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================================================================================
As filed with the Securities and Exchange Commission on April 16, 1999
1933 Act Registration No. 33-84186
1940 Act File No. 811-8774
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 [X]
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)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
__X__ 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.
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The information in this Prospectus is not complete and may be changed. Fairport
Funds may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
FAIRPORT FUNDS
CHARTING A COURSE YOU CAN TRUST
PROSPECTUS
FAIRPORT EMERGING GROWTH FUND
FAIRPORT INTERNATIONAL EQUITY FUND
July ___, 1999
Advised by
ROULSTON & COMPANY, INC.
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.
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TABLE OF CONTENTS
PAGE
----
EMERGING GROWTH FUND....................................................2
Investment Goal......................................................2
Principal Strategy...................................................2
Important Risks......................................................2
INTERNATIONAL EQUITY FUND...............................................2
Investment Goals.....................................................2
Principal Strategy...................................................2
Important Risks......................................................3
FEES AND EXPENSES OF THE FUNDS..........................................3
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES...............5
Fairport Emerging Growth Fund........................................5
Fairport International Equity Fund...................................5
OTHER SECURITIES AND RISKS..............................................6
MANAGEMENT OF THE FUNDS.................................................7
PRICING FUND SHARES.....................................................9
PURCHASE OF SHARES......................................................9
Purchase of Fund Shares.............................................11
Distribution Arrangements...........................................12
REDEMPTION OF SHARES...................................................12
DIVIDENDS, DISTRIBUTIONS AND TAXES.....................................13
Dividends & Distributions...........................................13
Tax Consequences....................................................13
TAX AND DISTRIBUTION CHECKLIST.........................................14
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EMERGING GROWTH FUND
INVESTMENT GOAL
Capital appreciation.
PRINCIPAL STRATEGY
The Fund invests primarily in common stocks of companies considered by Roulston
& Company, Inc., as the Fund's investment adviser, to be in their post-venture
capital stage of development, i.e., that have received venture capital financing
during the early stages of the company's existence or the early stages of the
development of a new product or service, or as part of a reorganization,
restructuring or recapitalization.
PRINCIPAL 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 the Fund's investments depends on the ability of the portfolio
manager to assess correctly the potential of the stocks purchased for the Fund;
- - because of the Fund's focus on companies in their post-venture capital stage,
from time to time the availability of companies for investment may be limited,
and such limited availability may adversely affect the Fund's performance under
certain market conditions or the Fund's ability to invest according to its
principal strategy;
- - the securities of companies in their post-venture capital stage involve
certain special risks including that such securities may exhibit greater price
volatility and be subject to greater risk of losing value than securities of
companies which are more established and have more certain sources of financing;
and
- - loss of part or all of your money invested in the Fund
INTERNATIONAL EQUITY FUND
INVESTMENT GOAL
Long-term capital appreciation by investing primarily in equity securities of
non-U.S companies.
PRINCIPAL STRATEGY
The Fund invests primarily in common stocks of non-U.S. companies which Roulston
& Company consider to have a competitive advantage, to be the perceived leaders
in their respective industries or to be in industries which are consolidating.
The Fund normally will invest in such common stocks that are either principally
traded in countries outside of the United States or are represented by
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American Depository Receipts or "ADRs." ADRs are United States securities
representing foreign securities that are deposited with foreign custodians or
foreign branches of U.S. commercial banks. ADRs trade in U.S. dollars on
national exchanges (such as the New York Stock Exchange) and the
over-the-counter markets (such as NASDAQ).
At any given time, the Fund may invest up to 50% of its assets in equity
securities of companies headquartered in any one country, although the Fund will
ordinarily invest at least 65% of its total assets in at least three foreign
countries.
PRINCIPAL RISKS
There are risks associated with any investment, but the particular 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 the economies of the countries in which the Fund invests
and general investor confidence;
- - foreign currency risk, or that the price of securities held by the Fund that
are denominated in a foreign currency may be affected by changes in currency
exchange rates and in exchange contract regulations, including currency
blockage;
- - the success of the Fund's investments depends on the ability of the portfolio
manager to assess correctly the potential for the stocks purchased for the Fund;
- - loss of part or all of your money invested in the Fund
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
EMERGING INTERNATIONAL
GROWTH EQUITY
FUND FUND
<S> <C> <C>
SHAREHOLDER FEES*:
- ------------------
(fees paid directly from
your investment) None None
ANNUAL FUND OPERATING
- ---------------------
EXPENSES:
- ---------
(EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees .75% .75%
Distribution and Service
(12b-1) Fees .25% .25%
Other Expenses** 1.53% 1.53%
</TABLE>
3
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<TABLE>
<S> <C> <C>
Total Annual Operating
Expenses 2.53% 2.53%
Less Fee Waiver and/or
Expense Reimbursement ( %) ( %)
-------- -------
Net Annual Operating Expenses % *** %***
</TABLE>
* A $9 wire redemption charge deducted from the amount of each redemption of
Fund shares you request by Federal Reserve wire.
** "Other Expenses" are based on estimated amounts for the current fiscal year.
*** These are the net fees and expenses that the Funds estimate that they will
incur for the fiscal period ending October 31, 1999, because Roulston & Company
has voluntarily agreed to waive advisory fees and/or reimburse expenses during
that period to the extent necessary to maintain each Fund's Net Annual Operating
Expenses at the levels shown in the above table. This agreement continues for
additional one-year terms unless Roulston & Company gives at least 60 days
advance notice.
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;
- - Your investment has a hypothetical 5% return each year;
- - All dividends are reinvested; and
- - Each Fund's operating expenses for the one year period are calculated net
of any fee waivers and/or expenses assumed, and each Fund's operating
expenses for the three year period do not reflect fee waivers or expenses
assumed.
This example is for comparison purposes only. Actual returns 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
- ------------------------------------------------------- ------------ -----------
<S> <C> <C>
Emerging Growth Fund $______ $837
- ------------------------------------------------------- ------------ -----------
International Equity Fund $______ $837
- ------------------------------------------------------- ------------ -----------
</TABLE>
4
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INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
FAIRPORT EMERGING GROWTH FUND
The Fund's investment objective is to provide capital appreciation. This
investment objective may be changed by Fairport Funds' Board of Trustees without
the approval of the Fund's shareholders.
The Fund intends to invest primarily in common stocks of companies considered by
Roulston & Company to be in their post-venture capital stage of development.
Such stocks may have warrants attached to them. Roulston & Company will select
those companies which it believes to have the potential for above-average growth
in market value. These types of companies are often in the early stages of their
development or existence or may have been in existence for a period of time but
have recently been a part of a reorganization, restructuring or
recapitalization. Generally companies that are in their post-venture capital
stage have not had their securities traded publicly - in other words, they have
not been "publicly held" - for very long. While most companies in their
post-venture capital stage of development are relatively small companies, the
Fund may invest in companies of all sizes.
The Fund will typically sell a stock when the portfolio manager feels that the
company's competitive advantage or future prospects will not be fully recognized
in its stock price, when the stock falls short of his expectations, or as a
result of external factors that could affect the company adversely.
The Fund may from time to time invest up to 100% of its total assets in money
market instruments or cash as a defensive measure to attempt to respond to
adverse market, political, economic or other conditions. If the Fund takes such
a defensive position it will not achieve its investment objective during that
time.
FAIRPORT INTERNATIONAL EQUITY FUND
The Fund's investment objective is to provide long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers. This investment
objective may be changed by Fairport Funds' Board of Trustees without the
approval of the Fund's shareholders.
The Fund will invest primarily in common stocks that are principally traded
outside of the United States and in American Depositary Receipts or "ADRs." Such
stocks may have warrants attached to them. At any time the Fund may invest up to
50% of its assets in common stocks of companies headquartered in any one
country. Generally, however, the Fund will invest at least 65% of its total
assets in at least three countries (based upon the location of the company's
headquarters). The Fund will focus primarily on companies headquartered in the
more developed foreign countries or areas of the world such as Western Europe,
Japan, Australia, Singapore, and Hong Kong.
Roulston & Company uses stock selection as its primary criteria when making
investment decisions and allocation of investments among foreign countries as a
secondary criteria. The primary focus of Roulston & Company's stock selection is
on companies that are perceived to have a competitive advantage and are
generally viewed to be ranked among the top three companies in their industry. A
secondary focus is on companies that are in consolidating industries.
The Fund will typically sell a stock when the portfolio manager feels that the
company's competitive advantage or future prospects will not be fully recognized
in its stock price, when the stock falls short of his expectations, or as a
result of external factors that could affect the company adversely.
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The Fund may from time to time invest up to 100% of its total assets in money
market instruments or cash as a defensive measure to attempt to respond to
adverse market, political, economic or other conditions. If the Fund takes such
a defensive position it will not achieve its investment objective during that
time. The Fund may, from time to time, attempt to hedge its exposure to currency
exchange risk by using forward currency contracts.
OTHER SECURITIES AND RISKS
- --------------------------
COMMON STOCKS AND ARDS GENERALLY. The Emerging Growth Fund and the International
Equity Fund will primarily invest in common stocks. The Funds may also invest in
warrants, which are securities that give the holder the right to purchase a
certain amount of the issuer's common stock at a specified price during a
specified time period. These types of investment may or may not pay dividends
and may or may not carry voting rights. The common stock of a company occupies
the most junior position of all securities issued by that company.
American Depositary Receipts or "ADRs" that the International Equity Fund may
purchase may be sponsored or unsponsored. Sponsored ADRs are those jointly
issued by the issuer of the underlying security and the depositary institution.
Unsponsored ADRs are issued only by the depositary without the participation of
the issuer of the underlying securities. Generally the markets for sponsored
ADRs are more established and more liquid than those for unsponsored ADRs. Also,
there is generally more financial and other types of information available
regarding the underlying securities and their issuers of sponsored ADRs than
unsponsored ADRs. This is so in part because the depositary institution for
unsponsored ADRs is frequently under no obligation to pass on to ADR holders
shareholder information or voting rights.
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. The securities of small- and mid-sized companies
generally are less "liquid" than securities of larger, more established
companies. Liquidity relates to the ability of a Fund to sell a security
promptly at or about the price the Fund has on its books.
FOREIGN SECURITIES. Securities in which the International Equity Fund invests
are usually denominated or quoted in currencies other than the U. S. dollar.
Changes in foreign currency exchange rates affect the value of the Fund's
portfolio. Generally, when the U. S. dollar rises in value against a foreign
currency, a security denominated in that currency loses value because the
currency is worth fewer U. S. dollars. Conversely, when the U. S. dollar
decreases in value against a foreign currency, a security denominated in that
currency gains value because the currency is worth more U. S. dollars. This
risk, generally known as "currency risk," means that a strong U. S. dollar will
reduce returns for U.S. investors while a weak U. S. dollar will increase those
returns.
Foreign investments involve special risks not applicable to investments in
securities of U.S. issuers. Such risks include:
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- - imposition of exchange controls or currency devaluations
- - less extensive regulation of foreign brokers, securities markets and
issuers
- - political, economic or social instability
- - less publicly available information and less liquidity in the market for
such securities
- - different accounting standards and reporting obligations
- - foreign economies differ from the U.S. economy (favorably or unfavorably)
in areas such as growth of gross domestic product, rates of inflation,
unemployment, currency depreciation and balance of payments positions.
- - possibility of expropriation (the taking of property or amending of
property rights by a foreign government) or foreign ownership limitations
- - excessive or confiscatory taxation
The Fund will generally hold its foreign securities in foreign banks and
depositories. Some foreign banks and securities depositories may be recently
organized or new to the foreign custody business. In addition, there may be
limited or no regulatory oversight over their operations. Also, the laws of
certain countries may put limits on the Fund's ability to recover its assets if
a foreign bank, depository or issuer of a security, or any of their agents, goes
bankrupt. When trading in foreign securities, the Fund is also subject to costs
for conversions between currencies, higher costs for holding, buying or selling
securities, possible delays in settlement of securities transactions in foreign
markets and difficulty in enforcing obligations in a foreign country or
exercising shareholder rights (such as voting proxies). In addition, the "Euro"
began serving as a new common currency for participating European nations on
January 1, 1999. It is unclear whether the newly created accounting, clearing,
settlement and payment systems for the new currency will be adequate.
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, 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
and the other funds of Fairport 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. For its services, Roulston is entitled to
receive a fee, computed daily and paid monthly, from each Fund at the annual
rate of seventy-five one hundredths of one percent (0.75%) of such Fund's
average daily net assets.
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<PAGE> 10
Mr. Howard W. Harpster is responsible for the day-to-day management of
the Funds' portfolios. Mr. Harpster joined Roulston as [add title here] in
[June], 1999. Prior to joining Roulston, Mr. Harpster served as Director of
Pension Investments with BP America, Inc. since 1989.
The table below includes performance information provided by Roulston
relating to the performance records of the BP America In-House Venture Capital
Account and the BP America In-House International Account of the [Defined
Benefit Plan] of BP America, Inc. during the period of January 1, 1991, through
December 31, 1998. Mr. Harpster managed the BP America In-House Venture Capital
Account during that time period using the specific investment approach specified
for the Emerging Growth Fund on pages______ and ______ of this Prospectus. Mr.
Harpster also managed the BP America In-House International Account during that
time period using the specific investment approach specified for the
International Equity Fund on pages______ and ______ of this Prospectus. The
Funds will be managed with investment objectives, policies and strategies
similar in all material respects to their respective Accounts. However, the
Accounts were not subject to the same types of expenses the Funds pay nor to the
diversification, specific tax restrictions and investment limitations imposed on
the Funds by the Investment Company Act of 1940 or related laws. The performance
information in the table is not intended to predict or suggest the returns to be
experienced by the Funds. You should not rely on the following performance data
as an indication of future performance of Roulston or the Funds.
<TABLE>
<CAPTION>
Total Return for the Years Ended December 31,*
1998 1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BP America In-House
Venture Capital Account 25.6% 44.37% 3.40% 47.64% 16.46% 6.13% 19.57% 41.08%
BP America In-House
International Account 34.16% 11.88% 23.48% 20.93% (13.21)% 39.45% (7.97)% 15.53%
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns for the Years Ended December 31,*
1 Year 3 Years 5 Years
------ ------- -------
<S> <C> <C> <C>
BP America In-House
Venture Capital Account 25.6% 23.3% 26.4%
BP America In-House
International Account 34.2% 22.8% 14.2%
</TABLE>
*Total return for each of these Accounts is calculated using the Modified Dietz
method, which is defined as the portfolio gain (including all realized and
unrealized gains and losses as well as all income) over the average capital for
the period. Average capital is the beginning market value plus/minus weighted
subscriptions/redemptions. These returns are net of all applicable fees and
expenses which are lower than
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those estimated to be borne by the Funds. Total return for the Funds will be
calculated using the standard total return formula required by the Securities
and Exchange Commission for all mutual funds.
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.
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 its portfolio
securities. If quotations are not available from 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 or market on which the
security is principally traded. Because the International Equity Fund will
invest in securities primarily traded on foreign exchanges that trade on days
when that Fund does not price its shares, the NAV of the Fund's shares may
change on days when shareholders will not be able to purchase or redeem the
Fund's shares. 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 Time, will be executed the same day, at that day's closing share price.
Orders received after 4:00 p.m., Eastern Time, will be executed the following
day, at that day's closing share price. Shares will not be priced on days when
the NYSE is closed.
Shares of the Funds will not be priced and are not available for purchase on the
following days on which the NYSE 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 either Fund directly by mail or by wire. An account
application may be obtained by calling Roulston Research Corp., the Funds'
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
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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 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 1-800-332-6459.
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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
your check made out to the Fund you wish to invest in to: account statement and mail your check or other
Fairport Funds negotiable bank 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. Call your bank with instructions to transmit
funds to: Follow the instructions under "TO OPEN AN ACCOUNT - By
UMB Bank, NA, ABA #10-10-00695 Wire."
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 (section 7 of the To add the AUTOMATIC INVESTMENT PLAN to an existing
application) with your initial investment. 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
account and invested in the designated Fund(s). materials.
Subsequent investments will be drawn from your bank
account and invested in the designated Fund(s).
- ----------------------------------------------------------- ---------------------------------------------------------
By Exchange By Exchange
- ----------------------------------------------------------- ---------------------------------------------------------
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
- - Kempers Cash Account Trust Money Market exchange of shares into:
Portfolio. For this exchange, you must first - Another Fairport Fund.
receive a prospectus. This may not be available in - Kemper's Cash Account Trust Money Market
all 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.
- ----------------------------------------------------------- ---------------------------------------------------------
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.
</TABLE>
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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.
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.
- ----------------------------------------------------------- ---------------------------------------------------------
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.
