past, the error would have the effect of having given more shares to
subscribers and less money to redeemers to which they were entitled.
Conversely, if the NAV should have been lower, the error would have the
effect of having given less shares to subscribers and overpaying
redeemers.
If the error affects the prior business day's NAV only, and
the prior day's work can be rerun before shareholder statements and
checks are mailed, the Trust hereby accepts this manner of correcting
the error.
If the error spans five (5) business days or less, Fund/Plan
shall reprocess shareholder purchases and redemptions where redeeming
shareholders have been underpaid. Fund/Plan shall assume liability to
the Trust for overpayments to shareholders who have fully redeemed.
If the error spans more than five (5) business days, Fund/Plan
will bear the liability to the Trust for, 1) buying in for excess
shares given to shareholders if the NAV should have been higher, or, 2)
funding overpayments to shareholders who have redeemed if the NAV
should have been lower. The cost of any reprocessing required for
shareholders who have been credited with fewer shares than appropriate,
or for redeeming shareholders who are due
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 4 OF 12
<PAGE> 5
additional amounts of money will also be borne by Fund/Plan.
SECTION 4. For all purposes under this Agreement, Fund/Plan is
authorized to act upon receipt of the first of any Written or Oral Instruction
it receives from the Trust or its agents on behalf of the Trust. In cases where
the first instruction is an Oral Instruction that is not in the form of a
document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where Fund/Plan receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Trust shall cause the
broker/dealer to send a written confirmation to the Custodian. Fund/Plan shall
be entitled to rely on the first Instruction received, and for any act or
omission undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Trust, provided however, that in the event
a Written or Oral Instruction received by Fund/Plan is countermanded by a timely
later Written or Oral Instruction received by Fund/Plan prior to acting upon
such countermanded Instruction, Fund/Plan shall act upon such later Written or
Oral Instruction. The sole obligation of Fund/Plan with respect to any follow-up
or confirmatory Written Instruction or Oral Instruction in documentary or
written form, shall be to make reasonable efforts to detect any such discrepancy
between the original Instruction and such confirmation and to report such
discrepancy to the Trust. The Trust shall be responsible, at the Trust's
expense, for taking any action, including any reprocessing, necessary to correct
any discrepancy or error, and to the extent such action requires Fund/Plan to
act, the Trust shall give Fund/Plan specific Written Instruction as to the
action required.
SECTION 5. The Trust shall cause its Custodian (the "Custodian") to
forward to Fund/Plan a daily statement of cash and portfolio transactions and,
at the end of each month, the Trust shall cause the Custodian to forward to
Fund/Plan a monthly statement of portfolio positions, which Fund/Plan will
reconcile with its Accounts and Records maintained on behalf of the Trust.
Fund/Plan will report any discrepancies to the Custodian, and report any
unreconciled items to the Trust.
SECTION 6. Fund/Plan shall promptly supply daily and periodic reports
to the Trust as requested by the Trust and agreed upon by Fund/Plan.
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 5 OF 12
<PAGE> 6
SECTION 7. The Trust shall provide and shall require each of its agents
(including the Custodian) to provide Fund/Plan as of the close of each business
day, or on such other schedule as the Trust determines is necessary, with
Written or Oral Instructions (to be delivered to Fund/Plan by 11:00 a.m.,
Eastern time, the next following business day) containing all data and
information necessary for Fund/Plan to maintain the Trust's Accounts and
Records, and Fund/Plan may conclusively assume that the information it receives
by Written or Oral Instructions is complete and accurate. Fund/Plan, as Transfer
Agent, accepts responsibility for providing reports of share purchases,
redemptions, and total shares outstanding, on the next business day after each
net asset valuation.
SECTION 8. The Accounts and Records, in the agreed-upon format,
maintained by Fund/Plan shall be the property of the Trust and shall be made
available to the Trust promptly upon request and shall be maintained for the
periods prescribed in Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended. Fund/Plan shall assist the Trust's independent auditors, or
upon approval of the Trust, or upon demand, any regulatory body, in any
requested review of the Trust's Accounts and Records but shall be reimbursed for
all expenses and employee time invested in any such review outside of routine
and normal periodic review and audits. Upon receipt from the Trust of the
necessary information, Fund/Plan shall supply the necessary data for the Trust
or an independent auditor's completion of any necessary tax returns,
questionnaires, periodic reports to Shareholders and such other reports and
information requests as the Trust and Fund/Plan shall agree upon from time to
time.
SECTION 9. In case of any request or demand for the inspection of the
Share records of the Trust, Fund/Plan, as Accounting Services Agent, shall
endeavor to notify the Trust and to secure instructions as to permitting or
refusing such inspection. Fund/Plan may however, exhibit such records to any
person in any case where it is advised by its counsel that it may be held liable
for failure to do so after notice to the Trust.
SECTION 10. Fund/Plan and the Trust may from time to time adopt such
procedures as agreed upon in writing, and Fund/Plan may conclusively assume that
any procedure approved by the Trust or directed by the Trust, does not conflict
with or violate any requirements of the Trust's Registration Statements, Trust
Instrument, By-Laws, or any rule or regulation of any regulatory body or
governmental agency. The Trust shall be responsible for notifying
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 6 OF 12
<PAGE> 7
Fund/Plan of any changes in regulations or rules which might necessitate changes
in Fund/Plan's procedures, and for working out with Fund/Plan such changes.
SECTION 11.
(a) Fund/Plan, its directors, officers, employees,
shareholders, and agents shall only be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement that results from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of Fund/Plan in the
performance of its obligations and duties under this Agreement.
(b) Any person, even though also a director, trustee, officer,
employee, shareholder or agent of Fund/Plan, who may be or become an officer,
trustee, employee or agent of the Trust shall be deemed, when rendering services
to the Trust or acting on any business of the Trust (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for the Trust, and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though receiving a salary from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, 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 Fund/Plan may sustain or incur or which may be asserted
against Fund/Plan by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Fund/
Plan except matters resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard on the part of Fund/Plan in the performance of
its obligations and duties under this Agreement; or
(ii) in reliance upon any certificate, instrument,
order or stock certificate or other document reasonably 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 Trust or upon the written opinion of legal counsel for the Trust
or Fund/Plan; or
(iii) any action taken or omitted to be taken in good
faith by Fund/Plan in connection with its appointment, in reliance upon any law,
act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended, or
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 7 OF 12
<PAGE> 8
repealed. Indemnification under this subparagraph shall not apply, however, to
actions or omissions of Fund/Plan or its directors, officers, employees,
shareholders, or agents in cases of its or their willful misfeasance, bad faith,
gross negligence or reckless disregard its or their duties hereunder.
(d) Fund/Plan shall give written notice to the Trust within
thirty (30) business days of receipt by Fund/Plan of a written assertion or
claim of any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to so notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising from this Section or otherwise, except to the extent
failure to give notice prejudices the Trust.
(e) For any legal proceeding giving rise to this
indemnification, the Trust shall be entitled to defend or prosecute any claim in
the name of Fund/Plan at its own expense and through counsel of its own choosing
if it gives written notice to Fund/Plan within thirty (30) business days of
receiving notice of such claim. Notwithstanding the foregoing, Fund/Plan may
participate in the litigation at its own expense through counsel of its own
choosing. If the Trust chooses to defend or prosecute such claim, then the
Parties shall cooperate in the defense or prosecution thereof and shall furnish
such records and other information as are reasonably necessary.
SECTION 12. All financial data provided to, processed by, and reported
by Fund/Plan under this Agreement shall be stated in United States dollars.
Fund/Plan shall have no obligation to convert to, equate, or deal in foreign
currencies or values, and expressly assumes no liability for any currency
conversion or non-U.S. dollar denominated computations relating to the affairs
of the Trust.
SECTION 13. The Trust agrees to pay Fund/Plan compensation for its
services, and to reimburse it for expenses, at the rates and amounts as set
forth in Schedule "B" attached hereto, and as shall be set forth in any
amendments to such Schedule "B" agreed upon in writing by the Trust and
Fund/Plan. The Trust agrees and understands that Fund/Plan's compensation will
be comprised of two components, payable on a monthly basis, as follows:
(i) A fixed fee for each Series, together with
an asset based fee which the Trust hereby authorizes Fund/Plan to collect by
debiting the Trust's custody account for invoices which are rendered for the
services performed for the applicable function. The
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 8 OF 12
<PAGE> 9
invoices for the services performed will be sent to the Trust after such
debiting with the indication that payment has been made; and
(ii) reimbursement of any reasonable out-of-
pocket expenses paid by Fund/Plan on behalf of the Trust, which out-of-pocket
expenses will be billed to the Trust within the first ten calendar days of the
month following the month in which such out-of-pocket expenses were incurred.
The Trust agrees to reimburse Fund/Plan for such expenses within ten calendar
days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
the Series' net assets shall be computed at the times and in the manner
specified in Series' Prospectus(es) and Statement(s) of Additional Information
then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in the attached Schedule "A", a
written amendment to Agreement Schedule "A" and Schedule "B", as necessary,
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Trust.
SECTION 14. Nothing contained in this Agreement is intended to or shall
require Fund/Plan, in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next succeeding business day
on which the New York Stock Exchange is open. Notwithstanding the foregoing,
Fund/Plan shall compute the net asset value of each Series on each day required
pursuant to (i) Rule 22c-1 promulgated under the Investment Company Act of 1940,
as amended, and (ii) such Series' then-current Prospectus and Statement of
Additional Information.
SECTION 15.
(a) The initial term of this Agreement shall be for a period
commencing on the date of this Agreement and ending on a date two (2) years
following the Exchange Date of the reorganization described in the Agreement
Fund Plan of Reorganization and Liquidation between the Trust and The Advisors'
Inner Circle Fund ("Initial Term").
(b) The fee schedule set forth in Schedule "B" attached shall
be fixed for the Initial Term of this Agreement. Thereafter, the fee schedule
will be subject to annual review and adjustment not to exceed 10% of those fees
set forth in Schedule "B."
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 9 OF 12
<PAGE> 10
(c) For any period after the Initial Term of this Agreement,
the Trust or Fund/Plan may give written notice to the other of the termination
of this Agreement, such termination to take effect at the time specified in the
notice, which date shall not be less than one hundred eighty (180) days after
the date of giving notice. Upon the effective termination date, the Trust shall
pay to Fund/Plan such compensation as may be due as of the date of termination
and shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) This Agreement also may be terminated at any time for
"cause," after the giving of not less than sixty (60) days' notice.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, negligence or reckless disregard on the part of the
party to be terminated with respect to its obligations and duties set forth
herein; (b) the commencement of a judicial, regulatory or administrative
proceeding by either state or federal authorities in which criminal, illegal or
unethical behavior in the conduct of its business has been alleged against the
party to be terminated; (c) financial difficulties on the part of the party to
be terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors; (d) any assignment (as
that term is defined in the 1940 Act) of this Agreement by Fund/Plan, including
any direct or indirect transfer or hypothecation of a controlling block of
Fund/Plan's voting securities by a security holder thereof, shall permit the
Trust to terminate for cause; or (e) any circumstance which substantially
impairs the performance of the obligations and duties of the party to be
terminated, or the ability to perform those obligations and duties, as
contemplated herein.
(e) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Fund/Plan in connection with the termination of this Agreement,
Fund/Plan shall promptly upon such termination and at the expense of the Trust,
transfer all records and shall cooperate in the transfer of such duties and
responsibilities.
SECTION 16. Except as otherwise provided in this Agreement, any notice
or other
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 10 OF 12
<PAGE> 11
communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid to the respective parties as follows:
IF TO THE ROULSTON FAMILY OF FUNDS: IF TO FUND/PLAN:
- ---------------------------------- ----------------
The Roulston Family of Funds Fund/Plan Services, Inc.
4000 Chester Avenue 2 West Elm Street
Cleveland, OH 44103 Conshohocken, PA 19428
Attention: Scott D. Roulston, Attention: Kenneth J. Kempf,
President President
SECTION 17. This Agreement may be amended from time to time by
supplemental agreement executed by the Trust and Fund/Plan and the compensation
stated in Schedule "B" attached hereto may be adjusted accordingly as mutually
agreed upon amendment of Schedule "B".
SECTION 18. The Trust represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Board of
Trustees of the Trust.
SECTION 19. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 20. This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust without the
written consent of Fund/Plan or by Fund/Plan without the written consent of the
Trust, authorized or approved by a resolution of its respective Boards of
Directors or Trustees.
SECTION 21. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
SECTION 22. No provision of this Agreement may be amended or modified,
in any manner except by a written agreement properly authorized and executed by
Fund/Plan and the Trust.
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ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 11 OF 12
<PAGE> 12
SECTION 23. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid, provided that the basic agreement is not thereby
substantially impaired.
SECTION 24. The Trust is a business trust organized under Chapter 1746,
Ohio Revised Code, and under its Trust Instrument, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all mandments thereto so filed or
hereafter filed. The obligations of "The Roulston Family of Funds" entered into
in the name or on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, officers, employees, agents or shareholders of the
Trust personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Series of
the Trust must look solely to the assets of the Trust belonging to such Series
for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of twelve typewritten pages, together with Schedules "A", "B" and
"C", to be signed by their duly authorized officers as of the day and year first
above written.
THE ROULSTON FAMILY OF FUNDS FUND/PLAN SERVICES, INC.
- -------------------------------- -------------------------------
By: Scott D. Roulston, President By: Kenneth J. Kempf, President
- --------------------------------------------------------------------------------
ORIGINAL ACCOUNTING SERVICES AGREEMENT
PAGE 12 OF 12
<PAGE> 13
AMENDMENT TO ACCOUNTING SERVICES AGREEMENT
This AGREEMENT, dated as of the 1st day of JANUARY, 1997, made by and
between Fairport Funds (formerly known as The Roulston Family of Funds), a
business trust (the "Trust") operating as an open-end management investment
company registered under the Investment Company Act of 1940, as amended, duly
organized and existing under the laws of the State of Ohio and FPS Services,
Inc. ("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into an Accounting Services
Agreement dated January 20, 1995, wherein FPS agreed to provide certain
portfolio accounting and pricing services to the Trust (the "Agreement"); and
WHEREAS, the Parties wish to amend the Agreement to reflect (i) the
respective change in names of the Parties; (ii) amendments to the services and
fees as set forth on the attached Schedules "A" and "B" respectively of the
Agreement; and (iii) the respective change of the names of the Trust's separate
series of shares as set forth on the attached Schedule "C."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. That Schedule "A" of the Agreement be replaced in its entirety with
Schedule "A" attached hereto;
2. That Schedule "B" of the Agreement be replaced in its entirety with
Schedule "B" attached hereto; and
3. That Schedule "C" of the Agreement be replaced in its entirety with
Schedule "C" attached hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "A," "B" and "C,"
to be signed by their duly authorized officers as of the day and year first
above written.
Fairport Funds FPS Services, Inc.
- -------------- ------------------
- --------------------------- ---------------------------
Scott D. Roulston, Chairman Kenneth J. Kempf, President
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Page 1
<PAGE> 14
SCHEDULE "A"
DATED JANUARY 1, 1997
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
FOR
FAIRPORT FUNDS
I. DAILY ACCOUNTING SERVICES
1) CALCULATE NET ASSET VALUE ("NAV") AND OFFERING PRICE PER SHARE:
o Update the daily market value of securities held by the Trust using
FPS's standard agents for pricing domestic equity and bond securities.
The domestic equity pricing services are Reuters, Inc. Muller Data
Corporation, J.J. Kenny Co., Inc. and Interactive Data Corporation
(IDC). Muller Data, Telerate Systems, Inc., J.J. Kenny Co., Inc. and
IDC are used for bond and money market prices/yields. Bloomberg is
available and used for price research.
o Enter limited number of manual prices supplied by the Trust and/or
broker.
o Prepare NAV proof sheet. Review components of change in NAV for
reasonableness.
o Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by the
Trust. Verify US dollar security prices exceeding variance levels by
notifying the Trust and pricing sources of noted variances.
o Review for ex-dividend items indicated by pricing sources; trace to
the general ledger for agreement.
o Communicate required pricing information (NAV) to the Trust, Transfer
Agent and, electronically, to NASDAQ.
