<PAGE> 1
As filed with the Securities and Exchange Commission on
December __, 1998
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
[_] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 5
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 6
FAIRPORT 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)
____ on (date) pursuant to paragraph (b)
x 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.
<PAGE> 2
FAIRPORT FUNDS
CHARTING A COURSE YOU CAN TRUST
Investment Adviser:
ROULSTON & COMPANY, INC.
FAIRPORT MIDWEST GROWTH FUND
FAIRPORT GROWTH AND INCOME FUND
FAIRPORT GOVERNMENT SECURITIES FUND
Prospectus dated March 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MIDWEST GROWTH FUND................................................3
Investment Goal..............................................3
Principal Strategy...........................................3
Important Risks..............................................3
Bar Chart and Performance Table..............................4
Portfolio Manager............................................5
GROWTH AND INCOME FUND.............................................5
Investment Goals.............................................5
Principal Strategy...........................................5
Important Risks..............................................5
Bar Chart and Performance Table..............................6
Portfolio Managers...........................................7
GOVERNMENT SECURITIES FUND.........................................7
Investment Goals.............................................7
Principal Strategy...........................................7
Important Risks..............................................8
Bar Chart and Performance Table..............................8
Portfolio Managers...........................................9
FEES AND EXPENSES OF THE FUNDS....................................10
OTHER SECURITIES AND RISKS........................................11
MANAGEMENT OF THE FUNDS...........................................12
PRICING FUND SHARES...............................................12
PURCHASE OF SHARES................................................13
Purchase of Fund Shares.....................................14
Distribution Arrangements...................................15
REDEMPTION OF SHARES..............................................16
DIVIDENDS, DISTRIBUTIONS AND TAXES................................17
Dividends & Distributions...................................17
Tax Consequences............................................17
FINANCIAL HIGHLIGHTS..............................................18
</TABLE>
<PAGE> 4
MIDWEST GROWTH FUND
INVESTMENT GOAL
Capital appreciation.
PRINCIPAL STRATEGY
The Fund invests primarily in common stocks and at least 65% of those
investments must be in companies headquartered in the Midwest region of the
United States. This region encompasses Ohio, Indiana, Michigan, Illinois,
Wisconsin, Minnesota, Western New York and Western Pennsylvania. Although the
Fund does not specifically focus on market capitalization, the majority of its
investments have been in small-sized and mid-sized companies, which means
companies with less than $5 billion in total market capitalization.
There are different ways to measure the size of a company. Market
capitalization is a common way to measure the size of a company based on the
price of its common stock; it is simply the number of outstanding shares of the
company multiplied by the current share price.
A very disciplined research effort looks for companies in which
significant change is taking place that, in the opinion of the portfolio
manager, is not fully reflected in the price of the stock. This value style of
investing seeks to identify companies that appear underpriced in regards to
their intrinsic worth and future prospects. It also takes into account the
fundamentals of a company in addition to looking for a catalyst of change. This
change might include new management, new products, implementing a new business
strategy or some internal operational turnaround.
The Fund typically sells a stock when its fundamentals deteriorate,
falls short of the portfolio manager's expectations, or no longer offers good
value.
IMPORTANT RISKS
There are risks associated with any investment, but the risks associated
with an investment in the Fund include:
- stock market risk, or the risk that the price of securities held by
the Fund, as well as the broader stock market, will fall due to
various factors or unpredictable circumstances, including interest
rate changes, trends in the U.S. and world economies and general
investor confidence.
- the success of Fund's investments depends on the ability of the
portfolio manager to correctly assess the potential of the stocks
purchased for the Fund.
- because of the Fund's regional focus, the population of companies
available for investment might influence performance under certain
market conditions.
<PAGE> 5
- small and mid-sized capitalization stocks involve certain special
risks including that such stocks may exhibit greater price volatility
and be subject to greater risks of losing value than stocks of
companies with larger market capitalizations.
- losing part or all of your investment.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and performance table provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual return compares with
that of a broad measure of market performance. Both the chart and the table
assume reinvestment of dividends and distributions. As with all mutual funds,
past performance is not a prediction of future performance.
During the five years ending December 31, 1998, the highest return for a quarter
was 14.09% for the quarter ended June 30, 1997 and the lowest return for a
quarter was -17.32% for the quarter ended September 30, 1998.
<TABLE>
<CAPTION>
28.32% 13.88% 17.56% 18.39% 20.41% %
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
1993* 1994 1995 1996 1997 1998
- --------------------------
</TABLE>
PERFORMANCE TABLE
(Average annual total returns as of
December 31, 1998)
<TABLE>
<CAPTION>
1 year 5 years Since Inception*
------------------------------------------------------------
<S> <C> <C> <C>
Midwest Growth
Fund % % %
S&P 500 % % %
Lipper Growth Fund Average % % --
- --------------------------
</TABLE>
*The Fund commenced operation on July 1, 1993.
The S&P 500 Index and Lipper Growth Fund Average are unmanaged indicators of
financial performance and as such are not sold as investments. The Lipper Growth
Fund Average provides information that shows how the Fund's performance compares
with the returns of an index of funds with similar investment objectives. Unlike
the Fund, these indices do not reflect any fees or expenses.
<PAGE> 6
PORTFOLIO MANAGER
The Fund is managed by Norman F. Klopp. Mr. Klopp graduated from Yale
University in 1960 and is a Chartered Financial Analyst. Mr. Klopp joined
Roulston & Company, Inc., the Fund's investment adviser, in 1964 and has
served as Director of Research and Chief Investment Officer. Since joining
Roulston, Mr. Klopp has closely followed companies and industries based in
the Midwest. He remains active as a security analyst working with the
Roulston's research department to identify and follow investments for the
Fund.
GROWTH AND INCOME FUND
INVESTMENT GOALS
Capital appreciation and current income.
PRINCIPAL STRATEGY
The Fund invests principally in the common stocks of well established
companies with long-term growth potential and a history of paying dividends. The
portfolio managers seek growing companies with strong cash flow returns
which sell at a lower price-to-earnings ratio than the S&P 500. Companies
selected must, in the managers' opinion, have:
- a strong business strategy.
- a durable competitive advantage.
- a record of increasing the dividend over time.
A company's price/earnings ratio is a common measure of the value of a common
stock; it is simply the ratio of the stock's market price to its earnings per
share. For example, a common stock with the P/E of 12 means that its price per
share is twelve times its earnings per share.
The portfolio managers adhere to a value approach to investment
management that also requires a potential investment to meet other standards
such as price/sales ratios and historical price/earnings ratios relative to the
S&P 500 and industry peers. The research process for current and potential
investments in the Fund requires personal visits with company management, as
well as other sources of information such as suppliers, customers, and
competitors, to track original assumptions, verify information, and make changes
regarding each investment. This value style of investing seeks to identify
companies that appear underpriced in regards to their intrinsic worth and future
prospects. It also takes into account the fundamentals of a company in addition
to looking for a catalyst of change.
The Fund typically sells a stock when its fundamentals deteriorate, falls short
of the portfolio managers' expectations, or no longer offers good value.
IMPORTANT RISKS
There are risks associated with any investment, but the particular risks
associated with your investment in the Fund include:
- stock market risk, or the risk that the price of securities held by
the Fund, as well as the broader stock market, will fall due to
various factors or unpredictable circumstances,
<PAGE> 7
including interest rate changes, trends in the U.S. and world
economies and general investor confidence.
- the success of the Fund's investments depends on the portfolio
managers' skill in assessing the potential for the securities
purchased.
- losing some portion or all of your investment.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and performance table provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual return compares with
that of a broad measure of market performance. Both the chart and the table
assume reinvestment of dividends and distributions. As with all mutual funds,
past performance is not a prediction of future performance.
During the five years ending December 31, 1998, the highest return for a quarter
was 17.65% for the quarter ended June 30, 1997 and the lowest return for a
quarter was -15.3% for the quarter ended September 30, 1998.
<TABLE>
<CAPTION>
10.39% 4.56% 13.69% 14.80% 18.08% %
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
1993* 1994 1995 1996 1997 1998
</TABLE>
PERFORMANCE TABLE
(Average annual total returns as of December 31, 1998)
<TABLE>
<CAPTION>
1 year 5 years Since Inception*
-------------------------------------------------------
<S> <C> <C> <C>
Growth and
Income Fund % % %
S&P 500 % % %
Lipper Growth & Income
Fund Average % % --
- --------------------------
</TABLE>
*The Fund commenced operation on July 1, 1993.
<PAGE> 8
The S&P 500 Index and Lipper Growth & Income Fund Average are unmanaged
indicators of financial performance and as such are not sold as investments.
The Lipper Growth & Income Fund Average provides information that shows how the
Fund's performance compares with the returns of an index of funds with similar
investment objectives. Unlike the Fund, these indices do not reflect any fees
or expenses.
PORTFOLIO MANAGERS
The Fund is co-managed by Joseph A. Harrison, CFA, and Elmer L. Mezaros, CFA.
Mr. Harrison is Executive Vice President and Director of Investments for
Roulston. He began his investment career in the Trust Investment Department of
Union Commerce Bank in 1960. After more than fifteen years in research and
portfolio management, Mr. Harrison joined Roulston in 1976, serving as Director
of Portfolio Management prior to assuming his present duties in 1990. Mr.
Harrison currently brings more than thirty years of portfolio management
experience to the management of the Fairport Growth and Income Fund which was
established on July 1, 1993. A 1959 graduate of John Carroll University, Mr.
Harrison is a Chartered Financial Analyst, a member of the Association for
Investment Research, and a member and past President of the Cleveland Society of
Security Analysts.