</TABLE>
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 days from the purchase date, until the
purchase check has cleared. If you are
12
<PAGE> 15
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
- - 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 shares 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 Funds' 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 dividends and
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 Funds
generally pay dividends semi-annually. 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 so
long as it meets the requirements for being a tax-qualified regulated investment
company, which each of the Funds intends to do. 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
13
<PAGE> 16
of net long term capital gains are taxable as long term capital gains. You will
be advised at least annually as to the federal income tax consequences of
distributions made to you during the year. You are urged to consult your tax
advisor concerning the application of federal, state and local taxes to your
particular 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.
Dividends and interest received by the International Equity Fund may give rise
to withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. You may be able to claim a credit or take a deduction for foreign taxes
paid by the Fund if certain requirements are met.
TAX AND DISTRIBUTION CHECKLIST
The following TAX CHECKLIST is a guide to the forms and reporting information
for any regular, taxable accounts which will help assist your tax preparer: (not
including IRSs or Retirement Accounts)
<TABLE>
<CAPTION>
TAX FORM WHAT IS IT? WHEN IT IS SENT?
- --------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Year End Summary Statement Sent to shareholders detailing the January
activity in an account for the entire
year. Keeping a copy of this statement
on an ongoing basis will help with taxes
down the road.
- --------------------------------------- -------------------------------------- --------------------------------------
1099-DIV Sent to shareholders in any Fund January
which made distributions of
dividends or capital gains during
the year.
- --------------------------------------- -------------------------------------- --------------------------------------
1099-B Sent to shareholders that have January
redeemed any shares during the year
through a redemption or exchange in
any Fund.
- --------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
The following DISTRIBUTION PROFILE is a guide to when distributions are
scheduled to be paid to shareholders in the event that a dividend or capital
gain distribution is declared in a particular Fund*:
<TABLE>
<CAPTION>
FUND DIVIDENDS CAPITAL GAINS
- --------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Fairport Emerging Growth Fund End of June Early December
End of December
- --------------------------------------- -------------------------------------- --------------------------------------
Fairport International Equity End of June Early December
End of December
- --------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
* There are no guarantees that either dividends or distributions will be
declared and the schedule is subject to change.
14
<PAGE> 17
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:
[LIGHT HOUSE LOGO] 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).
Fairport Funds' SEC File No. is 811-8774.
15
<PAGE> 18
The information in this Statement of Additional Information is not complete and
may be changed. Fairport Funds may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This Statement of Additional Information is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
FAIRPORT EMERGING GROWTH FUND
FAIRPORT INTERNATIONAL EQUITY FUND
Two Funds of
FAIRPORT FUNDS
Investment Adviser:
ROULSTON & COMPANY, INC.
This Statement of Additional Information is not a prospectus and
relates to FAIRPORT EMERGING GROWTH FUND (the "EMERGING GROWTH FUND"), and
FAIRPORT INTERNATIONAL EQUITY FUND (the "INTERNATIONAL EQUITY FUND"), two
separate series of Fairport Funds (the "Trust"). The EMERGING GROWTH FUND and
the INTERNATIONAL EQUITY 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
July __, 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.
July __, 1999
B-1
<PAGE> 19
TABLE OF CONTENTS
-----------------
THE TRUST.....................................................................4
INFORMATION ON PERMITTED INVESTMENTS AND RELATED RISK FACTORS.................4
Bankers' Acceptances.......................................................4
Certificates of Deposit....................................................4
Commercial Paper...........................................................4
Time Deposits..............................................................4
U.S. Government Securities.................................................5
Repurchase Agreements......................................................5
Investment Company Shares..................................................6
Temporary Defensive Positions..............................................6
Initial Public Offerings...................................................6
Section 4(2) Securities....................................................6
Foreign Investment.........................................................7
Warrants...................................................................7
Forward Currency Contracts.................................................8
Portfolio Turnover.........................................................9
INVESTMENT LIMITATIONS OF THE FUNDS...........................................9
Non-fundamental Restrictions..............................................10
MANAGEMENT OF THE TRUST......................................................11
Trustees and Officers of the Trust........................................11
PRINCIPAL HOLDERS OF SECURITIES..............................................14
INVESTMENT ADVISORY AND OTHER SERVICES.......................................15
The Investment Adviser....................................................15
The Distributor...........................................................17
Distribution and Shareholder Service Plan.................................17
The Administrator.........................................................18
The Custodians............................................................19
Independent Auditors......................................................20
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.............................20
Portfolio Transactions....................................................20
Brokerage Commissions.....................................................20
NET ASSET VALUE..............................................................20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................21
Systematic Withdrawal Plan................................................22
TAXES........................................................................22
B-2
<PAGE> 20
PERFORMANCE INFORMATION......................................................25
Calculation of Total Return...............................................25
Performance Comparisons...................................................26
SHARES OF BENEFICIAL INTEREST................................................26
Description of Shares.....................................................26
Voting Rights.............................................................27
B-3
<PAGE> 21
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. In March, 1996, the Trust changed its name
from "The Roulston Family of Funds" to "Fairport Funds." Each of the Funds is
classified as diversified, meaning that, with respect to 75% of its total
assets, it does not invest 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).
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
------------------------
BANKERS' ACCEPTANCES
- --------------------
Bankers' acceptances are 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. Each Fund is permitted to invest in bankers' acceptances.
CERTIFICATES OF DEPOSIT
- -----------------------
A certificate of deposit is 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. Each Fund is
permitted to invest in certificates of deposit.
COMMERCIAL PAPER
- ----------------
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. Each Fund may invest in commercial paper.
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.
Each Fund is permitted to invest in time deposits.
B-4
<PAGE> 22
U.S. GOVERNMENT SECURITIES
- --------------------------
U.S. Government securities are 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. Each of
the Funds may invest in U.S. Government securities with remaining maturities of
12 months or less.
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 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.
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
B-5
<PAGE> 23
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 Investment Company Act
of 1940.
INVESTMENT COMPANY SHARES
- -------------------------
Each Fund may invest up to 10% of the value of its total assets in
securities of money market mutual funds. Each Fund intends to invest 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.
TEMPORARY DEFENSIVE POSITIONS
- -----------------------------
When either 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,
short-term U.S. Government securities, money market mutual funds and repurchase
agreements.
INITIAL PUBLIC OFFERINGS
- ------------------------
The EMERGING GROWTH FUND and the INTERNATIONAL EQUITY FUND may invest
from time to time in the securities of selected new issuers, or initial public
offerings (IPOs). The Funds will only invest in securities which Roulston
believes present an acceptable amount of risk. Investments in relatively new
issuers may carry special risks and may be more speculative because such
companies are often 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 EMERGING GROWTH FUND and the INTERNATIONAL EQUITY FUND may invest
in restricted, or Section 4(2), securities. These securities are issued by
corporations without registration under the
B-6
<PAGE> 24
Securities Act of 1933, as amended (the "1933 Act") in reliance on an exemption
from registration which is afforded by Section 4(2) of the 1933 Act ("Section
4(2) securities"). 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 must also generally be made in an exempt
transaction. Section 4(2) securities are normally resold, if at all, to other
institutional investors through or with the assistance of the issuer or
investment dealers who facilitate the resale of such Section 4(2) securities,
thus providing some liquidity.
Pursuant to procedures adopted by the Board of Trustees of the Trust,
Roulston may determine Section 4(2) securities to be liquid if such securities
are eligible for resale under Rule 144A of the 1933 Act and are readily
saleable. Rule 144A permits a Fund 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 a Fund's illiquidity to
the extent that qualified institutional buyers become, for a time, uninterested
in purchasing these securities.
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, the International
Equity Fund may be affected favorably or unfavorably by changes in currency
rates and in exchange control regulations and may incur costs in connection with
conversions between various currencies.
Since foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a U.S. company. Securities of
many foreign companies are less liquid and more volatile than securities of
comparable U.S. companies.
In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect the International
Equity 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.
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. Each of the
Funds is permitted to invest in warrants.
B-7
<PAGE> 25
FORWARD CURRENCY CONTRACTS
- --------------------------
The International Equity Fund may enter into forward currency contracts
from time to time as a hedging technique against possible losses to the Fund in
connection with the currency risk associated with investing in securities
denominated in a foreign currency. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may engage enter
into forward contracts to protect against uncertainty in the level of future
exchange rates and may also enter in such contracts to increase income and total
return.
At or before the maturity of a forward contract, the Fund may either
sell a portfolio security and make delivery of the currency or retain the
security and fully or partially offset its contractual obligation to deliver the
currency by purchasing a second contract. If the Fund retains the portfolio
security and engages in an offsetting transaction, the Fund, at the time of
execution of the offsetting transaction, will incur a gain or a loss to the
extent that movement has occurred in forward contract prices.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
While the values of forward currency contracts may be expected to
correlate with exchange rates, they will not reflect other factors that may
affect the value of the Fund's investments. For example, a currency hedge should
help protect a Yen-denominated common stock against a decline in the Yen, but
will not protect the Fund against such stock's price decline as a result of some
issuer-specific event such as a drop in earnings. Because the value of the
Fund's investments denominated in a foreign currency will change in response to
many factors other than exchange rates, a currency hedge may not be entirely
successful in mitigating changes in the value of the Fund's investments
denominated in that currency over time. In addition, a decline in the dollar
value of a foreign currency in which the Fund's securities are denominated will
reduce the dollar value of the securities, even if their value in the foreign
currency remains constant.
Successful use of forward contracts depends upon Roulston's ability to
predict movements of the overall securities and currency markets. There can be
no assurance that any particular use will be successful. In addition, as
described above, there may be imperfect correlation, or even no correlation,
between price movements of a currency or contract and the investment being
hedged. And while a hedging strategy, if successful, can reduce the risk of loss
by wholly or partially offsetting the negative effect of the unfavorable price
movements in the investments being hedged, such hedging strategy may also reduce
the opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged instruments.
B-8
<PAGE> 26
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 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.
INVESTMENT LIMITATIONS OF THE FUNDS
-----------------------------------
The investment objective of each Fund is not fundamental, meaning that
they may be amended by the Trustees of the Trust without shareholder approval.
The investment limitations described immediately below are fundamental policies
of the Funds. Fundamental 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;
B-9
<PAGE> 27
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
8. Purchase or sell commodities or commodities contracts (including future
contracts), except to the extent disclosed in the then 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; or
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.
B-10
<PAGE> 28
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.
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
- ---------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>
B-11
<PAGE> 29
<TABLE>
- ---------------------------------------- ------------------------------------ ----------------------------------------
<S> <C> <C>
facilities public development company).
- ---------------------------------------- ------------------------------------ ----------------------------------------
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).
- ---------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>
B-12
<PAGE> 30
<TABLE>
<S> <C> <C>
- ---------------------------------------- ------------------------------------ ----------------------------------------
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.
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.
B-13
<PAGE> 31
COMPENSATION TABLE:
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
Name and Position Aggregate Total Compensation
With the Trust Compensation From the Trust and
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.
As of April __, 1999, Mr. Roulston owned approximately ____% of the
Midwest Growth Fund, ____% of the Growth and Income Fund and ____% of the
Government Fund. As of that date, 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 April 5, 1999, owned of record or beneficially 5% or more of
the shares of a Fund.
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
B-14
<PAGE> 32
organizations could have the ability to approve or reject those matters
submitted to the shareholders of such Fund for their approval.
FAIRPORT MIDWEST GROWTH FUND:
- -----------------------------
<TABLE>
<CAPTION>
Shareholder(s) Percentage Owned
-------------- ----------------
<S> <C>
Charles Schwab & Co., Inc. 9.28%
Special Custody Account (of record)
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
FAIRPORT GROWTH AND INCOME FUND:
<TABLE>
<CAPTION>
Shareholder(s) Percentage Owned
-------------- ----------------
<S> <C>
Saxon Company 33.24%
P. O. Box 7780-1088 (of record)
Philadelphia, Pennsylvania 19182
Charles Schwab & Co., Inc. 12.85%
Special Custody Account (of record)
ATTN: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
FAIRPORT GOVERNMENT SECURITIES FUND:
- ------------------------------------
<TABLE>
<CAPTION>
Shareholder(s) Percentage Owned
-------------- ----------------
<S> <C>
Charles Schwab & Co., Inc. 22.15%
Special Custody Account (of record)
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
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. 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. Roulston also
serves as investment adviser for the other three funds of the Trust: the Midwest
Growth Fund, the Growth and Income Fund and the Government Securities Fund. For
services as investment adviser, Roulston receives a fee, which is
B-15
<PAGE> 33
calculated daily and paid monthly, at an annual rate of 0.75% of the average
daily net assets of each of the Midwest Growth Fund and the Growth and Income
Fund up to $100 million, and 0.50% of each such Fund's assets of $100 million or
more. With respect to the Government Fund, Roulston receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.25% of the average
daily net assets of the Government Fund up to $100 million, and .125% of such
assets of $100 million or more.
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 such other Fairport Funds.
<TABLE>
<CAPTION>
- -------------------------------------------------- ----------------- ------------------ --------------------
FUND Gross Advisory Net
Advisory Fees Advisory
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 such other Fairport Funds.
<TABLE>
<CAPTION>
- -------------------------------------------------- ----------------- ------------------ --------------------
FUND Gross Advisory Net
Advisory Fees Advisory
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>
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 such other Fairport Funds.
B-16
<PAGE> 34
<TABLE>
<CAPTION>
- -------------------------------------------------- ----------------- ------------------ --------------------
FUND Gross Advisory Net
Advisory Fees Advisory
Fees Earned Waived Fees Received
----------- ------ -------------
- -------------------------------------------------- ----------------- ------------------ --------------------
<S> <C> <C> <C>
Midwest Growth Fund $417,458 $169,950 $247,508
- -------------------------------------------------- ----------------- ------------------ --------------------
Growth and Income Fund $184,723 $81,095 $103,628
- -------------------------------------------------- ----------------- ------------------ --------------------
Government Securities Fund $18,674 $18,674 $0
- -------------------------------------------------- ----------------- ------------------ --------------------
TOTALS $620,855 $269,719 $351,136
- -------------------------------------------------- ----------------- ------------------ --------------------
</TABLE>
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. No information regarding
investment advisory fees paid by the Funds is provided because the Funds have
not yet commenced operations.
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.
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
B-17
<PAGE> 35
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 for the Funds 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.
In addition, the Distributor will enter 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, TRANSFER AGENT AND FUND ACCOUNTANT
- -----------------------------------------------------
First Data Investor Services Group, Inc., a wholly-owned subsidiary of
First Data Corporation ("First Data"), 4400 Computer Drive, Westborough, MA
01581, serves as the administrator for the Funds and the Trust. Pursuant to the
terms of a Services Agreement, First Data assists in supervising all operations
of each Fund (other than those performed by Roulston, by UMB Bank, n.a. as the
custodian for each of the funds of the Trust other than the International Equity
Fund, and by The Bank of New York as the custodian for the International Equity
Fund).
B-18
<PAGE> 36
Under the Services Agreement, First Data 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 to each Fund of the Trust other than
the International Equity Fund, and by The Bank of New York as custodian for the
International Equity Fund.
First Data 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 as administrator, transfer agent and
fund accountant, the Trust has agreed to pay First Data a fee, computed daily
and paid periodically, at an annual rate calculated as follows:
0.20% on the Trust's average net assets of $0 to $150 Million (subject
to a monthly minimum fee of $22,000); 0.15% on the next $150 Million of
average net assets; 0.10% on the next $200 Million of average net
assets; and 0.05% on the average net assets over $500 Million.
THE CUSTODIANS
- --------------
UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri 64141, serves
as the Emerging Growth Fund's Custodian pursuant to a Custody Agreement. The
Bank of New York, 48 Wall Street, New York, New York 10286, serves as the
International Equity Fund's custodian. In such capacity, UMB Bank, n.a. and The
Bank of New York hold or arrange for the holding of all portfolio securities and
other assets of their respective Fund.
B-19
<PAGE> 37
INDEPENDENT AUDITORS
- --------------------
McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, OH
44145, has been selected as independent auditors for the Funds, and as such will
audit the financial statements of the Funds.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
------------------------------------------------
PORTFOLIO TRANSACTIONS
- ----------------------
Roulston is authorized to select brokers and dealers to effect
securities transactions for the Funds. Roulston will seek to obtain the most
favorable net results by taking into account various factors, including price,
commission, if any, size of the transactions and difficulty of executions, the
firm's general execution and operational facilities and the firm's risk in
positioning the securities involved. While Roulston generally seeks reasonably
competitive spreads or commissions, a Fund will not necessarily be paying the
lowest spread or commission available. Roulston seeks to select brokers or
dealers that offer a Fund best price and execution or other services which are
of benefit to the Fund.
BROKERAGE COMMISSIONS
- ---------------------
Roulston may, consistent with the interests of the Funds, select
brokers on the basis of the research services they provide to Roulston. Such
services may include analyses of the business or prospects of a company,
industry or economic sector, or statistical and pricing services. Information so
received by Roulston will be in addition to and not in lieu of the services
required to be performed by Roulston under the Advisory Agreement. If, in the
judgment of Roulston, a Fund or other accounts managed by Roulston will be
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.