2) DETERMINE AND REPORT CASH AVAILABILITY BY APPROXIMATELY 9:30 AM EASTERN
TIME:
o Receive daily cash and transaction statements from the Custodian by
8:30 AM Eastern time.
o Receive previous day shareholder activity reports from the Transfer
Agent by 8:30 AM Eastern time.
o Fax hard copy Cash Availability calculations with all details to the
Trust.
o Supply the Trust with 3-day cash projection report.
o Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the Custodian and
the Trust.
3) RECONCILE AND RECORD ALL DAILY EXPENSE ACCRUALS:
o Accrue expenses based on budget supplied by the Trust either as
percentage of net assets or specific dollar amounts.
o If applicable, monitor expense limitations established by the Trust.
o If applicable, accrue daily amortization of Organizational expense.
o If applicable, complete daily accrual of 12b-1 expenses.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 1
<PAGE> 15
appreciation/depreciation and percentage of portfolio comprised of
each security).
- NAV calculation report.
- Cash Availability and 3-day Cash Projection Report.
II. MONTHLY ACCOUNTING SERVICES
1) FULL FINANCIAL STATEMENT PREPARATION (automated Statements of Assets
and Liabilities, of Operations and of Changes in Net Assets) and
submission to the Trust by 10th business day.
2) SUBMISSION OF MONTHLY AUTOMATED IAS REPORTS TO THE TRUST:
o Security Purchase/Sales Journal
o Interest and Maturity Report
o Brokers Ledger (Commission Report)
o Security Ledger Transaction Report with Realized Gains/Losses
o Security Ledger Tax Lot Holdings Report
o Additional reports available upon request
3) RECONCILE ACCOUNTING ASSET LISTING TO CUSTODIAN ASSET LISTING:
o Report any security balance discrepancies to the Custodian/the
Trust.
4) PROVIDE MONTHLY ANALYSIS AND RECONCILIATION OF ADDITIONAL TRIAL BALANCE
ACCOUNTS, SUCH AS:
o Security cost and realized gains/losses
o Interest/dividend receivable and income
o Payable/receivable for securities purchased and sold
o Payable/receivable for shares; issued and redeemed
o Expense payments and accruals analysis
5) IF APPROPRIATE, PREPARE AND SUBMIT TO THE TRUST (ADDITIONAL FEES MAY
APPLY):
o SEC yield reporting (non-money market funds with domestic and
ADR securities only).
o Income by state reporting.
o Standard Industry Code Valuation Report.
o Alternative Minimum Tax Income segregation schedule.
III. ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES
1) ASSIST AND SUPPLY AUDITORS WITH SCHEDULES supporting securities and
shareholder transactions, income and expense accruals, etc. during the
year in accordance with standard audit assistance requirements.
2) PROVIDE NSAR REPORTING (ACCOUNTING QUESTIONS):
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62,
63, 64B, 71, 72, 73, 74, 75 and 76.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 3
<PAGE> 16
ACCOUNTING SERVICES UNIT BASIC ASSUMPTIONS FOR FAIRPORT FUNDS
The Accounting Fees as stated herein, are based on the following assumptions. To
the extent these assumptions and requirements should change, fee revisions may
be necessary.
Basic Assumptions:
1) The Trust's Administrator will complete all necessary compliance reports
(Sub-Chapter "M"), as well as monitoring of the various prospectus
limitations and restrictions.
2) The Trust's security trading activity will be approximately 12 trades per
month in the Midwest Growth Fund, 17 trades per month in the Growth and
Income Fund and 2 trades per month in the Government Securities Fund
(inclusive of domestic and money market transaction).
3) The number of securities and portfolio asset composition in each series of
the Trust will remain comparable to that identified in the annual and
semi-annual reports described above.
4) Each series of the Trust has a tax year-end which coincides with its fiscal
year-end. No additional accounting requirements are necessary to identify
or maintain book-tax differences.
To the extent tax accounting for certain securities differs from the book
accounting, it will be done by the Trust's Administrator or the Trust's
Independent Accountant. FPS recommends book/tax differences be minimized.
5) The Trust foresees no difficulty in using FPS's standard current pricing
agents for domestic equity, bond, and ADR securities. FPS currently uses
Reuters, Inc., Muller Data or Interactive Data Corporation (IDC) for
domestic equities and listed ADR's. Muller Data Corporation, Telerate
Systems, Inc. and IDC are used for bonds, and money market issues.
Bloomberg is also used for price research and back-up.
It is assumed that FPS will work closely with Trust to ensure the accuracy
of the Trust's NAV, and to obtain the most satisfactory pricing sources and
specific methodologies.
6) To the extent the Trust requires daily security prices (limited in number)
from specific brokers for domestic securities, these manual prices will be
obtained by the Trusts' Investment Adviser (or brokers) and faxed to FPS by
approximately 4:00 PM Eastern time for inclusion in the NAV calculations.
The Trust will supply FPS with the appropriate pricing contacts for these
manual quotes.
Based on our current clients' experience, we believe the Trust's Investment
Adviser will have better success in obtaining accurate and a timely broker
quotes on a more consistent basis than FPS.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 4
<PAGE> 17
7) To the extent the Trust should ever purchase/hold open-end
registered investment companies (RIC's), procedural discussions shall
take place between FPS and Trust management clarifying the appropriate
pricing and dividend rate sources. Depending on the methodologies
selected by the Trust additional fees may apply.
8) FPS will supply daily Portfolio Valuation Reports to the Trust's
Investment Adviser or manager identifying current security
positions, original/amortized cost, security market values and changes
in unrealized appreciation/depreciation.
It will be the responsibility of the Trust's Investment Adviser to
review these reports and to promptly notify FPS of any possible
problems, trade discrepancies, incorrect security prices, corporate
action/capital change information that could result in a misstated Trust
NAV.
9) The Trust does not expect to invest in Futures, Swaps, Hedges,
Derivatives or Foreign (non-US dollar denominated) Securities. To the
extent these investment strategies should change, additional fees will
apply after the appropriate procedural discussions have taken place
between FPS and Trust management. (Advance notice is required should the
Trust commence trading in these investments).
10) It is assumed for all debt issues, the Adviser will supply FPS with
critical income information such as accrual methods, interest payment
frequency details, coupon payment dates, floating rate reset dates, and
complete security descriptions with issue types and cusip numbers. If
applicable, for proper income accrual accounting, FPS will look to the
Trust's Adviser to supply PSA, Y.T.M., and related cash flow models for
any mortgage asset-backed securities and IO/PO positions held in the
Trust.
11) It is assumed that the Trust's custodian (the "Custodian") will
provide FPS with daily Custodian statements and on-line access to the
custody system reflecting all prior day cash activity on behalf of each
portfolio by 8:30 AM Eastern time. Complete and clear descriptions of
any postings, inclusive of CUSIP numbers, interest/dividend payment
dates, capital stock details, expense authorizations, beginning/ending
balances, etc. will be provided by the Custodian's reports or system.
12) It is assumed that the Custodian will handle and report on all
settlement problems, failed trades and resolve unsettled
dividends/interest/pay downs and capital changes. Additionally, the
Custodian will process all applicable capital change paperwork based
upon advice from Trust. FPS will supply segregated Trial Balance
reporting and supplemental reports to assist in this process.
13) With respect to Mortgage/Asset-Backed securities such as GNMA's,
FHLMC's, FNMA's, CMO's, ARM's, IO's, PO's etc., the Custodian (or a
Trust supplied source) will provide FPS with current principal repayment
factors on a timely basis in accordance with the appropriate securities'
schedule. Income accrual adjustments (to the extent necessary) based
upon initial estimates will be completed by FPS when actual
principal/income payments are collected by the Custodian.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 5
<PAGE> 18
14) To the extent applicable, FPS will maintain US dollar denominated qualified
covered call options and index options reporting on the daily Trial Balance
and value the respective options and underlying positions daily. The
Trust's Independent Accountants or the Trust's Administrator shall perform
any required tax classifications.
The Trust does not currently expect to invest in domestic options or
designated hedges. (Advance notice is requested should the Trust commence
trading in the above investments to clarify operational procedures between
FPS and the Advisor.)
15) To the extent the Trust should establish a Line of Credit in segregated
accounts with the custodian for temporary administrative purposes, and/or
leveraging/hedging the portfolio, the investment Adviser will complete the
appropriate paperwork/monitoring for segregation of assets and adequacy of
collateral. FPS will reflect appropriate Trial Balance account entries and
interest expense accrual charges on the daily Trial Balance adjusting as
necessary at month-end.
16) The Trust does not currently expect to participate in Security Lending,
Leveraging, or Short Sales within their portfolio securities. To the extent
they do so in the future, additional fees will apply. (Advance notice is
required should the Trust desire to participate in the above.)
17) The Trust's management or administrator will supply FPS with portfolio
specific expense accrual procedures and monitor the expense accrual
balances for adequacy based on outstanding liabilities monthly. The Trust's
administrator will promptly communicate to the FPS any adjustments needed.
18) Specific deadlines and complete Trust supplied information will be
identified for all security trades in order to minimize any settlement
problems, NAV miscalculations or income accrual adjustments.
Trade Authorization Forms, with the appropriate officer's signature, shall
be supplied to the FPS on all security trades placed by the Trust no later
than settlement/value date by 12:30 PM Eastern time for money market
securities (it is assumed trade date equals settlement date for money
market issues), and by 11:00 AM Eastern time on trade date plus one for
non-money market securities. Receipt of trade information within these
identified deadlines may be via telex, fax, or on-line system access.
CUSIP numbers and/or ticker symbols for all US dollar denominated trades
will be supplied by the Investment Adviser via the Trade Authorization,
telex or on-line support. If appropriate, FPS will supply the Investment
Adviser with recommended trade ticket documents to minimize receipt of
incomplete information. FPS will not be responsible for NAV changes that
result from incomplete information about a trade.
19) To the extent the Trust utilizes Purchases In-Kind (U.S. dollar denominated
securities) as a method for shareholder subscriptions, FPS will provide
Trust with recommended procedures to properly handle and process security
in-kinds. Should the Trust prefer procedures other than those provided by
FPS, additional fees may apply. (Discussions must take place in advance
between FPS and the Trust to clarify the appropriate In-
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 6
<PAGE> 19
Kind operational procedures to be followed.)
20) It is assumed that the Trust's Investment Adviser or administrator will
complete the applicable performance and rate of return calculations as
required by the SEC for the Trust.
21) With respect to amortization and accretion requirements for the debt issues
in the Trust, FPS' Investment Accounting System (IAS) offers a very
comprehensive and fully automated level of support. Market discounts and
acquisition premiums are calculated either utilizing the straight-line or
yield-to-maturity (scientific) method.
It is extremely important that the Trust's requirements and proper
amortization procedures be clarified prior to conversion. FPS, the Trust's
management and independent accountant shall review pre-conversion system
reports to ensure that IAS calculated amortization amounts are in agreement
with any tax schedules prepared by the Trust's independent accountants for
all appropriately held debt issues as of the date last calculated.
It is assumed that the Trust will not hold any issues with Original Issue
Discounts (OID). It is FPS' position that OID is a tax requirement and, as
such, not necessarily reflected on the books of the Trust. FPS' current
clients have not required any OID support. To the extent the Trust should,
in the future, own securities with OID, it is expected that the Trust's
independent accountants will complete the necessary OID adjustments for
financial statements and/or tax reporting.
22) The Trust is not currently expected to issue separate classes of shares. To
the extent it does so, additional fees will be negotiated.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule A, Page 7
<PAGE> 20
SCHEDULE "B"
DATED JANUARY 1, 1997
ACCOUNTING SERVICES FEE SCHEDULE
FOR
FAIRPORT FUNDS
This Fee Schedule is fixed for a period of two years from
January 1, 1997 and shall not increase greater than 10%
during the one year period beginning January 1, 1999.
The Accounting Fees as set forth below are based on the "Basic
Assumptions" as set forth in Schedule "A." To the extent that those
assumptions are inaccurate or requirements change, fee
revisions may be necessary.
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
I. ANNUAL FEE SCHEDULE Per Domestic Portfolio: U.S. Dollar Denominated
<TABLE>
<CAPTION>
Securities only (1/12th payable monthly)
<S> <C> <C>
$24,000 Minimum to $ 20 Million of Average Net Assets
.0004 On Next $ 30 Million of Average Net Assets
.0003 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
</TABLE>
II. PRICING SERVICES QUOTATION FEE: Specific costs will be identified based
upon options selected by the Trust and will be billed monthly.
FPS does not currently pass along the charges for the domestic
equity prices supplied by Muller Data. Should the Trust invest in
security types other than domestic equities supplied by Muller,
the following fees would apply.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Muller Data Interactive J.J. Kenny
Security Types Corp.* Data Corp.* Co., Inc.*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
- --------------------------------------------------------------------------------------------------------
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
- --------------------------------------------------------------------------------------------------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
- --------------------------------------------------------------------------------------------------------
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
- --------------------------------------------------------------------------------------------------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
- --------------------------------------------------------------------------------------------------------
Convertible Bonds .50 .50 1.00 (a)
- --------------------------------------------------------------------------------------------------------
High Yield Bonds .50 .50 1.00 (a)
- --------------------------------------------------------------------------------------------------------
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
- --------------------------------------------------------------------------------------------------------
Domestic Equities (d)* .15 n/a
- --------------------------------------------------------------------------------------------------------
Domestic Options n/a .15 n/a
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule B
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Muller Data Interactive J.J. Kenny
Security Types Corp.* Data Corp.* Co., Inc.*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Dividends & Capital Changes
(per Issue per Month) (d)* 3.50 n/a
- --------------------------------------------------------------------------------------------------------
Foreign Securities .50 .50 n/a
- --------------------------------------------------------------------------------------------------------
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
- --------------------------------------------------------------------------------------------------------
Set-up Fees n/a n/a (e) .25 (c)
- --------------------------------------------------------------------------------------------------------
All Added Items n/a n/a .25 (c)
- --------------------------------------------------------------------------------------------------------
<FN>
* Based on current Vendor costs, subject to change. Costs are quoted based on
individual security CUSIP/identifiers and are per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to FPS clients
(e) Interactive Data also charges monthly transmission costs and disk
storage charges.
</TABLE>
A) Futures and Currency Forward Contracts $2.00 per Issue per Day
B) Telerate Systems, Inc.* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the Trust will be billed monthly.
C) Reuters, Inc.*
*Based on current vendor costs, subject to change.
FPS does not currently pass along the charges for the domestic
security prices supplied by Reuters, Inc.
III. SEC YIELD CALCULATION: (if applicable)
Provide up to 12 reports per year to reflect the yield calculations
for non-money market funds required by the SEC, $1,000 per year per
separate series of shares. For multiple class series, $1,000 per year
per class. Daily SEC yield reporting is available at $3,000 per year
per separate series of shares (US dollar denominated securities
only).
OUT-OF-POCKET EXPENSES
The Trust will reimburse FPS monthly for all reasonable out-of-pocket expenses,
including telephone, postage, overdraft charges, EDGAR filings, Fund/SERV and
Networking expenses, telecommunications, special reports, record retention,
special transportation costs, copying sending materials to auditors and/or
regulatory agencies as incurred and approved.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule B
<PAGE> 22
ADDITIONAL SERVICES
To the extent the Trust commences using investment techniques such as Futures,
Security Lending, Swaps, Leveraging, Short Sales, Derivatives, Precious Metals,
or foreign trading (non U.S. dollar denominated securities and currency),
additional fees will apply. Activities of a non-recurring nature such as
shareholder in kinds , consolidations, mergers or reorganizations will be
subject to negotiation. To the extent that the Trust should decide to issue
multiple/separate classes of shares, additional fees will apply. Any
additional/enhanced services, programming requests, or reports will be quoted
upon request.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule B
<PAGE> 23
SCHEDULE "C"
JANUARY 1, 1997
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
Fairport Funds
1. Fairport Midwest Growth Fund
2. Fairport Growth and Income Fund
3. Fairport Government Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
- --------------------------------------------------------------------------------
Amendment to Accounting Services Agreement between Fairport Funds
and FPS Services, Inc.