Mr. Mezaros has 31 years of investment experience. He began his investment
career as a security analyst and portfolio manager at the predecessor
organization to the Huntington Bank in 1966, while still in college. He joined
Roulston, in 1975 as an Investment Analyst. Mr. Mezaros has experience in
evaluating a variety of industries and has personally interviewed hundreds of
managements. He has specialized in close coverage of bank and financial stocks.
A 1975 graduate of the MBA Program at Case Western Reserve's Weatherhead School,
Mr. Mezaros is a Chartered Financial Analyst, a member of the Association for
Investment Management and Research, and is a member of the Cleveland Society of
Security Analysts.
GOVERNMENT SECURITIES FUND
INVESTMENT GOALS
Current income consistent with preservation of capital.
PRINCIPAL STRATEGY
The Fund primarily invests in U.S. government and agency securities and expects
to maintain an average portfolio maturity of three to ten years. Normally, at
least 65% of the Fund's total assets are invested in U.S. government securities,
including:
- direct obligations issued by the U.S. Treasury;
- securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities;
- repurchase agreements backed by any of the foregoing securities.
<PAGE> 9
IMPORTANT RISKS
There are risks associated with any investment, but the particular risks
associated with your investment in the Fund include:
- the market value of the Fund's portfolio securities will change in
response to interest rate changes and other factors.
- during periods of falling interest rates, the value of fixed income
securities generally rises; conversely during periods of rising
interest rates, the value of such securities generally declines.
- securities with longer maturities generally pay higher rates of
interest but they are also subject to greater price volatility due to
changes in interest rates.
- the success of a Fund's investments depends on the ability of the
portfolio manager to correctly assess the potential of the holdings
relative to the market climate and interest rate changes.
- while the U.S. Government or its Agencies may guarantee the principal
and interest on such obligations, they do not guarantee the market
price of such securities.
- losing part or all of your investment.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and performance table provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual return compares with
that of a broad measure of market performance. Both the chart and the table
assume reinvestment of dividends and distributions. As with all mutual funds,
past performance is not a prediction of future performance.
During the five years ending December 31, 1998, the highest return for a quarter
was 6.45% for the quarter ended June 30, 1995 and the lowest return for a
quarter was -4.41% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
4.26% -3.01% 4.86% 4.12% 4.87% %
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
1993* 1994 1995 1996 1997 1998
</TABLE>
<PAGE> 10
PERFORMANCE TABLE
(Average annual total returns as of December 31, 1998)
<TABLE>
<CAPTION>
1 year 5 years Since Inception*
--------------------------------------------------------
<S> <C> <C> <C>
Government
Securities Fund % % %
Merrill Lynch
Intermediate
Government Bond
Index % % %
- --------------------------
</TABLE>
*The Fund commenced operation on July 1, 1993.
The Merrill Lynch Index is an unmanaged indicator of financial performance
and as such is not sold as an investment. Unlike the Fund, this index does not
reflect any fees or expenses.
PORTFOLIO MANAGERS
The Fund is co-managed by Thomas H. Roulston and D. Keith Lockyer. Mr. Roulston
founded Roulston and has been Chairman since 1990. He became a manager of the
Fund in June 1998. Mr. Roulston has over 35 years of investment management
experience.
Mr. Lockyer has managed the Fund since its inception. He has been Vice President
and a portfolio manager at Roulston since 1986.
<PAGE> 11
FEES AND EXPENSES OF THE FUNDS
------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of one or more of the Funds.
<TABLE>
<CAPTION>
FAIRPORT FAIRPORT FAIRPORT
MIDWEST GROWTH GOVERNMENT
GROWTH AND INCOME SECURITIES
FUND FUND FUND
SHAREHOLDER FEES*:
- ----------------
<S> <C> <C> <C>
(fees paid directly from
your investment) None None None
ANNUAL FUND OPERATING
- ---------------------
EXPENSES: FAIRPORT FAIRPORT FAIRPORT
- -------- MIDWEST GROWTH GOVERNMENT
(EXPENSES THAT ARE DEDUCTED GROWTH AND INCOME SECURITIES
FROM FUND ASSETS) FUND FUND FUND
Management Fees .75% .75% .25%
Distribution and/or Service
(12b-1) Fees .25% .25% .25%
Other Expenses .48% .53% 1.69%
---- ---- ----
Total Annual Operating
Expenses 1.48%** 1.53%** 2.19%**
</TABLE> ==== ==== ====
* A $9 wire redemption charge deducted from the amount of each redemption of
Fund shares you request by Federal Reserve wire.
** The annual fund operating expenses shown in the table are higher than what
the Funds actually paid during the fiscal year because they reflect what
expenses would be without the voluntary fee waivers and /or reimbursements from
the Funds' investment adviser. Such waivers/reimbursements shall continue until
further written notice to shareholders so that total operating expenses are
reduced to 1.38% for the Midwest Growth Fund; 1.50% for the Growth and Income
Fund; and 0.90% for the Government Securities Fund.
EXAMPLE
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The example assumes that:
- - You invest $10,000 in a Fund for the time periods indicated;
- - You redeem all of your shares at the end of each time period;
<PAGE> 12
- - Your investment has a hypothetical 5% return each year;
- - All dividends are reinvested; and
- - Each Fund's operating expenses remain the same throughout each time period.
This example is for comparison purposes only. Actual return and expenses will be
different and each Fund's performance and expenses may be higher or lower. Based
on the above assumptions, your costs for each Fund would be:
<TABLE>
<CAPTION>
- ------------------------------------------------------- ------------ ------------- ------------ ------------
1 year 3 years 5 years 10 years
- ------------------------------------------------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Midwest Growth Fund $151 $468 $ 801 $1,768
- ------------------------------------------------------- ------------ ------------- ------------ ------------
Growth and Income Fund $156 $483 $ 834 $1,824
- ------------------------------------------------------- ------------ ------------- ------------ ------------
Government Securities Fund $222 $685 $ 1,175 $2,524
- ------------------------------------------------------- ------------ ------------- ------------ ------------
</TABLE>
OTHER SECURITIES AND RISKS
--------------------------
BONDS AND OTHER DEBT SECURITIES. Generally, the Government Securities Fund is
subject to interest rate risk, which is the risk that increases in market
interest rates may decrease the value of the bonds or other debt securities held
by that Fund. Usually the prices of bonds fall when interest rates increase, and
rise when interest rates decrease. Typically, the longer the maturity of a bond,
the more sensitive its price is to shifts in interest rates. Because the
Government Securities Fund invests principally in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, there is
very little risk that the principal of and interest on such securities will not
be paid when due.
STOCKS OF SMALL- AND MID-SIZED COMPANIES. The prices of stocks of small-and
mid-sized companies are generally more volatile than those of larger, more
established companies for a variety of factors including lack of market makers
and analysts following such companies. In addition, small- and mid-sized
companies are more sensitive to adverse economic changes because they usually
rely on only a few products, have more limited financial resources and have less
experienced management.
TEMPORARY DEFENSIVE POSITIONS. In response to economic, political or unusual
market conditions, each Fund may adopt a temporary defensive position. In such
an event, each Fund may invest up to 100% of its assets in cash or money market
instruments. Should this occur,
<PAGE> 13
there is no guarantee that the Fund taking the temporary defensive position will
achieve its investment objective during that time.
REPURCHASE AGREEMENTS. Each of the Funds may enter into repurchase agreements.
In a repurchase agreement, the Fund essentially is making a short-term
loan to a broker or bank (seller). The Fund buys securities that the seller has
agreed to buy back at a specific time and at a set price that includes
interest. There is a risk that the seller will be unable to buy back the
securities at the time required, and the Fund could experience delays in
recovering the amounts owed it.
YEAR 2000 COMPLIANCE. The Funds could be adversely affected if the computer
systems used by their service providers do not properly process and calculate
date-related information after December 31, 1999. The Year 2000 issue affects
virtually all companies and organizations. While Year 2000-related computer
problems could have a negative effect on the Funds, Roulston and First Data are
working to avoid such problems and to obtain assurances from the Funds' service
providers that they are taking similar steps. Companies, organizations,
governmental entities and securities in which the Funds invest could be affected
by the Year 2000 issue, but at this time the Funds cannot predict the degree of
impact. To the extent the effect is negative, a Fund's returns could be reduced.
MANAGEMENT OF THE FUNDS
-----------------------
Roulston & Company, Inc., 4000 Chester Avenue, Cleveland, Ohio 44103, serves as
the investment adviser for each Fund. Roulston is a professional investment
management firm and registered investment adviser founded in 1963. 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 pursuant to an
investment 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.
During the fiscal year ended October 31, 1998, the Midwest Growth Fund paid net
advisory fees of .71% on its average net assets (reflecting fee waivers of .04%
or $34,063), the Growth and Income Fund paid net advisory fees of .70% on its
average net assets (reflecting fee waivers of .05% or $16,411), and the
Government Securities Fund paid net advisory fees of .00% on its average net
assets (reflecting fee waivers of .25% or $11,854).
PRICING FUND SHARES
-------------------
Fund shares are sold and redeemed (sold back to the Fund) at net asset value
(NAV). NAV per share of each Fund is determined by dividing the total market
value of a Fund's investments and other assets, less any liabilities, by the
total outstanding shares of that Fund. NAV per share for each fund is determined
each day the New York Stock Exchange (NYSE) is open for regular business at the
earlier of 4 P.M., Eastern Time, or the close of regular trading on the NYSE.
<PAGE> 14
When you place an order to purchase shares or to redeem shares with a Fund or
one of its authorized agents, the shares purchased or redeemed will be priced at
the next NAV or price that is calculated for that Fund. Authorized agents for
the Funds include First Data Investors Group, the Funds' transfer agent, or
certain discount brokers or banks with whom the Funds have entered into
agreements for shareholder servicing.
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 quotations are not available on one or
more pricing services, securities will be valued by a method which the funds'
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.