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
B-20
<PAGE> 38
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 First Data, as administrator and fund
accountant, 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 or market on which the security is principally traded. Equity
securities for which there is no sale on that day will be valued at their
closing bid prices obtained from one or more dealers making markets for such
securities or, if market quotations are not readily available, at their fair
value as determined in good faith by the Board of Trustees.
The procedures used by the pricing service are reviewed by the officers
of the Trust under the general supervision of the Trustees. The Trustees may
deviate from the valuation provided by the pricing service whenever, in their
judgment, such valuation is not indicative of the fair value of the debt
security. In such instances the debt security will be valued at fair value as
determined in good faith by or under the direction of the Trustees.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
The Funds' shares may be purchased at the public offering price, which
is the net asset value next computed, and are sold on a continuous basis through
the Distributor, principal underwriter of the Funds' shares, at its address and
number set forth under the heading "The Distributor", and through other
broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with the Distributor.
The Trust 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)
B-21
<PAGE> 39
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.
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 a 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.
B-22
<PAGE> 40
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 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
B-23
<PAGE> 41
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.
The International Equity Fund will invest in equity securities of
foreign issuers. If the Fund purchases shares in certain foreign investment
companies, known as "passive foreign investment companies," it may be subject to
federal income tax on a portion of an "excess distribution" from such passive
foreign investment companies or gain from the disposition of such shares, even
though such income may have to be distributed as a taxable dividend by the Fund
to its shareholders. In addition, certain interest charges may be imposed on the
Fund or its shareholders in respect of unpaid taxes arising from such
distributions or gains. Alternatively, the Fund would be required each year to
include in its income and distribute to shareholders a pro rata portion of the
foreign investment company's income, whether or not distributed to the Fund. The
Fund is permitted to "mark-to-market" any marketable stock held by the Fund in a
passive foreign investment company. If the Fund makes such an election, each
investor in the Fund would include in income in each year an amount equal to its
share of the excess, if any, of the fair market value of the stock in such
passive foreign investment company as of the close of the taxable year over the
adjusted basis of such stock. The investor would be allowed a deduction for its
share of the excess, if any, of the adjusted basis of the stock in such passive
foreign investment company over the fair market value of such stock as of the
close of the taxable year, but only to the extent of any net mark-to-market
gains with respect to the stock included by the investor for prior taxable
years.
It is expected that the International Equity Fund may be subject to
foreign withholding taxes with respect to income received from sources within
foreign countries. The International Equity Fund intends to elect to "pass
through" to its investors the amount of foreign income taxes paid by the Fund,
with the result that each shareholder will (i) include in gross income, even
though not actually received, the pro rata share of the Fund's foreign income
taxes, and (ii) either deduct (in calculating U.S. taxable income) or credit (in
calculating U.S. federal income tax) the pro rata share of the Fund's foreign
income taxes. A foreign tax credit may not exceed the U.S. federal income tax
otherwise payable with respect to the foreign source income. For this purpose,
each shareholder must treat as foreign source grow income (i) his proportionate
share of foreign taxes paid by the Fund and (ii) the portion of any dividend
paid by the Fund which represents income derived from foreign sources; the gain
from the sale of securities will generally be treated as U.S. source income.
This foreign tax credit limitation is, with certain exceptions, applied
separately to separate categories of income; dividends from the Fund will be
treated as "passive" or "financial services" income for this purpose. The effect
of this limitation may be to prevent from claiming as a credit the full amount
of their pro rata share of the Fund's foreign income taxes. In addition,
shareholders are not eligible to claim a foreign tax credit with respect to
foreign income taxes paid by the Fund unless certain holding period requirements
are met.
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
B-24
<PAGE> 42
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, you are urged to consult your tax adviser with specific
reference to your 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.
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)to the nth power = ERV
Where: P = a hypothetical initial payment of $1,000, T = average annual
total return, n = number of years, and ERV = ending redeemable value of a
hypothetical $1,000 payment at the beginning of the period at the end of the
period for which average annual total return is being calculated assuming a
complete redemption. The calculation of average annual total return assumes the
deduction of the
B-25
<PAGE> 43
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.
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
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 five series of shares, two of 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.
B-26
<PAGE> 44
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.
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
B-27
<PAGE> 45
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.
B-28
<PAGE> 46
Registration Statement
of FAIRPORT FUNDS
on
Form N-1A
PART C. OTHER INFORMATION
Item 23. EXHIBITS
(a) (i) 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.
(ii) Amendment to ARTICLE IV, Section 4.2 of the Declaration of
Trust, effective as of March 15, 1999 -- filed herewith.
(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, and as proposed to be amended as of July
__, 1999, between Registrant and Roulston & Company, Inc. -- filed
herewith.
(e) (i) Distribution Agreement dated January 20, 1995, as amended
as of June 3, 1996, and as proposed to be amended as of
July __, 1999, between Registrant and Roulston Research
Corp. -- filed herewith.
(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.
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;
<PAGE> 47
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.
(B) Retirement Plan Order Processing Amendment
dated October 15, 1998, to the Operating
Agreement dated October 25, 1996, among
Charles Schwab & Co., Inc., The Charles
Schwab Trust Company and the Fund Company --
filed herewith.
(C) Amendment dated as of January 1, 1999, to
Operating Agreement dated October 25, 1996,
between Charles Schwab & Co., Inc. and the
Fund Company -- filed herewith.
(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.
(iii) Proposed Custody Agreement between Registrant and The Bank
of New York (relating to Fairport International Equity
Fund) -- to be filed by amendment.
<PAGE> 48
(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 Amendment No. 3 to Registration Statement
#33-84186 filed via EDGAR on February 27, 1997.
(iv) Proposed Services Agreement between Registrant and First
Data Investor Services Group, Inc. -- filed herewith.
(i) Opinion of Counsel with respect to shares of the Trust.
(j) Consent of McCurdy & Associates CPA's, Inc. (with respect to
Fairport Emerging Growth Fund and Fairport International Equity
Fund) -- filed herewith. Consent of McCurdy & Associates CPA's,
Inc. (with respect to Fairport Midwest Growth Fund, Fairport
Growth and Income Fund and Fairport Government Securities Fund) --
incorporated herein by reference to Post-Effective Amendment No. 5
to Registration Statement #33-84186 filed via EDGAR on December
30, 1998.
(k) None
(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 Post-Effective Amendment No. 2
<PAGE> 49
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.
(v) Agreement Pursuant to Plan of Distribution under Rule 12b-1
dated as of January 1, 1999, between Roulston Research
Corp., Roulston & Company, Inc. and PNC Bank, National
Association -- filed herewith.
(n) Financial Data Schedules with respect to Fairport Midwest
Growth Fund, Fairport Growth and Income Fund and Fairport Government
Securities Fund -- incorporated herein by reference to Post-Effective
Amendment No. 5 to Registration Statement #33-84186 filed via EDGAR on
December 30, 1998. Financial Data Schedules for Fairport Emerging Growth
Fund and Fairport International Equity Fund -- to be filed by amendment.
(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.
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
<PAGE> 50
Exhibit 8(a) hereto, Section 4(c) of the Custody Administration and
Agency Agreement filed as Exhibit 8(b) hereto, Section 5 of the
Investment Advisory Agreement filed as Exhibit 5 hereto, Section 9(d) of
the Administration Agreement filed as Exhibit 9(a) hereto, Section 11(c)
of the Accounting Services Agreement filed as Exhibit 9(b) hereto and
Section 19(c) of the Transfer Agent Services Agreement filed as
Exhibit 9(c) hereto. As of the effective date of this Registration
Statement, Registrant will have obtained from a major insurance carrier a
trustees' and officers' liability policy covering certain types of errors
and omissions. In no event will Registrant indemnify any of its trustees,
officers, employees or agents against any liability to which such person
would otherwise be subject by reason of his willful misfeasance, bad
faith, or gross negligence in the performance of his duties, or by reason
of his reckless disregard of the duties involved in the conduct of his
office or under his agreement with Registrant. Registrant will comply
with Rule 484 under the Securities Act of 1933 and Release 11330 under
the Investment Company Act of 1940 in connection with any
indemnification.
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 FUNDS"
contained in Prospectuses and "MANAGEMENT OF THE TRUST" in the Statements
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
<PAGE> 51
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> 52
<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 Industries Chairman and Director
900 Keele Street
Toronto, Canada
M6N 3E7
---------------------------------------------------------------
Continental Managed Chairman and Director
Pharmacy Services
1400 East Schaaf Road
Brooklyn Heights, OH 44131
---------------------------------------------------------------
Roulston Investment Trust General Partner
Limited Partnership
4000 Chester Avenue
Cleveland, OH 44103
---------------------------------------------------------------
Roulston Ventures Limited General Partner
Partnership
4000 Chester Avenue
Cleveland, OH 44103
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
- --------------------------------------- ------------------------ ------------------------------ ------------------------------
<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 Pharmacy Director
Services
1400 Schaaf Road
Cleveland, Ohio 44113
---------------------------------------------------------------
RB Manufacturing Company Director
2620 West Monroe
Sandusky, OH 44870
- ----------------------------------------------------------------------------------------------- --------------------------------
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
================================================================================================================================
OFFICERS AND DIRECTORS OF POSITION WITH NAME AND ADDRESS OF NATURE 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
- --------------------------------------- ------------------------------------ ------------------------ -------------------------
Kevin M. Crotty Director of Finance
- --------------------------------------- ------------------------------------ ------------------------ -------------------------
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> 55
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;
4000 Chester Avenue President Trustee;
Cleveland, Ohio 44103 President
------------------------------------- ------------------------------- -----------------------
Heather R. Ettinger Director;
4000 Chester Avenue Executive Vice President and
Cleveland, Ohio 44103 Secretary
------------------------------------- ------------------------------- -----------------------
Kevin M. Crotty Treasurer Treasurer
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> 56
(d) UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri
64141 (records relating to its functions as custodian for
each Fairport Fund other than Fairport International Equity
Fund).
(e) The Bank of New York, 48 Wall Street, New York, New York
10286 (records relating to its functions as custodian for
Fairport International Equity Fund)
Item 29 MANAGEMENT SERVICES
None.
Item 30 UNDERTAKINGS
None.
<PAGE> 57
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. 6 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 7 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 16th day of April, 1999.
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.
Signature Title Date
- ----------------------------------------------------------------------------
/s/ Scott D. Roulston President (Principal April 16, 1999
- ----------------------- Executive Officer) and Trustee
Scott D. Roulston
/s/ Kevin M. Crotty Treasurer April 16, 1999
- ----------------------
Kevin M. Crotty
* /s/ Thomas V. Chema Trustee April 16, 1999
- ----------------------
Thomas V. Chema
* /s/ David B. Gale Trustee April 16, 1999
- ----------------------
David B. Gale
*By /s/ Deborah Ann Potter
-----------------------
Deborah Ann Potter, Attorney-In-Fact
<PAGE> 58
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(a)(ii) Amendment to ARTICLE IV, Section 4.2 of the Declaration of Trust,
effective as of March 15, 1999.
(d) Investment Advisory Agreement dated January 20, 1995, as amended
as of November 30, 1996, and as proposed to be amended as of July
__, 1999, between Registrant and Roulston & Company, Inc.
(e)(i) Distribution Agreement dated January 20, 1995, as amended as of
June 3, 1996, and as proposed to be amended as of July __, 1999,
between Registrant and Roulston Research Corp.
(e)(iii)(B) Retirement Plan Order Processing Amendment dated October 15, 1998,
to the Operating Agreement dated October 25, 1996, among Charles
Schwab & Co., Inc., The Charles Schwab Trust Company and the Fund
Company.
(e)(iii)(C) Amendment dated as of January 1, 1999, to Operating Agreement
dated October 25, 1996, between Charles Schwab & Co., Inc. and the
Fund Company.
(h)(iv) Proposed Services Agreement between Registrant and First Data
Investor Services Group, Inc.
(i) Opinion of Counsel with respect to shares of the Trust.
(j) Consent of McCurdy & Associates CPA's, Inc.
(m)(v) Agreement Pursuant to Plan of Distribution under Rule 12b-1 dated
as of January 1, 1999, between Roulston Research Corp., Roulston &
Company, Inc. and PNC Bank, National Association.
<PAGE> 1
Exhibit 99(a)(ii)
FAIRPORT FUNDS
AMENDMENT TO DECLARATION OF TRUST
---------------------------------
Amended: March 15, 1999
The first paragraph of ARTICLE IV, Section 4.2 of the Trust's
Declaration of Trust dated as of September 16, 1994, as amended to date,
hereby is amended further by deleting such first paragraph of Article IV,
Section 4.2 in its entirety and substituting in place thereof the following
new first paragraph of Article IV, Section 4.2:
"Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Series or Sub-Series or to classify all or
any part of the issued Shares of any Series to make them part of an existing
or newly created Sub-Series or to amend the rights and preferences of new or
existing Series or Sub-Series, including the following Series, all without
Shareholder approval, there are hereby established and designated initial
Series of Shares designated Series A, which shall represent interests in
Fairport Midwest Growth Fund, Series B, which shall represent interests in
Fairport Growth and Income Fund, and Series C, which shall represent interests
in Fairport Government Securities Fund, and there are further established and
designated additional series of Shares designated Series D, which shall
represent interests in Fairport Emerging Growth Fund, and Series E, which
shall represent interests in Fairport International Equity Fund. Shares of
Series A, Series B, Series C, Series D, and Series E and, unless provisions to
the contrary are set forth in an amendment of the Declaration of Trust, Shares
of each additional Series, shall have the following relative rights and
preferences:;"
<PAGE> 1
Exhibit 99(d)
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of January 20, 1995, between The Roulston
Family of Funds, an Ohio business trust (the "Trust"), and Roulston & Company,
Inc., an Ohio corporation (the "Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the newly created investment portfolios of the Trust and
may retain the Adviser to serve in such capacity to certain additional
investment portfolios of the Trust, all as now or hereafter may be identified in
Schedule A hereto (such initial investment portfolios and any such additional
investment portfolios together called the "Funds") and the Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained in this Agreement, the parties hereto agree as follows:
SECTION 1. APPOINTMENT. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms and subject to
the conditions set forth in this Agreement. The Adviser accepts such appointment
and agrees to furnish the services herein set forth for the compensation herein
provided. Additional investment portfolios may from time to time be added to
those covered by this Agreement by the parties executing a new Schedule A which
shall become effective upon its execution and shall supersede any Schedule A
having an earlier date.
SECTION 2. INVESTMENT ADVISORY SERVICES. Subject to the supervision of
the Trust's Board of Trustees, the Adviser shall provide a continuous investment
program for the Funds, including investment, research and management with
respect to all securities and investments and cash equivalents in the Funds. The
Adviser shall determine from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds. The
Adviser shall provide the services under this Agreement in accordance with each
of the Fund's investment objectives, policies, and restrictions as stated in
such Fund's most current Prospectus and Statement of Additional Information, as
then in effect, and all amendments or supplements thereto, and resolutions of
the Trust's Board of Trustees as may be adopted from time to time. The Adviser
further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to any fiduciary
accounts for which it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission (the "Commission") and,
in addition, will conduct its activities under this Agreement
in accordance with any applicable regulations of
<PAGE> 2
any governmental authority pertaining to the investment
advisory activities of the Adviser;
(c) will place orders pursuant to its investment
determinations for the Funds either directly with the issuer
or with any broker or dealer. In placing orders with brokers
and dealers, the Adviser will attempt to obtain and is hereby
directed to obtain prompt execution of orders in an effective
manner at the most favorable price. Consistent with this
obligation, the Adviser may, in its discretion, purchase and
sell portfolio securities to and from brokers and dealers who
provide the Adviser with brokerage and research services
(within the meaning of Section 28(e) of the Securities
Exchange Act of 1934). Subject to the review of the Trust's
Board of Trustees from time-to-time with respect to the extent
and continuation of this policy, the Adviser is authorized to
pay a broker or dealer who provides such brokerage and
research services a commission for effecting a securities
transaction for any of the Funds which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the
Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to the accounts
as to which it exercises investment discretion. In no instance
will portfolio securities be purchased from or sold to
Roulston Research Corp., the Adviser, or any affiliated person
of the Trust, Roulston Research Corp. or the Adviser unless
otherwise permitted by the 1940 Act, an exemption therefrom,
or an order thereunder;
(d) will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the
Trust's Board of Trustees such periodic and special reports as
the Board may request; and
(e) will advise and assist the officers of the Trust in taking
such actions as may be necessary or appropriate to carry out
the decisions of the Trust's Board of Trustees and of the
appropriate committees of such Board regarding the conduct of
the business of the Funds; and
SECTION 3. EXPENSES. During the term of this Agreement, the Adviser
will pay all expenses incurred by it in connection with its activities, duties
and obligations under this Agreement, other than the costs of securities
(including brokerage fees, if any) purchased for the Funds.