Schedule C
<PAGE> 1
Exhibit 99B(9)(c)
TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the 20th day of January, 1995, made by and
between THE ROULSTON FAMILY OF FUNDS, an Ohio Business Trust (the "Trust")
operating as a registered investment company under the Investment Company Act of
1940, as amended (the "Act"), and duly organized and existing under the laws of
the State of Ohio, and FUND/PLAN SERVICES, Inc. ("Fund/Plan"), a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Declaration of Trust ("Trust
Instrument") to issue separate series of shares representing interests in
separate investment portfolios (the "Series"), which Series are identified on
Schedule "C" attached hereto and which Schedule "C" may be amended from time to
time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform share
transfer agency, redemption and dividend disbursing services as set forth in
this Agreement and in Schedule "A" attached hereto, and to perform certain other
functions in connection with these duties; and
WHEREAS, Fund/Plan is registered with the Securities and Exchange
Commission as a Transfer Agent as required under Section 17(A)(c) of the
Securities Exchange Act of 1934, as amended ("1934 Act"); and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
SHARE CERTIFICATES shall mean the certificates representing shares of
stock of the Series.
SHAREHOLDERS shall mean the registered owners of the Shares
of the Series in accordance with the share registry records maintained by
Fund/Plan for the Trust.
SHARES shall mean the issued and outstanding shares of the Series.
SIGNATURE GUARANTEE shall mean the guarantee of signatures by an
"eligible guarantor institution" as defined in rule 17Ad-15 under the 1934 Act.
Eligible guarantor institutions include banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. Broker-dealers guaranteeing signatures must
be members of a clearing corporation or maintain net capital of at least
$100,000. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
ORAL INSTRUCTION shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to Fund/Plan in
person or by telephone, telegram, telecopy or other mechanical or documentary
means lacking original signature, by a person or persons reasonably identified
to Fund/Plan to be a person or persons so authorized by a
<PAGE> 2
resolution of the Board of Trustees of the Trust.
WRITTEN INSTRUCTION shall mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Fund/Plan in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person or persons so authorized
by a resolution of the Board of Trustees of the Trust to give Written
Instructions to Fund/Plan.
TRANSFER AGENCY SERVICES
SECTION 2. Fund/Plan as Transfer Agent shall make original issues of
Shares in accordance with Section 9 and 10 below and with each Series'
Prospectus and Statement of Additional Information upon the written request of
the Trust, and upon being furnished with (i) a certified copy of a resolution or
resolutions of the Board of Trustees of the Trust authorizing such issue; (ii)
an opinion of counsel as to the validity of such Shares; and (iii) necessary
funds for the payment of any original issue tax applicable to such additional
Shares.
SECTION 3. Subject to the terms of the applicable prospectus then in
effect transfers of Shares shall be registered and new Shares issued by
Fund/Plan upon redemption of outstanding Shares, (i) in the form deemed by
Fund/Plan to be properly endorsed for transfer, (ii) with all necessary
endorser's signatures guaranteed pursuant to Rule 17Ad-15 under the 1934 Act, as
amended, accompanied by, (iii) such assurances as Fund/Plan shall deem necessary
or appropriate to evidence the genuineness and effectiveness of each necessary
endorsement, and (iv) satisfactory evidence of compliance with all applicable
laws relating to the payment or collection of taxes.
SECTION 4. In registering transfers, Fund/Plan as Transfer Agent may
rely upon the applicable commercial code or any other applicable law which, in
the written opinion (a copy of which shall previously have been furnished to the
Trust) of counsel, protect Fund/Plan and the Trust in not requiring complete
documentation, in registering transfer without inquiry into adverse claims, in
delaying registration for purposes of such inquiry, or in refusing registration
where in its judgment an adverse claim requires such refusal.
SECTION 5. With respect to confirmed trades received by Fund/Plan as
Transfer Agent for the Series, Fund/Plan shall periodically notify the Trust of
the current status of outstanding confirmed trades. Fund/Plan is authorized to
cancel confirmed trades which have been outstanding for thirty (30) days. Upon
such cancellation, Fund/Plan shall instruct the accounting agent to adjust the
books of the Trust accordingly.
SECTION 6. Fund/Plan will maintain stock registry records in the usual
form in which it will note the issuance, transfer and redemption of Shares.
Fund/Plan is responsible to provide reports of Share purchases, redemptions, and
total Shares outstanding on the next business day after each net asset
valuation. Fund/Plan is authorized to keep records, which will be part of the
stock transfer records, in which it will note the names and registered address
of Shareholders and the number of Shares and fractions thereof owned by them.
SECTION 7. Fund/Plan in its capacity as Transfer Agent will, in
addition to the duties and functions above-mentioned, perform the usual duties
and functions of a stock transfer agent for an investment company as listed in
Schedule "A" attached hereto. Fund/Plan may rely conclusively and act without
further investigation upon any list, instruction, certification, authorization
or other instrument or paper believed by it in good faith to be genuine and
<PAGE> 3
unaltered, and to have been signed, countersigned, or executed by duly
authorized person or persons, or upon the instructions of any officer of the
Trust, or upon the advice of counsel for the Trust or for Fund/Plan. Fund/Plan
may record any transfer of Shares which is reasonably believed by it to have
been duly authorized or may refuse to record any transfer of Shares if in good
faith Fund/Plan in its capacity as Transfer Agent reasonably deems such refusal
necessary in order to avoid any liability either of the Trust or Fund/Plan. The
Trust agrees to indemnify and hold harmless Fund/Plan from and against any and
all losses, costs, claims, and liability which it may suffer or incur by reason
of so relying or acting or refusing to act. Fund/Plan shall maintain and
reconcile all operating bank accounts necessary to facilitate all transfer
agency processes; including, but not limited to, distribution disbursements,
redemptions and payment clearance accounts.
SECTION 8. In case of any request or demand for the inspection of the
Share records of a Series, Fund/Plan as Transfer Agent shall endeavor to notify
the Trust and to secure instructions as to permitting or refusing such
inspection. Fund/Plan may, however, exhibit such records to any person in any
case where it is advised by its counsel that it may be held liable for failure
to do so.
ISSUANCE OF SHARES
SECTION 9. Prior to the daily determination of net asset value in
accordance with the Series' Prospectus and Statement of Additional Information,
Fund/Plan shall process all purchase orders received since the last
determination of the Series' net asset value.
Fund/Plan shall calculate daily the amount available for investment in
Shares at the net asset value determined by the Series' pricing agent as of the
close of regular trading on the New York Stock Exchange, the number of Shares
and fractional Shares to be purchased and the net asset value to be deposited
with the Custodian. Fund/Plan as agent for the Shareholders shall place a
purchase order daily with the appropriate Series for the proper number of Shares
and fractional Shares to be purchased and confirm such number to the Trust, in
writing.
SECTION 10. Fund/Plan having made the calculations provided for in
Section 9, shall thereupon pay over the net asset value of Shares purchased to
the Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder Registration Records.
The Shares and fractional Shares purchased for each Shareholder will be credited
by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to
each Shareholder a confirmation of each purchase, with copies to the Trust, if
requested. Such confirmations will show the prior Share balance, the new Share
balance, the amount invested and the price paid for the newly purchased Shares.
REDEMPTIONS
SECTION 11. Fund/Plan shall, prior to the daily determination of net
asset value in accordance with the Series' Prospectus and Statement of
Additional Information, process all requests from Shareholders to redeem Shares
and determine the number of Shares required to be redeemed to make monthly
payments, automatic payments or the like. Thereupon, Fund/Plan shall advise the
Trust of the total number of Shares available for redemption and the number of
Shares and fractional Shares requested to be redeemed. Fund/Plan as pricing
agent shall then determine the applicable net asset value, whereupon Fund/Plan
shall furnish the Trust with an appropriate confirmation of the redemption and
process the redemption by filing
<PAGE> 4
with the Custodian an appropriate statement and make the proper distribution and
application of the redemption proceeds in accordance with each Series'
Prospectus and Statement of Additional Information then in effect. The stock
registry books recording outstanding Shares, the Shareholder Registration
Records and the individual account of the Shareholder shall be properly debited.
SECTION 12. The proceeds of redemption shall be remitted by Fund/Plan
in accordance with the appropriate Series' Prospectus and Statement of
Additional Information, by check mailed to the Shareholder at the Shareholder's
registered address or wired to an authorized bank account.
For the purposes of redemption of Shares which have been purchased
within 15 days of a redemption request, the Trust shall provide Fund/Plan, from
time to time, with Written Instructions concerning the time within which such
requests may be honored.
DIVIDENDS
SECTION 13. The Trust shall notify Fund/Plan of the date of each
dividend declaration or capital gains distribution. In addition, the Trust shall
provide to Fund/Plan five business days' prior written notice of the record date
for determining the Shareholders entitled to payment. The per-share payment
amount of any dividend or capital gain shall be determined by the Trust after
receipt of necessary information from and consultation with Fund/Plan.
SECTION 14. On or before each payment date, the Trust will notify
Fund/Plan in its capacity as dividend disbursing agent of the total amount of
the dividend or distribution currently payable. Fund/Plan will, on the
designated payment date, automatically reinvest all dividends in additional
Shares except in cases where Shareholders have elected to receive distribution
in cash, in which case Fund/Plan will mail distribution checks to the
Shareholders for the proper amounts payable to them from monies transferred by
the Custodian to Fund/Plan for that purpose.
FEES
SECTION 15. The Trust agrees to pay Fund/Plan compensation for its
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation will be comprised of two components,
payable on a monthly basis, as follows:
(i) An annual Shareholder account maintenance
fee calculated by multiplying the monthly average number of accounts in each
Series by one twelfth (1/12th) the per account fee as stated in Schedule "B",
subject to a minimum fee per Series, which fee the Trust hereby authorizes
Fund/Plan to collect by debiting the Trust's custody account for invoices which
are rendered for such services performed. The invoices for the services
performed will be sent to the Trust after such debiting with the indication that
payment has been made; and
(ii) reimbursement of any reasonable out-of-
pocket expenses paid by Fund/Plan on behalf of the Trust, which out-of-pocket
expenses will be billed to the Trust within the first ten calendar days of the
month following the month in which such out-of-pocket expenses were incurred.
The Trust agrees to reimburse Fund/Plan for such expenses within ten calendar
days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
each Series' net assets shall be computed at the times and in the manner
specified in each Series' Prospectus
<PAGE> 5
and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to Agreement Schedule "A" and Schedule "B", as necessary,
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
SECTION 16. Fund/Plan shall maintain records (which may be part of the
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestments, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each Shareholder. Fund/Plan agrees to make
available upon request and to preserve for the periods prescribed in Rule 31a-2
under the Act, any records relating to services provided under this Agreement
which are required to be maintained by Rule 31a-1 under the Act.
SECTION 17. In addition to the services as Transfer Agent and dividend
disbursing agent set forth above, Fund/Plan will perform other services for the
Trust as agreed upon from time to time, including but not limited to,
preparation of and mailing Federal Tax Information Forms and mailing semi-annual
reports to shareholders of the Trust.
SECTION 18. Nothing contained in this Agreement is intended to or shall
require Fund/Plan in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange are closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next business day on which both the New York Stock Exchange and the
Custodian are open.
SECTION 19.
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall only be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust, in connection with the
performance of this Agreement that result from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of Fund/Plan in the
performance of its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer,
employee, shareholder or agent of Fund/Plan, who may be or become an officer,
trustee, employee, or agent of the Trust, shall be deemed, when rendering
services to such entity or acting on any business of the Trust (other than
services or business in connection with Fund/Plan's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the control or
direction of Fund/Plan even though that person is being paid salary by
Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, 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 Fund/Plan may sustain or incur or which may be asserted
against Fund/Plan by any person by reason of, or as a result of (i) any action
taken or omitted to be taken by Fund/Plan in good faith hereunder; (ii) any
action taken or omitted to be taken by Fund/Plan in good faith in reliance upon
any certificate, instrument, order, or stock certificate or other document
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions
<PAGE> 6
or Written Instructions of an authorized person of the Trust or upon the opinion
of legal counsel to the Trust, or its own counsel; or (iii) any action taken or
omitted to be taken by Fund/Plan in connection with its appointment under this
Agreement, which action or omission was taken 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. Indemnification
under this subparagraph, however, shall not apply to actions or omissions of
Fund/Plan or its directors, officers, employees, shareholders, or agents in
cases of its or their willful misfeasance, bad faith, gross negligence or
reckless disregard of its or their duties hereunder.
(d) Fund/Plan shall give written notice to the Trust within
thirty (30) business days of receipt by Fund/Plan of a written assertion or
claim of any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify the Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve the Trust
of any liability arising under this Section or otherwise, except to the extent
that failure to give notice prejudices the Trust.
(e) For any legal proceeding giving rise to this
indemnification, the Trust shall be entitled to defend or prosecute any claim in
the name of Fund/Plan at its own expense and through counsel of its own choosing
if it gives written notice to Fund/Plan within thirty (30) business days of
receiving notice of such claim. Notwithstanding the foregoing, Fund/Plan may
participate in the litigation at its own expense through counsel of its own
choosing. In the event the Trust chooses to defend or prosecute such claim, the
parties shall cooperate in the defense or prosecution thereof and shall furnish
such records and other information as are reasonably necessary.
(f) The Trust shall not settle any claim under Section 19(d)
and 19(e) without Fund/Plan's express written consent, which consent shall not
be unreasonably withheld. Fund/Plan shall not settle any such claim without the
Trust's express written consent, which likewise shall not be unreasonably
withheld.
SECTION 20. Fund/Plan is authorized, upon receipt of Written
Instructions from the Trust, and as described in the prospectus to make payment
upon redemption of Shares without a signature guarantee. The Trust hereby agrees
to indemnify and hold Fund/Plan, its successors and assigns, harmless of and
from any and all expenses, damages, claims, suits, liabilities, actions,
demands, losses whatsoever arising out of or in connection with a payment by
Fund/Plan upon redemption of Shares pursuant to Written Instructions and without
a signature guarantee; upon the request of Fund/Plan, the Trust shall assume the
entire defense of any action, suit or claim subject to the foregoing indemnity.
Fund/Plan shall notify the Trust of any such action, suit or claim within thirty
(30) days after receipt by Fund/Plan of notice thereof.
SECTION 21.
(a) The initial term of this Agreement shall be for a period
commencing on the date of this Agreement and ending on a date two (2) years
following the Exchange Date of the reorganization described in the Agreement and
Plan of Reorganization and Liquidation between the Trust and The Advisors' Inner
Circle Fund ("Initial Term").
(b) The fee schedule set forth in Schedule "B" attached shall
be fixed for the Initial Term of this Agreement. Thereafter, the fee schedule
will be subject to review and adjustment, not to exceed 10% of those fees set
forth in Schedule "B."