All requests received by First Data Investor Services Group before 4:00 p.m.
Eastern Standard Time will be executed the same day, at that day's closing share
price. Orders received after 4:00 p.m. Eastern Standard Time will be executed
the following day, at that day's closing share price. Shares will not be priced
on days when the New York Stock Exchange is closed.
Shares of the funds will not be priced and are not available for purchase on the
following days on which the New York Stock Exchange is closed for trading: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
PURCHASE OF SHARES
------------------
GENERAL INFORMATION: You may purchase shares of any Fund directly by mail or by
wire. An account application may be obtained by calling Roulston Research
Corp., the Fund's distributor, at 1-800-332-6459 (1-800-3-FAMILY).
Payment for shares 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 will be your
record of shares of the Funds owned by you. No share certificates will be
issued.
The funds reserve the right to reject any purchase order. Checks that do not
clear will result in a cancellation of the purchase, and you could be liable for
any losses or fees incurred, including a $20 returned check fee.
RETIREMENT PLANS: The funds are eligible for investment by tax deferred
retirement programs such as 401(k) plans, traditional IRAs, spousal IRAs, Roth
IRAs, Education IRAs, SEP IRAs and SIMPLE
<PAGE> 15
IRAs. All accounts established under such plans must have all dividends
reinvested in the fund. For more information about prototype plans or for an IRA
application, please call 800-332-6459.
PURCHASE OF FUND SHARES
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ---------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- ----------------------------------------------------------- ---------------------------------------------------------
By Mail By Mail
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C>
Complete the application and mail the application and Fill out the subsequent investment stub from your account
your check made out to the fund you wish to invest in to: statement and mail your check or other negotiable bank
Fairport Funds draft with your account number on it to:
c/o First Data Investor Services Group Fairport Funds
3200 Horizon Drive c/o First Data Investor Services Group
King of Prussia, Pennsylvania 19406 P.O. Box 412797
Kansas City, Missouri 64141-2797
Minimum initial investment for each Fund: Please make your check payable to the Fund you are
$250 for each account (including retirement accounts) investing in.
Minimum additional investments for each Fund: $50.00
for each account (including retirement accounts)
- ----------------------------------------------------------- ---------------------------------------------------------
By Wire By Wire
- ----------------------------------------------------------- ---------------------------------------------------------
Telephone 800-332-6459 and you will receive an account Call 800-332-6459
number.
Follow the instructions under "TO OPEN AN ACCOUNT
Call your bank with instructions to transmit funds to: - By Wire."
UMB Bank, NA, ABA #10-10-00695
Attn: First Data Investor Services Group
Account #98-7037-071-9
Name of the Fund
Name on the Account
Mail a completed account application to First Data
Investor Services Group at the above address.
Note: Your bank may charge you a wire fee.
- ----------------------------------------------------------- ---------------------------------------------------------
By Automatic Investment By Automatic Investment
- ----------------------------------------------------------- ---------------------------------------------------------
Submit your AUTOMATIC INVESTMENT PLAN To add the AUTOMATIC INVESTMENT PLAN to an
application with your initial investment. existing account, call 800-332-6459 to request the form.
Subsequent investments will be drawn from your bank Complete and return the form and any additional materials.
account and invested in the designated Fund(s).
Subsequent investments will be drawn from your bank
account and invested in the designated Fund(s).
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ---------------------------------------------------------
By Exchange
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C>
Call 800-332-6459 to request an exchange of shares into: - If you have previously authorized telephone
- - Another Fairport Fund exchanges, call 800-332-6459 to request an exchange
- - Kemper's Cash Account Trust Money Market of shares into:
Portfolio. For this exchange, you must first receive - Another Fairport Fund.
a prospectus. This may not be available in all - Kemper's Cash Account Trust Money Market
states. Portfolio. For this exchange, you must first receive
a prospectus. This may not be available in all
states.
NOTE: No fee or charge will apply, but there may be a NOTE: No fee or charge will apply, but there may be a
capital gain or loss. The exchange privilege is subject capital gain or loss. The exchange privilege is subject
to amendment or termination at any time upon sixty days to amendment or termination at any time upon sixty days
prior notice. prior notice.
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
PLEASE NOTE THAT IF YOU USE A BROKER-DEALER TO ASSIST YOU IN ANY OF THESE
TRANSACTIONS, THE BROKER-DEALER MAY CHARGE YOU A FEE FOR THIS SERVICE.
DISTRIBUTION ARRANGEMENTS
The Funds do not charge up-front or deferred sales charges. Each Fund has
adopted a distribution and shareholder service plan under Rule 12b-1 of the
Investment Company Act, which allows the Funds to pay for the sale and
distribution of their shares, as well as for shareholder services. These fees
generally are paid to persons selling the Funds' shares. The maximum amount that
each Fund may pay under the 12b-1 plan is 0.25% of its average net assets.
Because these fees are paid out of Fund assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
<PAGE> 17
REDEMPTION OF SHARES
--------------------
GENERAL INFORMATION: You may sell or redeem shares of any Fund by any one or
more of the following methods:
TO SELL FROM OR CLOSE AN ACCOUNT
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ---------------------------------------------------------
By Mail By Telephone
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C>
Write a letter of instruction that includes: If you have previously authorized redemption by
- - the fund name, your account number, the name in telephone, call 800-332-6459.
which the account is registered and the dollar value
or number of shares you wish to sell. You will receive your redemption payment in the form
- - Include all signatures and any additional documents you previously selected: check, deposit to your bank
that may be required. account, or wire transfer (for wire transfers, a fee
will be charged)
Mail your request to:
Fairport Funds
c/o First Data Investor Services Group
3200 Horizon Drive
King of Prussia, PA 19406
A check will be mailed to the name(s) and address in which
the account is registered.
- ----------------------------------------------------------- ---------------------------------------------------------
By Systematic Withdrawal By Exchange
- ----------------------------------------------------------- ---------------------------------------------------------
Call 800-332-6459 to request an application for the If you have previously authorized telephone exchanges,
SYSTEMATIC WITHDRAWAL PLAN. Specify the amount and call 800-332-6459 to request an exchange of shares into:
frequency of withdrawals (minimum of $100). - another Fairport Fund
- Kemper's Cash Account Trust Money Market
NOTE: A minimum account balance of $10,000 is required Portfolio. For this exchange, you must first
and you must have all dividends and distributions receive a prospectus. This may not be available
reinvested. in all states.
NOTE: No fee or charge will apply, but an exchange of
shares is treated as a sale, and there may be a capital
gain or loss. The exchange privilege is subject to
amendment or termination at any time upon sixty days
prior notice.
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
PLEASE NOTE THAT IF YOU USE A BROKER-DEALER TO ASSIST YOU IN ANY OF THESE
TRANSACTIONS, THE BROKER-DEALER MAY CHARGE YOU A FEE FOR THIS SERVICE.
SELLING RECENTLY PURCHASED SHARES: If the shares to be redeemed were recently
purchased by check, proceeds from your redemption may be delayed up to 15
business days until the purchase check has cleared. If you are considering
redeeming shares soon after purchase, you should purchase by bank wire or
certified check to avoid this possible delay.
SIGNATURE GUARANTEES: The Funds will require a signature guarantee for any of
the following:
- - any written redemption request for $25,000 or more; or
<PAGE> 18
- - a change in address or payee to where redemption proceeds may be mailed as
shown on your account application; or
- - a change in the bank account to which redemption payments are made.
A signature guarantee may be obtained from most banks or securities dealers, but
not from a notary public.
ACCOUNTS WITH LOW BALANCES: If your account balance falls below $250 due to
redemptions made by you, a Fund may redeem your share at NAV. The Fund will
notify you if your balance has fallen below the required minimum, and you will
have 60 days to meet the minimum before your shares are redeemed.
RIGHT TO REDEEM IN KIND: Each of the Funds has elected generally to pay only
cash for redemptions of up to $250,000 (or 1% of the Fund, whichever is less).
The Funds will generally only pay cash for any other redemptions over that
amount unless the Trust's Board of Trustees believes that under current
conditions, further payments in cash would not be in that Fund's best
interests. In those situations, you may receive portfolio securities instead of
cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
DIVIDENDS & DISTRIBUTIONS
Dividends and distributions from the Fund(s) will be automatically used to
purchase additional shares of that Fund unless you have elected to receive
dividends and distributions in cash. If you participate in the systematic
withdrawal plan or any retirement plan, you must have your distributions
reinvested.
The Funds distribute substantially all of their net investment income in the
form of dividends and capital gains in the form of distributions. The Midwest
Growth Fund and the Growth and Income Fund generally pay dividends
semi-annually. The Government Securities Fund declares dividends daily and
distributes them on a monthly basis. Any capital gains realized by a fund will
be distributed at least annually.
TAX CONSEQUENCES
A fund pays no federal income tax on earnings distributed to shareholders as
long as it meets the requirements for being a tax-qualified regulated investment
company, which each of the Funds has done in the past and intends to do in the
future. Any dividend or distribution you receive, whether in cash or reinvested,
is considered taxable income to you. Dividends of net investment income are
taxable to you as ordinary income. Capital gains distributions are taxed based
on how long the Fund held the assets that generated such gains. Net short term
capital gains are generally taxable to shareholders as ordinary income.
Distributions of net long term capital gains are taxable as long term capital
gains. Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made to them during the year. You are urged to
consult your tax advisor concerning the application of federal, state and local
taxes to your particular
<PAGE> 19
situation. An exchange of shares of a Fund for shares of another Fund is
considered to be a sale of Fund shares for tax purposes.
FINANCIAL HIGHLIGHTS
--------------------
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. The total returns in each table
represent the rate that you would have earned (or lost) on an investment in a
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McCurdy & Associates CPAs, Inc., whose report,
along with the Funds' financial statements, is included in the Funds' annual
report, which is available upon request.