SECTION 4. COMPENSATION. For the services provided and the expenses
assumed pursuant to this Agreement, each of the Funds will pay the Adviser and
the Adviser will accept as full compensation therefor a fee set forth on
Schedule A hereto. The obligations of the Funds to pay the above-described fee
to the Adviser will begin as of the respective dates of the initial public sale
of shares in the Funds, including any shares sold or exchanged in connection
with a merger, consolidation or reorganization involving one or more of the
Funds.
2
<PAGE> 3
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, the Adviser will
reimburse such Fund for such excess expenses. The obligation of the Adviser to
reimburse the Funds hereunder is limited in any fiscal year to the amount of its
fee hereunder for such fiscal year; provided, however, that notwithstanding the
foregoing, the Adviser shall reimburse the Funds for such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over the
Trust so require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
SECTION 5. LIMITATION OF LIABILITY. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
SECTION 6. DURATION AND TERMINATION. This Agreement will become
effective as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date a registration statement relating to that
Fund becomes effective with the Commission), provided that it shall have been
approved by vote of a majority of the outstanding voting securities of such
Fund, in accordance with the requirements, if any, under the 1940 Act, and,
unless sooner terminated as provided herein, shall continue in effect until
January 20, 1997.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive periods of twelve months each ending on
January 20th of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding shares of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to a particular Fund at any time on sixty days' written
notice, without the payment of any penalty, by the Trust (by vote of the Trust's
Board of Trustees or by vote of a majority of the outstanding voting securities
of such Fund) or by the Adviser. This Agreement will immediately terminate in
the event of its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities," "interested persons" and "assignment" shall
have the same meanings as ascribed to such terms in the 1940 Act.)
SECTION 7. NAME. The Trust hereby acknowledges that the name "Roulston"
is a property right of the Adviser. The Adviser agrees that the Trust and the
Funds may, so long as this Agreement remains in effect, use "Roulston" as part
of its name. The Adviser may permit other persons, firms or corporations,
including other investment companies, to use such name and may, upon termination
of this Agreement, require the Trust and the Funds to refrain from using the
name "Roulston" in any form or combination in its name or in its business or in
the name of any of its Funds, and the Trust shall, as soon as practicable
following its receipt of any such request from the Adviser, so refrain from
using such name.
3
<PAGE> 4
SECTION 8. ADVISER'S REPRESENTATIONS. The Adviser hereby represents and
warrants that it is willing and possesses all requisite legal authority to
provide the services contemplated by this Agreement without violation of
applicable laws and regulations.
SECTION 9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
SECTION 10. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of Ohio.
The Roulston Family of Funds is a business trust organized under
Chapter 1746, Ohio Revised Code and under a Declaration of Trust, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of Ohio as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Roulston Family of
Funds" entered into in the name or on behalf thereof by any of the Trustees,
officers, employees or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, officers, employees, agents or
shareholders of the Trust personally, but bind only the assets of the Trust, as
set forth in Section 1746.13(A), Ohio Revised Code, and all persons dealing with
any of the Funds of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE ROULSTON FAMILY OF FUNDS
By /s/ Scott D. Roulston
-----------------------------
Name Scott D. Roulston
-----------------------------
Title President
-----------------------------
ROULSTON & COMPANY, INC.
By /s/ Ronald G. Fountain
-----------------------------
Name Ronald G. Fountain
-----------------------------
Title Sr. Exec. V.P.
-----------------------------
4
<PAGE> 5
Dated July __, 1999
Schedule A
to the
Investment Advisory Agreement
between Fairport Funds (fka The Roulston Family of Funds) and
Roulston & Company, Inc.
dated as of January 20, 1995
NAME OF FUND COMPENSATION*
Fairport Midwest Growth Fund Annual rate of seventy-five one hundredths
of one percent (0.75%) of the average daily
net assets of such Fund up to $100 Million
and fifty one-hundredths of one percent
(0.50%) of the average daily net assets of
such Fund of $100 Million or more.
Fairport Growth and Income Fund Annual rate of seventy-five one hundredths
of one percent (0.75%) of the average daily
net assets of such Fund up to $100 Million
and fifty one-hundredths of one percent
(0.50%) of the average daily net assets of
such Fund of $100 Million or more.
Fairport Government Securities
Fund Annual rate of twenty-five one-hundredths of
one percent (.25%) of the average daily net
assets of such Fund up to $100 Million and
one hundred twenty-five one thousandths of
one percent (0.125%) of the average daily
net assets of such Fund of $100 Million or
more.
Fairport Emerging Growth Fund Annual rate of seventy-five one-hundredths
of one percent (0.75%) of the average daily
net assets of such Fund.
A-1
<PAGE> 6
Fairport International Equity Fund Annual rate of seventy-five one-hundredths
of one percent (0.75%) of the average daily
net assets of such Fund.
ROULSTON & COMPANY, INC. FAIRPORT FUNDS
By By
-------------------------- ------------------------------
Name Name Scott D. Roulston
-------------------------- ------------------------------
Title Title President
-------------------------- ------------------------------
- -----------------------------------------
* All fees are computed and paid monthly.
A-2
<PAGE> 1
Exhibit 99(e)(i)
DISTRIBUTION AGREEMENT
January 20, 1995
as amended as of June 4, 1996
Roulston Research Corp.
4000 Chester Avenue
Cleveland, Ohio 44103
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Fairport Funds, an Ohio business trust (the
"Trust"), has agreed that Roulston Research Corp., an Ohio corporation
("Distributor"), shall be, for the period of this Distribution Agreement (the
"Agreement"), the principal underwriter and distributor of the shares of
beneficial interest of each currently constituted investment portfolio and any
additional investment portfolios of the Trust, as each is or will be identified
on Schedule A hereto (such current investment portfolios and any additional
investment portfolios together called the "Funds"). Such shares of beneficial
interest are hereinafter called "Shares."
1. SERVICES AS DISTRIBUTOR.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "1933 Act").
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust understands
that Distributor is now and, in the future, may be the distributor of the shares
of other investment companies or series (together, "Companies") including
Companies having investment objectives similar to those of the Funds of the
Trust. The Trust further understands that investors and potential investors in
the Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
Except as provided in Section 2 herein, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 All activities by Distributor and its shareholders, directors,
agents, and employees as distributor of the Shares shall comply with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended ("1940 Act"), and the Securities Exchange Act of 1934, as amended
(the "1934 Act"), by the Securities and Exchange Commission (the "Commission")
or any securities association registered under the 1934 Act.
<PAGE> 2
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust and
the Funds.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) quarterly earnings statements prepared by
the Trust, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional information regarding the financial
condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that all registration
statements and prospectuses filed by the Trust with the Commission under the
1933 Act with respect to the Shares have been carefully prepared in conformity
with the requirements of the 1933 Act and rules and regulations of the
Commission thereunder. As used in this agreement the terms "registration
statement" and "prospectus" shall mean any registration statement and any
prospectus and statement of additional information relating to the Funds filed
with the Commission and any amendments and supplements thereto which at any time
shall have been filed with the Commission. The Trust represents and warrants to
Distributor that any registration statement and prospectus, when such
registration statement becomes effective, will contain all statements required
to be stated therein in conformity with the 1933 Act and the rules and
regulations of the Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of the Shares. The Trust may but shall not be
obligated to propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus as,
in the light of future developments, may, in the
2
<PAGE> 3
opinion of the Trust's counsel, be necessary or advisable. If the Trust shall
not propose such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Trust of a written request from Distributor to
do so, Distributor may, at its option, terminate this agreement. The Trust shall
not file any amendment to any registration statement or supplement to any
prospectus without giving Distributor reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall in any way
limit the Trust's right to file at any time such amendments to any registration
statement and/or supplements to any prospectus, of whatever character, as the
Trust may deem advisable, such right being in all respects absolute and
unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus
in the form most recently furnished in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its directors,
shareholders and employees, and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its shareholders,
directors and employees, or any such controlling person, may incur under the
1933 Act or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its shareholders, directors or employees,
and any such controlling person shall not be deemed to cover any claims,
demands, liabilities or expenses arising out of any statements or
representations as are contained in any prospectus and in such financial and
other statements as are furnished in writing to the Trust by Distributor and
used in the answers to the registration statement or in the corresponding
statements made in the prospectus, or arising out of or based upon any omission
or alleged omission to state a material fact in connection with the giving of
such information required to be stated in such answers or necessary to make the
answers not misleading; and further provided that the Trust's agreement to
indemnify Distributor and the Trust's representations and warranties
hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any
liability to the Trust or its Shareholders to which Distributor would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of Distributor's reckless disregard
of its obligations and duties under this agreement. The Trust's agreement to
indemnify Distributor, its shareholders, directors and employees, and any such
controlling person, as aforesaid, is expressly conditioned upon the Trust's
being notified of any action brought against Distributor, its shareholders,
directors or employees, or any such controlling person, such notification to be
given by letter or by telegram addressed to the Trust at its principal office in
Cleveland, Ohio and sent to the Trust by the person against whom such action is
brought, within 10 days after the summons or other first legal process shall
have been served. The failure to so notify the Trust of any such action shall
not relieve the Trust from any liability which the Trust may have to the person
against whom such action is brought by reason of any such untrue, or allegedly
untrue, statement or omission, or alleged omission, otherwise than on account of
the Trust's indemnity agreement contained in this paragraph 1.11. The Trust will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen
3
<PAGE> 4
by the Trust and approved by Distributor, which approval shall not be
unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain counsel of good standing approved by Distributor, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Trust does not elect
to assume the defense of any such suit, or in case Distributor reasonably does
not approve of counsel chosen by the Trust, the Trust will reimburse
Distributor, its shareholders, directors and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.11 and the Trust's
representations and warranties in this agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its shareholders, directors and employees, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to Distributor's benefit, to the benefit of its
several shareholders, directors and employees, and their respective estates, and
to the benefit of the controlling persons and their successors. The Trust agrees
promptly to notify Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees in connection
with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the 1933 Act or under common law
or otherwise, but only to the extent that such liability or expense incurred by
the Trust, its officers or Trustees or such controlling person resulting from
such claims or demands, shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by Distributor to the Trust and used in the answers to any of the
items of the registration statement or in the corresponding statements made in
the prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Distributor's being notified of any
action brought against the Trust, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Cleveland, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
4
<PAGE> 5
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10(a) of
the 1933 Act is not on file with the Commission; provided, however, that nothing
contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Declaration of Trust, or By-Laws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation by
service of process on the Trust of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration
statement or prospectus then in effect or which requires the
making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus which
may from time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State of Ohio.
2. FEE.
Distributor shall receive from the Funds identified on Schedule B
hereto a distribution fee at the rate and upon the terms and conditions set
forth in the Distribution and Shareholder
5
<PAGE> 6
Service Plan attached as Schedule C hereto, and as amended from time to time.
The distribution fee described above shall be accrued daily and shall be paid on
the first business day of each month, or at such time(s) as Distributor shall
reasonably request.
3. SALE AND PAYMENT.
(a) Distributor shall, as agent for the Trust, sell Shares of
the Funds to the public and to dealers against orders therefor at their
net asset value.
(b) Prior to the time of delivery of any Shares by a Fund to,
or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Fund or to its order an amount in federal funds equal to
the applicable net asset value of such Shares.
4. TERM AND MATTERS RELATING TO THE TRUST AS AN OHIO BUSINESS TRUST.
This Agreement became effective on January 20, 1995, and, as amended,
shall become effective as of June 3, 1996, and, unless sooner terminated as
provided herein, shall continue until January 20, 1997, and thereafter shall
continue automatically for successive annual periods ending on January 20 of
each year with respect to each of the Funds, provided such continuance is
specifically approved at least annually by (i) the Trust's Board of Trustees or
(ii) by "vote of a majority of the outstanding voting securities" (as defined
below) of the Trust, provided, however, that in either event the continuance is
also approved by the majority of the Trust's Trustees who are not parties to the
agreement or interested persons (as defined in the 1940 Act) of any party to
this agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This agreement is terminable without penalty, on not
less than sixty days' notice, by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Trust or by Distributor. This agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).
Fairport Funds is a business trust organized under Chapter 1746, Ohio
Revised Code, and under a Declaration of Trust to which reference is hereby made
and a copy of which is on file at the office of the Secretary of the State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "Fairport Funds" entered into in the name or
on behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders, officers, employees or agents of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
6
<PAGE> 7
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
Yours very truly,
FAIRPORT FUNDS
By /s/ Scott D. Roulston
------------------------------------
Scott D. Roulston, President
Accepted:
ROULSTON RESEARCH CORP.
By /s/ Heather R. Ettinger
----------------------------------
(name) (title)
7
<PAGE> 8
Dated: July __, 1999
Schedule A
to the
Distribution Agreement
between Fairport Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 4, 1996
Name of Fund Date
- ------------ ----
Fairport Midwest Growth Fund January 20, 1995
Fairport Growth and Income Fund January 20, 1995
Fairport Government Securities Fund January 20, 1995
Fairport Emerging Growth Fund July __, 1999
Fairport International Equity Fund July __, 1999
FAIRPORT FUNDS
By
------------------------------------
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By
------------------------------------
(Name) (Title)
A-1
<PAGE> 9
Dated: July __, 1999
Schedule B
to the
Distribution Agreement
between Fairport Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 4, 1996
Name of Plan Fund Date
- ----------------- ----
Fairport Midwest Growth Fund January 20, 1995
Fairport Growth and Income Fund January 20, 1995
Fairport Government Securities Fund January 20, 1995
Fairport Emerging Growth Fund July __, 1999
Fairport International Equity Fund July __, 1999
FAIRPORT FUNDS
By
-------------------------------------
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By
-------------------------------------
(Name) (Title)
B-1
<PAGE> 10
Schedule C
to the
Distribution Agreement
between Fairport Funds and
Roulston Research Corp.
January 20, 1995
As amended as of March 1, 1996
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
-----------------------------------------
This Plan (the "Plan") constitutes a distribution and shareholder
service plan of Fairport Funds, an Ohio business trust (the "Trust"), adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Plan relates to shares of those investment portfolios
identified on Schedule B to the Trust's Distribution Agreement, as such schedule
may be amended from time to time (the "Plan Funds").
SECTION 1. Each Plan Fund shall pay to the principal underwriter
("Distributor") of the Trust's shares of beneficial interest (the "Shares"),
currently Roulston Research Corp., an Ohio corporation, or its designee, a fee
in an amount not to exceed on an annual basis .25% of the average daily net
asset value of such Plan Fund (the "Plan Fee") for: (a) payments Distributor
makes or agrees to have made to broker/dealers, banks and other institutions (a
"Participating Organization") for distribution assistance and/or Shareholder
service pursuant to an agreement with the Participating Organization or for
distribution assistance and/or Shareholder service provided by Distributor
pursuant to the Plan; or (b) reimbursement of expenses incurred by a
Participating Organization pursuant to an agreement in connection with
distribution assistance and/or Shareholder service including, but not limited
to, the reimbursement of expenses relating to printing and distributing
prospectuses to persons other than Shareholders of a Plan Fund, printing and
distributing advertising and sales literature and reports to Shareholders used
in connection with the sale of Shares, and personnel and communication equipment
used in servicing Shareholder accounts and prospective shareholder inquiries.
For purposes of the Plan, a Participating Organization may include Distributor
and Distributor's affiliates and subsidiaries.
SECTION 2. The Plan Fee shall be paid by the Plan Funds to Distributor
only to compensate Distributor for assistance or services provided, or to
reimburse Distributor for payments or expenses incurred, pursuant to Section 1.
SECTION 3. The Plan shall not take effect with respect to a Plan Fund
until it has been approved by the vote of the initial Shareholder of such Fund.
SECTION 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to
C-1
<PAGE> 11
time, be required by Section 12(b) of the 1940 Act or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on the Plan or such agreement.
SECTION 5. The Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Plan Funds pursuant to the Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
SECTION 7. The Plan may be terminated as to a Plan Fund at any time,
without the payment of any penalty, by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding Shares of a Plan Fund.
SECTION 8. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the
outstanding voting securities of the Plan Fund, on not more
than 60 days' written notice to any other party to the
agreement; and
(b) That such agreement shall terminate automatically in the
event of its assignment.
SECTION 9. The Plan may not be amended to increase materially the
amount of distribution expenses of a Plan Fund permitted pursuant to Section 1
hereof without approval by a vote of at least a majority of the outstanding
voting securities of such Plan Fund, and all material amendments to the Plan
shall be approved in the manner provided for approval of the Plan in Section 4.
SECTION 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
Effective: January 20, 1995, as amended as of
March 1, 1996.