<PAGE> 7
(c) For any period after the Initial Term of this Agreement,
the Trust or Fund/Plan may give written notice to the other of the termination
of this Agreement, such termination to take effect at the time specified in the
notice, which date shall not be less than one hundred eighty (180) days after
the date of giving notice. Upon the effective termination date, the Trust shall
pay to Fund/Plan such compensation as may be due as of the date of termination
and shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) This Agreement also may be terminated at any time for
"cause," after the giving of not less than sixty (60) days' notice.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, negligence or reckless disregard on the part of the
party to be terminated with respect to its obligations and duties set forth
herein; (b) the commencement of a judicial, regulatory or administrative
proceeding by either state or federal authorities in which criminal, illegal or
unethical behavior in the conduct of its business has been alleged against the
party to be terminated; (c) financial difficulties on the part of the party to
be terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors; (d) any assignment (as
that term is defined in the 1940 Act) of this Agreement by Fund/Plan, including
any direct or indirect transfer or hypothecation of a controlling block of
Fund/Plan's voting securities by a security holder thereof, shall permit the
Trust to terminate for cause; or (e) any circumstance which substantially
impairs the performance of the obligations and duties of the party to be
terminated, or the ability to perform those obligations and duties, as
contemplated herein.
(e) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by the Trust by written notice to Fund/Plan
in connection with the termination of this Agreement, Fund/Plan shall promptly
upon such termination and at the expense of the Trust, transfer all records and
shall cooperate in the transfer of such duties and responsibilities.
SECTION 22. The Trust shall file with Fund/Plan a certified copy of
each resolution of its Board of Trustees authorizing the execution and
transmittal of Written Instructions or the transmittal of Oral Instructions, as
provided in Section 1 of this Agreement.
SECTION 23. The Trust shall promptly turn over to Fund/Plan such of the
Series' accounts and records previously maintained by or for it as are requested
by Fund/Plan to perform its functions under this Agreement. The Trust authorizes
Fund/Plan to rely on such Accounts and Records turned over to it and hereby
indemnifies and holds Fund/Plan, its successors and assigns, harmless of and
from any and all expenses, damages, claims, suits, liabilities, actions, demands
and losses whatsoever arising out of or in connection with any error, omission,
inaccuracy or other deficiency of such accounts and records.
Fund/Plan shall make reasonable efforts to isolate and correct any
inaccuracies, omissions, discrepancies, or other deficiencies in the Accounts
and Records delivered to Fund/Plan, to the extent such matters are disclosed to
Fund/Plan or are discovered by it and are relevant to its performance of it
functions under this Agreement; however, Fund/Plan expressly makes no warranty
or representation that any error, omission or deficiency can be
<PAGE> 8
satisfactorily corrected. The Trust shall provide Fund/Plan with such assistance
as it may reasonably request in connection with its efforts to correct such
matters. The Trust agrees to pay Fund/Plan on a current and ongoing basis for
its reasonable time and costs expended on the correction of such matters at an
hourly rate of $50.00, said payment to be in addition to the fees and charges
agreed to for the normal services rendered under this Agreement.
SECTION 24. This Agreement may be amended from time to time by a
written agreement executed by the Trust and Fund/Plan.
SECTION 25. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid, to the respective parties as follows:
If to the Trust: If to Fund/Plan:
---------------- ----------------
The Roulston Family of Funds Fund/Plan Services, Inc.
4000 Chester Avenue 2 West Elm Street
Cleveland, OH 44103 Conshohocken, PA 19428
Attention: Scott D. Roulston, Attention: Kenneth J. Kempf,
President President
SECTION 26. The Trust represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Board of
Trustees of the Trust.
SECTION 27. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 28. This Agreement shall extend to and shall be binding upon
the Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of their respective Boards of Directors
or Trustees.
SECTION 29. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
SECTION 30. No provision of this Agreement may be amended or modified,
in any manner except in writing, properly authorized and executed by Fund/Plan
and the Trust.
SECTION 31. If any part, term or provision of this Agreement is held by
any court to be
<PAGE> 9
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby substantially
impaired.
SECTION 32. The Trust is a business trust organized under Chapter 1746,
Ohio Revised Code, and under its Trust Instrument, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Roulston Family of Funds" entered into
in the name or on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, officers, employees, agents or shareholders of the
Trust personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Series of
the Trust must look solely to the assets of the Trust belonging to such Series
for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting in its entirety, of twelve typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as of the day
and year first above written.
The Roulston Family of Funds Fund/Plan Services, Inc.
- --------------------------------- --------------------------------
By: Scott D. Roulston, President By: Kenneth J. Kempf, President
<PAGE> 10
AMENDMENT TO TRANSFER AGENT SERVICES AGREEMENT
This AGREEMENT, dated as of the 1st day of January , 1997, made by and
between Fairport Funds (formerly known as The Roulston Family of Funds), a
business trust (the "Trust") operating as an open-end management investment
company registered under the Investment Company Act of 1940, as amended, duly
organized and existing under the laws of the State of Ohio and FPS Services,
Inc. ("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into an Transfer Agent Services
Agreement dated January 20, 1995, wherein FPS agreed to provide certain
shareholder services to the Trust (the "Agreement"); and
WHEREAS, the Parties wish to amend the Agreement to reflect (i) the
respective change in names of the Parties; (ii) amendments to the services and
fees as set forth on the attached Schedules "A" and "B" respectively of the
Agreement; and (iii) the respective change of the names of the Trust's separate
series of shares as set forth on the attached Schedule "C."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. That Schedule "A" of the Agreement be replaced in its entirety with
Schedule "A" attached hereto;
2. That Schedule "B" of the Agreement be replaced in its entirety with
Schedule "B" attached hereto; and
3. That Schedule "C" of the Agreement be replaced in its entirety with
Schedule "C" attached hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "A," "B" and "C,"
to be signed by their duly authorized officers as of the day and year first
above written.
Fairport Funds FPS Services, Inc.
- ----------------- ---------------------
- ------------------------------- -----------------------------
Scott D. Roulston, Chairman Kenneth J. Kempf, President
<PAGE> 11
SCHEDULE "A"
=============
DATED JANUARY 1, 1997
=====================
FUND TRANSFER AGENT/SHAREHOLDER SERVICES
FOR
FAIRPORT FUNDS
Under this Agreement, the following services shall be provided:
I. - Shareholder File Services
1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and NSCC - Fund/SERV - Networking
transmissions.
2. Create Customer Information File (CIF) to link accounts within the Fund
and across funds within the Fund Group. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality of new account information, including verification of
initial investment.
* 4. Systematic linkage of shareholder accounts with exact matches on SSN
and address for the purpose of consolidated account history reporting.
Periodic production of laser printed combined statements.
* 5. Production of household mailing labels which enable the Fund to do
special mailings to each address in the Fund Group rather than each
account.
6. Maintain account and customer file records based on shareholder request
and routine quality review.
7. Maintain tax ID certification and NRA records for each account,
including backup withholding.
8. Provide written confirmation of address changes.
9. Produce shareholder statements for daily activity, dividends,
on-request, third party, and periodic mailings.
* 10. Produce shareholder lists, labels and ad hoc reports to Fund management
as requested.
11. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
<PAGE> 12
12. Image all applications, account documents, data changes,
correspondence, monetary transactions, and other pertinent shareholder
documents.
II. - Shareholder Services
1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research and
correspondence representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals, pre-authorized drafts, FundSERV and
wire order trades, problem solving and process telephone transactions.
3. Silent monitoring of shareholder calls by the phone supervisor to
ensure exceptional customer service.
4. Record and maintain tape recordings of all shareholder calls for a six
month period.
5. Phone Supervisor produces daily management reports of shareholder
calls which track volumes, length of calls, average wait time and
abandoned call rates to ensure quality service.
6. Phone representatives are thoroughly trained through in house training
programs on the techniques of providing Exceptional Customer Service.
7. Customer inquiries received by letter or telephone are thoroughly
researched by a correspondence team member. These inquires include
such items, as account/customer file information, complete historical
account information, stop payments on checks, transaction details, and
lost certificates.
III. - Investment Processing
1. Initial investment (checks or Fed wires).
2. Subsequent investments (checks or Fed wires) processed through lock
box.
3. Pre-authorized investments (PAD) through ACH system.
4. Government allotments through ACH system.
5. Prepare and process telephone purchase transactions.
* 6. NSCC-FundSERV trades.
<PAGE> 13
IV. - Redemption Processing
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal File and process automated
transactions on monthly basis.
4. Issue checkbooks and process checkbook redemptions through agent bank.
5. Redemptions proceeds distributed to shareholder by check, Fed wire or
ACH processing.
* 6. Provide NSCC - FundSERV trade processing.
V. - Exchange & Transfer Processing
1. Process legal transfers.
2. Issue and cancel certificates.
3. Replace certificates through surety bonds (separate charge to
shareholder).
4. Process exchange transactions (letter and telephone request).
5. Process ACATS transfers.
VI. - Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70-1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRA's and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
<PAGE> 14
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
VII. - Settlement & Control
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Fund's
Accounting Agent by 10:00 a.m. EST.
2. Preparation of daily cash movement information to be passed to the
Fund's Accounting Agent and Custodian Bank by 10:00 a.m. EST for use
in determining Fund's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to include the proper notification of
any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of Fund's declared dividends and capital gains
to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rate used and the
NAV price of reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Fund's Accounting Agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement information for the cash portion
of the dividend payment on payable date.
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all FPS clients. Monthly deposits to the IRS
of all types withhold from shareholder disbursements, distributions
and foreign account distributions. Correspond with the IRS concerning
any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV activity.
<PAGE> 15
VIII. - Year End Processing
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid Tax IDs. This includes initiating 31%
backup withholding and notifying shareholders of their tax status and
the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year end activity with client. Activities include
producing year end statements, scheduling record dates for year
dividends and capital gains, production of combined statements and
printing of inserts to be mailed with tax forms.
6. Distribute Dividend Letter to funds for them to sign off on all
distributions paid year to date. Dates and rates must be authorized
so that they can be used for reporting to the IRS.
7. Coordinate the ordering of form stock and envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year end statements and tax forms.
9. Match and settle tax reporting totals to fund records and on-line
data from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.
12. Prepare IRS magnetic tapes and appropriate forms for the filing of
all reportable activity to the Internal Revenue Service.
IX. - Client Services
1. An Account Manager is assigned to each relationship. The Account
Manager acts as the liaison between the Fund and the Transfer Agency.
Responsibilities include scheduling of events, system enhancement
implementation, special promotion/event implementation and follow-up,
and constant fund interaction on daily operational issues.
<PAGE> 16
Specifically:
a. Scheduling of dividends, proxies, report mailing and special
mailings.
b. Coordinate with the Fund the shipment of materials for scheduled
mailings.
c. Liaison between the Fund and support services for preparation of
proofs and eventual printing of statement forms, certificates,
proxy cards, envelopes, etc.
d. Handle all notification to the client regarding proxy tabulation
through the meeting. Coordinate scheduling of materials,
including voted cards, tabulation letters, and shareholder list,
to be available for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
f. Implement any new operational procedures, i.e., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions, etc.
g. Coordinate with systems, services and operations any special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings, additional
mail files, etc.
h. Prepare standard operating procedures and review prospectuses for
new start up funds and our current client base. Coordinate
implementation of suggested changes with the Fund.
i. Liaison between the Fund and the Transfer Agency staff regarding
all service and operational issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and mailroom.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Fund's direction.
b. Provide daily and monthly reports to enable the Fund to do
necessary state filings.
*Separate fees will apply for these services.
<PAGE> 17
DAILY REPORTS
-------------
REPORT NUMBER REPORT DESCRIPTION
------------- ------------------
-- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
MONTHLY REPORTS
---------------
REPORT DESCRIPTION
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
<PAGE> 18
SCHEDULE "B"
============
DATED JANUARY 1, 1997
=====================
TRANSFER AGENT SERVICES FEE SCHEDULE
FOR
FAIRPORT FUNDS
This Fee Schedule is fixed for a period of two years from January 1,
1997 and shall not increase greater than 10% during the one year
period beginning January 1, 1999.
I. Base Fees
---------
A) Account Maintenance
-------------------
$15.00 per Account per year Annual Maintenance Fee subject to a
minimum monthly fee of $2,500 for Fairport Midwest Growth Fund,
$2,500 for Fairport Growth and Income Fund and $2,000 for Fairport
Government Securities Fund.
B) IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
--------------------------------------------------------
$12.00 per Account per Year Annual Maintenance Fee
II. Out of Pocket Expenses:
-----------------------
The Trust will reimburse FPS monthly for all reasonable out-of-pocket
expenses, including telephone, postage (including overnight services),
overdraft charges, Fund/SERV and Networking expenses, telecommunications
(fax etc.), special reports, record retention, transportation costs as
incurred and copying and sending materials to auditors and/or regulatory
agencies as incurred and approved.
III. Other Services Not Covered By This Agreement
--------------------------------------------
Activities of a non-recurring nature, including but not limited to, fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be quoted separately. To the extent the Trust should
decide to issue multiple/separate classes of shares, additional fees may
apply. Any additional/enhanced services or reports will be quoted upon
request.
<PAGE> 19
SCHEDULE "C"
============
JANUARY 1, 1997
===============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
Fairport Funds
1. Fairport Midwest Growth Fund
2. Fairport Growth and Income Fund
3. Fairport Government Securities Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE> 1
EXHIBIT 99.B(11)(a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references made to our firm under the captions "Financial
Highlights" in the Prospectus and "Legal Counsel and Independent Auditors" in
the Statement of Additional Information and to the use, in this Post-Effective
Amendment No. 3 to Registration Statement (Form N-1A, Number 33-84186) of the
Fairport Funds, of our report dated November 27, 1996.
ERNST & YOUNG LLP
Cleveland, Ohio
February 21, 1997
<PAGE> 1
Exhibit 99.B(14)
DISCLOSURE STATEMENT
RIGHT TO REVOKE YOUR IRA
If you receive this Disclosure Statement at the time you establish your IRA, you
have the right to revoke your IRA within seven (7) days of its establishment. If
revoked, you are entitled to a full return of the contribution you made to your
IRA. The amount returned to you would not include an adjustment for such items
as sales commissions, administrative expenses, or fluctuation in market value.
You may make this revocation only by mailing or delivering a written notice to
the Custodian at:
FPS SERVICES, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406-0903
If you send your notice by first-class mail, your revocation will be deemed
mailed as of the date of the postmark.
If you have any questions about the procedure for revoking your IRA, please call
the Custodian at the telephone number listed on the Application.
REQUIREMENTS OF AN IRA
A. CASH CONTRIBUTIONS -- Your contribution must be in cash, unless it is a
rollover contribution.
B. MAXIMUM CONTRIBUTIONS -- The total amount you may contribute to an IRA for
any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation.
C. NONFORFEITABILITY -- Your interest in your IRA is nonforfeitable.
D. ELIGIBLE CUSTODIANS -- The Custodian of your IRA must be a bank, savings and
loan association, credit union, or a person approved by the Secretary of the
Treasury.
E. COMMINGLING ASSETS -- The assets of your IRA cannot be commingled with other
property except in a common trust fund or common investment fund.
F. LIFE INSURANCE -- No portion of your IRA may be invested in life insurance
contracts.
G. COLLECTIBLES -- You may not invest the assets of your IRA in collectibles
(within the meaning of Internal Revenue Code (IRC) Section 408(m)). A
collectible is defined as any work of art, rug or antique, metal or gem, stamp
or coin, alcoholic beverage, or any other tangible personal property specified
by the Internal Revenue Service. Specially minted United States gold and silver
bullion coins and certain state-issued coins are permissible IRA investments.
H. REQUIRED MINIMUM DISTRIBUTIONS -- You are required to take minimum
distributions from your IRA at certain times in accordance with Proposed
Treasury Regulations Section 1.408-8. Below is a summary of the IRA distribution
rules.
1. You are required to take a minimum distribution from your IRA for the year
in which you reach age 70H and for each year thereafter. You must take
your first payout by your required beginning date, April 1 of the year
following the year you attain age 70H. The minimum distribution for any
taxable year is equal to the amount obtained by dividing the account
balance at the end of the prior year (less any required distribution taken
between January 1 and April 1 of the year following the year you attain
age 70H) by the joint life expectancy of you and your designated
beneficiary. If you have not designated a beneficiary for your IRA by your
required beginning date, your single life expectancy will be used.