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND
----------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.88 $15.50 $13.55 $12.27 $11.07
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) (0.01) 0.02 0.04 0.02
Net realized and unrealized gain (loss) on investments (1.30) 4.55 2.16 2.04 1.19
----- ---- ---- ---- ----
Total from investment operations (1.33) 4.54 2.18 2.08 1.21
----- ---- ---- ---- ----
LESS DISTRIBUTIONS:
From net investment income 0.00 (0.01) (0.03) (0.04) (0.01)
From realized capital gains (1.10) (1.15) (0.20) (0.76) 0.00
------ ------ ------ ------ ----
Total distributions (1.10) (1.16) (0.23) (0.80) (0.01)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $16.45 $18.88 $15.50 $13.55 $12.27
====== ====== ====== ====== ======
TOTAL RETURN (7.73%) 31.00% 16.28% 18.17% 10.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $65,387 $77,017 $57,198 $49,408 $29,688
Ratio of expenses to average net assets:
Before reimbursement of expenses by Adviser 1.43% 1.58% 1.69% 1.57% 1.54%
After reimbursement of expenses by Adviser 1.38% 1.38% 1.38% 1.41% 1.45%
Ratio of net investment income to average net assets:
Before reimbursement of expenses by Advise (0.18%) (0.25%) (0.16%) 0.14% 0.08%
After reimbursement of expenses by Adviser (0.13%) (0.05%) 0.15% 0.29% 0.17%
Portfolio turnover 52.23% 41.16% 58.01% 46.51% 77.57%
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND
-------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.87 $14.22 $12.29 $10.68 $10.36
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.01 (0.05) 0.13 0.15 0.14
Net realized and unrealized gain (loss) on investments (0.15) 4.83 2.04 1.68 0.35
------ ---- ---- ---- ----
Total from investment operations (0.14) 4.88 2.17 1.83 0.49
------ ---- ---- ---- ----
LESS DISTRIBUTIONS:
From net investment income 0.00 (0.09) (0.14) (0.12) (0.14)
From realized capital gains (1.84) (1.14) (0.10) (0.10) (0.03)
------ ------ ------ ------ ------
Total distributions (1.84) (1.23) (0.24) (0.22) (0.17)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.89 $17.87 $14.22 $12.29 $10.68
====== ====== ====== ====== ======
TOTAL RETURN (1.20%) 36.61% 17.77% 17.36% 4.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $33.047 $30.841 $23,071 $23,082 $18,177
Ratio of expenses to average net assets:
Before reimbursement of expenses by Adviser 1.53% 1.76% 1.83% 1.79% 1.72%
After reimbursement of expenses by Adviser 1.49% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income to average net assets:
Before reimbursement of expenses by Adviser (0.02%) 0.03% 0.58% 0.98% 1.20%
After reimbursement of expenses by Adviser 0.02% 0.29% 0.91% 1.26% 1.42%
Portfolio turnover 40.43% 42.45% 34.02% 13.36% 35.16%
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
FAIRPORT GOVERNMENT SECURITIES FUND
-----------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.90 $9.75 $9.84 $9.03 $10.20
----- ----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.49 0.49 0.49 0.49 0.43
Net realized and unrealized gain (loss) on investments 0.53 0.15 (0.05) 0.81 (1.17)
---- ---- ------ ---- ------
Total from investment operations 1.02 0.64 0.44 1.30 (0.74)
---- ---- ---- ---- ------
LESS DISTRIBUTIONS:
From net investment income (0.49) (0.49) (0.53) (0.49) (0.42)
From realized capital gains 0.00 0.00 0.00 0.00 (0.01)
---- ---- ---- ---- ------
Total distributions (0.49) (0.49) (0.53) (0.49) (0.43)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.43 $9.90 $9.75 $9.84 $9.03
====== ===== ===== ===== =====
TOTAL RETURN 10.61% 6.76% 4.58% 14.76% (7.24%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $5,057 $4,411 $5,752 $8,647 $7,614
Ratio of expenses to average net assets:
Before reimbursement of expenses by Adviser 2.19% 2.70% 2.05% 2.16% 1.80%
After reimbursement of expenses by Adviser 0.90% 0.90% 0.90% 0.90% 0.90%
Ratio of net investment income to average net assets:
Before reimbursement of expenses by Adviser 3.60% 3.23% 3.78% 3.89% 3.88%
After reimbursement of expenses by Adviser 4.89% 5.03% 4.93% 5.16% 4.78%
Portfolio turnover 89.89% 21.01% 21.23% 1.28% 24.14%
</TABLE>
<PAGE> 22
Additional information about each Fund's investments is available in
the Funds' annual and semi-annual reports to shareholders. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance
[LOGO]
The Statement of Additional Information ("SAI") provides more detailed
information about the funds. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus.
The SAI and the annual/semi-annual reports are available at no charge
by calling or writing:
Fairport Funds
4000 Chester Avenue
Cleveland, OH 44103
(800) 332-6459
This number may also be used to request other information about the Funds or for
shareholder inquiries. You may also visit the Funds' website at
www.fairport.com.
Reports and other information about the Funds, including the SAI, are available
on the SEC's Internet site at http://www.sec.gov. This information may also be
viewed or copied at the SEC's Public Reference Room in Washington D.C or by
sending your request, along with a duplicating fee, to the SEC's Public
Reference Section, Washington D.C 20549-6009. (For information on the Public
Reference Room, telephone 800-SEC-0330).
The Trust's SEC File No. is 811-8774.
<PAGE> 23
STATEMENT OF ADDITIONAL INFORMATION
===================================
FAIRPORT MIDWEST GROWTH FUND
FAIRPORT GROWTH AND INCOME FUND
FAIRPORT 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"), three separate series of Fairport Funds
(the "Trust"). The MIDWEST GROWTH FUND, GROWTH AND INCOME FUND, and GOVERNMENT
FUND are sometimes referred to individually as a "Fund" and collectively as the
"Funds".
This Statement of Additional Information is intended to provide
additional information regarding the activities and operations of the Funds and
the Trust and should be read in conjunction with the Funds' Prospectus dated
March 1, 1999. The Prospectus may be obtained without charge through the Funds'
Distributor, Roulston Research Corp., 4000 Chester Avenue, Cleveland, Ohio 44103
(the "Distributor") by calling 1-800-332-6459.
Each Fund's most recent Annual Report to Shareholders is a separate
document that is incorporated by reference into this Statement of Additional
Information. The Funds' Annual and Semi-Annual Reports to Shareholders are also
available without charge by calling the Distributor at 1-800-332-6459.
March 1, 1999
-1
<PAGE> 24
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
THE TRUST.....................................................................4
INFORMATION ON PERMITTED INVESTMENTS AND RELATED RISK FACTORS.................4
Bankers' Acceptances.........................................................4
Certificates of Deposit......................................................5
Commercial Paper.............................................................5
Convertible Securities.......................................................5
Time Deposits................................................................5
U.S. Government Securities...................................................6
Temporary Defensive Positions................................................7
Variable Amount Master Demand Notes..........................................7
Variable and Floating Rate Securities........................................7
Initial Public Offerings.....................................................8
Section 4(2) Securities......................................................8
Repurchase Agreements........................................................9
Foreign Investment...........................................................9
Options Trading.............................................................10
Warrants....................................................................11
When-Issued and Delayed-Delivery Securities.................................11
Investment Company Shares...................................................12
Portfolio Turnover..........................................................12
INVESTMENT LIMITATIONS OF THE FUNDS..........................................13
Non-fundamental Restrictions................................................14
MANAGEMENT OF THE TRUST......................................................14
Trustees and Officers of the Trust..........................................14
</TABLE>
-2-
<PAGE> 25
<TABLE>
<S> <C>
PRINCIPAL HOLDERS OF SECURITIES..............................................17
INVESTMENT ADVISORY AND OTHER SERVICES.......................................19
The Investment Adviser......................................................19
The Distributor.............................................................20
Distribution and Shareholder Service Plan...................................20
The Administrator...........................................................22
Transfer Agent and Fund Accountant..........................................23
The Custodian...............................................................24
Independent Auditors........................................................24
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.............................24
Portfolio Transactions......................................................24
Brokerage Commissions.......................................................25
NET ASSET VALUE..............................................................26
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................27
Systematic Withdrawal Plan..................................................27
TAXES........................................................................28
PERFORMANCE INFORMATION......................................................30
Calculation of Total Return.................................................30
Performance Comparisons.....................................................31
SHARES OF BENEFICIAL INTEREST................................................32
Description of Shares.......................................................32
Voting Rights...............................................................32
FINANCIAL STATEMENTS.........................................................33
</TABLE>
-3-
<PAGE> 26
THE TRUST
---------
FAIRPORT 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. Each of the Trust's Funds is classified as
diversified, meaning that, with respect to 75% of its total assets, it has not
invested more than 5% of its assets in the securities of any single issuer
(other than securities issued by the U.S. Government or its agencies or
instrumentalities).
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"), the MIDWEST GROWTH FUND, the GROWTH AND INCOME FUND and the
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.
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.
INFORMATION ON PERMITTED INVESTMENTS
------------------------------------
AND RELATED RISK FACTORS
------------------------
AMERICAN DEPOSITORY RECEIPTS ("ADRS)"
- -------------------------------------
ADRs are typically issued by a U.S. financial institution and are
evidence ownership of underlying securities issued by a foreign issuer.
Sponsored ADRs are a joint arrangement between the foreign issuer and the U.S.
financial institution acting depository and tend to be more liquid than
unsponsored ADRs. The Growth and Income Fund may invest in sponsored or
unsponsored ADRs.
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.
-4-
<PAGE> 27
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.