C-2
<PAGE> 1
Exhibit 99(e)(iii)(B)
RETIREMENT PLAN ORDER PROCESSING AMENDMENT
TO THE OPERATING AGREEMENT
This Retirement Plan Order Processing Amendment is made as of October
15, 1998, by and between Charles Schwab & Co., Inc. ("Schwab"), a California
corporation; The Charles Schwab Trust Company ("CSTC"), a California banking
corporation; and each registered investment company ("Fund Company") listed on
Schedule I hereto, executing this Amendment on its own behalf and on behalf of
each of its series or classes of shares ("Fund(s)"), which are parties to an
Operating Agreement with Schwab, made as of October 25, 1996, as amended
thereafter ("Operating Agreement"), including such Funds as are listed on
Schedule II hereto, which are excluded from participation in retirement plan
order processing under this Amendment ("Excluded Funds"). This Amendment amends
the Operating Agreement. In the event that there are no Funds, then the term
"Fund(s)" shall mean "Fund Company."
WHEREAS, Schwab and Fund Company, on its own behalf and on behalf of
the Funds, have entered into the Operating Agreement pursuant to which shares of
the Funds are made available for purchase and redemption by Schwab's brokerage
customers through Schwab's Mutual Fund Marketplace(R) ("MFMP");
WHEREAS, Schwab has designated CSTC as its agent to perform certain
functions under the Operating Agreement, including communication of aggregate
purchase and redemption orders for Fund shares to each Fund, for which Schwab
remains fully responsible to Fund Company and the Funds;
WHEREAS, Schwab and Fund Company desire to amend the Operating
Agreement to facilitate the purchase and redemption of Fund shares on behalf of
certain retirement plans ("Plans") for which CSTC acts as trustee or custodian
of the trust funds under the Plans and for which an entity identified on
Schedule III, as amended by Schwab from time to time, acts as recordkeeper
("Recordkeeper"), subject to the terms and conditions of this Amendment; and
WHEREAS, Fund Company wishes to appoint CSTC as a limited purpose
co-transfer agent to each Fund's named transfer agent to facilitate such
purchases and redemptions on behalf of the Plans, and CSTC wishes to accept this
appointment.
NOW THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties hereto agree as follows:
1. AGENCY APPOINTMENT AND ACCEPTANCE. Fund Company hereby appoints CSTC
to be a limited purpose co-transfer agent to each Fund's named transfer agent
for the purpose of receiving instructions in proper form from the persons
designated to direct investment of the Plan assets ("Instructions") from which
are derived orders for purchases and redemptions of Fund shares ("Orders"). CSTC
hereby accepts the appointment as limited purpose co-transfer agent to each
Fund's named transfer agent.
<PAGE> 2
2. AGENTS OF CSTC. CSTC, as a co-transfer agent, may engage such
sub-agents as it deems necessary, appropriate or desirable to carry out its
obligation as a limited purpose co-transfer agent to each Fund's named transfer
agent under Section 1 of this Amendment, pursuant to such terms as are
consistent with the agreements set forth in this Amendment and as CSTC deems
necessary, appropriate or desirable. CSTC shall, however, remain fully
responsible to Fund Company and the Funds for any obligations performed by
CSTC's agents under this Section 2. These agents of CSTC shall be the
Recordkeepers and shall each be a service company and a limited purpose
sub-transfer agent to CSTC as co-transfer agent to each Fund's named transfer
agent.
3. CSTC'S RECEIPT AND TRANSMISSION OF ORDERS. CSTC agrees that (a)
Orders derived from Instructions received by Recordkeepers prior to the close of
the New York Stock Exchange (generally, 4:00 p.m. Eastern Time) ("Market Close")
on any Business Day ("Day 1") will be transmitted by CSTC to the Fund by 9:00
a.m. Eastern Time on the next Business Day ("Day 2") (such Orders are referred
to herein as "Day 1 Trades"); and (b) Orders derived from Instructions received
by Recordkeepers after Market Close on any Business Day ("Day 1") will be
transmitted by CSTC to the Fund by 9:00 a.m. Eastern Time on the second Business
Day following Day 1 ("Day 3") (such Orders are referred to herein as "Day 2
Trades").
4. FUND'S PRICING OF ORDERS. Fund Company agrees that Day 1 Trades will
be effected at the net asset value of each Fund's shares ("Net Asset Value")
calculated as of Market Close on Day 1, provided such trades are received by the
Fund by 9:00 a.m. Eastern Time on Day 2; and Day 2 Trades will be effected at
the Net Asset Value calculated as of Market Close on Day 2, provided such trades
are received by the Fund by 9:00 a.m. Eastern Time on Day 3. Fund Company agrees
that, consistent with the foregoing, Day 1 Trades will have been received by the
Fund prior to Market Close on Day 1, and Day 2 Trades will have been received by
the Fund prior to Market Close on Day 2 for all purposes, including, without
limitation, effecting distributions.
5. SETTLEMENT. In accordance with the Operating Agreement, Schwab and
Fund Company will settle Day 1 Trades on Day 2 and will settle Day 2 Trades on
Day 3.
6. PROVISION OF NET ASSET VALUE. In accordance with the Operating
Agreement, Fund Company will provide Schwab the Net Asset Value calculated as of
Market Close on each Business Day by 7:00 p.m. Eastern Time on such Business
Day.
7. REPRESENTATIONS AND WARRANTIES AS TO TRANSFER AGENCY. CSTC
represents and warrants that it is registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended ("1934 Act"), and CSTC
will amend its TA-1 filing to disclose its appointment pursuant to this
Amendment as a limited purpose co-transfer agent to each Fund's named transfer
agent. CSTC further represents and warrants that each Recordkeeper appointed by
CSTC pursuant to Section 2 of this Amendment shall be registered as a transfer
agent under Section 17A of the 1934 Act, and that it shall cause each
Recordkeeper to amend its TA-1 to disclose its appointment as a service company
and a limited purpose sub-transfer agent to CSTC as co-transfer agent to each
Fund's named transfer agent.
2
<PAGE> 3
Fund Company represents and warrants that the Funds' named transfer
agent is set forth on Schedule IV hereto, as amended by Fund Company from time
to time.
8. BOOKS AND RECORDS. To the extent required under the Investment
Company Act of 1940, as amended ("1940 Act"), and the rules thereunder, CSTC
agrees that such records maintained by it or each Recordkeeper hereunder are the
property of the Funds and will be preserved, maintained, and made available in
accordance with the 1940 Act and the rules thereunder. Copies, or if required
originals, of such records shall be surrendered promptly to a Fund and its
agents (or independent accountants) upon request. This Section 8 shall survive
termination of this Amendment.
9. ROLE AND RELATIONSHIP OF CSTC. The parties acknowledge and agree
that, except as specifically provided in this Amendment, and for the sole and
limited purpose set forth herein, CSTC acts as an agent for Schwab under the
Operating Agreement in connection with the effectuation of Orders subject to
this Amendment. CSTC shall not be nor hold itself out as an agent of any Fund
other than as provided herein.
10. ROLE AND RELATIONSHIP OF RECORDKEEPERS. The parties acknowledge and
agree that, except as specifically provided in this Amendment and for the sole
and limited purpose set forth herein, the Recordkeepers act as agents of the
Plans in connection with the effectuation of Orders subject to this Amendment.
The parties agree that the Recordkeepers are not agents of the Funds other than
as provided herein, and CSTC shall ensure that the Recordkeepers do not hold
themselves out as an agent of any Fund other than as provided herein.
11. INSURANCE COVERAGE. CSTC shall maintain, and shall cause each
Recordkeeper to maintain, general liability insurance, at all times that this
Amendment is in effect, that is reasonable and customary in light of its duties
hereunder. Such general liability insurance coverage shall be issued by a
qualified insurance carrier, with limits of not less than $5 million.
12. TERMINATION. Fund Company will provide Schwab and CSTC 90 days'
prior written notice if purchase orders for a Fund's shares may no longer be
effected in accordance with this Amendment. Such termination shall not affect
the remaining provisions of this Amendment as to such Fund, and redemption
orders shall continue to be effected pursuant to this Amendment. Schwab and CSTC
may terminate this Amendment as to a Fund upon 90 days' prior written notice to
Fund Company.
Any termination of the Operating Agreement by Fund Company shall not
apply to transactions effected pursuant to this Amendment prior to 90 days after
the date the Fund Company provides written notice of such termination to Schwab
and CSTC.
13. INDEMNIFICATION. Schwab and CSTC, on the one hand, and Fund
Company, on the other, agree to indemnify and hold harmless Fund Company, on the
one hand, and Schwab and CSTC, on the other, together with each of its
directors, trustees, officers, employees and agents, from and against any and
all losses, liabilities, demands, claims, actions and expenses (including,
without limitation, reasonable attorney's fees) ("Losses") arising out of or in
connection with any breach by Schwab or CSTC, on the one hand, and Fund Company,
on the other, of its obligations
3
<PAGE> 4
under this Amendment, except to the extent such breach was a direct consequence
of an act or omission of an indemnified party constituting negligence or willful
misconduct. In no event will any party be liable for consequential, incidental,
special or indirect damages resulting to an indemnified party subject to this
Amendment. This Section 13 shall survive termination of this Amendment.
14. PROPRIETARY INFORMATION. The parties agree that all books, records,
information, and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or carrying out of this
Amendment, including but not limited to the information on Schedule III, as
amended by Schwab from time to time, and any reports regarding Fund
shareholdings of the Plans or the Recordkeepers that CSTC may provide to Fund
Company from time to time as part of its obligations as a limited purpose
co-transfer agent to each Fund's named transfer agent, shall be kept
confidential and shall not be otherwise used or voluntarily disclosed to any
other person, except as may be required by law or judicial process. Fund Company
expressly agrees not to use nor permit others to use any such books, records,
information, or data to solicit Plans, sponsors of Plans, or Recordkeepers. This
Section 14 shall survive termination of this Amendment.
15. EFFECT OF AMENDMENT. This Amendment is intended to amend and
supplement the provisions of the Operating Agreement. In the event of a conflict
between the provisions of this Amendment and the provisions of the Operating
Agreement, the provisions of this Amendment shall control. All other provisions
of the Operating Agreement shall remain in full force and effect.
CHARLES SCHWAB & CO., INC. FAIRPORT FUNDS, on its own behalf and
on behalf of each Fund
By: By:
-------------------------------- ---------------------------------
Fred Potts
Vice President/Mutual Funds Name:
Operations Administration -------------------------------
Title:
Date: ------------------------------
------------------------------- Date:
------------------------------
THE CHARLES SCHWAB
TRUST COMPANY
By:
---------------------------------
George Munson
Vice President
Date:
--------------------------------
4
<PAGE> 5
SCHEDULE I
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF OCTOBER 15, 1998
FUND COMPANY
Fairport Funds
<PAGE> 6
SCHEDULE II
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING
AGREEMENT, MADE
AS OF OCTOBER 15, 1998
EXCLUDED FUNDS
<PAGE> 7
SCHEDULE III
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING
AGREEMENT, MADE
AS OF OCTOBER 15, 1998
RECORDKEEPERS
Schwab Retirement Plan Services, Inc.
<PAGE> 8
SCHEDULE IV
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF OCTOBER 15, 1998
NAMED TRANSFER AGENT
First Data Investor Services Group, Inc.
<PAGE> 9
LIMITED POWER OF ATTORNEY
Charles Schwab & Co., Inc. ("Schwab") does hereby make, constitute, and appoint
The Charles Schwab Trust Company ("CSTC"), as its trustee and lawful attorney or
agent ("Agent"), to transmit to each account for Schwab for the reinvestment of
capital gains and the reinvestment of dividends ("Account") with each of the
Fairport mutual funds ("Funds"), which are parties to the Retirement Plan Order
Processing Amendment to the Operating Agreement ("Amendment"), dated October 15,
1998, by and among Schwab, CSTC, and the Funds or their transfer agent, orders
for the purchase or redemption of Fund shares for the Account, as set forth in
the Amendment.
Schwab agrees to indemnify and hold harmless the Fund and their transfer agent
from acting upon orders for purchase or redemption of Fund shares received from
Agent to the same extent as if the orders were received from Schwab under the
Amendment.
This authorization and indemnity is a continuing one and shall remain in full
force and effect and shall be binding upon Schwab until revoked by Schwab in
writing.
--------------------------------------
Dennis P. Clark
Senior Vice President - Mutual Funds
Date:
-----------------------------------
<PAGE> 1
Exhibit 99(e)(iii)(C)
AMENDMENT TO OPERATING AGREEMENT
This Amendment ("Amendment") by Charles Schwab & Co., Inc. ("Schwab"),
effective as of January 1, 1999, amends the Operating Agreement between Schwab
and each Fund Company, made as of October 25, 1996, as amended thereafter
("Operating Agreement"). All capitalized terms used in this Amendment and not
defined herein shall have the meaning ascribed to them in the Operating
Agreement.
WHEREAS, Schwab wishes to amend Exhibit A to the Operating Agreement to
provide for procedures in the event that Fund Company fails to (i) settle
redemption orders on the next business day after trade date ("Settlement Date")
without having notified Schwab on trade date, as required under the terms of the
Operating Agreement, or (ii) pay distributions in a timely manner, as required
under the terms of the Operating Agreement; and
WHEREAS, Schwab may unilaterally amend Exhibit A to the Operating
Agreement upon 40 days' written notice to Fund Company under the terms of the
Operating Agreement and has provided this executed Amendment to Fund Company 40
days prior to its effective date.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth in the Operating Agreement, Exhibit A to the Operating
Agreement is hereby amended as follows:
1. SETTLEMENT OF TRANSACTIONS
a. In the event that a Fund should need to extend settlement on
redemption orders, including but not limited to redemption orders under the
Retirement Plan Order Processing Amendment if in effect, a Fund Company must
contact Schwab by 7:00 p.m. Eastern Time on trade date to discuss the extension.
b. If Fund Company does not settle redemption orders on
Settlement Date and has not contacted Schwab by 7:00 p.m. Eastern Time on trade
date to discuss such extension of settlement (even if such extension is due to a
systems problem unknown on trade date), then Schwab may, at its option, take any
or all of the following actions:
i. Charge interest on the amount of the redemption proceeds
due to it, as follows:
(A) For the first day, (a) Schwab may charge Fund Company
interest at the Federal Funds "offered" rate for such day as published in The
Wall Street Journal if the amount does not exceed $1 million, or (b) Schwab may
charge Fund Company interest at the Prime Rate for such day as published in The
Wall Street Journal if the amount exceeds $1 million; and
<PAGE> 2
(B) For each day following, Schwab may charge Fund
Company interest at the Prime Rate for each such day as published in The Wall
Street Journal, plus 2% per annum; and
(ii) Upon notice to Fund Company, on any subsequent Settlement
Date and for so long as such redemption proceeds are due to it;
(A) Schwab may settle purchase orders and redemption
orders net of each other for such Fund; and/or
(B) Schwab may net any redemption proceeds still due to
it against any net or gross purchase amount due from it to the Funds.
2. DISTRIBUTIONS
a. With respect to a consolidated omnibus Account, and for purposes of
effecting cash distributions for investors who have elected to receive their
capital gains distributions and/or dividends in cash, if Fund Company does not
wire the cash proceeds to Schwab on the next business day after the ex-dividend
date for such distribution (a "Due Date"), as required under the terms of the
Operating Agreement, then Schwab may, at its option, charge interest on the
amount of such cash proceeds outstanding on or after the Due Date as set forth
in Section 2(c) below.
b. With respect to a cash distribution Account, if Fund Company does
not wire the cash distribution to Schwab on the payable date for such
distribution (a "Due Date"), as required under the terms of the Operating
Agreement, then Schwab may, at its option, charge interest on the amount of such
cash distribution outstanding on or after the Due Date as set forth in Section
2(c) below.
c. For the Due Date, (i) Schwab may charge Fund Company interest at the
Federal Funds "offered" rate for such day as published in The Wall Street if the
amount does not exceed $1 million, and (ii) Schwab may charge Fund Company
interest at the Prime Rate for such day as published in The Wall Street Journal
if the amount exceeds $1 million. For each day following the Due Date, Schwab
may charge Fund Company interest at the Prime Rate for each such day as
published in The Wall Street Journal, plus 2% per annum.
3. Except as specifically set forth herein, all other provisions of the
Operating Agreement shall remain in full force and effect. To the extent of any
conflict between this Amendment and the Operating Agreement, this Amendment
shall control.
-2-
<PAGE> 3
IN WITNESS WHEREOF, Schwab has executed this Amendment on the date
written below.
CHARLES SCHWAB & CO., INC.
By:
-------------------------------
Fred Potts
Vice President/Mutual Funds
Operations Administration
Date:
----------------------------
-3-
<PAGE> 1
Exhibit 99(h)(iv)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this ____ day of _________________, 199_ (the
"Effective Date") between Fairport Funds (the "Fund"), a Massachusetts Business
Trust having its principal place of business at 4000 Chester Ave, Cleveland, OH,
44103 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor Services Group"),
a Massachusetts corporation with principal offices at 4400 Computer Drive,
Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its administrator, fund accounting agent, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 DEFINITIONS.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of
the governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to
this Agreement.