2. Your single or joint life expectancy is determined by using the IRS unisex
life expectancy tables. You can find these tables in Treasury Regulation
Section 1.72-9.
We may establish a policy dictating whether or not life expectancies may
be recalculated in determining required minimum distributions from your
IRA. Alternatively, we may allow you to elect whether or not to
recalculate your life expectancies.
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<PAGE> 2
You may choose (within the limits set forth in the distribution rules and
our life expectancy recalculation policy) how you want your required
minimum distributions structured. You must make your payment elections no
later than April 1 following your 70 1/2 year. If you do not make an
election by that date, we may do any one of the following:
(a) make no payment until you give us a proper payout request,
(b) pay your entire IRA to you in a single sum payment, or
(c) determine your required minimum distribution each year based on your
single life expectancy (not recalculated) and pay those distributions
to you until you direct otherwise.
3. If you name someone other than your spouse as your beneficiary, and
your beneficiary is more than 10 years younger than you, your required
minimum distributions must satisfy the Minimum Distribution Incidental
Benefit (MDIB) rule. The MDIB rule generally requires that your required
minimum distributions be calculated as if your beneficiary were exactly
10 years younger than you.
4. If you die:
(a) on or after your required beginning date, distributions must be made to
your beneficiary or beneficiaries at least as rapidly as under the
method being used to determine minimum distributions as of the date of
your death.
(b) before your required beginning date, the entire amount remaining in
your account will, at the election of your beneficiary or
beneficiaries, either
(i) be distributed by December 31 of the year containing the fifth
anniversary of your death, or
(ii) be distributed in equal or substantially equal payments over the
life or life expectancy of your designated beneficiary or
beneficiaries.
Your beneficiary or beneficiaries must elect either option (i) or (ii) by
December 31 of the year following the year of your death. If no election
is made, distribution will be made in accordance with (ii) if the
beneficiary is your surviving spouse, and in accordance with (i) if your
beneficiary is not your surviving spouse. In the case of distributions
under (ii), distributions must commence by December 31 of the year
following the year of your death. If your spouse is the beneficiary,
distributions need not commence until December 31 of the year you would
have attained age 70 1/2, if later.
INCOME TAX CONSEQUENCES OF ESTABLISHING AN IRA
A. IRA DEDUCTIBILITY -- If you have not yet reached the year in which you
attain age 70 1/2 and have earned income from services rendered, you may make
an IRA contribution of the lesser of 100 percent of compensation or $2,000.
However, the amount of the contribution for which you may take a tax deduction
will depend upon whether you (or your spouse) are an active participant in an
employer-maintained retirement plan. If you (and your spouse) are not an active
participant, your IRA contribution will be totally deductible. If you (or your
spouse) are an active participant, the deductibility of your contribution will
depend on your adjusted gross income (AGI) for the tax year for which the
contribution was made. AGI is determined on your tax return (disregarding any
deductible IRA contribution).
DEFINITION OF ACTIVE PARTICIPANT -- Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. a qualified pension, profit sharing, 401(k), or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation
plans under IRC Section 457);
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<PAGE> 3
5. a tax sheltered annuity for employees of certain tax-exempt organizations
or public schools;
6. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan);
and
7. a SIMPLE IRA plan or a SIMPLE 401(k) plan.
If you do not know whether your employer maintains one of these plans or whether
you are an active participant in it, check with your employer and your tax
advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at the end
of the year from your employer will indicate whether you are an active
participant.
If you are single, your threshold AGI level is $25,000. The threshold level if
you are married and file a joint tax return is $40,000, and if you are married
but file a separate tax return, the threshold level is $0. If your AGI is less
than $10,000 above your threshold level, you will still be able to make a
deductible contribution but it may be limited in amount (but never less than
$200).
The deductible amount of your contribution is determined by taking your
threshold AGI level plus $10,000 (e.g., $50,000 if you are married and filing
jointly, $35,000 if you are single) and subtracting from it your AGI (determined
prior to taking your itemized deductions). Multiply the resulting number by .2
to give you your personal deduction limit. You must round up the resulting
number to the next highest $10 if the number is not a multiple of 10.
B. TAX-DEFERRED EARNINGS -- The investment earnings of your IRA are not subject
to federal income tax until distributions are made (or, in certain instances,
when distributions are deemed to be made).
C. NONDEDUCTIBLE CONTRIBUTIONS -- You may make nondeductible contributions to
your IRA to the extent that deductible contributions are not allowed. The sum of
your deductible and nondeductible IRA contributions cannot exceed your
contribution limit (the lesser of $2,000 or 100 percent of compensation). You
may elect to treat deductible IRA contributions as nondeductible contributions.
If you make nondeductible contributions for a particular tax year, you must
report the amount of the nondeductible contribution on your federal income tax
return (using IRS Form 8606).
If you overstate the amount of designated nondeductible contributions for any
taxable year, you are subject to a $100 penalty unless reasonable cause for the
overstatement can be shown. Failure to file any form required by the IRS to
report non-deductible contributions (eg., IRS Form 8606) will result in a $50
per failure penalty.
D. TAXATION OF DISTRIBUTIONS -- The taxation of IRA distributions depends on
whether or not you have ever made nondeductible IRA contributions. If you have
only made deductible contributions, any IRA distribution will be fully included
in income.
If you have ever made nondeductible contributions to any IRA, the following
formula must be used to determine the amount of any IRA distribution excluded
from income:
(Aggregate Nondeductible Contributions)
x (Amount Withdrawn)
- ---------------------- = Amount Excluded
Aggregate IRA Balance From Income
NOTE: Aggregate nondeductible contributions include all nondeductible
contributions made by you through the end of the year of the distribution
(which have not previously been withdrawn and excluded from income). Also note
that aggregate IRA balance includes the total balance of all of your IRAs as of
the end of the year of distribution and any distributions occurring during the
year.
E. ROLLOVERS -- Your IRA may be rolled over to an IRA of yours, or may receive
rollover contributions, provided that all of the applicable rollover rules are
followed. Rollover is a term used to describe a tax-free movement of cash or
other property to your IRA from any of your IRAs, or from your employer's
Qualified Retirement Plan or Tax Sheltered Annuity. SIMPLE IRA funds may not be
rolled to your IRA during the first two years you participate in your employer's
SIMPLE IRA plan. The rollover rules are generally summarized below. These
transactions are often complex. If you have any questions regarding a rollover,
please see a competent tax advisor.
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<PAGE> 4
1. IRA TO IRA ROLLOVERS -- Funds distributed from your IRA may be rolled over
to an IRA of yours if the requirements of IRC Section 408(d)(3) are met. A
proper IRA to IRA rollover is completed if all or part of the distribution
is rolled over not later than 60 days after the distribution is received.
You may not have completed another IRA to IRA rollover from the
distributing IRA during the 12 months preceding the date you receive the
distribution. Further, you may roll the same dollars or assets only once
every 12 months.
2. QUALIFIED PLAN (OR TAX-SHELTERED ANNUITY) TO IRA ROLLOVERS -- Effective
for qualified plan distributions received after January 1, 1993, you may
roll over, directly or indirectly, any eligible rollover distribution. An
eligible rollover distribution is defined generally as any distribution
from a qualified plan (other than distributions to nonspouse
beneficiaries) unless it is part of certain series of substantially equal
periodic payments, after-tax dollars or a required minimum distribution.
If you elect to receive your rollover distribution prior to placing it in
an IRA, thereby conducting an indirect rollover, your plan administrator
will generally be required to withhold 20 percent of your distribution as
a prepayment of income taxes. When completing the rollover, you may make
up the amount withheld, out of pocket, and roll over the full amount
distributed from your qualified plan balance, if you so choose. To qualify
as a rollover, your eligible rollover distribution must be rolled over to
your IRA not later than 60 days after you receive it. Alternatively, you
may claim the withheld amount as income and pay the applicable income tax
and, if you are under age 59 1/2, the 10 percent early distribution
penalty (unless an exception to the penalty applies).
As an alternative to the indirect rollover, your employer generally must
give you the option of directly rolling your qualified plan balance over
to an IRA. If you elect the direct rollover option, your eligible rollover
distribution will be paid directly to the IRA (or other qualified plan)
that you designate. The 20 percent withholding requirements do not apply
to direct rollovers.
If you place your rollover contribution in a separate (i.e., conduit) IRA
plan which holds just those dollars, you preserve the right to later roll
the money originating from the qualified plan into another qualified plan.
3. WRITTEN ELECTION -- At the time you make a proper rollover to an IRA, you
must designate to the Custodian, in writing, your election to treat that
contribution as a rollover. Once made, the rollover election is
irrevocable.
F. CARRYBACK CONTRIBUTIONS -- A contribution is deemed to have been made on the
last day of the preceding taxable year if you make a contribution by the
deadline for filing your income tax return (not including extensions), and you
designate that contribution as a contribution for the preceding taxable year.
For example, if you are a calendar year taxpayer and you make your IRA
contribution on or before April 15, your contribution is considered to have been
made for the previous tax year if you designated it as such.
LIMITATIONS AND RESTRICTIONS
A. SEP PLANS -- Under a Simplified Employee Pension (SEP) Plan that meets the
requirements of IRC Section 408(k), your employer may make contributions to your
IRA. Your employer is required to provide you with information which describes
the terms of your employer's SEP Plan.
B. SPOUSAL IRA -- If you are married, you may make payments to an IRA
established for the benefit of your spouse. Your spouse must not have attained
age 70 1/2 in that year, or any prior year, even if you are age 70 1/2 or
older. You must file a joint tax return for the year for which the
contribution is made.
The amount you may contribute to your IRA and your spouse's IRA is the lesser of
$4,000 or 100 percent of
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<PAGE> 5
your combined compensation. However, you may not contribute more than $2,000 to
any one IRA.
C. DEDUCTION OF ROLLOVERS AND TRANSFERS -- A deduction is not allowed for
rollover or transfer contributions.
D. ESTATE TAX EXCLUSION -- The $100,000 federal estate tax exclusion previously
available has been repealed for individuals dying after 12/31/84. No exclusion
will be allowed for individuals dying after that date. Transfers of your IRA
assets to a named beneficiary made during your life and at your request or
because of your failure to instruct otherwise, may be subject to federal gift
tax under IRC Section 2501 if made after October 22, 1986.
E. SPECIAL TAX TREATMENT -- Capital gains treatment and the favorable five or
ten year forward averaging tax authorized by IRC Section 402 do not apply to IRA
distributions.
F. INCOME TAX TREATMENT -- Any withdrawal from your IRA, except a direct
transfer, is subject to federal income tax withholding. You may, however, elect
not to have withholding apply to your IRA withdrawal. If withholding is applied
to your withdrawal, not less than 10 percent of the amount withdrawn must be
withheld.
G. PROHIBITED TRANSACTIONS -- If you or your beneficiary engage in a prohibited
transaction with your IRA, as described in IRC Section 4975, your IRA will lose
its tax-exempt status and you must include the value of your account in your
gross income for that taxable year.
H. PLEDGING -- If you pledge any portion of your IRA as collateral for a loan,
the amount so pledged will be treated as a distribution and will be included in
your gross income for that year.
FEDERAL TAX PENALTIES
A. EARLY DISTRIBUTION PENALTY -- If you are under age 59 1/2 and receive an IRA
distribution, an additional tax of 10 percent will apply, unless made on account
of death, disability, a qualifying rollover, a direct transfer, the timely
withdrawal of an excess contribution; or if the distribution is part of a series
of substantially equal periodic payments (at least annual payments) made over
your life expectancy or the joint life expectancy of you and your beneficiary.
Beginning January 1, 1997, payments made to pay medical expenses which exceed
7.5 percent of your adjusted gross income and distributions to pay for insurance
by an individual who has separated from employment and who has received
unemployment compensation under a federal or state program for at least 12 weeks
are also exempt from the 10 percent tax. This additional tax will apply only to
the portion of a distribution which is includible in your income.
B. EXCESS CONTRIBUTION PENALTY -- An excise tax of 6 percent is imposed upon any
excess contribution you make to your IRA. This tax will apply each year in which
an excess remains in your IRA. An excess contribution is any contribution amount
which exceeds your contribution limit, excluding rollover and direct transfer
amounts. Your contribution limit is the lesser of $2,000 or 100 percent of your
compensation for the taxable year.
C. EXCESS ACCUMULATION PENALTY -- One of the requirements listed above is that
you are required to take a minimum distribution by April 1 of the year
following the year you attain age 70 1/2 and by the end of each year thereafter
and that your designated beneficiary(ies) is required to take certain minimum
distributions after your death. An additional tax of 50 percent is imposed on
the amount of the required minimum distribution which should have been taken
but was not. This tax is referred to as an excess accumulation penalty tax.
D. EXCESS DISTRIBUTION PENALTY -- You will be taxed an additional 15 percent on
any amount received and included in income during a calendar year from qualified
retirement plans, tax-sheltered annuities and IRAs which exceeds $112,500
(indexed each year for the cost of living). Certain exceptions may apply. If you
receive an excess distribution as described above, you should see your tax
advisor to determine if these exceptions apply to you. This tax is referred to
as an excess distribution penalty. However, this penalty is suspended for
payments received during 1997, 1998 and 1999 as a result of the Small Business
Job Protection Act of 1996.
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<PAGE> 6
E. EXCESS RETIREMENT ACCUMULATION PENALTY -- Your estate will have to pay
additional federal estate tax if you die with an excess retirement
accumulation. The increased estate tax will be equal to 15 percent of the
excess retirement accumulation. An excess retirement accumulation exists if, at
the time of your death, the value of all of your interests in qualified plans,
tax-sheltered annuities and IRAs exceeds the present value of an annuity with
annual payments of $112,500 (indexed each year for the cost of living), payable
over your life expectancy immediately before your death. This tax is referred
to as an excess retirement accumulation tax penalty.
F. PENALTY REPORTING -- You must file Form 5329 with the Internal Revenue
Service to report and remit any penalties or excise taxes.
CUSTODIAN/PLAN ADMINISTRATOR
The Custodian of your IRA is identified in the Individual Retirement Account
Application. If FPS Services, Inc. is not the Custodian, FPS Services, Inc.
serves as the Plan Administrator, and in such capacity is responsible for all
record keeping, applicable tax reporting and fee collection in connection with
IRA accounts. FPS Services, Inc. is also the transfer agent for the Funds.
FEES
The custodial fee currently in effect is an annual maintenance fee of $12 per
Fund account.
Your first annual maintenance fee may be paid at the same time that you mail
your IRA Application to FPS Services, Inc. Forward a separate check for $12,
made payable to FPS Services, Inc.
In subsequent years, you may pay the annual maintenance fee by forwarding a
check to FPS Services, Inc. If you do not forward payment for the annual
maintenance fee by August 31 of each year, FPS Services, Inc. will obtain
payment directly from your IRA by redeeming a sufficient number of the Fund
shares held in your IRA.
The Custodial Fees may be modified upon 30 days' written notice from the
Custodian of your IRA.
One or more of the mutual funds available for investment through your IRA may be
subject to sales charges. Such charges, if any, are listed in the prospectus of
that fund.
OTHER
A. IRS PLAN APPROVAL -- The Agreement used to establish this IRA has been
approved by the Internal Revenue Service. The Internal Revenue Service approval
is a determination only as to form. It is not an endorsement of the plan in
operation or of the investments offered.
B. ADDITIONAL INFORMATION -- You may obtain further information on IRAs from
your District Office of the Internal Revenue Service. In particular, you may
wish to obtain IRS Publication 590, Individual Retirement Arrangements.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
Form 5305-S Under Section 408(a) of the Internal Revenue Code
The depositor whose name appears on the attached is establishing an Individual
Retirement Account under section 408(a) to provide for his or her retirement and
for the support of his or her beneficiaries after death.