COMMERCIAL PAPER
- ----------------
The commercial paper is unsecured short-term promissory notes issued by
corporations and other entities. Maturities on these notes typically vary from a
few days to nine months. All funds may invest in commercial paper.
CONVERTIBLE SECURITIES
- ----------------------
Convertible securities are 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 may invest in convertible securities.
TIME DEPOSITS
- -------------
A time deposit is 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.
-5-
<PAGE> 28
U.S. GOVERNMENT SECURITIES
- --------------------------
The GOVERNMENT FUND invests in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Securities issued directly
by the U.S. Government consist of bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
securities that are transferable only through the Federal Reserve's book entry
system known as Separately Traded Registered Interest and Principal Securities
("STRIPs"). Agencies and instrumentalities of the U.S. Government 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.
Some of these agency 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.
STRIPS are sold as zero coupon securities; that is, the component parts
of 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 non-zero coupon securities with
-6-
<PAGE> 29
similar maturity and credit qualities. The Funds intend to invest in STRIPs that
are only traded through the U.S. Government-sponsored program.
Roulston will purchase only those STRIPs that it determines are liquid
or, if illiquid, do not violate that 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.
TEMPORARY DEFENSIVE POSITIONS
- -----------------------------
When any of the Funds takes a temporary defensive position, it may
invest up to 100% of its assets as cash or money market instruments, including
bankers' acceptances, certificates of deposit, high quality commercial paper and
short-term U.S. Government 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
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 be considered to be of comparable quality to the issuers of
commercial paper that could be purchased 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. 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 SECURITIES
- -------------------------------------
Each Fund may acquire variable and floating rate securities, subject to
such Fund's investment objectives, policies and restrictions. A variable rate
security 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 security 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. 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 securities 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
-7-
<PAGE> 30
that the current interest rate on such obligations may not accurately reflect
existing market rates, and therefore that upon such interest rate reset, the
instrument may decline in value.
Such securities frequently are not rated by credit rating agencies;
however, unrated variable and floating rate securities purchased by a Fund must
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 security 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 security 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 security, such a security will be treated as an
illiquid security for purposes of calculation of the 15% limitation on such
Fund's investment in illiquid 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 a Fund is to invest in securities of relatively new issuers, it will only
invest in 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 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 a 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.
SECTION 4(2) SECURITIES
- -----------------------
The MIDWEST GROWTH and the 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.
-8-
<PAGE> 31
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.
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 102% 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.
FOREIGN INVESTMENT
- ------------------
Investment in foreign securities, including ADRs, 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
-9-
<PAGE> 32
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 for various
securities and securities indices that are traded on national securities
exchanges, from time to time, as Roulston deems 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 call option gives the purchaser of the option the right
to buy, and the 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, and the writer the obligation to buy, 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.
The MIDWEST GROWTH and GROWTH AND INCOME FUNDS may invest in options on
stocks and stock indices, while the GOVERNMENT FUND may invest in options on
fixed income securities and fixed income securities indices. OPTIONS WILL BE
USED ONLY FOR HEDGING PURPOSES AND WILL NOT BE ENGAGED IN FOR SPECULATIVE
PURPOSES. Currently, no Fund anticipates entering into options transactions to
the extent that the aggregate value of portfolio securities subject to options
or invested in options positions will exceed 5% of a Fund's net assets as of the
time the Fund purchases or enters into such options.
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.
-10-
<PAGE> 33
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.
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 SECURITIES
- -------------------------------------------
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). 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 rise due to changes in interest rates, and/or market prices,
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.
When a Fund agrees to purchase securities on a "when-issued" or
"delayed-delivery" basis, the Funds' custodian will set aside in a separate
account cash or liquid securities equal to the amount of the Funds' 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
-11-
<PAGE> 34
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 liquid 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.
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. 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 up to 10% of the value of its total assets in
securities of other investment companies, including shares of money market
mutual funds. 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 objective, and in money market mutual funds
for purposes of short-term cash management. 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.
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, 1998 and
1997 for the MIDWEST GROWTH FUND were 52.23% and 41.16% respectively; for the
GROWTH AND INCOME FUND were 40.43% and 42.45%, respectively; and for the
GOVERNMENT FUND were 89.89% and 21.01% respectively. There was an increase in
turnover for the Government Fund due to expected market conditions. Maturities
were extended to take advantage of the expected decline in interest rates. 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.
-12-
<PAGE> 35
INVESTMENT LIMITATIONS OF THE FUNDS
-----------------------------------
The investment objective or objectives of each Fund and the investment
limitations described immediately below are fundamental policies of that Fund.
Fundamental objectives and policies cannot be changed with respect to a Fund
without the "vote of a majority of the outstanding shares" of that Fund as that
term is defined below under "SHARES OF BENEFICIAL INTEREST -- 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.
4. 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;
5. 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);
6. 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;
7. 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
-13-
<PAGE> 36
8. 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. Pledge, mortgage or hypothecate assets in excess of one third of the
Fund's total assets;
4. 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;
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 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.
MANAGEMENT OF THE TRUST
-----------------------
TRUSTEES AND OFFICERS 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.
-14-
<PAGE> 37
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.
<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 and President President and Director of Roulston &
4000 Chester Avenue Company, Inc. and Roulston Research
Cleveland, Ohio 44103 Corp. since 1990.
Age: 41
- ---------------------------------------- ------------------------------------ ----------------------------------------
Thomas V. Chema Trustee Partner, Arter & Hadden (law firm)
1100 Huntington Building since April, 1989; since June, 1995,
Cleveland, Ohio 44115 President, Gateway Consultants Group,
Inc. (sports and related public
facilities consulting); from June,
1990, to June, 1995, Executive
Age: 52 Director of Gateway Economic
Development Corp. of Greater Cleveland
(sports and related facilities public
development company).
- ---------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>
-15-
<PAGE> 38
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------ ----------------------------------------
<S> <C> <C>
David B. Gale Trustee Executive Director of North American
1700 East 13th Street Association of State and Provincial
Suite 4PE Lotteries (non-profit association of
Cleveland, Ohio 44114 sanctioned lotteries) since March,
1995; President of DBG Consulting,
Inc. (management consulting firm)
Age: 46 since December, 1994; from August,
1993 to November 1994, Vice President
and General Manager of Media Drop-In
Productions, Inc.
(marketing/promotions firm).
- ---------------------------------------- ------------------------------------ ----------------------------------------
Charles A. Kiraly Secretary and Assistant Treasurer Since May, 1997, Manager of Mutual
4000 Chester Avenue Fund Administration and an employee of
Cleveland, Ohio 44103 Roulston & Company, Inc. since April,
1996; prior thereto, Senior Dealer
Services Representative at BISYS Fund
Age 29 Services, Ohio, Inc. (mutual fund
services company); employee at BISYS
Fund Services, Ohio, Inc. since May,
1993.
- ---------------------------------------- ------------------------------------ ----------------------------------------
Kevin M. Crotty Treasurer Since June, 1997, Director of Finance
4000 Chester Avenue of Roulston & Company, Inc. and an
Cleveland, Ohio 44103 employee of Roulston & Company, Inc.
since November, 1996; from October,
1993 to October, 1996, Accounting
Manager of Philanthropic and Tax
Age: 37 Planning Department of Premier
Industrial Corporation (electronic
component distributor).
- ---------------------------------------- ------------------------------------ ----------------------------------------
</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 Trustees of the Trust receive no compensation for such services, but
those officers who are employees of Roulston receive compensation from Roulston.
-16-
<PAGE> 39
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, 1998. The Trust has no
pension or retirement plans.
COMPENSATION TABLE:
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
AGGREGATE TOTAL COMPENSATION
NAME AND POSITION COMPENSATION FROM THE TRUST AND
WITH THE TRUST FROM THE TRUST THE FUND COMPLEX *
-------------- -------------- ------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Scott D. Roulston, $ 0 $ 0
Chairman
- ---------------------------------------- ------------------------------------- -------------------------------------
Thomas V. Chema, $8,000 $8,000
Trustee
- ---------------------------------------- ------------------------------------- -------------------------------------
David B. Gale $8,000 $8,000
Trustee
- ---------------------------------------- ------------------------------------- -------------------------------------
David H. Gunning,** $4,000 $4,000
Trustee
- ---------------------------------------- ------------------------------------- -------------------------------------
Ivan J. Winfield,** $4,000 $4,000
Trustee
- ---------------------------------------- ------------------------------------- -------------------------------------
</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.
** Effective July 21, 1998, Messrs. Gunning and Winfield resigned from the
Board of Trustees.
Mr. Roulston owned approximately 1.5% of the Midwest Growth Fund, 1.6%
of the Growth and Income Fund and 1.2% of the Government Fund. As of the
date hereof, all Trustees and Officers of the Trust, as a group, except for Mr.
Roulston, 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 December 1, 1998, owned of record or beneficially 5% or more
of the shares of a Fund.
-17-
<PAGE> 40
Persons or organizations owning 25% or more of the outstanding shares
of a Fund may be presumed to "control" (as that term is defined in the 1940 Act)
a Fund. As a result, these persons or organizations could have the ability to
approve or reject those matters submitted to the shareholders of such Fund for
their approval.