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(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(j) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person;
(k) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 APPOINTMENT OF INVESTOR SERVICES GROUP.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
administrator, fund accounting agent, shareholder servicing agent for the Fund
and Investor Services Group hereby accepts such appointments and agrees to
perform the duties hereinafter set forth. This Agreement shall be effective as
of the Effective Date.
Article 3 DUTIES OF INVESTOR SERVICES GROUP.
3.1 Investor Services Group shall be responsible for:
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(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. Investor Services Group
shall provide the Fund on a regular basis with the total number of
Shares of each Portfolio which are authorized and issued and
outstanding and shall have no obligation, when recording the issuance
of Shares, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(c) Investor Services Group shall be responsible for the
following: performing the customary services of an administrator,
including corporate secretarial, treasury and blue sky services, and
fund accounting agent for the Fund, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and subject to the supervision and
direction of the Board of Directors of the Fund.
(d) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its exclusive service
provider with respect to the Print/Mail Services as set forth in
Schedule C for the fees also identified in Schedule C. Investor
Services Group agrees to perform the services and its obligations
subject to the terms and conditions of this Agreement.
(e) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Investor Services Group for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
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3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 RECORDKEEPING AND OTHER INFORMATION.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
Article 5 FUND INSTRUCTIONS.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
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5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 COMPENSATION.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees and other charges set forth in the written Fee Schedule
annexed hereto as Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios hereby authorizes
Investor Services Group to collect its fees, other charges and related
out-of-pocket expenses by debiting the Fund's or Portfolio's custody account for
invoices which are rendered for the services performed for the applicable
function. Invoices for the services performed will be sent to the Fund after
such debiting with an indication that payment has been made.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees and charges that Investor
Services Group charges the Fund under this Agreement reflect the allocation of
risk between the parties, including the disclaimer of warranties in Section 9.3
and the limitations on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is stated here would
affect the fees that Investor Services Group charges, and in consideration of
those fees, the Fund agrees to the stated allocation of risk.
6.6 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar
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organization; investment advisory expenses; costs of printing and mailing stock
certificates, prospectuses, reports and notices; interest on borrowed money;
brokerage commissions; stock exchange listing fees; taxes and fees payable to
Federal, state and other governmental agencies; fees of Board Members of the
Fund who are not affiliated with Investor Services Group; outside auditing
expenses; outside legal expenses; Blue Sky registration or filing fees; or other
expenses not specified in this Section 6.7 which may be properly payable by the
Fund. Investor Services Group shall not be required to pay any Blue Sky
registration or filing fees unless and until it has received the amount of such
fees from the Fund.
Article 7 DOCUMENTS.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 INVESTOR SERVICES GROUP SYSTEM.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 REPRESENTATIONS AND WARRANTIES.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
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(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered
and lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
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Article 10 INDEMNIFICATION.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by Investor Services
Group in the performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited to the prior transfer agent for the Fund, in the
performance of Investor Services Group's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the
offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 The Fund agrees and acknowledges that Investor Services Group has
not prior to the date hereof assumed, and will not assume, any obligations or
liabilities arising out of the conduct by the Company prior to the date hereof
of those duties which Investor Services Group has agreed to perform pursuant to
this Agreement. The Fund further agrees to indemnify Investor Services Group
against any losses, claims, damages or liabilities to which Investor Services
Group may become subject in connection with the conduct by the Fund or its agent
of such duties prior to the date hereof.
10.3 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further
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legal or other expenses in respect of such Claim. Investor Services Group will
not confess any Claim or make any compromise in any case in which the Fund will
be asked to provide indemnification, except with the Fund's prior written
consent. The obligations of the parties hereto under this Article 10 shall
survive the termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Investor Services Group becomes aware
of the event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 STANDARD OF CARE.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause whatsoever
(including but not limited to those arising out of or related to this Agreement)
and regardless of the form of action or legal theory shall not exceed the lesser
of (i) $500,000 or (ii) the fees received by Investor Services Group for
services provided under this Agreement during the twelve months immediately
prior to the date of such loss or damage. Fund understands the limitation on
Investor Services Group's damages to be a reasonable allocation of risk and Fund
expressly consents with respect to such allocation of risk. In allocating risk
under the Agreement, the parties agree that the damage limitation set forth
above shall apply to any alternative remedy ordered by a court in the event such
court determines that sole and exclusive remedy provided for in the Agreement
fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 CONSEQUENTIAL DAMAGES.
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NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 TERM AND TERMINATION.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of one (1) year (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each,
unless the Fund or Investor Services Group provides written notice to the other
of its intent not to renew. Such notice must be received not less than ninety
(90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, should the Fund desire to move any of the services provided by
Investor Services Group hereunder to a successor service provider prior to the
expiration of the then current Initial or Renewal Term, or should the Fund or
any of its affiliates take any action which would result in Investor Services
Group ceasing to provide transfer agency, administration or fund accounting
services to the Fund prior to the expiration of the Initial or any Renewal Term,
Investor Services Group shall make a good faith effort to facilitate the
conversion on such prior date, however, there can be no guarantee that Investor
Services Group will be able to facilitate a conversion of services on such prior
date. In connection with the foregoing, should services be converted to a
successor service provider or should the Fund or any of its affiliates take any
action which would result in Investor Services Group ceasing to provide transfer
agency, administration or fund accounting services to the Fund prior to the
expiration of the Initial or any Renewal Term, the payment of fees to Investor
Services Group as set
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forth herein shall be accelerated to a date prior to the conversion or
termination of services and calculated as if the services had remained with
Investor Services Group until the expiration of the then current Initial or
Renewal Term and calculated at the asset and/or Shareholder account levels, as
the case may be, on the date notice of termination was given to Investor
Services Group.
Article 14 ADDITIONAL PORTFOLIOS.
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 CONFIDENTIALITY.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and Investor Services Group may also disclose
the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases,
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inventions, know-how, show-how and trade secrets, whether or not
patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault
of such party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for
maintaining such information in confidence have been exhausted
including, but not limited to, giving the other party as much advance
notice of the possibility of such disclosure as practical so the other
party may attempt to stop such disclosure or obtain a protective order
concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 FORCE MAJEURE; EXCUSED NON-PERFORMANCE.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In addition, no party shall be liable for
any default or delay in the performance of its obligations under this Agreement
if and to the extent that such default or delay is caused, directly or
indirectly, by the actions or inactions of the other party. In any such event,
the non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such circumstances
prevail and such party continues to use commercially reasonable efforts to
recommence performance or observance as soon as practicable.
Article 17 ASSIGNMENT AND SUBCONTRACTING.
12
<PAGE> 13
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 ARBITRATION.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 NOTICE.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Roulston Research Corp.
4000 Chester Ave
Cleveland OH 44103
Attention: Scott Roulston, President
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 GOVERNING LAW/VENUE.
13
<PAGE> 14
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 CAPTIONS.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 PUBLICITY.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 RELATIONSHIP OF PARTIES/NON-SOLICITATION.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 25 ENTIRE AGREEMENT; SEVERABILITY.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
14
<PAGE> 15
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 MISCELLANEOUS.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
Fairport Funds
By:
-------------------------------------
Scott Roulston
Title: PRESIDENT
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
-------------------------------------
Kennth J Kempf
Title: SENIOR VICE PRESIDENT
16
<PAGE> 17
SCHEDULE A
----------
FAIRPORT GROWTH & INCOME FUND
FAIRPORT MIDWEST GROWTH FUND
FAIRPORT GOVERNMENT SECURITIES FUND
FAIRPORT INTERNATIONAL EQUITY FUND
FAIRPORT EMERGING GROWTH FUND
17
<PAGE> 18
SCHEDULE B
----------
DUTIES OF INVESTOR SERVICES GROUP
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
DAILY ACCOUNTING SERVICES
1) CALCULATE NET ASSET VALUE PER SHARE:
- Update the daily market value of securities held by the Trust
using Investor Services Group's standard agents for pricing
domestic equity and bond securities.
- If necessary, enter limited number of manual prices supplied
by Trust.
- Prepare NAV proof sheet. Review components of change in NAV
for reasonableness.
- Review variance reporting on-line and in hard copy for price
changes in individual securities using variance levels
established by Trust.
- Review for ex-dividend items indicated by pricing sources;
trace to general ledger for agreement.
- Communicate required pricing information (NAV) to Trust,
Transfer Agent and, electronically, to NASDAQ.
2) DETERMINE AND REPORT CASH AVAILABILITY TO TRUST BY APPROXIMATELY 9:30
AM EASTERN TIME:
- Receive daily cash and transaction statements from the
Custodian by 8:30 AM Eastern time.
- Receive daily shareholder activity reports from the Trust's
Transfer Agent by 8:30 AM Eastern time.
- Fax hard copy Cash Availability calculations with all details
to Trust.
- Supply Trust with 5-day cash projection report.
- Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the
Custodian/Trust.
3) RECONCILE AND RECORD ALL DAILY EXPENSE ACCRUALS:
- Accrue expenses based on Trust supplied budget either as
percentage of Trust's net assets or specific dollar amounts.
- If applicable, monitor expense limitations established by
Trust.
- If applicable, accrue daily amortization of Organizational
Expense.
- If applicable, complete daily accrual of 12(b)1 expenses.
4) VERIFY AND RECORD ALL DAILY INCOME ACCRUALS FOR DEBT ISSUES:
- Review and verify all system generated Interest and
Amortization reports.
- Establish unique security codes for bond issues to permit
segregated Trial Balance income reporting.
5) MONITOR DOMESTIC SECURITIES HELD FOR CASH DIVIDENDS, corporate actions
and capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
- Monitor electronically received information from pricing
vendors for all domestic securities.
- Review current daily security trades for dividend activity.
- Interface with custodian to monitor timely collection and
postings of corporate actions, dividends and interest.
6) ENTER ALL SECURITY TRADES based on written instructions from Trust.
- Review system verification of trade and interest
calculations.
- Verify settlement through the Custodian statements.
- Maintain security ledger transaction reporting.
- Maintain tax lot holdings.
- Determine realized gains or losses on security trades.
- Provide complete broker commission reporting.
7) ENTER ALL TRUST SHARE TRANSACTIONS:
- Process activity identified on the Transfer Agent reports.
18
<PAGE> 19
- Verify settlement through the Custodian statements.
- Reconcile to the Investor Services Group Transfer Agent report
balances.
8) PREPARE AND RECONCILE/PROVE ACCURACY OF THE DAILY TRIAL BALANCE
(listing all asset, liability, equity, income and expense accounts)
- Post manual entries to the general ledger.
- Post custodian bank activity.
- Post shareholder and security transactions.
- Post and verify system generated activity, i.e., income and
expense accruals.
- Prepare general ledger net cash proof used in NAV
calculation.
9) REVIEW AND RECONCILE WITH CUSTODIAN STATEMENTS:
- Verify all posted interest, dividends, expenses, and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to and resolved by the
Custodian.)
- Post all cash settlement activity to the Trial Balance.
- Reconcile to ending cash balance accounts.
- Clear subsidiary reports with settled amounts.
- Track status of past due items and failed trades handled by
the Custodian.
10) SUBMISSION OF DAILY ACCOUNTING REPORTS TO ROULSTON: (Additional reports
readily available.)
- Trial Balance.
- Portfolio Valuation (listing inclusive of holdings,
costs, market values, unrealized
appreciation/depreciation and percentage of portfolio
comprised of each security).
- NAV Calculation Report.
- Cash Availability and 5 day Cash Projection Report.
MONTHLY ACCOUNTING SERVICES
1) FULL FINANCIAL STATEMENT PREPARATION (automated Statements of Assets
and Liabilities, of Operations and of Changes in Net Assets) and
submission to Trust by 10th business day.
2) SUBMISSION OF MONTHLY REPORTS TO TRUST:
- Security Purchase/Sales Journal.
- Interest and Maturity Report.
- Brokers Ledger (Commission Report).
- Security Ledger Transaction Report with Realized
Gains/Losses.
- Security Ledger Tax Lot Holdings Report.
- Additional reports available upon request.
3) RECONCILE ACCOUNTING ASSET LISTING TO CUSTODIAN ASSET LISTING:
- Report any security balance discrepancies to the
Custodian/Trust.
4) PROVIDE MONTHLY ANALYSIS AND RECONCILIATION OF ADDITIONAL TRIAL BALANCE
ACCOUNTS, such as:
- Security cost and realized gains/losses.
- Interest/dividend receivable and income.
- Payable/receivable for securities purchased and sold.
- Payable/receivable for fund shares; issued and redeemed.
- Expense payments and accruals analysis.
5) IF APPROPRIATE, PREPARE AND SUBMIT TO TRUST:
- SEC yield reporting (non-money market funds with domestic
and ADR securities only).
- Income by state reporting.
- Standard Industry Code Valuation Report.
- Alternative Minimum Tax Income segregation schedule.
19
<PAGE> 20
ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. during the
year in accordance with standard audit assistance requirements.
2) PROVIDE NSAR REPORTING (ACCOUNTING QUESTIONS):
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62,
63, 64B, 71, 72, 73, 74, 75, 76
NOTE: Complete NSAR reporting is provided by Investor Services Groups'
Administration Group.
FUND ADMINISTRATION SERVICES
I. REGULATORY COMPLIANCE
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12(b)-1) plans - includes NASD
Rule 26 calculations
e administration contracts
f. accounting contracts
g. custody contracts
h. transfer agent and shareholder services
2. Filings.
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective amendments
and supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under 30b2-1
B. Performing "Blue Sky" compliance functions, as follows:
1. Effecting and maintaining, as the case may be, the
registration of Shares of the Fund for sale under the
securities laws of the jurisdictions listed in the
Written Instructions of the Fund, which instructions
will include the amount of Shares to be registered as
well as the warning threshold to be maintained. Any
Written Instructions not received at least 45 days
prior to the date the Fund intends to offer or sell
its Shares cannot be guaranteed a timely notification
to the states. In addition, Investor Services Group
shall not be responsible for providing to any other
service provider of the Fund a list of the states in
which the Fund may offer and sell its Shares.
2. Filing with each appropriate jurisdiction the
appropriate materials relating to the Fund. The Fund
shall be responsible for providing such materials to
Investor Services Group, and Investor Services Group
shall make such filings promptly after receiving such
materials.
3. Providing to the Fund quarterly reports of sales
activity in each jurisdiction in accordance with the
Written Instructions of the Fund. Sales will be
reported by shareholder residence. NSCC trades and
order clearance will be reported by the state
provided by the dealer at the point of sale. Trades
by omnibus accounts
20
<PAGE> 21
will be reported by trustee state of residence in
accordance with the Written Instructions of the Fund
outlining the entities which are permitted to
maintain omnibus positions with the Fund.
4. In the event sales of Shares in a particular
jurisdiction reach or exceed the warning levels
provided in the Written Instructions of the Fund,
Investor Services Group will promptly notify the Fund
with a recommendation of the amount of Shares to be
registered in such jurisdiction and the fee for such
registration. Investor Services Group will not
register additional Shares in such jurisdiction
unless and until Investor Services Group shall have
received written instructions from the Fund to do so.
5. If Investor Services Group is instructed by the Fund
not to register Shares in a particular jurisdiction,
Investor Services Group will use its best efforts to
cause any sales in such jurisdictions to be blocked,
and such sales will not be reported to Investor
Services Group as sales of Shares of the Fund.
C. Compliance - Other
1. applicable stock exchange rules
2. applicable state tax laws
II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION
A. Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. keep attendance records
c. maintain corporate records/minute book
B. Maintain Corporate Calendars and Files
1. General
2. Blue sky
C. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
III. FINANCIAL AND MANAGEMENT REPORTING
A. Income and Expenses
1. preparation of budgets
2. expense figures calculated and accrual levels set
3. monitoring of expenses
4. approve and authorize payment of expenses
5. projection of income
6. checking account reconciliation
B. Distributions to Shareholders
1. Projections of distribution amounts
21
<PAGE> 22
a. compliance with income tax
provisions
b. compliance with excise tax
provisions
c. compliance with Investment Company
Act of 1940
2. Compilation and reclassification of distributions,
where applicable, for year end tax reporting to
shareholders
C. Financial Reporting
1. preparation of unaudited and audited reports to
shareholders
2. 60 day delivery to SEC and shareholders
3. preparation of semi-annual and annual N-SAR's
4. liaison between fund management and printers for
financial reports
D. Subchapter M Compliance
1. Asset diversification test
2. Income qualification test
E. Other Financial Analyses
1. Sales information, portfolio turnover (monthly)
2. Work closely with independent auditors on return of
capital presentation, excise tax calculation
3. Performance (total return) calculation (monthly)
4. 1099 Miscellaneous - prepared and filed for
Directors/Trustees (annual)
5 Analysis of interest derived from various Government
obligations (annual) (if interest income was
distributed in a calendar year)
6. Review and characterize 1099-Dividend Forms
7. Prepare and coordinate with printer and the printing
and mailing of 1099-Dividend Insert Cards
F. Review and Monitoring Functions
1. Review NAV calculations
2. Coordinate and review transfer agent, accounting and
custody functions
3. Review 12b-1, accruals, expenditures and payment
trail commissions where applicable
G. Preparation and distribution of periodic operation reports to
management
H. Monitor money market funds under Rule 2a-7
TRANSFER AGENT/SHAREHOLDER SERVICES
THE FOLLOWING IS A LIST OF TRANSFER AGENCY SERVICES TO BE PROVIDED UNDER THIS
AGREEMENT:
- - Opening new accounts and entering demographic data into shareholder
base.