The Custodian named on the attached Application has given the Depositor the
disclosure statement required under Regulations section 1.408-6. The Depositor
has assigned the custodial account the sum indicated on the Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a Simplified
Employee Pension Plan as
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<PAGE> 7
described in Section 408(k). Rollover contributions before January 1, 1993,
include rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a Simplified
Employee Pension Plan described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE III
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
Section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the Custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
Section 408(a)(6) and Proposed Regulations Section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations Section
1.401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a non-spouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the Custodial account must be, or begin to
be, distributed by the Depositor's required beginning date (April 1 following
the calendar year end in which the Depositor reaches age 70 1/2). By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the Custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over
a specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph
3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of the
beneficiary or beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year
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of the Depositor's death. If, however, the beneficiary is the
Depositor's surviving spouse, then this distribution is not required
to begin before December 31 of the year in which the Depositor would
have turned age 70 1/2.
(c)Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d)If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Depositor (or the joint life and last survivor expectancy of the Depositor and
the Depositor's designated beneficiary, or the life expectancy of the
designated beneficiary, whichever applies). In the case of distributions under
paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of a distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
ARTICLE VIII
1. CONTRIBUTIONS. The Custodian is under no duty to compel the Depositor to make
any contributions to the Custodial account (the "Account"). The Depositor must
certify to the Custodian (in form satisfactory to it) that any contribution
other than a regular contribution is:
(a) A rollover contribution under Section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8) or 408(d)(3) of the Code, or
(b)A direct transfer from another individual retirement account (as defined
in Section 7701(a)(37) of the Code permitted under Article I of this
agreement.
2. INVESTMENTS. The Depositor shall direct the Custodian with respect to the
investment of all contributions. However, such direction shall be limited to the
purchase
11
<PAGE> 9
of shares of the Fund or Funds. Investments received without direction may be
returned or held uninvested without liability for loss of income, interest or
appreciation while directions are obtained. All dividends and capital gain
distributions received on shares held in the Account shall be reinvested in
additional shares of the issuing Fund(s).
3. CASH CONTRIBUTIONS. The Custodian shall not accept any contribution or direct
transfer from another individual retirement account qualified under Section 408
of the Code unless it is made in cash (or its equivalent).
4. NOTICES AND VOTING. The Custodian shall deliver to the Depositor (or, in the
event of the Depositor's death, the Depositor's designated beneficiary) all
shareholder notices and reports, prospectuses, financial statements, proxy
material and other materials as they are received from the Fund(s). The
Custodian shall vote at all shareholder meetings of the Fund in accordance with
written instructions of the Depositor which will be secured by the Custodian.
5. FEES AND TAXES. The Custodian shall receive, and the Depositor hereby agrees
to pay, such reasonable compensation for its services ("fees") as set forth in
the currently effective Disclosure Statement for the Account. The Custodian may
substitute a different fee schedule at any time upon 30 days' notice in writing
to the Depositor. Such fees may be paid by the Depositor; however, they shall
constitute a charge upon the assets of the Account until paid. Unless otherwise
paid, the Custodian shall have the right to redeem sufficient Fund shares in the
Account and to apply the proceeds to the payment of its annual fees. Any income
taxes or other taxes of any kind that may be levied or assessed against the
Account may be similarly paid from the assets of the Account and shall not be an
obligation of the Custodian.
6. CUSTODIAN'S DUTIES AND OBLIGATIONS. If FPS Services, Inc. is not the
Custodian, FPS Services, Inc. serves as the Plan Administrator for the Custodian
and in such capacity is responsible for all record keeping, applicable tax
reporting and fee collection in connection with IRA accounts. FPS Services, Inc.
also serves as transfer agent for the Fund(s). The Custodian shall be under no
duty whatsoever except such duties as are specifically set forth in this
Agreement, and, notwithstanding Article IV of this Agreement, shall be under no
duty to make any distribution from the Account in the absence of specific
directions from the Depositor or, upon the death of the Depositor, the
Depositor's designated beneficiary, whether or not the Depositor has attained
age 70 1/2 or is deceased. Neither the Custodian, the Plan Administrator, the
Sponsor, the Fund(s) nor any of their respective affiliates shall have any duty:
(a) To ascertain whether a rollover contribution described in Article I of
this Agreement or a direct transfer from another IRA is properly made
in accordance with applicable provisions of the Code or any other
plan, IRA or other retirement arrangement;
(b) To ascertain whether any distribution is sufficient for purposes of
the rules described in Article IV of this Agreement;
(c) To make distributions in the form of an annuity contract under Article
IV of this Agreement;
(d) To confirm the existence of a disability;
(e) To review or make suggestions regarding the investment of the assets
of the Account; or
(f) To invest, reinvest or dispose of any assets held in the Account
except in accordance with Section 2 or 3 of this Article VIII.
Whenever the Depositor is responsible for any direction, notice,
warranty, representation, or instruction under this Agreement, the
Custodian shall be entitled to assume the truth of any statement made,
or believed to have been made, by the Depositor, and the Custodian
shall be under no duty of further inquiry and shall have no liability
with respect to any action taken in reliance upon the truth of such
statement.
12
<PAGE> 10
7. DEPOSITOR'S WARRANTIES. The Depositor hereby agrees that it is not intended
that any fiduciary duties be conferred (by implication or otherwise) upon the
Custodian under this Agreement, and he or she shall look solely to the assets of
his or her Account for the payment of any benefits to which he or she may become
entitled under this Agreement. The Depositor hereby acknowledges his or her
understanding that taxes and penalties may be imposed under the Code for:
(a) Excess contributions;
(b) Premature distributions made before the Depositor dies, becomes disabled
(as defined in Section 72(m) of the Code) or reaches age 59 1/2, except
in the case of:
(i) Rollovers or transfers to other IRAs or rollovers to eligible
retirement plans in accordance with applicable provisions of the Code
and related regulations; or
(ii) A series of substantially equal periodic payments (as defined in
Section 72(t) of the Code);
(c) Distributions which are less than the minimum amounts required under
Sections 401(a)(9), 408(a)(6) and 4974 of the Code; and
(d) Prohibited transactions under Section 4975 of the Code.
Any and all such taxes and penalties shall be paid by the Depositor.
8. AMENDMENT. The Depositor hereby delegates to the Custodian the power to amend
this Agreement, and the Depositor shall be deemed to have consented to any such
amendment. The Custodian shall adopt amendments only in accordance with
directions made by the Sponsor. The Depositor shall be furnished a copy of any
such amendment. Notwithstanding the foregoing, the Custodian may not amend this
Agreement in such manner as to permit or cause assets of the Account to be
diverted to purposes other than for the exclusive benefit of the Depositor and
his or her beneficiaries, except to the extent that any such amendment is
necessary to conform this Agreement to any applicable law, governmental
regulation or ruling or to satisfy the requirements of the Code.
9. TERMINATION. This Agreement shall terminate upon the complete distribution of
the Account to the Depositor or his or her beneficiaries or to another IRA. The
Custodian shall have the right to terminate this Account upon 30 days' notice in
writing to the Depositor or (in the event of his or her death) to the
Depositor's beneficiaries. In such event and upon expiration of such period, the
Custodian shall distribute the Account:
(a) To such other IRA as the Depositor (or his or her beneficiaries) shall
designate;
(b) In the absence of such direction, to the Depositor; or
(c) In the event of the Depositor's death, to the beneficiaries, as their
interests shall appear.
10. RESIGNATION. The Custodian may resign at any time, upon 30 days' notice in
writing to the Depositor, and may be removed by the Depositor or the Sponsor at
any time, upon 30 days' notice in writing to the Custodian. Upon such
resignation or removal, the Depositor or the Sponsor (as appropriate) shall
appoint a qualified successor custodian which shall be a bank, within the
meaning of Section 408(n) of the Code, or another person who has satisfied the
requirements of Section 408(a)(2) of the Code and related regulations.
11. SUCCESSOR CUSTODIAN. Upon receipt by the Custodian of written acceptance of
such appointment by the successor custodian, the Custodian shall transfer and
pay over to the successor custodian the assets of the Account and all records
pertaining thereto. The Custodian is authorized, however, to reserve such sum of
money or assets as it may deem advisable for payment of all of its fees,
compensation, costs and expenses, or for payment of any other liabilities
constituting a charge on or against the assets of the Account or on or against
the Custodian with respect to the Account; and any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor custodian. If assets are retained
13
<PAGE> 11
in accordance with this Section 11, they may be disposed of in accordance with
the provisions of Section 5 of this Article VIII. The successor custodian shall
hold the assets paid over to it under terms which are consistent with Section
408 of the Code and related regulations.
12. FAILURE OF APPOINTMENT. It shall be a condition of the removal of the
Custodian that the Depositor or the Sponsor shall have appointed a qualified
successor custodian. In the event of the resignation of the Custodian and the
failure to appoint a qualified successor custodian, the Custodian may itself
appoint such successor, unless it elects to terminate this Agreement pursuant to
Section 9 of this Article VIII, and the costs of such appointment shall be
treated in the same manner as fees under Section 5 of this Article VIII.
13. REQUIRED APPOINTMENT OF SUCCESSOR CUSTODIAN. The Depositor may remove the
Custodian and appoint a successor custodian upon notification by the
Commissioner of Internal Revenue Service that the Custodian has failed to comply
with the applicable requirements of Section 1.401-12(n) or applicable successor
provisions of the Income Tax Regulations or is not keeping such records, making
such returns or rendering such statements as are required by applicable Treasury
Regulations or by forms prescribed by the Internal Revenue Service.
14. BENEFICIARIES. By separate written document attached as the Beneficiary
Designation to this Agreement, the Depositor may designate a method for payment
of benefits in accordance with Article IV of this Agreement and designate a
beneficiary for the receipt of such benefits in the event of the Depositor's
death. Should the Depositor die without an effective designation of method of
distribution or beneficiary, the assets of the Account shall be distributed to
the surviving spouse in such manner as the Depositor's spouse shall designate
under Article IV of this Agreement. In the absence of a surviving spouse or
surviving designated beneficiary, the assets of the Account shall be distributed
to the Depositor's estate in a lump sum.
15. INDEMNIFICATION. The Depositor agrees to indemnify and hold harmless the
Custodian, the Plan Administrator (if applicable), the Sponsor, the Fund(s) and
their respective affiliates, agents, employees, successors and assigns, from and
against any claim or liability arising in connection with the Depositor's
Account, except in the case of gross negligence or willful misconduct.
16. GOVERNING LAWS. Except to the extent preempted by the Code or other
applicable federal law, this Agreement shall be governed by and construed and
administered under the laws of the Commonwealth of Pennsylvania.
17. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed and enforced
as if such provision had not been included.
18. CAPTIONS. The captions contained in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of this Agreement nor in any way shall affect the
construction of any provision of this Agreement.
19. DEFINITIONS. For purposes of this Article VIII, "Sponsor" means the
institution identified as such in the IRA Application; and "Fund" or "Funds"
means the regulated investment company or companies, the investment advisor to
which, or the principal underwriter of which, is the Sponsor.
INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-A is a model Custodial account agreement that meets the requirements
of Section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is
14
<PAGE> 12
fully executed by both the individual (Depositor) and the Custodian and must be
completed no later than the due date of the individual's income tax return for
the tax year (without regard to extensions). This account must be created in the
United States for the exclusive benefit of the Depositor or his or her
beneficiaries.
Individuals may rely on regulations for Tax Reform Act of 1986 to the extent
specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get from
your Custodian, get Pub. 590, Individual Retirement Accounts (IRAs).
DEFINITIONS
CUSTODIAN: The Custodian must be a bank or savings and loan association, as
defined in Section 408(n), or other person who has the approval of the IRS to
act as Custodian.
DEPOSITOR: The Depositor is the person who establishes the Custodial account.
IDENTIFYING NUMBER
The Depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number is required only for an IRA
for which a return is filed to report unrelated business taxable income. An
employer identification number is required for a common fund created for IRAs.
IRA FOR NON-WORKING SPOUSE
Form 5305-A may be used to establish the IRA Custodial account for a nonworking
spouse. Contributions to an IRA Custodial account for a nonworking spouse must
be made to a separate IRA Custodial account established by the nonworking
spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV: Distributions made under this Article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of Section 408(a)(6) have been met.
ARTICLE VIII: Article VIII and any that follow it may incorporate additional
provisions that are agreed upon by the Depositor and Custodian to complete the
Agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of Custodian,
Custodian's fees, State law requirements, beginning date of distributions,
accepting only cash, treatment of excess contributions, prohibited transactions
with the Depositor, etc. Use additional pages if necessary and attach them to
this form.
REQUESTING DISTRIBUTION
A request for a distribution from the IRA must be submitted in writing to:
FPS SERVICES, INC.
RETIREMENT PLANS -- LIQUIDATION DESK
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406-0903
If a request does not contain all necessary information, FPS Services, Inc. will
notify the Depositor in writing as to its incompleteness, requesting the
additional information, including signature guarantee if required by the Fund.
When the distribution instructions are in proper order, only then will the
shares be redeemed and the monies distributed.
NOTE: Form 5305-A may be reproduced and reduced in size for adoption to
passbook purposes.
15
<PAGE> 1
EXHIBIT 99.B (15)(c)
WATERHOUSE SECURITIES, INC.
MEMBER NEW YORK STOCK EXCHANGE - SIPC
CLEARING DIVISION
44 WALL STREET - NEW YORK, NEW YORK 10005 - (212) 440-0300
OMNIBUS ACCOUNT SERVICES AGREEMENT
AGREEMENT entered into as of JULY 7, 1996, by and between ROULSTON RESEARCH
CORP.(ROULSTON), AS PRINCIPAL UNDERWRITER FOR FAIRPORT FUNDS. (FUNDS) and
Waterhouse Securities Inc., (WSI).
As used in this Agreement, the following terms shall have the following
meanings, unless a different meaning is clearly required by the context:
CLIENT-SHAREHOLDERS shall mean those clients of WSI who maintain an interest in
an omnibus account with the Funds registered in the name of "Waterhouse
Securities Inc." and who receive services from WSI under this Agreement.
FUNDS - See attached list.
In consideration of the mutual covenants herein contained, the parties agree as
follows:
1. WSI agrees to perform certain services for the Client-shareholders as more
particularly set forth below. WSI represents and warrants that it has and
will continue at all times to have the necessary facilities, equipment and
personnel to perform its services hereunder in a business like and
competent manner; systems to comply with any applicable laws, rules and
regulations related to the services to be provided under this Agreement,
including the maintenance and preservation of all records and registrations
required by any applicable laws, rules and regulations.
2. WSI represents and warrants that all Client-shareholders are aware that
they are transacting business with WSI and not Roulston or the Funds, and
that they will look only to WSI and not Roulston or the Funds for
resolution of problems or discrepancies in their accounts.
3. WSI agrees that it will establish with the Funds one or more omnibus
accounts registered in WSI's name for Client-shareholders in the Funds, and
will perform various services for the Client-shareholders in those
accounts, including without limitation: establishing and maintaining
records of Client-shareholders' accounts; processing purchase and
redemption transactions; confirming client-shareholder transactions;
answering routine client inquiries regarding the Funds; assistance to
clients in changing dividend options, account designations and addresses;
withholding taxes on non-resident alien accounts; disbursing income
dividends and capital gains distributions; reinvesting dividends and
distributions; preparing and delivering to Client-shareholders, and state
and federal authorities, including the United States Internal Revenue
Service, such information respecting dividends and distributions paid by
the Funds as may be required by law, rule or regulation; withholding on
dividends and
<PAGE> 2
distributions as may be required by state or Federal authorities from time
to time; and such other services as Fund may reasonably request.