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND:
- -----------------------------
Shareholder(s) Percentage Owned
-------------- ----------------
<S> <C>
Charles Schwab & Co., Inc. 11.55%
Special Custody Account ( of record)
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
FAIRPORT GROWTH AND INCOME FUND:
- --------------------------------
Shareholder(s) Percentage Owned
-------------- ----------------
National City Bank Northeast 19.67%
Trustee, Alphabet Inc. Profit Sharing (beneficially)
ATTN: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101
Charles Schwab & Co., Inc. 16.24%
Special Custody A/C for BNFT CUST (of record)
ATTN: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
National City Bank Northeast 12.22%
Trustee, Alphabet Inc. Money Purchase (beneficially)
ATTN: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101
FAIRPORT GOVERNMENT SECURITIES FUND:
- ------------------------------------
Shareholder(s) Percentage Owned
-------------- ----------------
Charles Schwab & Co., Inc. 41.28%
Special Custody A/C for BNFT CUST (of record)
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
-18-
<PAGE> 41
INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------
THE INVESTMENT ADVISER
- ----------------------
Roulston is controlled directly and indirectly by Thomas H. Roulston
and members of his immediate family. Thomas Roulston is the Chairman of Roulston
and is a portfolio manager of the Government Securities Fund. Scott D. Roulston,
Trustee and President of the Trust, is President and a Director of Roulston.
Roulston Research Corp., the distributor of the Funds of the Trust, is a
wholly-owned subsidiary of Roulston.
For the fiscal year ended October 31, 1998, Roulston earned and
voluntarily waived the amounts indicated below with respect to its investment
advisory services to the Funds.
<TABLE>
<CAPTION>
- -------------------------------------------------- ----------------- ------------------ --------------------
GROSS ADVISORY NET
ADVISORY FEES ADVISORY
FUND FEES EARNED WAIVED FEES RECEIVED
---- ----------- ------ -------------
- -------------------------------------------------- ----------------- ------------------ --------------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $581,223 $34,063 $547,160
- -------------------------------------------------- ----------------- ------------------ --------------------
GROWTH AND INCOME FUND $260,482 $16,411 $244,071
- -------------------------------------------------- ----------------- ------------------ --------------------
GOVERNMENT SECURITIES FUND $11,854 $11,854 $0
- -------------------------------------------------- ----------------- ------------------ --------------------
TOTALS $853,559 $62,328 $791,231
- -------------------------------------------------- ----------------- ------------------ --------------------
</TABLE>
For the fiscal year ended October 31, 1997, Roulston earned and
voluntarily waived the amounts indicated below with respect to its investment
advisory services to the Funds.
<TABLE>
<CAPTION>
- -------------------------------------------------- ----------------- ------------------ --------------------
GROSS ADVISORY NET
ADVISORY FEES ADVISORY
FUND FEES EARNED WAIVED FEES RECEIVED
---- ----------- ------ -------------
- -------------------------------------------------- ----------------- ------------------ --------------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $513,898 $136,636 $377,262
- -------------------------------------------------- ----------------- ------------------ --------------------
GROWTH AND INCOME FUND $204,420 $72,293 $132,127
- -------------------------------------------------- ----------------- ------------------ --------------------
GOVERNMENT SECURITIES FUND $11,697 $11,697 $0
- -------------------------------------------------- ----------------- ------------------ --------------------
TOTALS $730,015 $220,626 $509,389
- -------------------------------------------------- ----------------- ------------------ --------------------
</TABLE>
-19-
<PAGE> 42
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
ADVISORY FEES ADVISORY
FUND 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>
Roulston voluntarily has agreed to waive its fees and reimburse fund expenses to
the extent necessary to keep total fund operating expenses from exceeding 1.35%
for the Midwest Growth Fund, 1.50% for the Growth and Income Fund, and 0.90% for
the Government Securities Fund. Waivers and reimbursements will continue until
further notice to shareholders.
THE DISTRIBUTOR
- ---------------
Roulston Research Corp., 4000 Chester Avenue, Cleveland, OH 44103 (the
"Distributor") is a wholly owned subsidiary of Roulston, and the distributor for
the Funds of the Trust. Pursuant to a 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 for distribution of shares of the Funds
under the Distribution Agreement, but receives payments under the Trust's
Distribution and Shareholder Service Plan described below. There are no sales
charges imposed by the Distributor upon the purchase or redemption of shares of
the Funds.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
- -----------------------------------------
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 compensate 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.
-20-
<PAGE> 43
As authorized by the Plan, the Distributor has agreed to provide
certain distribution and shareholder 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,
marketing of 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. Fees paid
are borne solely by the applicable Fund. Such fees may exceed the actual costs
incurred by the Distributor in providing such services.
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 a 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 a 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 upon 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.
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.
-21-
<PAGE> 44
For the fiscal year ended October 31, 1998, such fees totaled $289,915,
all of which were paid to the Distributor for the services described above. The
amounts incurred with respect to each Fund during such period are set forth
below:
<TABLE>
<CAPTION>
- ----------------------------------------------- -----------------------
AMOUNTS
INCURRED
PURSUANT
FUND TO 12b-1 PLAN
---- -------------
- ----------------------------------------------- -----------------------
<S> <C>
MIDWEST GROWTH FUND $192,062
- ----------------------------------------------- -----------------------
GROWTH AND INCOME FUND $86,093
- ----------------------------------------------- -----------------------
GOVERNMENT SECURITIES FUND $11,760
- ----------------------------------------------- -----------------------
TOTAL $289,915
- ----------------------------------------------- -----------------------
</TABLE>
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 ADMINISTRATOR
- -----------------
First Data Investor Services Group, Inc., a wholly-owned subsidiary of
First Data Corporation, 4400 Computer Drive, Westborough, MA 01581, serves as
Administrator for the Funds and the Trust. The Administrator assists in
supervising all operations of each Fund (other than those performed by Roulston,
by UMB Bank, n.a. as the Custodian, and by the Administrator under the
Accounting Services Agreement, the Transfer Agent Services Agreement and the
Custody Administration and Agency Agreement).
Under an 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, by UMB Bank, n.a. as Custodian and by the Administrator under the
Accounting Services Agreement, the Transfer Agent Services Agreement and the
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:
-22-
<PAGE> 45
.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 years indicated below, Investor Services Group earned
the following amounts with respect to administrative
services provided to the Funds:
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------------- ---------------------------
11/01/97 11/01/96 11/01/95
TO TO TO
FUND 10/31/98 10/31/97 10/31/96
----
---------------------------------------- ------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $91,176 $85,926 $75,644
---------------------------------------- ------------------------- ------------------------- ---------------------------
GROWTH AND INCOME FUND $40,204 $34,406 $33,436
---------------------------------------- ------------------------- ------------------------- ---------------------------
GOVERNMENT SECURITIES FUND $5,257 $6,056 $10,062
---------------------------------------- ------------------------- ------------------------- ---------------------------
TOTAL $136,637 $126,388 $119,142
---------------------------------------- ------------------------- ------------------------- ---------------------------
</TABLE>
TRANSFER AGENT AND FUND ACCOUNTANT
- ----------------------------------
First Data Investor Services Group, Inc. also serves as the transfer
and dividend disbursing agent for each Fund and provides certain fund accounting
services to each of the Funds.
Such fund accounting 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 First Data Investor Services, Group, Inc.
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.
-23-
<PAGE> 46
For the fiscal years indicated below, Investor Services Group earned
the following amounts with respect to administrative services provided to the
Funds:
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------------- ---------------------------
11/01/97 11/01/96 11/01/95
TO TO TO
FUND 10/31/98 10/31/97 10/31/96
----
---------------------------------------- ------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $44,080 $42,495 $39,023
---------------------------------------- ------------------------- ------------------------- ---------------------------
GROWTH AND INCOME FUND $29,944 $27,573 $26,857
---------------------------------------- ------------------------- ------------------------- ---------------------------
GOVERNMENT SECURITIES FUND $24,353 $25,315 $25,267
---------------------------------------- ------------------------- ------------------------- ---------------------------
TOTAL $98,377 $95,383 $91,147
---------------------------------------- ------------------------- ------------------------- ---------------------------
</TABLE>
THE CUSTODIAN
- -------------
UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri 64141, serves
as the Funds' Custodian pursuant to a Custody Agreement. In such capacity, the
Custodian holds or arranges for the holding of all portfolio securities and
other assets of the Funds.
INDEPENDENT AUDITORS
- --------------------
McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, OH
44145, serves as independent auditors for the Funds. The audited financial
statements and notes thereto for each Fund, contained in the Annual Report to
Shareholders dated October 31, 1998, are incorporated by reference into this
Statement of Additional Information and have been audited by McCurdy &
Associates CPA's, Inc., whose report also appears in the Annual Report and is
also incorporated by reference herein. No other parts of the Annual Report are
incorporated by reference herein. Such financial statements and notes thereto
have been incorporated herein in reliance on the report of McCurdy & Associates
CPA's, Inc., independent auditors, given on the authority of said firm as
experts in auditing and accounting.
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.
-24-
<PAGE> 47
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
benefited 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 trades on behalf of privately managed accounts and the
Funds. During the period November 1, 1997 through October 31, 1998, the
following transactions were placed with Merrill Lynch/Dayton (MLDAYTON), the
executing broker-dealer for Thompson during such period. The Growth & Income
Fund placed 52 trades for shares totaling 390,500 with a commission rate of
$0.06 per share for a total commission of $24,460 with MLDAYTON. The Fairport
Midwest Growth Fund placed 40 trades for shares totaling 621,300 with a
commission rate of $0.06 per share for a total commission of $37,278 with
MLDAYTON.
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.
-25-
<PAGE> 48
In addition, a Fund may direct commission business to one or more designated
broker/dealers, in connection with such broker/dealer's payment of certain of a
Fund's or the Trust's expenses.
For the fiscal years ended October 31, 1998, 1997, and 1996, the total
brokerage commissions attributable to each Fund are set forth below.
<TABLE>
<CAPTION>
---------------------------------------- ------------------ ------------------ -------------------
11/01/97 11/01/96 11/01/95
TO TO TO
FUND 10/31/98 10/31/97 10/31/96
---- -------- -------- --------
---------------------------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND $150,490 $74,304 $122,870
---------------------------------------- ------------------ ------------------ -------------------
GROWTH AND INCOME FUND $47,652 $33,625 $33,208
---------------------------------------- ------------------ ------------------ -------------------
GOVERNMENT SECURITIES FUND $0 $0 $0
---------------------------------------- ------------------ ------------------ -------------------
TOTALS $198,142 $107,929 $156,078*
---------------------------------------- ------------------ ------------------ -------------------
</TABLE>
* 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.