- - Real-time Customer Information File (CIF) to link accounts within a
Series and across all Series.
- - 100% Quality Control of new accounts opened on a same-day/next day
basis.
- - Account Maintenance.
- - Processing all investments including:
- initial investments
- subsequent investments through lock box computer interface
- pre-authorized investments through ACH
- government allotments through ACH
22
<PAGE> 23
- - Processing tax ID certifications and Non-Resident Alien (NRA) and
reporting back-up withholding.
- - Processing legal transfers of accounts.
- - Automated exchange processing.
- - Recording and retaining on tape all shareholder calls.
- - Research and respond to shareholder calls and written inquiries.
- - Processing reinvestment of dividends of one fund into another fund.
(if applicable)*
- - Processing sweep purchases and redemptions for brokerage, bank, or
other accounts via tape or transmission.*
- - Generating account statements with copies to appropriate interested
parties. (Up to four statements.)
- - Combined shareholder statements.*
- - Redemption processing includes:
- complete and partial redemptions
- selected group redemptions*
- check redemption processing (if applicable)
- - Distribution options:
- federal wires*
- mailing checks
- ACH*
- - Certificate issuance and cancellation.
- - Replacement of certificates through surety bonds.*
- - Process dividends.
- - Produce daily and monthly Blue Sky reports.
- - Producing daily and monthly reports of shareholder activity.
- - Producing shareholder lists, labels, ad hoc reports to management,
etc. *
- - Addressing, mailing, and tabulation of proxy cards, as necessary.*
- - Preparation of federal tax information forms to include 1099-DIV's,
1099-B's, 1042's, etc. to shareholders with tape to IRS.
- - Microfilming and indexing in PC system of all application,
correspondence and other pertinent shareholder documents to provide
automated location of these records.
- - Microfilming all checks presented for investment and check
redemptions.
- - System access by PC dial-up or by dedicated line. (If Applicable)*
- - Retirement Plan processing.* (IRA, SEP, Omnibus Qualified Plans)
- Systematic tracking of current, prior year and rollover
contributions
- 5498 tax reporting
- 1099R reporting on distributions
- Processing transfer of assets between custodians
23
<PAGE> 24
- PC based recalculation of required minimum distributions for IRA
SWP's for shareholders over 59 1/2 years of age.
- - INSTITUTIONAL SERVICING -
Institutional customers are assigned a specific representative within
the unit providing daily availability and settlement information, and
coordinating sweep activity. In addition, this representative interacts
with the Retail Operations area to endure proper handling and coding of
accounts.
CASH MANAGEMENT SERVICES.
(a) Investor Services Group shall establish demand deposit accounts
(DDA's) with a cash management provider to facilitate the receipt of
purchase payments and the processing of other Shareholder-related
transactions. Investor Services Group shall retain any excess balance
credits earned with respect to the amounts in such DDA's ("Balance
Credits") after such Balance Credits are first used to offset any
banking service fees charged in connection with banking services
provided on behalf of the Fund. Balance Credits will be calculated and
applied toward the Fund's banking service charges regardless of the
withdrawal of DDA balances described in Section (b) below.
(b) DDA balances which cannot be forwarded on the day of receipt may be
withdrawn on a daily basis and invested in U.S. Treasury and Federal
Agency obligations, money market mutual funds, repurchase agreements,
money market preferred securities (rated A or better), commercial paper
(rated A1 or P1), corporate notes/bonds (rated A or better) and/or
Eurodollar time deposits (issued by banks rated A or better). Investor
Services Group bears the risk of loss on any such investment and shall
retain any earnings generated thereby. Other similarly rated investment
vehicles may be used, provided however, Investor Services Group shall
first notify the Fund of any such change.
(c) Investor Services Group may facilitate the payment of distributions
from the Fund which are made by check ("Distributions") through the
"IPS Official Check" program. "IPS Official Check" is a product and
service provided by Investor Services Group's affiliate, Integrated
Payment Systems ("IPS"). IPS is licensed and regulated as an "issuer of
payment instruments". In the event the IPS Official Check program is
utilized, funds used to cover such Distributions shall be forwarded to
and held by IPS. IPS may invest such funds while awaiting presentment
of items for payment. In return the services provided by IPS, IPS
imposes a per item charge which is identified in the Schedule of
Out-of-Pocket Expenses attached hereto and shall retain, and share with
Investor Services Group, the benefit of the revenue generated from its
investment practices.
LOST SHAREHOLDERS. Investor Services Group shall perform such services
as are required in order to comply with Rules 17a-24 and 17Ad-17 of the
34 Act (the Lost Shareholder Rules"), including, but not limited to
those set forth below. Investor Services Group may, in its sole
discretion, use the services of a third party to perform the some or
all such services.
- documentation of electronic search policies and procedures;
- execution of required searches;
- creation and mailing of confirmation letters;
- taking receipt of returned verification forms;
- providing confirmed address corrections in batch via
electronic media;;
- tracking results and maintaining data sufficient to comply with
the Lost Shareholder Rules; and preparation and submission of
data required under the Lost Shareholder Rules.
* Separate fees will apply for these services.
CUSTODY ADMINISTRATION SERVICES
Assign an experienced Custody Administrator to accept, control and
process the Fund's daily portfolio transactions.
24
<PAGE> 25
- - Match and review DTC eligible ID's and trade information with the
Fund's instructions for accuracy and coordinating with the Custodian
and the Accounting Agent for recording and affirmation processing with
the depository.
- - Settle all depository eligible issues in a totally automated
environment. Transactions requiring physical delivery will be settled
through the Custodian's New York office.
- - Assist the Fund in placing cash management trades through the
Custodian, such as commercial paper, CDs and repurchase agreements.
- - Provide the Fund's fund accounting agent and investment Adviser
with daily custodian statements reflecting all prior day cash activity
on behalf of each portfolio by 8:30 a.m. eastern time. Complete
descriptions of any posting, inclusive of Sedol/CUSIP numbers,
interest/dividend payment date, capital stock details, expense
authorizations, beginning/ending cash balances, etc., will be provided
by the Custodian's reports or system.
- - Provide monthly activity statements combining both cash changes
and security trades, and a full portfolio listing.
- - Communicate to the Fund and the Fund's fund accounting agent on
any corporate actions, capital changes and interest rate changes
supported by appropriate supplemental reports received from the
Custodian. Follow-up will be made with the Custodian to ensure all
necessary actions and/or paperwork is completed.
- - Work with fund accounting and the Custodian Bank on monthly asset
reconciliations.
- - Coordinate and resolve unsettled dividends, interest, paydowns and
capital changes. Assist in resolution of failed transactions and any
settlement problems.
- - Provide a comprehensive program that audits transactions, monitors
and evaluates the Custodian's service and recommends changes that may
improve performance.
- - Arrange for Securities Lending, Lines of Credit, and/or Letters of
Credit through the Custodian.
- - Monitor Fund cash positions.
- - Provide Automated Mortgage-Backed processing through the
Custodian.
- - Provide the Fund's auditors with trade documentation to help
expedite the fund's audit.
- - Investor Services Group shall be entitled to retain any excess
balance credits or fee reductions or other concessions or benefits
earned or generated by or associated with the Fund's custodial accounts
or made available by the institution at which such accounts are
maintained after such benefits are first applied towards banking
service fees charged to the Trust by such institution.
25
<PAGE> 26
SCHEDULE C
FEE SCHEDULE
I.. Fees related to Portfolio Valuation and Mutual Fund Accounting,
Administration and Custody Administration
A. ANNUAL FEE SCHEDULE
.0020 On Average Daily Net Assets of $ 0 to $150 million
.0015 On Average Daily Net Assets of $150 to $300 million
.0010 On Average Daily Net Assets of $300 to $500 million
.0005 On Average Daily Net Assets over $500 million
1. The above fee is subject to a monthly minimum of $17,000 for the
portfolios listed in Schedule A as Existing. Any International
portfolios will increase this minimum by $5,000 per month. Any
other Portfolios will increase this fee by $4,000 per month
2. Fees are based on COMBINED FUNDS' AVERAGE DAILY NET ASSETS.
B. PRICING SERVICES QUOTATION FEE
Specific costs will be identified based upon options selected by the
Trust and will be billed monthly.
Investor Services Group does not currently pass along the charges for
the U.S. equity prices supplied by Muller Data. Should the Fund invest
in security types other than domestic equities supplied by Muller, the
following fees would apply.
<TABLE>
<CAPTION>
----------------- ---------------- ----------------
MULLER DATA INTERACTIVE J.J. KENNY
SECURITY TYPES CORP.* DATA CORP.* CO., INC.*
------------------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
------------------------------------------------- ----------------- ---------------- ----------------
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
------------------------------------------------- ----------------- ---------------- ----------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
------------------------------------------------- ----------------- ---------------- ----------------
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
------------------------------------------------- ----------------- ---------------- ----------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
------------------------------------------------- ----------------- ---------------- ----------------
Convertible Bonds .50 .50 1.00 (a)
------------------------------------------------- ----------------- ---------------- ----------------
High Yield Bonds .50 .50 1.00 (a)
------------------------------------------------- ----------------- ---------------- ----------------
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
----------------- ---------------- ----------------
MULLER DATA INTERACTIVE J.J. KENNY
SECURITY TYPES CORP.* DATA CORP.* CO., INC.*
------------------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
U.S. Equities (D) .15 n/a
------------------------------------------------- ----------------- ---------------- ----------------
U.S. Options n/a .15 n/a
------------------------------------------------- ----------------- ---------------- ----------------
Domestic Dividends & Capital Changes
(per Issue per Month) (d) 3.50 n/a
------------------------------------------------- ----------------- ---------------- ----------------
Foreign Securities .50 .50 n/a
------------------------------------------------- ----------------- ---------------- ----------------
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
------------------------------------------------- ----------------- ---------------- ----------------
Set-up Fees (one-time) n/a n/a (e) .25 (c)
------------------------------------------------- ----------------- ---------------- ----------------
All Added Items n/a n/a .25 (c)
------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
* Based on current Vendor costs, subject to change. Costs are quoted
based on individual security CUSIP/identifiers and are per issue
per day EXCEPT AS NOTED.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to Investor Services Group clients
(e) Interactive Data also charges monthly transmission costs
and disk storage charges.
1) Futures and Currency Forward Contracts $2.00 per Issue per Day
2) Dow Jones Markets (formerly Telerate Systems, Inc.)* (if
applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the Trust and will be billed monthly.
3) Reuters, Inc.*
*Based on current vendor costs, subject to change.
Investor Services Group does not currently pass along the
charges for the domestic security prices supplied by Reuters,
Inc.
4) Municipal Market Data* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the Trust and will be billed monthly.
27
<PAGE> 28
E. SEC YIELD CALCULATION - For Domestic Funds Only: (if applicable)
Provide up to 12 reports per year to reflect the yield calculations
for non-money market Funds required by the SEC, $1,000 per year per
Fund. For multiple class Funds, $1,000 per year per class. Daily SEC
yield reporting is available at $3,000 per year per Fund (US dollar
denominated securities only).
II. Fees related to Shareholder Servicing
A. TRANSFER AGENT AND SHAREHOLDER SERVICES:
$15.00 per account per year per portfolio
Minimum monthly fee - $2,000 per portfolio
Each additional class minimum monthly fee is $1,500.
B. RETIREMENT PLANS:
$12.00 per account per year annual maintenance fee
III. Fees related to Custody Administration
A.United Missouri Bank
CUSTODY DOMESTIC SECURITIES TRANSACTIONS CHARGE
Book Entry DTC, Federal Book Entry $12.00
NOW Accounts $2.50
Physical/Options/Physical GNMA's/RICs $24.50
Mortgage Backed Securities -
Principal Pay Down Per Pool $10.00
B. The Bank of New York
Custody Domestic Securities Transactions Charge: (billed monthly)
Book Entry DTC, Federal Book Entry, PTC $12.00
Options/Futures $20.00
Physical Securities $20.00
P & I Paydowns $ 5.50
Wires $ 7.00
Check Request $ 6.00
A transaction includes buys, sells, maturities or free security
movements.
CEDEL/EUROCLEAR
4 BPS safekeeping charge, $25 transaction charge.
Fee expressed in basis points per annum based upon month end market
value.
CUSTODY OF FOREIGN SECURITIES PER GLOBAL PORTFOLIO
(Bank of New York Custody Schedule)
28
<PAGE> 29
<TABLE>
<CAPTION>
=========================================================================================
COUNTRIES *SAFEKEEPING CHARGES TRANSACTION FEE
(BASIS POINTS) (USD)
---------------------------------------------------
<S> <C> <C>
Argentina 22 75
------------------------------------------------------------------------------------------
Australia 5 65
------------------------------------------------------------------------------------------
Austria 6 90
------------------------------------------------------------------------------------------
Bangladesh 49 180
------------------------------------------------------------------------------------------
Belgium (reg bds) 3.5 80
------------------------------------------------------------------------------------------
Belgium (equities and Cpn bds) 6 80
------------------------------------------------------------------------------------------
Brazil 34 40
------------------------------------------------------------------------------------------
Canada 3 20
------------------------------------------------------------------------------------------
Chile 34 65
------------------------------------------------------------------------------------------
China 24 20
------------------------------------------------------------------------------------------
Colombia 54 165
------------------------------------------------------------------------------------------
Czech Republic 27 65
------------------------------------------------------------------------------------------
Denmark 4 110
------------------------------------------------------------------------------------------
Euromarket (Cedel/Euroclear) 4 20
------------------------------------------------------------------------------------------
Finland 16 75
------------------------------------------------------------------------------------------
France 5 75
------------------------------------------------------------------------------------------
Germany 3 40
------------------------------------------------------------------------------------------
Greece 34 150
------------------------------------------------------------------------------------------
Hong Kong 10 70
------------------------------------------------------------------------------------------
Hungary 69 205
------------------------------------------------------------------------------------------
India 54 180**
------------------------------------------------------------------------------------------
Indonesia 15 105
------------------------------------------------------------------------------------------
Ireland 4.5 55
------------------------------------------------------------------------------------------
Israel 79 60
------------------------------------------------------------------------------------------
Italy 5 95
------------------------------------------------------------------------------------------
Japan (bonds) 5 15
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
=========================================================================================
COUNTRIES *SAFEKEEPING CHARGES TRANSACTION FEE
(BASIS POINTS) (USD)
---------------------------------------------------
<S> <C> <C>
------------------------------------------------------------------------------------------
Japan (equities) 4 15
------------------------------------------------------------------------------------------
Luxembourg 9.50 85
------------------------------------------------------------------------------------------
Malaysia 11 95
------------------------------------------------------------------------------------------
Mexico 15 30
------------------------------------------------------------------------------------------
Morocco 39 115
------------------------------------------------------------------------------------------
Netherlands 8 17
------------------------------------------------------------------------------------------
New Zealand 4.5 90
------------------------------------------------------------------------------------------
Norway 4 90
------------------------------------------------------------------------------------------
Pakistan 44 170
------------------------------------------------------------------------------------------
Peru 79 195
------------------------------------------------------------------------------------------
Philippines 15 145
------------------------------------------------------------------------------------------
Poland 59 155
------------------------------------------------------------------------------------------
Portugal 34 145
------------------------------------------------------------------------------------------
Russia 31 170
------------------------------------------------------------------------------------------
Singapore 7 45
------------------------------------------------------------------------------------------
South Africa 3 40
------------------------------------------------------------------------------------------
South Korea 16 30
------------------------------------------------------------------------------------------
Spain 6 55
------------------------------------------------------------------------------------------
Sri Lanka 21 75
------------------------------------------------------------------------------------------
Sweden 4 65
------------------------------------------------------------------------------------------
Switzerland 4 105
------------------------------------------------------------------------------------------
Taiwan 20 105
------------------------------------------------------------------------------------------
Thailand 6 50
------------------------------------------------------------------------------------------
Turkey 34 105
------------------------------------------------------------------------------------------
United Kingdom 4 40
------------------------------------------------------------------------------------------
United Kingdom (gilts) 4 55
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
=========================================================================================
COUNTRIES *SAFEKEEPING CHARGES TRANSACTION FEE
(BASIS POINTS) (USD)
---------------------------------------------------
<S> <C> <C>
------------------------------------------------------------------------------------------
Uruguay (Equities) 64 90
------------------------------------------------------------------------------------------
Uruguay (bonds) 44 90
------------------------------------------------------------------------------------------
Venezuela 54 180
------------------------------------------------------------------------------------------
</TABLE>
CHART NOTES:
* Fee expressed in basis points per annum is calculated based
upon month-end market value.