4. WSI shall maintain all historical Client-shareholder records consistent
with requirements of all applicable laws, rules and regulations. Upon the
request of the Funds or Roulston, WSI shall provide copies of written
communications regarding the Funds to or from such Client-shareholders, and
other materials. WSI shall make available (if requested) to the Funds
and/or Roulston the records or communications necessary to determine the
number of Client-shareholders in each WSI omnibus account. If, at any time,
the Funds or Roulston determines that WSI's practices, procedures or
controls are inadequate, written notice of such inadequacy shall be given
to WSI, and WSI shall have 15 days plus any additional time which the Fund
or Roulston may provide to correct its practices, procedures or controls.
In the event such practices, procedures or controls are not adequately
corrected by WSI, Roulston shall have the right to immediately terminate
this Agreement. Nothing in this Agreement shall impose upon Fund or
Roulston the obligation to review WSI's practices, procedures and controls.
5. The official records of transactions of WSI's omnibus account and the
number of shares in such omnibus accounts shall be as determined by the
Funds transfer Agent, Fund/Plan Services, Inc. WSI shall be solely
responsible for any discrepancies between its omnibus accounts and the
Client-shareholder accounts and for the maintenance of all records
regarding the Client-shareholders, the Client-shareholders' transactions,
and the Client-shareholders' interest in the omnibus accounts.
6. WSI is solely responsible for the reconciliation of customer accounts with
its omnibus account at the Fund. If any such reconciliation indicates any
unexplained reconciling item or items, Fund agrees to assist WSI in
resolving any discrepancies.
7. Roulston and/or Fund/Plan Services, Inc as transfer Agent will have the
sole authority and responsibility under this Agreement for monitoring the
issuance of securities of the Funds with a view to preventing unauthorized
issuance, registering the transfer of securities of the Funds, exchanging
or converting securities of the Funds or transferring record ownership of
securities of the Funds by bookkeeping entry without physical issuance of
securities certificates of the Funds. While WSI will provide the services
to its Client-shareholders as described in this Agreement, WSI will not
engage in monitoring the issuance of securities of the Funds with a view to
preventing unauthorized issuance, registering the transfer of securities of
the Funds, exchanging or converting securities of the Funds, or
transferring record ownership of securities of the Funds by bookkeeping
entry without physical issuance of securities certificates of the Funds.
8. Roulston represents and warrants that it will not use any information
relating to Client-shareholders received pursuant to this knowingly
Agreement to solicit or otherwise attempt to sell products to
Client-shareholders.
9. For the services and facilities described in agreement Roulston will pay a
fee to WSI after the end of each month at the annual rate applicable to the
average aggregate daily net asset value
<PAGE> 3
of shares of the Funds in accounts for which WSI provides services. The
initial terms, conditions and amounts of such payments are set forth in
Schedule A. In computing WSI's fee, one-twelfth of the applicable fee rate
set forth in Schedule A shall be applied to the average aggregate daily net
asset value of shares of the applicable Funds in accounts for which WSI
provides services for the month in question. Each month's fee shall be
determined independently of every other month's fee. For the month in which
this Agreement becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days that the Agreement
is in effect during the month. Except as otherwise agreed in writing with
Roulston or the Funds with respect to specific expenditures by WSI, WSI
shall be solely responsible for all costs and expenses of providing
services under this Agreement.
10. With regard to all the services provided to its Client-shareholders by WSI,
WSI is an independent contractor, is solely responsible for its actions or
inactions, and is not and does not have authority to act as an agent of
Roulston or the Funds. WSI is solely responsible to its Client-shareholders
and agrees that at all times, including after termination of this
Agreement, it will be responsible for all complaints and inquiries from its
Client-shareholders relating to WSI's actions or inactions under this
Agreement or relating to the Client-shareholders' accounts during the
period in which this Agreement was in effect.
11. Roulston will be responsible for any loss, claim demand or liability
arising from a material error or omission contained in the Funds'
prospectuses provided that the error or omission was not a result of
information provided by WSI. This Paragraph shall survive the termination
of the Agreement.
12. WSI shall provide such security as is necessary to prevent unauthorized use
of any online computer facilities (if applicable).
13. WSI acknowledges that Roulston may enter into similar agreements with
others without the consent of WSI.
14. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be affected
thereby.
15. This Agreement supersedes all prior services agreements between the parties
relating to the Funds except a Dealer Agreement, if any.
16. This agreement shall become effective as of the date it is accepted by WSI,
and will continue in effect until terminated, which may be at any time, in
writing upon sixty (60) days prior notice by either party to the other;
provided, that WSI shall be entitled to receive all Fees it has earned up
to and including the effective date of the termination. In addition, this
Agreement may be terminated at any time as to any Fund, without the payment
of any penalty by the vote of a majority of the members of the Board of
Trustees of the Funds who are not interested persons of the Funds and have
no direct or indirect financial interest in the operation of the Plan or in
any related agreements to the
<PAGE> 4
plan ("Disinterested Trustees") or by a majority of the outstanding voting
securities of the Funds on not more than sixty (60) days written notice to
the parties to this Agreement.
17. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
18. Whenever notice is required under this Agreement, it shall be given in
writing by registered mail to Roulston at 4000 CHESTER AVE., CLEVELAND OH
44103; and to WSI at 44 WALL STREET, 6TH FLOOR, NEW YORK NY 10005,
attention, PETER A. WIGGER, EXECUTIVE VICE PRESIDENT.
19. WSI shall prepare such quarterly reports for Roulston as shall reasonably
be requested by Roulston.
20. No person is authorized to make any representations concerning the Funds of
their Shares except those contained in the current prospectus of the Funds
and any such information as may be officially designated as information
supplemental to the prospectus.
21. This agreement is a related agreement under the funds' Distribution and
Shareholder Service Plan (the "Plan").
22. This agreement will terminate automatically in the event of its assignment
as defined in the Investment Company Act of 1940, or upon the termination
of the Distribution Agreement between the Funds And Roulston.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
their respective corporate seals to be affixed as of the date first above
written by their respective officers hereunto duly authorized.
ATTEST: Roulston
/s/ Kathryn G. Balazs By: /s/ Scott D. Roulston
- ----------------------------- ----------------------
Kathryn G. Balazs Scott D. Roulston
Senior Vice President President
ATTEST: WSI
By:
/s/ Janet Blackwell /s/ Peter A. Wigger
- ------------------------------ -------------------------
Janet Blackwell Peter A. Wigger
First Vice President Executive Vice President
<PAGE> 5
OMNIBUS ACCOUNT SERVICE AGREEMENT
List of participating funds:
- ----------------------------
Fairport Growth & Income Fund # 580
Fairport Government Securities Fund # 581
Fairport Midwest Growth Fund # 582
<PAGE> 6
OMNIBUS ACCOUNT SERVICES AGREEMENT
Schedule A
Fee payable to Waterhouse Securities Inc. is based on the average aggregate
daily net asset value of shares of the Funds included in this agreement.
==================================================================
Net Asset Value Rate
- ------------------------------------------------------------------
Less than $50,000,000 0.0025
- ------------------------------------------------------------------
Less than $100,000,000 0.0025
- ------------------------------------------------------------------
Greater than $100,000,000 0.0025
==================================================================
<PAGE> 1
EXHIBIT 99.B(15)(d)
SHAREHOLDER SERVICE AGREEMENT
This Shareholder Service Agreement (this "Agreement") is made and entered
into by and between First Trust Corporation ("FTC"), a Colorado corporation with
its principal office at 717 Seventeenth Street, Denver, Colorado 80202 and
Roulston Research Corporation (the "Company"), an Ohio corporation, with its
principal office at 4000 Chester Avenue, Cleveland, Ohio 44103.
RECITALS
A. FTC is a duly licensed trust company providing trust, custodial and
other services to individual retirement accounts, qualified retirement plans and
taxable investment accounts (the "Plan(s)"). Some of the Plans contain
provisions that permit or require each participant to direct the investment of
that portion of a Plan's assets that is allocated to such participant's account.
Some of the Plans provide for the delegation of investment authority to
investment managers, co-trustees, or named fiduciaries other than FTC. In no
case does FTC have any investment discretion or authority with respect to any of
the Plans.
B. In its capacity as principal underwriter, the Company has entered into a
plan and agreement with each of the mutual fund companies identified on EXHIBIT
A for making payments to certain persons for shareholder servicing and
administration of shareholder accounts. The Company may enter into a similar
plan and agreement with other mutual fund companies in the future, and such
additional mutual fund companies may be added to this Agreement as provided
below. The mutual fund companies currently identified on Exhibit A and those
added to this Agreement in the future are referred to below individually as the
"Fund" and collectively as the "Funds."
C. FTC desires to make the Funds available to the Plans and to provide
shareholder servicing and recordkeeping functions required for purchases and
redemptions of, and dividends paid on account of, the shares of the Funds to be
held by FTC for the benefit of the Plans.
AGREEMENT
1. PROCEDURES FOR ACCOUNTS AND TRANSACTIONS. The Company will cause the
Funds' transfer agent (the "Transfer Agent") to maintain one or more accounts
(the "FTC Account(s)") on its books for each Fund for the Plans. The assets of
one or more Plans may be held in any FTC Account. The FTC Accounts will be
titled in the nominee name of "FTC & Co., Attn: DATAlynx #_____________," and
FTC, as trustee or custodian of the Plans, will be the shareholder of record
for the FTC Accounts. FTC will purchase or redeem shares of each Fund for
the benefit of the Plans, as applicable, as follows:
(a) The Company confirms that if FTC notifies the Company or the
Transfer Agent prior to the earlier of 4:00 P.M. or the close of trading on the
New York Stock Exchange on any business day (which is defined as each day that
the New York Stock Exchange is open for regular business) concerning the
purchase of a Fund's shares, the purchase will be effected on
<PAGE> 2
such business day, and that if FTC notifies the Company or the Transfer Agent at
or after such time on any business day concerning the purchase of a Fund's
shares, the purchase will be effected on the next business day. (All times
referred to in this Agreement will be Eastern time.) Purchases will be paid for
in cash or by Federal Funds at prices equal to net asset value. FTC will make
reasonable efforts to ensure that payment is received by the Transfer Agent
prior to 4:00 o'clock P.M. on the next business day following the effective date
of the purchase.
(b) The Company confirms that if FTC notifies the Company or the
Transfer Agent prior to the time set forth in Section l(a) on any business day
concerning the redemption of a Fund's shares, the redemption will be effected on
such business day, and that if FTC notifies the Company or the Transfer Agent at
or after such time on any business day concerning the redemption of a Fund's
shares, the redemption will be effected on the next business day. The Company
confirms that the Transfer Agent will wire redemption proceeds to FTC on the
next business day following the effective date of the redemption.
(c) The Company confirms that FTC may make orders for the purchase or
redemption of shares of a Fund by telephonic advice, subject to that Fund's
telephone order procedures as set forth in Exhibit C.
(d) FTC will maintain separate accounting and recordkeeping for each
of the Plans, and will allocate on its records the number of Fund shares
purchased, accrued as dividends and redeemed, and any cash dividends or
distributions paid on account of the shares of each Fund, for each of the Plans.
FTC will reconcile the amounts posted to each Plan with the amounts recorded on
the Transfer Agent's records for each Fund for each respective FTC Account.
(e) The Company will be responsible under this Agreement for the
servicing of the respective FTC Accounts and will have no responsibility for the
servicing of the Plans. FTC will provide recordkeeping services to the Plans.
The foregoing obligations of the parties are more particularly described on
Exhibit B. which is made a part of this Agreement.
2. FEES. For the services provided by FTC under this Agreement, the Company
will pay to FTC a quarterly service fee equal on an annual basis to .25%
(0.0625% per quarter) of the average daily net asset value of the shares of such
Fund which are owned beneficially by the Plans during such period. Such fees
will be paid no later than ten (10) days following the end of the calendar
quarter in which they accrue.
3. MAIMER OF PAYMENT. Payments made pursuant to Section 2 of this Agreement
will be made by check, and will be accompanied by one report for each FTC
Account. Such report will show the calculation used to arrive at the amount
paid.
4. REPORTING OF TRANSACTIONS. The Company will furnish or cause to be
furnished to FTC, on a transaction-by-transaction basis, a statement that will
set forth for each FTC Account the number of shares purchased or redeemed, the
beginning and ending share balances, and the net asset value per share. The
Company will mail such statement to FTC no later than the business
<PAGE> 3
day next following the transaction being reported.
5. SHAREHOLDER COMMUNICATIONS. FTC will cause the mailing to the Plans of
all currently effective prospectuses of the Fund, proxy materials (including
notices, proxy statements and forms of proxies), reports and other
communications which must be furnished by law to shareholders, in accordance
with the procedures set forth on Exhibit B. Upon FTC's request, the Company will
provide FTC with sufficient copies of any requested communications to ensure FTC
is able to fulfill its obligations as described in this Section 5.
6. COORDINATION OF OPERATIONS. The Company will cause appropriate personnel
to be made available, as may be reasonably requested by FTC, to consult with FTC
in coordinating operations pursuant to this Agreement.
7. STATUS OF FTC. The parties acknowledge and agree that the services
provided by FTC are recordkeeping and related services only and are not the
services of an underwriter or a principal underwriter of the Funds within the
meaning of the Securities Act of 1933 or the Investment Company Act of 1940.
This Agreement does not grant FTC any right to purchase shares from the Funds,
nor does it constitute FTC an agent of the Funds or of the Company, for purposes
of selling shares of the Funds to any dealer or to the public, or for any other
purposes. To the extent FTC enters any purchase or redemption order for an FTC
Account, such purchase or redemption order will be made by FTC (a) as agent of
each of the Plans whose shares are the subject of such purchase or redemption
order, and (b) pursuant to instructions from the account owner, participant,
named fiduciary entity or any other person with investment discretion and
authority for the assets that are the subject of the transaction.
8. AMENDMENTS. Any amendment to this Agreement will be valid only if in
writing and signed by the parties. The parties agree that Funds may be deleted
from and additional Funds may be added to this Agreement (and thus would become
"Funds" for purposes of this Agreement), whenever the patties sign an addendum
that identifies such Funds, at which time this Agreement will be deemed to have
been so amended without further action by the parties.
9. TERMINATION WITHOUT CAUSE. FTC will have the right to terminate this
Agreement for any reason upon 60 days' written notice to the Company, without
any liability arising by reason of such termination. Company may terminate this
Agreement at any time, without payment of any penalty, by vote of a majority of
the Independent Trustees or by vote of a majority of the outstanding voting
securities of any Fund, upon 60 days written notice to FTC.
10. TERMINATION UPON BREACH. Upon any breach of this Agreement by FTC, the
Company may terminate this Agreement upon 10 days' written notice to FTC. Upon
any breach of this Agreement by the Company, FTC may terminate this Agreement at
any time upon 10 day's written notice to he Company.
11. RESOLUTION OF DISPUTES. All disputes arising out of or in connection
with this Agreement (except disputes concerning the Company's use of FTC
proprietary information described in Section 14) will be settled by arbitration,
to be conducted pursuant to the rules of the American
<PAGE> 4
Arbitration Association. All arbitration proceedings will take place only in
Denver, Colorado. To the extent not preempted by federal law, Colorado statutory
law (including without limitation the statutes governing the award of damages
and arbitration) and Colorado common law will control during arbitration. Both
parties waive any right either of them may have to institute or conduct
litigation or arbitration in any other forum or location, or before any other
body, except that FTC expressly reserves the rights granted to it in Section 14.
Arbitration is final and binding on the parties. An award rendered by the
arbitrator(s) may be entered in any court having jurisdiction over the pertinent
party. The prevailing party in any arbitration, or in any judicial proceeding
relating to the rights of FTC under Section 14, will be entitled to reasonable
attorneys' fees and costs.