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, Martin Luther King, Jr.
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 Investor Services Group, 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
-26-
<PAGE> 49
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.
ADITIONAL 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 has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designated other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order and that orders will be priced at the Fund's Net Asset Value next computed
after they are accepted by an authorized broker or the broker's authorized
designee.
The Funds reserve the right to pay redemptions in kind with portfolio
securities in lieu of cash. In accordance with its election pursuant to Rule
18f-1 under the 1940 Act, the Funds may limit the amount of redemption proceeds
paid in cash. The Funds may, under normal circumstances, limit redemptions in
cash with respect to each shareholder during any ninety-day period to the lesser
of (i) $250,000 or (ii) 1% of the net asset value of the Fund at the beginning
of such period. A shareholder may incur brokerage costs if the securities
received were sold.
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.
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.
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.
-27-
<PAGE> 50
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.
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; 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. If any Fund fails to qualify as a regulated
investment company under the Code, the Fund would be required to pay federal
income taxes like a corporation.
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 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, if any, is taxable to shareholders as long-term
capital gain in the year in which it is received, regardless
-28-
<PAGE> 51
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.
Long-term capital gains of individuals are subject to a maximum tax
rate of 20% (10% for individuals in the 15% ordinary income tax bracket).
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. The holding
period for long-term capital gains is more than one year.
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 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
-29-
<PAGE> 52
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
-----------------------
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 "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.
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, 1998, the yields for FAIRPORT
MIDWEST GROWTH FUND, FAIRPORT GROWTH AND INCOME FUND and FAIRPORT GOVERNMENT
SECURITIES FUND were .30%, 0.0%, and 3.96%, respectively.
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 = ERV
-30-
<PAGE> 53
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 following periods ended October 31, 1998, the average annual
total returns for the Funds were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------------- ---------------- ---------------
FUND 1 YEAR 5 YEAR SINCE
----
INCEPTION*
- ------------------------------------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C>
MIDWEST GROWTH FUND -7.73% 12.98% 14.32%
- ------------------------------------------------- ----------------- ---------------- ---------------
GROWTH AND INCOME FUND -1.20% 14.32% 14.20%
- ------------------------------------------------- ----------------- ---------------- ---------------
GOVERNMENT SECURITIES FUND 10.61% 5.62% 5.85%
- ------------------------------------------------- ----------------- ---------------- ---------------
</TABLE>
* Each of the Funds commenced on July 1, 1993.
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
- -----------------------
The performance of a Fund may periodically be compared with that of
other mutual funds or broad groups of comparable mutual funds tracked by mutual
fund rating services (such as Lipper Analytical Services, Inc.) and financial
and business publications and periodicals. In addition, a Fund's performance may
be compared with unmanaged indices of various investments for which reliable
performance data is available. These may assume investment of dividends but
generally do not reflect deductions for administrative and management costs. The
performance of a Fund may also be compared in various publications to averages,
performance rankings or other information prepared by recognized mutual fund
statistical services. A Fund may quote Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance, or Ibbotson Associates
of Chicago, Illinois, which provides historical returns of the capital markets
in the United States. A Fund may use the long-term performance of these capital
markets to demonstrate general long-term risk versus reward scenarios and could
include the value of a hypothetical investment in any of the capital markets.
A Fund may also quote financial and business publications and
periodicals, such as SMART MONEY, 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
-31-
<PAGE> 54
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.
SHARES OF BENEFICIAL INTEREST
-----------------------------
DESCRIPTION OF SHARES
- ---------------------
The Trust's 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.
VOTING RIGHTS
- -------------
Shareholders 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. 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.
-32-
<PAGE> 55
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.
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.
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. 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.
FINANCIAL STATEMENTS
--------------------
The audited financial statements and notes thereto for each Fund,
contained in the Annual Report to Shareholders dated October 31, 1998, are
incorporated by reference into this Statement of Additional Information and have
been audited by McCurdy & Associates CPA's, Inc., whose report also appears in
the Annual Report and is also incorporated by reference herein. No other parts
of the Annual Report are incorporated by reference herein.
-33-
<PAGE> 56
APPENDIX "A"
------------
DESCRIPTIONS OF SECURITIES RATINGS
-34-
<PAGE> 57
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 IBCA:
Commercial paper rated "F-1" by Fitch IBCA ("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
-35-
<PAGE> 58
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 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.
-36-
<PAGE> 59
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 IBCA:
The following summarizes the six highest long-term debt ratings by Fitch
IBCA(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 "BBB" 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.
-37-
<PAGE> 60
THOMPSON BANKWATCH, INC.:
The following summarizes the six highest long-term debt ratings by Thompson
BankWatch, 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. Thomson may include a plus (+) or minus (-) designation to
indicate where within the respective category the issue is placed.
-38-
<PAGE> 61
REGISTRATION STATEMENT
OF
FAIRPORT FUNDS
ON
FORM N-1A
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
(a) 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.
(b) 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.
(c) Articles IV, V, VI and VII of the Declaration of
Trust, Exhibit (a) above, define the rights of
security holders.
(d) Investment Advisory Agreement dated January 20, 1995,
as amended as of November 30, 1996, between
Registrant and Roulston & Company, Inc. --
incorporated herein by reference to Post-Effective
Amendment No. 3 to Registration Statement #33-84186
filed via EDGAR on February 27, 1997.
(e) (i) Distribution Agreement dated January 20,
1995, as amended as of June 3, 1996, between
Registrant and Roulston Research Corp --
incorporated herein by reference to
Post-Effective Amendment No. 3 to
Registration Statement #33-84186 filed via
EDGAR on February 27, 1997.
(ii) 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.
<PAGE> 62
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.; Jack White & Company;
Mutual Service Corporation; 1st Cleveland
Securities Corporation; Vista Financial Services
Corporation; Capital Analysts Incorporated; Titan
Value Equities Group, Inc.; Maxwell Securities, Inc.;
Advanced Clearing, Inc.; and Vestax.
(iii) Charles Schwab Mutual Fund Marketplace
Operating Agreement dated October 25, 1996,
between Charles Schwab & Co., Inc. and the
Fund Company -- incorporated herein by
reference to Post-Effective Amendment No. 4
to Registration Statement #33-84186 filed
via EDGAR on February 27, 1998.
(A) Order Placement Procedures Amendment
to the Operating Agreement dated
December 1, 1997, between Charles
Schwab & Co., Inc., and the Fund
Company -- incorporated herein by
reference to Post-Effective
Amendment No. 4 to Registration
Statement #33-84186 filed via EDGAR
on February 27, 1998.
(f) None.
(g) (i) 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.
(ii) Custody Administration and Agency Agreement
dated January 20, 1995, as amended January
1, 1997, between Registrant and FPS
Services, Inc. -- incorporated herein by
reference to Post-Effective Amendment No. 3
to Registration Statement #33-84186 filed
via EDGAR on February 27, 1997.
(h) (i) Administration Agreement dated January
20, 1995, as amended January 1, 1997,
between Registrant and FPS Services, Inc. --
incorporated herein by reference to
Post-Effective Amendment No. 3 to
Registration Statement #33-84186 filed via
EDGAR on
February 27, 1997.
(ii) Accounting Services Agreement dated January
20, 1995, as amended January 1, 1997,
between Registrant and FPS Services, Inc. --
incorporated herein by reference to
Post-Effective Amendment No. 3 to
Registration Statement #33-84186 filed via
EDGAR on February 27, 1997.
(iii) Transfer Agent Services Agreement dated
January 20, 1995, as amended January 1,
1997, between Registrant and FPS Services,
Inc. -- incorporated herein by reference to
Post-Effective
<PAGE> 63
Amendment No. 3 to Registration Statement #33-84186
filed via EDGAR on February 27, 1997.
(iv) 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.
(i) See opinion of Counsel filed as attachment to
Registrant's Rule 24f-2 Notice filed December 24,
1996 and incorporated herein by reference.
(j) Consent of McCurdy & Associates CPA's, Inc. -- filed
herewith.
(k) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B:
-- Incorporated by reference in Part B hereof:
The audited financial statements and related
notes thereto as well as the auditors report
thereon for the fiscal year ended October
31, 1998 are incorporated by reference to
the Annual Report to shareholders as filed
with the Securities and Exchange commission
on December 30, 1998 pursuant to Rule 30b2-1
of the Investment Company Act of 1940.
(l) None.
(m) (i) Distribution and Shareholder Services
Plan dated January 20, 1995, as amended June
3, 1996 -- incorporated herein by reference
to Post-Effective Amendment No. 3 to
Registration Statement #33- 84186 filed via
EDGAR on February 27, 1997.
(ii) Form of Selected Dealer Agreement (a related
agreement under the Rule 12b-1 Plan) is
incorporated by reference to Exhibit 15(b)
of
<PAGE> 64
Post-Effective Amendment No. 2 to
Registration Statement #33-84186 filed via
EDGAR on February 29, 1996. -- see (e)(ii)
above.
(iii) Omnibus Account Services Agreement dated
July 7, 1996, between Roulston Research
Corp. and Waterhouse Securities, Inc. --
incorporated herein by reference to
Post-Effective Amendment No. 3 to
Registration Statement #33-84186 filed via
EDGAR on February 27, 1997.
(iv) Shareholder Service Agreement dated December
12, 1996, between Roulston Research Corp.
and First Trust Corporation -- incorporated
herein by reference to Post-Effective
Amendment No. 3 to Registration Statement
#33-84186 filed via EDGAR on
February 27, 1997.