** Transaction charge is per 10,000 shares or part thereof.
A transaction includes buys, sells, maturities or Free Security
movements.
GLOBAL NETWORK USAGE FEE:
$350 per portfolio per month.
If trades in foreign assets denominated in foreign currencies held in
the local country, the above fee will apply. The $350 fee is waived
on Euroclear/Cedel transactions.
Minimum charges imposed by Agent Banks/Local Administrators
Chile - USD 5,000 per annum.
Columbia - USD 600 per month.
Peru - USD 6,000 per annum per account.
Brazil - USD 15 basis points for annual administrative charge.
Taiwan - USD 3,000 account opening charge.
C. When Issued, Securities Lending, Index Futures, etc:
Should any investment vehicle require a separate segregated custody
account, a fee of $250 per account per month will apply.
D. Custody Miscellaneous Fees
Administrative fees incurred in certain local markets will be passed onto
the customer with a detailed description of the fees. Fees include income
collection, corporate action handling, overdraft charges, funds transfer,
special local taxes, stamp duties, registration fees, messenger and courier
services and other out-of-pocket expenses.
IV Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000 so long
as the Fund retains Keane Tracers, Inc. ("KTI") to provide the
Fund with KTI's "In-Depth Research Program" services.
V Print Mail
a) Standard Pricing:
IMPLEMENTATION FEE $5,000 (waived for conversion)
31
<PAGE> 32
TESTING APPLICATION OR DATA REQUIREMENTS: $3.00/fax
WORK ORDER: $15.00 per workorder
DAILY WORK (CONFIRMS):
Hand: $71/K with $20.00 minimum (includes BRE or CRE)
$0.07/each additional insert
Machine: $42/K with $15.00 minimum (includes BRE or CRE)
$0.01/each additional insert
DAILY CHECKS*:
Hand: $91/K with $30.00 minimum daily (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $20.00 minimum (includes 1 insert)
$0.01/each additional insert
* There is a $3.00 charge for each 3606 Form sent.
STATEMENTS:
Hand: $78/K with $20.00 minimum (includes BRE or CRE)
$0.08/each additional insert
$125/K for intelligent inserting
Machine: $52/K with $20.00 minimum (includes BRE or CRE)
$0.01 each additional insert
$58/K for intelligent inserting
PERIODIC CHECKS:
Hand: $91/K with $30.00 minimum (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $30.00 minimum (includes 1 insert)
$0.01/each additional insert
12B1/DEALER COMMISSION CHECKS/STATEMENTS: $0.78/each envelope with
$30.00 minimum
SPAC REPORTS/GROUP STATEMENTS: $78/K with $20.00 minimum
LISTBILLS: $0.78 per envelope with $20.00 minimum
PRINTING CHARGES: (price ranges dependent on volumes)
$0.08/per confirm/statement/page
$0.10/per check
FOLDING (MACHINE): $18/K
FOLDING (HAND): $.12 each
PRESORT CHARGE: postage rate
$0.035 per piece
FAST FORWARD: $0.15 per piece
32
<PAGE> 33
COURIER CHARGE: $15.00 for each on call courier trip/or
actual cost for on demand
OVERNIGHT CHARGE: $3.50 per package service charge plus Federal
Express/Airborne charge
INVENTORY STORAGE: $20.00 for each inventory location as of the 15th
of the month
INVENTORY RECEIPT: $20.00 for each SKU / Shipment
HOURLY WORK; SPECIAL PROJECTS, OPENING ENVELOPES, ETC...:
$24.00 per hour
SPECIAL PULLS: $2.50 per account pull
BOXES/ENVELOPES: Shipping boxes $0.85 each
Oversized Envelopes $0.45 each
FORMS DEVELOPMENT/PROGRAMMING FEE: $100/hr
SYSTEMS TESTING: $85/hr
CUTTING CHARGES: $10.00/K
(b) Special Mailings:
Special mailing pricing is based on appropriate notification
(standard of 30 day notification) and scheduling for special
mailings. Scheduling requirements include having collateral
arrive at agreed upon times in advance of deadlines. Mailings
which arise with shorter time frames and turns will be billed
at a premium based on turn around requirements.
WORK ORDER: $30.00 per Workorder
DAILY WORK (CONFIRMS):
Hand: $135.00 to create an admark tape
$10.00/K to zip + 4 data enhance/$125.00
minimum
$80.00/hr for any data manipulation
$10.00/K combo charge
ADMARK & MACHINE INSERT
#10, #11, 6x9: $62/K to admark envelope and machine insert
1 piece/$125.00 min
$2.50/K for each additional insert
$38/K to admark only with $75.00 minimum
$25.00/K hand sort
9x12: $135/K to admark envelope and machine
insert 1 piece/$125.00 min
$5.00/K for each additional insert
$38/K to admark only/$75.00 minimum
$0.08 for each hand insert
ADMARK & HAND INSERT:
#10, #11, 6x9: $0.08 for each hand insert
$25.00/K hand sort
9x12 $0.09 for each hand insert
$35.00/K hand sort
PRESSURE/SENSITIVE LABELS:
$0.32 each to create, affix and hand insert 1 piece/$75.00
minimum
$0.08 for each hand insert
$0.10 to affix labels only
$0.10 to create labels only
33
<PAGE> 34
LEGAL DROP: $150.00 / compliant legal drop per job and
processing fees
CREATE MAILING LIST: $0.40 per entry with $75.00 minimum
PRESORT FEE: $0.035 per piece
VI Investor Services Group shall be entitled to the following fee for the
performance of any Special Legal Services as described in Schedule B in
accordance with the Written Instructions of the Fund: $185 per hour subject to
certain project caps as may be agreed to by Investor Services Group and the
Fund. Services and charges may vary based on volume.
VII Miscellaneous Charges. The Fund shall be charged for the following products
and services as applicable:
1. Ad hoc reports
2. Ad hoc SQL time
3. COLD Storage
4. Digital Recording
5. Banking Services, including incoming and outgoing wire charges
6. Microfiche/microfilm production
7. Magnetic media tapes and freight
8. Manual Pricing
9. Materials for Rule 15c-3 Presentations
10. Pre-Printed Stock, including business forms, certificates,
envelopes, checks and stationary
VII Fee Adjustments. After the one year anniversary of the effective date of
this Agreement, Investor Services Group may adjust the fees described in the
above sections once per calendar year, upon thirty (30) days prior written
notice in an amount not to exceed the cumulative percentage increase in the
Consumer Price Index for All Urban Consumers (CPI-U) U.S. City Average, All
items (unadjusted) - (1982-84=100), published by the U.S. Department of Labor
since the last such adjustment in the Client's monthly fees (or the Effective
Date absent a prior such adjustment).
IX. Programming Costs. The following programming rates are subject to an annual
5% increase after the one year anniversary of the effective date of this
Agreement.
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per programmer
34
<PAGE> 35
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
1. Postage - direct pass through to the Fund
2. Telephone and telecommunication costs,
including all lease, maintenance and line
costs
3. Proxy solicitations, mailings and
tabulations
4. Shipping, Certified and Overnight mail and
insurance
5. Terminals, communication lines, printers and
other equipment and any expenses incurred in
connection with such terminals and lines
6. Duplicating services
7. Distribution and Redemption Check Issuance
8. Courier services
9. Federal Reserve charges for check clearance
10. Overtime, as approved by the Fund
11. Temporary staff, as approved by the Fund
12. Travel and entertainment, as approved by the
Fund
13. Record retention, retrieval and destruction
costs, including, but not limited to exit
fees charged by third party record keeping
vendors
14. Third party audit reviews
15. Insurance
16. Pricing services (or services used to
determine Fund NAV)
17. Vendor set-up charges for Blue Sky and other
services
18. Blue Sky filing or registration fees
19. EDGAR filing fees
20. Vendor pricing comparison
21. Such other expenses as are agreed to by
Investor Services Group and the Fund
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
35
<PAGE> 36
SCHEDULE E
FUND DOCUMENTS
1. Certified copy of the Articles of Incorporation of the Fund,
as amended
2. Certified copy of the By-laws of the Fund, as amended
3. Copy of the resolution of the Board of Directors authorizing
the execution and delivery of this Agreement
4. Copies of all agreements between the Fund and its service
providers
5. Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of
the Fund, with a certificate of the Secretary of the Fund as
to such approval
6. All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service
offered by the Fund
7. Certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each
Shareholder, and the number of Shares of the Fund held by
each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against
which stop transfer orders have been placed, together with the
reasons therefore, and the number of Shares redeemed by the
Fund
8. All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation
or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby
9. A listing of all jurisdictions in which each Portfolio is
registered and lawfully available for sale as of the date of
this Agreement and all information relative to the monitoring
of sales and registrations of Fund shares in such
jurisdictions
10. Each Fund's most recent post-effective amendment to its
Registration Statement
11. Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements
thereto
36
<PAGE> 1
Exhibit 99(i)
---------------
BAKER
&
HOSTETLER LLP
---------------
COUNSELLORS AT LAW
- --------------------------------------------------------------------------------
Capitol Square, Suite 2100 - 65 East State Street - Columbus, Ohio 43215-4260
- (614) 228-1541
April 15, 1999
Fairport Funds
4000 Chester Avenue
Cleveland, Ohio 44103
Subject: FAIRPORT FUNDS -- REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 33-21489, FILED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND REGISTRATION STATEMENT
ON FORM N-1A, FILE NO. 811-5545, FILED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE
"REGISTRATION STATEMENT")
Ladies and Gentlemen:
In connection with the filing of the Post-Effective Amendment No. 6 to
the Registration Statement (the "Amendment"), it is our opinion that the
indefinite number of units of beneficial interest of Fairport Midwest Growth
Fund, Fairport Growth and Income Fund, and Fairport Government Securities Fund,
are and upon the effectiveness of the Amendment, the indefinite number of units
of beneficial interest of Fairport Emerging Growth Fund and Fairport
International Equity Fund will be, when issued for the consideration described
in the Registration Statement, as amended to date, legally issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very truly yours,
BAKER & HOSTETLER LLP
<PAGE> 1
EXHIBIT 99(j)
McCurdy 27955 Clemens Road
& Associates Westlake, Ohio 44145
CPA's, Inc. Phone: (440) 835-8500
Fax: (440) 825-1093
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this Post-
Effective Amendment Number 6 to the Fairport Funds Registration Statement of
all references to our firm included in or made a part of this Post-Effective
Amendment.
/s/ McCurdy & Associates CPA's, Inc.
McCurdy & Associates CPA's, Inc.
April 14, 1999
<PAGE> 1
Exhibit 99(m)(v)
FAIRPORT FUNDS
Agreement Pursuant to Plan of Distribution Under Rule 12b-1
Roulston Research Corp. (RRC) is the distributor of the shares of
beneficial interest of Fairport Midwest Growth Fund, Fairport Growth and Income
Fund, and Fairport Government Securities Fund (each a "Fund"), each of which is
a separate series of Fairport Funds, a registered investment company under the
Investment Company Act of 1940 (the "Trust"). Roulston & Company, Inc. (RCI) is
the investment adviser for each Fund. The Trust has adopted a Plan of
Distribution pursuant to Rule 12b-1 (a "Plan") under the Investment Company Act
of 1940, as amended (the "Act") pursuant to which RRC is authorized to make
payments for activities and expenses intended to result in the sale of each
Fund's shares or to assist shareholders of the Fund's shares. This Agreement
will confirm our understanding under which RRC will make payments to you for
activities authorized by the Plan and under which RCI will make additional
payments to you for such activities.
To the extent that you provide services to customers who may, from time
to time, directly or beneficially own shares of a Fund ("Clients"), including
(i) if you are a licensed broker-dealer, providing assistance with respect to
the distribution of shares, including the distribution of prospectuses and sales
literature to new investors ("Distribution Assistance") or (ii) if you are
providing personal services to shareholders, including answering routine
customer inquiries regarding such Fund, assisting customers in changing dividend
options, account designations and addresses, assisting in the establishment and
maintenance of customer accounts records, and in the processing of purchase and
redemption transactions, investing dividends and capital gains distributions
automatically in shares and providing such other service as the Fund or customer
reasonably request ("Shareholder Services"), RCI will make monthly payments to
you in an amount equal to the following percentage (determined on an annual
basis) of the Fund's average daily net asset value per share, multiplied by the
number of shares of such Fund owned by your Clients: .10% for Shareholder
Services, and RRC will make monthly payments to you in an amount equal to the
following percentage (determined on an annual basis) of the Fund's average daily
net asset value per share, multiplied by the number of shares of such Fund owned
by your Clients: .25% for Shareholder Services, for a total of .35%. Such
payments shall be made by the 10th day of the month following the month for
which such compensation is determined. You will bear, without reimbursement, any
expenses incurred by you in rendering the foregoing services.
Notwithstanding the above, RRC and RCI, respectively, will accrue such
fees until such time as Clients of yours have invested in such Fund a share
value of at least $100,000, at which time all accrued 12b-1 payments and other
payments will be paid to you; provided, however, that such fees will not accrue
for more than a trailing 12-month period.
We agree that instructions to purchase or redeem shares
("Instructions") shall be deemed to have been received by us as of the day on
which the Instructions were placed by you with the Fund or its designated agent
("Trade Date"), if such Instructions are received by you from a Client, or from
a person having discretion over the Client's account, prior to the earlier of
4:00 p.m. Eastern Time or the close of regular trading on the New York Stock
Exchange (the "Valuation Time") on a Business Day (as that term is defined in
the Funds' most current
<PAGE> 2
prospectus) and transmitted to the Fund's designated agent no later than 8:30
a.m. Eastern Time, on the next Business Day following such Trade Date ("Cut-Off
Time"). You understand that Instructions received in proper form by the Funds'
designated agent after the Cut-Off Time on any Business Day shall be treated as
if received by the Funds' designated agent on such Business Day. You have
advised us that you have implemented control procedures reasonably designed to
limit the transmission of orders with respect to any Business Day to those
orders actually received before the Valuation Time on any such Business Day. You
will, within 10 business days after a written request, provide a description of
such control procedures and any records created in the implementation of such
procedures to the Trust.
Except for the limited purpose in the immediately preceding paragraph,
nothing in this Agreement shall be deemed or construed to make you an employee,
agent, representative or partner of RRC, RCI, the Trust or of the Funds or any
affiliates thereof, and neither you nor any of your affiliates is authorized to
act for RRC, RCI, the Trust, the Funds or any affiliates thereof or to make any
representations on behalf of any of them. Without limiting the foregoing
sentence and except as provided in the immediately preceding paragraph, this
Agreement does not constitute you an agent of RRC, RCI, the Trust, the Funds or
any affiliates thereof for purposes of selling, redeeming or exchanging Shares
and to the extent you are involved in the purchase, redemption or exchange of
Shares, such involvement will be as agent of your Client.
This Agreement shall not take effect as to any Fund until it has been
approved by votes of a majority of both (a) the Board of Trustees of the Trust
and (b) those Trustees of the Trust who are not "interested persons" of the
Trust (as defined in the Act) and have no direct or indirect financial interest
in the operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on the
Plan or any such agreements.
This Agreement is subject to annual approval by votes of a majority of
both (a) the Board of Trustees of the Trust and (b) the Rule 12b-1 Trustees,
cast in persons at a meeting called for purpose of voting on the Plan or such
agreements. This Agreement shall continue in effect for a period of more than
one year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner just
stated.
This Agreement may be terminated as to any Fund at any time without the
payment of any penalty by vote of majority of the Rule 12b-1 Trustees of the
Trust, or by a vote of a majority of the outstanding securities of such Fund,
upon sixty days within notice to you.
This Agreement shall terminate automatically in the event of its
assignment, as that term is defined in the Act and the rules adopted thereunder.
2
<PAGE> 3
Please indicate your agreement to the terms of this Agreement by
signing and returning a copy to:
Roulston Research Corp. Roulston & Company, Inc.
4000 Chester Avenue 4000 Chester Avenue
Cleveland, Ohio 44103 Cleveland, Ohio 44103
Roulston Research Corp. Roulston & Company, Inc.
By: By:
- ------------------------------------- ------------------------------
Date Date
ACCEPTED AND AGREED:
PNC Bank, National Association
By:
----------------------------------
Date
3