12. INDEMNIFICATION OBLIGATIONS. FTC agrees to indemnify and hold harmless
the Company any loss, expense, cost, liability or damage (including reasonable
attorneys fees) which may be suffered by it as a result of any breach of this
Agreement by FTC or arising from any negligent act or omission of FTC in the
performance of its duties under this Agreement. The Company agrees to indemnify
and hold harmless FTC from any loss, expense, cost, liability or damage
(including reasonable attorneys fees) which may be suffered by it as a result of
any breach of this Agreement by the Company or arising from any negligent act or
omission of the Company in the performance of its duties under this Agreement.
13. INDEMNIFICATION PROCEDURES. If a person receives notice of the
commencement of any action, suit, or proceeding (an "Action") or notice that any
Action may be commenced, and if the person receiving the notice (the
"indemnified person") desires to be indemnified by a party under this Agreement
(the "indemnifying party"), the indemnified person will give notice to the
indemnifying party of the commencement of the Action or of the possibility that
an Action will be commenced. Any omission to notify an indemnifying party will
not relieve the indemnifying party from any liability which it may have under
this Agreement, except to the extent the failure to notify the indemnifying
party prejudices the rights of the indemnifying party. The indemnified person
will be entitled, at the sole expense and liability of the indemnifying party,
to exercise full control of the defense, compromise or settlement of any such
Action unless the indemnifying party, within a reasonable time after the giving
of such notice by the indemnified person, (1) admits in writing to the
indemnified person the indemnifying party's duty to indemnify the indemnified
person for such Action under the terms of this Section, (2) notifies the
indemnified person in writing of the indemnifying party's intention to assume
such defense, (3) provides evidence reasonably satisfactory to the indemnified
person as to the indemnifying party's ability to pay the amount, if any, for
which the indemnified person may be liable as a result of such Action, and (4)
retains legal counsel reasonably satisfactory to the indemnified person to
conduct the defense of such Action. The other person will cooperate with the
person assuming the defense, compromise or settlement of any Action in
accordance with this Agreement in any manner that such person reasonably may
request. If the indemnifying party so assumes the defense of any such Action,
the indemnified person will have the right to employ a separate counsel and to
participate in (but not control) the defense, compromise or settlement of the
Action, but the fees and expenses of such counsel will be at the expense of the
indemnified person unless (a) the indemnifying party has agreed to pay such fees
and expenses, (b) any relief other than the payment of money damages is sought
against the indemnified person, or (c) the
<PAGE> 5
indemnified person has been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the indemnifying party and that a conflict of interest therefore
exists, and in any such case that portion of the fees and expenses of such
separate counsel that are reasonably related to matters covered by the indemnity
provided in this Section will be paid by the indemnifying party. No indemnified
person will settle or compromise any such Action for which it is entitled to
indemnification under this Agreement without the prior written consent of the
indemnifying party, which consent cannot be unreasonably withheld, unless the
indemnifying party has failed, after reasonable notice, to undertake control of
such Action in the manner provided in this Section. No indemnifying party will
settle or co Promise any such Action in which any relief other than the payment
of money damages is sought against any indemnified person without the consent of
the indemnified person, such consent not to be unreasonably withheld.
14. CONFIDENTIALITY OF INFORMATION. The Company recognizes that the
information provided to it or to be provided to it under this Agreement relating
to the Plans (including the names and addresses of the participants, the account
numbers of the Plans, and any similar information) is the proprietary
information of FTC and agrees to keep such information confidential and to
prevent the use of such information by others, except to the extent it is
required by law to disclose such information or necessary it to perform its own
actions under this agreement. Prior to disclosing any such information to any
person in accordance with a requirement of law, the Company will redact such
information to the greatest extent permissible under law and will provide FTC
with a reasonable opportunity to appear in any judicial, administrative or
arbitration proceeding or investigation to contest the disclosure of such
information. The Company also agrees not to use such information for its benefit
or the benefit of any affiliate of the Company, directly or indirectly. The
obligations of the Company under this Section 14 will aptly during the term of
this Agreement and for a period of five (5) years after the date this Agreement
is terminated, for whatever reason. Because a violation of the duties of the
Company under this Section 14 could cause irrevocable injury to FTC and could
cause injury to FTC which may not be measurable in money damages, the Company
agrees that FTC will be entitled to obtain injunctive relief against the Company
for any violation of such duties, without prejudicing FTC's right to obtain
money damages.
15. INTEREST ON AMOUNTS DUE. Any amount due under this Agreement from one
party to another party will bear interest, from the date such amount is due
until such payment is made, at a rate equal to the "prime rate," as published
from time to time by The Wall Street Journal.
16. PRIOR AGREEMENTS. This Agreement supersedes all proposals, prior
communications, advertising, representations, warranties and promises, whether
oral or written, relating to :he subject matter of this Agreement.
17. ASSIGNMENT. This Agreement shall terminate automatically in the event
of its assignment.
18. SEPARABILITY. If any provision of this Agreement is deemed to be in
violation of law or is unenforceable, the remainder of this Agreement with such
provision omitted will remain in full
<PAGE> 6
force and effect.
19. COMPLIANCE WITH LAWS. Each party agrees to abide by all applicable
federal and sta e laws and regulations in connection with the performance of its
obligations under this Agreement.
20. SURVIVAL OF OBLIGATIONS. The representations and warranties of the
parties and all obligations and responsibilities of the parties under this
Agreement, including all payment obligations, as to periods through the date
this Agreement is terminated, will survive the termination of this Agreement.
Without limiting the foregoing, the provisions of Sections 11, 12, 13, 14, and
15 will continue to apply aft' r termination of this Agreement.
21. NOTICES. Except as otherwise provided in this Agreement, all notices
given under this Agreement will be given only by delivery in person, by deposit
in the United States mails, using certified mail, by commercial overnight
delivery service, or by facsimile transmission (with machine confirmation) or
electronic mail. All notices will be in writing and addressed to the party at
the address set forth in the first paragraph of this Agreement (unless a party
specifies by a written notice to the other party that a different address should
be used). Notices will be deemed delivered when delivered in person or, if
mailed by certified mail, on the third business day after the date of deposit
into the United States mails, and upon receipt, if by commercial overnight
delivery service. Facsimile transmission and electronic mail will be deemed
received the same day as sent.
22. EFFECTIVE DATE. This Agreement will be effective on the date it is
accepted and executed by FTC.
23. GOVERNING LAW. This Agreement will be construed by and governed in
accordance with the laws of the State of Colorado.
ROULSTON RESEARCH CORPORATION (Company)
By /s/ Scott D. Roulston
-------------------------------------
Its: President
------------------------------------
Date: December 11, 1996
-----------------------------------
Accepted by:
FIRST TRUST CORPORATION (FTC)
By:
--------------------------------------
Its: Senior Vice President/Compliance
-------------------------------------
Date: December 12, 1996
------------------------------------
<PAGE> 7
EXHIBIT A
to Shareholder Service Agreement
Mutual Fund Companies
<TABLE>
<CAPTION>
Fund Name Cusip Ticker Symbol Trading Cutoff Time
- --------- ----- ------------- -------------------
<S> <C> <C> <C>
1. Fairport Midwest Growth* 305562308 FPMGX 4:00 p.m. EST
2. Fairport Growth and Income* 305562100 FPGIX 4:00 p.m. EST
3. Fairport Government
Securities Fund* 305562209 FPGSX 4:00 p.m. EST
</TABLE>
* These Funds have adopted a Rule 12b-1 Plan.
<PAGE> 8
EXHIBIT B
TO SHAREHOLDER SEANCE AGREEMENT
REGISTRAR, TRANSFER AGENT AND RECORDKEEPING SERVICES
A. Registrar and Transfer Agency Functions Provided or Caused to be Provided
by the Company
1. Process purchases, redemptions and exchanges of Fund shares in
accordance with instructions received from FTC.
2. Provide to FTC one Fund statement for each FTC Account as described in
Section 4 of the Agreement.
3. Provide daily pricing, dividend reinvestment and capital gain
information for each FTC Account.
4. Assist FTC in resolving any account discrepancies between FTC and the
Fund.
B. Recordkeeping and Shareholder Servicing Functions Provided by FTC
1. Provide sub-accounting services in accordance with Section 1(d) of the
Agreement.
2. Timely cause the mailing of Fund prospectuses, proxies and related
information to those Plans and individual participants identified by
FTC and in accordance with Section 5 of the Agreement.
3. Assist in processing purchase and redemption transactions; changing
dividend options, account designations and addresses; and
establishment and maintenance of Plan accounts and records.
4. Provide additional services to the Plans as required in the separate
IRA account, custodial account or service agreement between FTC and
each taxable investment account owner or plan employer, as they may be
amended from time to time.
<PAGE> 9
EXHIBIT C
TO SHAREHOLDER SERVICE AGREEMENT
The Funds currently permit the transaction of purchase and redemption orders by
telephone. Shareholders may purchase or redeem shares by telephone by calling
the Company or the Transfer Agent. Orders received by the Company or the
Transfer Agent prior to the Valuation Time (as defined in the Funds' Prospectus)
on any Business Day will be effective that day, and the price of shares will be
the net asset value per share of that Fund next determined after the order, in
proper order, is received by the Company or the Transfer Agent.
Neither Fairport Funds, the Funds nor the Funds' transfer agent will be
responsible for the authenticity of the instructions received by telephone if it
reasonably believes those instructions to be genuine. Fairport Funds and the
Funds' 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.
In addition, any transaction requests, whether by telephone or otherwise, are
subject to the Funds' transaction procedures as described in their then current
prospectus.
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
=========================================
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints JOSEPH M. O'DONNELL, ESQ., GERALD J. HOLLAND, DEBORAH ANN POTTER and
WILLIAM J. BALTRUS and each of them, with full power to act without the other,
as his/her true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute any amendment
to the Trust's registration statement with the Securities Exchange Commission
under the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended; to file for exemptive orders or to qualify or register all or
part of the securities of FAIRPORT FUNDS (the "Funds") for sale in various
states; to perform on behalf of the Funds any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
23rd day of April, 1996.
----------------------------
THOMAS V. CHEMA,
Trustee
ACKNOWLEDGMENT
--------------
State of Ohio )
) ss:
County of )
---------------------------------------
The foregoing instrument was acknowledged before me this 23rd day of April,
1996, by THOMAS V. CHEMA, Trustee of FAIRPORT FUNDS.
- ------------------------------
Notary Public
<PAGE> 2
POWER OF ATTORNEY
=========================================
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints JOSEPH M. O'DONNELL, ESQ., GERALD J. HOLLAND, DEBORAH ANN POTTER and
WILLIAM J. BALTRUS and each of them, with full power to act without the other,
as his/her true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute any amendment
to the Trust's registration statement with the Securities Exchange Commission
under the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended; to file for exemptive orders or to qualify or register all or
part of the securities of FAIRPORT FUNDS (the "Funds") for sale in various
states; to perform on behalf of the Funds any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
23rd day of April, 1996.
------------------------------
DAVID H. GUNNING,
Trustee
ACKNOWLEDGMENT
--------------
State of Ohio )
) ss:
County of )
---------------------------------------
The foregoing instrument was acknowledged before me this 23rd day of April,
1996, by DAVID H. GUNNING, Trustee of FAIRPORT FUNDS.
- -------------------------
Notary Public
<PAGE> 3
POWER OF ATTORNEY
=========================================
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints JOSEPH M. O'DONNELL, ESQ., GERALD J. HOLLAND, DEBORAH ANN POTTER and
WILLIAM J. BALTRUS and each of them, with full power to act without the other,
as his/her true and lawful attorney-in-fact and agent, with full and several
power of substitution, to take any appropriate action to execute any amendment
to the Trust's registration statement with the Securities Exchange Commission
under the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended; to file for exemptive orders or to qualify or register all or
part of the securities of FAIRPORT FUNDS (the "Funds") for sale in various
states; to perform on behalf of the Funds any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
23rd day of April, 1996.
--------------------------
IVAN J. WINFIELD,
Trustee
ACKNOWLEDGMENT
--------------
State of Ohio )
) ss:
County of )
---------------------------------------
The foregoing instrument was acknowledged before me this 23rd day of April,
1996, by IVAN J. WINFIELD, Trustee of FAIRPORT FUNDS.
- -----------------------------
Notary Public
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000930363
<NAME> FAIRPORT FUNDS
<SERIES>
<NUMBER> 1
<NAME> FAIRPORT MIDWEST GROWTH FUND
<MULTIPLIER> 1
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<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
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<INVESTMENTS-AT-VALUE> 55795310
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<OTHER-ITEMS-ASSETS> 754
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<DIVIDEND-INCOME> 716743
<INTEREST-INCOME> 134338
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<EXPENSES-NET> 768463
<NET-INVESTMENT-INCOME> 82618
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<APPREC-INCREASE-CURRENT> 3805220
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<DISTRIBUTIONS-OF-INCOME> 91013
<DISTRIBUTIONS-OF-GAINS> 774801
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</TABLE>
<TABLE> <S> <C>
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<NAME> FAIRPORT FUND
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
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<INVESTMENTS-AT-COST> 5561814
<INVESTMENTS-AT-VALUE> 5561882
<RECEIVABLES> 60324
<ASSETS-OTHER> 22313
<OTHER-ITEMS-ASSETS> 117328
<TOTAL-ASSETS> 5761847
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 9547
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<SHARES-COMMON-STOCK> 589863
<SHARES-COMMON-PRIOR> 879015
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (108913)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 68
<NET-ASSETS> 5752300
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 434855
<OTHER-INCOME> 0
<EXPENSES-NET> 67226
<NET-INVESTMENT-INCOME> 367629
<REALIZED-GAINS-CURRENT> (97666)
<APPREC-INCREASE-CURRENT> (3304)
<NET-CHANGE-FROM-OPS> 266659
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 405004
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 177063
<NUMBER-OF-SHARES-REDEEMED> 498079
<SHARES-REINVESTED> 31864
<NET-CHANGE-IN-ASSETS> (2894516)
<ACCUMULATED-NII-PRIOR> 37375
<ACCUMULATED-GAINS-PRIOR> (11247)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18674
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 152944
<AVERAGE-NET-ASSETS> 7478245
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> (0.05)
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.75
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000930363
<NAME> FAIPORT FUNDS
<SERIES>
<NUMBER> 2
<NAME> FAIRPORT GROWTH & INCOME FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 17,777,261
<INVESTMENTS-AT-VALUE> 22,843,333
<RECEIVABLES> 708,242
<ASSETS-OTHER> 19,487
<OTHER-ITEMS-ASSETS> 833
<TOTAL-ASSETS> 23,571,895
<PAYABLE-FOR-SECURITIES> 421,530
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 79,512
<TOTAL-LIABILITIES> 501,042
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,110,573
<SHARES-COMMON-STOCK> 1,622,062
<SHARES-COMMON-PRIOR> 1,877,974
<ACCUMULATED-NII-CURRENT> 35,717
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,858,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,066,072
<NET-ASSETS> 23,070,853
<DIVIDEND-INCOME> 551,308
<INTEREST-INCOME> 43,022
<OTHER-INCOME> 0
<EXPENSES-NET> 369,619
<NET-INVESTMENT-INCOME> 224,711
<REALIZED-GAINS-CURRENT> 1,856,970
<APPREC-INCREASE-CURRENT> 1,863,728
<NET-CHANGE-FROM-OPS> 3,945,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 254,673
<DISTRIBUTIONS-OF-GAINS> 178,762
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 361,212
<NUMBER-OF-SHARES-REDEEMED> 646,096
<SHARES-REINVESTED> 28,972
<NET-CHANGE-IN-ASSETS> (11,153)
<ACCUMULATED-NII-PRIOR> 65,679
<ACCUMULATED-GAINS-PRIOR> 180,283
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 450,714
<AVERAGE-NET-ASSETS> 24,568,929
<PER-SHARE-NAV-BEGIN> 12.29
<PER-SHARE-NII> 0.139
<PER-SHARE-GAIN-APPREC> 2.04
<PER-SHARE-DIVIDEND> 0.14
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</TABLE>