(n) Finacial Data Schedules -- filed herewith.
(o) None.
(p) Powers of Attorney of Scott D. Roulston, Thomas V.
Chema, and David B. Gale, incorporated herein by
reference to Post-Effective Amendment No.4 to
Registration Statement #33-84186 filed via EDGAR on
February 27, 1998.
(q) IRA Disclosure Statement -- incorporated herein by
reference to Post-Effective Amendment No.4 to
Registration Statement #33-84186 filed via EDGAR on
February 27, 1998.
Item 24. Persons Controlled By Or Under Common Control With Registrant
-------------------------------------------------------------
None.
Item 25. 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
<PAGE> 65
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.
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 26. 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.
<PAGE> 66
<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
------------------------------- -------------------------------
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
------------------------------- -------------------------------
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
- -------------------------------------- ------------------------- ------------------------------- -------------------------------
</TABLE>
<PAGE> 67
<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>
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
- -------------------------------------- ------------------------- ------------------------------- -------------------------------
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>
<PAGE> 68
<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
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Elmer L. Meszaros Senior Vice President
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Director of Finance
Kevin M. Crotty
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
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>
<PAGE> 69
Item 27. Principal Underwriter
---------------------
(a) None.
(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
- -------------------------------------- -------------------------------- -------------------------
Scott D. Roulston Director; Trustee;
4000 Chester Avenue President President
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Heather R. Ettinger Director;
4000 Chester Avenue Executive Vice
Cleveland, Ohio 44103 President and Secretary
- -------------------------------------- -------------------------------- -------------------------
Treasurer Treasurer
Kevin M. Crotty
4000 Chester Avenue
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Executive Vice
Joseph A. Harrison President;
4000 Chester Avenue Assistant Treasurer
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Executive Vice
Norman F. Klopp, Jr. President
4000 Chester Avenue
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
- -------------------------------------- -------------------------------- -------------------------
<S> <C> <C>
Robert. J. Yaroma Executive Vice
4000 Chester Avenue President
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Secretary;
Assistant Treasurer
Charles A. Kiraly
4000 Chester Avenue
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Senior Vice President
Elmer L. Meszaros
4000 Chester Avenue
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Vice President
Mark Wipper
4000 Chester Avenue
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
Vice President
Keith Vargo
4000 Chester Avenue
Cleveland, Ohio 44103
- -------------------------------------- -------------------------------- -------------------------
</TABLE>
(c) None.
Item 28. Location of Accounts and Records
--------------------------------
(a) Roulston & Company, Inc., 4000 Chester Avenue,
Cleveland, Ohio 44103 (records relating to its
functions as investment adviser).
(b) Roulston Research Corp., 4000 Chester Avenue,
Cleveland, Ohio 44103 (records relating to its
function as distributor).
(c) First Data Investor Services Group, 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).
<PAGE> 71
(d) UMB Bank, n.a., 928 Grand Avenue, Kansas City,
Missouri 64141 (records relating to its functions as
custodian).
Item 29. Management Services
-------------------
None.
Item 30. Undertakings
------------
None.
<PAGE> 72
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 5 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 6 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 30th day of December, 1998.
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 December 30, 1998
- --------------------- Executive Officer) and Trustee
Scott D. Roulston
/s/ Kevin M. Crotty Treasurer December 30, 1998
- -------------------
Kevin M. Crotty
/s/ Charles A. Kiraly Secretary December 30, 1998
- ---------------------
Charles A. Kiraly
* /s/ Thomas V. Chema Trustee December 30, 1998
- ---------------------
Thomas V. Chema
* /s/ David B. Gale Trustee December 30, 1998
- ------------------------
David B. Gale
*By /s/ Deborah Ann Potter
------------------------------------
Deborah Ann Potter, Attorney-In-Fact
</TABLE>
<PAGE> 73
99.B Index to Exhibits Filed Pursuant to Form N-1A:
(23)(j) Consent of Independent Auditors
(23)(n) Financial Data Schedules
<PAGE> 1
Exhibit 23j
[McCurdy & Associates Logo & Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this Post-
Effective Amendment Number 5 to the Fairport Funds Registration Statement of
all references to our firm included in or made a part of this Post-Effective
Amendment.
McCurdy & Associates CPA's, Inc.
December 28, 1998
<PAGE> 1
[ARTICLE] 6
[CIK] 0000930363
[NAME] FAIRPORT FUNDS
[SERIES]
[NUMBER] 1
[NAME] FAIRPORT MIDWEST GROWTH FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1998
[PERIOD-START] NOV-01-1997
[PERIOD-END] OCT-31-1998
[INVESTMENTS-AT-COST] 56662290
[INVESTMENTS-AT-VALUE] 65480612
[RECEIVABLES] 117539
[ASSETS-OTHER] 6160
[OTHER-ITEMS-ASSETS] 609
[TOTAL-ASSETS] 65604920
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 217789
[TOTAL-LIABILITIES] 217789
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 47331083
[SHARES-COMMON-STOCK] 3975342
[SHARES-COMMON-PRIOR] 4078689
[ACCUMULATED-NII-CURRENT] (102535)
[OVERDISTRIBUTION-NII] 91388
[ACCUMULATED-NET-GAINS] 9431649
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8818322
[NET-ASSETS] 65387131
[DIVIDEND-INCOME] 885239
[INTEREST-INCOME] 79572
[OTHER-INCOME] 0
[EXPENSES-NET] 1067346
[NET-INVESTMENT-INCOME] (102535)
[REALIZED-GAINS-CURRENT] 9390471
[APPREC-INCREASE-CURRENT] (14925981)
[NET-CHANGE-FROM-OPS] (5638045)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 4536145
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 784282
[NUMBER-OF-SHARES-REDEEMED] 1129115
[SHARES-REINVESTED] 241486
[NET-CHANGE-IN-ASSETS] (11630275)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 4577323
[OVERDISTRIB-NII-PRIOR] 91388
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 581223
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1101409
[AVERAGE-NET-ASSETS] 77498022
[PER-SHARE-NAV-BEGIN] 18.88
[PER-SHARE-NII] (.03)
[PER-SHARE-GAIN-APPREC] (1.30)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 1.10
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.45
[EXPENSE-RATIO] 1.38
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 2
[ARTICLE] 6
[CIK] 0000930363
[NAME] FAIRPORT FUNDS
[SERIES]
[NUMBER] 2
[NAME] FAIRPORT GROWTH & INCOME FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1998
[PERIOD-START] NOV-01-1997
[PERIOD-END] OCT-31-1998
[INVESTMENTS-AT-COST] 25843344
[INVESTMENTS-AT-VALUE] 33076569
[RECEIVABLES] 21453
[ASSETS-OTHER] 5358
[OTHER-ITEMS-ASSETS] 237
[TOTAL-ASSETS] 33103617
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 56679
[TOTAL-LIABILITIES] 56679
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 23843685
[SHARES-COMMON-STOCK] 2079854
[SHARES-COMMON-PRIOR] 1725373
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 21713
[ACCUMULATED-NET-GAINS] 1991741
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7233225
[NET-ASSETS] 33046938
[DIVIDEND-INCOME] 448810
[INTEREST-INCOME] 73096
[OTHER-INCOME] 0
[EXPENSES-NET] 516184
[NET-INVESTMENT-INCOME] 5722
[REALIZED-GAINS-CURRENT] 1978014
[APPREC-INCREASE-CURRENT] (2771879)
[NET-CHANGE-FROM-OPS] (788143)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 3271584
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 753991
[NUMBER-OF-SHARES-REDEEMED] 591000
[SHARES-REINVESTED] 191490
[NET-CHANGE-IN-ASSETS] 2206092
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 3285311
[OVERDISTRIB-NII-PRIOR] 27435
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 260482
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 532595
[AVERAGE-NET-ASSETS] 34747807
[PER-SHARE-NAV-BEGIN] 17.87
[PER-SHARE-NII] .01
[PER-SHARE-GAIN-APPREC] (.15)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 1.84
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.89
[EXPENSE-RATIO] 1.49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 3
[ARTICLE] 6
[CIK] 0000930363
[NAME] FAIRPORT FUNDS
[SERIES]
[NUMBER] 3
[NAME] FAIRPORT GOVERNMENT SECURITIES FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1998
[PERIOD-START] NOV-01-1997
[PERIOD-END] OCT-31-1998
[INVESTMENTS-AT-COST] 4647307
[INVESTMENTS-AT-VALUE] 4870278
[RECEIVABLES] 68708
[ASSETS-OTHER] 8386
[OTHER-ITEMS-ASSETS] 131786
[TOTAL-ASSETS] 5079158
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 22402
[TOTAL-LIABILITIES] 22402
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 4852920
[SHARES-COMMON-STOCK] 484955
[SHARES-COMMON-PRIOR] 445505
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 34
[ACCUMULATED-NET-GAINS] (19101)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 222971
[NET-ASSETS] 5056756
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 274423
[OTHER-INCOME] 0
[EXPENSES-NET] 42675
[NET-INVESTMENT-INCOME] 231748
[REALIZED-GAINS-CURRENT] 85201
[APPREC-INCREASE-CURRENT] 162209
[NET-CHANGE-FROM-OPS] 479158
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 231782
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 247860
[NUMBER-OF-SHARES-REDEEMED] 230820
[SHARES-REINVESTED] 22410
[NET-CHANGE-IN-ASSETS] 645952
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (104302)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 11854
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 103773
[AVERAGE-NET-ASSETS] 4727575
[PER-SHARE-NAV-BEGIN] 9.90
[PER-SHARE-NII] .49
[PER-SHARE-GAIN-APPREC] .53
[PER-SHARE-DIVIDEND] .49
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.43
[EXPENSE-RATIO] .90
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
