<PAGE> 1
As filed with the Securities and Exchange Commission on
February 28, 2000
1933 Act Registration No. 33-84186
1940 Act File No. 811-8774
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 7
and/or
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 8
ROULSTON FUNDS
(Exact Name of Registrant as Specified in Charter)
3636 Euclid Avenue, Suite 3000, Cleveland, Ohio 44115
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 216/431-3000
Scott D. Roulston, 3636 Euclid Avenue, Suite 3000, Cleveland, Ohio 44115
(Name and Address of Agent for Service)
Copy to: Kristin H. Ives, Esq., Baker & Hostetler LLP
65 East State Street, Columbus, Ohio 43215
Approximate Date of Proposed Public Offering:
Immediately, upon effectiveness
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- ---
X on March 1, 2000 pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1)
- ---
on (date) pursuant to paragraph (a)(1)
- ---
75 days after filing pursuant to paragraph (a)(2)
- ---
on (date) pursuant to paragraph (a)(2) of Rule 485
- ---
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
ROULSTON FUNDS
CHARTING A COURSE YOU CAN TRUST
PROSPECTUS
ROULSTON EMERGING GROWTH FUND
ROULSTON INTERNATIONAL EQUITY FUND
ROULSTON GROWTH FUND
ROULSTON GROWTH AND INCOME FUND
ROULSTON GOVERNMENT SECURITIES FUND
March 1, 2000
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.....................................................
Investment Goal.......................................................
Principal Strategy....................................................
Principal Risks.......................................................
Performance ..........................................................
INTERNATIONAL EQUITY FUND................................................
Investment Goal.......................................................
Principal Strategy....................................................
Principal Risks.......................................................
Performance ..........................................................
GROWTH FUND..............................................................
Investment Goal.......................................................
Principal Strategy....................................................
Principal Risks.......................................................
Bar Chart and Performance Table.......................................
GROWTH AND INCOME FUND...................................................
Investment Goal.......................................................
Principal Strategy....................................................
Principal Risks.......................................................
Bar Chart and Performance Table.......................................
GOVERNMENT SECURITIES FUND...............................................
Investment Goal.......................................................
Principal Strategy....................................................
Principal Risks.......................................................
Bar Chart and Performance Table.......................................
FEES AND EXPENSES OF THE FUNDS...........................................
FURTHER INFORMATION ON INVESTMENT OBJECTIVES
AND INVESTMENT STRATEGIES.............................................
OTHER SECURITIES AND RISKS...............................................
MANAGEMENT OF THE FUNDS..................................................
PERFORMANCE DATA FROM BP IN-HOUSE ACCOUNTS...............................
PRICING FUND SHARES......................................................
PURCHASE OF SHARES.......................................................
FINANCIAL HIGHLIGHTS.....................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
<PAGE> 4
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 related
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. While most companies in their post-venture
capital phase of development are relatively small companies, the Fund may invest
in companies of all sizes.
Roulston & Company selects those companies which it believes to have the
potential for above-average growth in market value. These types of companies
often are conducting their initial public offerings, are 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.
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 expects that it may engage in active and frequent trading of portfolio
securities to achieve its principal investment strategy resulting in an annual
portfolio turnover rate of over 100%. Trading securities may produce capital
gains, which are taxable when distributed to investors with non-tax-sheltered
accounts. Active trading may also increase the amount of commissions or mark-ups
to broker-dealers that the Fund pays when it buys and sells securities and could
affect adversely the Fund's performance.
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;
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- - the securities purchased in initial public offerings or 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.
PERFORMANCE
A bar chart and performance table are not provided for this Fund because it does
not have performance for one full calendar year. The Fund commenced operations
on July 1, 1999.
PORTFOLIO MANAGER
Howard W. Harpster
3
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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, Inc. considers to have a competitive advantage, to be the perceived
leaders in their respective industries or to be in industries which are
consolidating. The Fund focuses 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.
The Fund invests principally in common stocks that are either principally traded
in countries outside of the United States or are represented by American
Depository Receipts or "ADRs." The Fund ordinarily invests at least 65% of its
total assets in at least three foreign countries, although at any given time,
the Fund may invest up to 50% of its assets in equity securities of companies
headquartered in any one country. In addition, under normal circumstances at
least 65% of the Fund's total assets will be invested in the equity securities
of non-U.S. companies. Equity securities include common stocks and ADRs
representing interests in common stocks.
WHAT IS AN ADR?
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 in the over-the-counter markets (such as NASDAQ).
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.
The Fund may, from time to time, attempt to hedge its exposure to currency
exchange risk by using forward currency contracts.
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;
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- - 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; and
- - loss of part or all of your money invested in the Fund.
PERFORMANCE
A bar chart and performance table are not provided for this Fund because it does
not have performance for one full calendar year. The Fund commenced operations
on July 1, 1999.
PORTFOLIO MANAGER
Howard W. Harpster
5
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GROWTH FUND
INVESTMENT GOAL
Capital appreciation.
PRINCIPAL STRATEGY
The Fund seeks capital appreciation over the long term by investing primarily in
the common stocks of companies projected to grow faster than the economy in
general. Although not exclusively, these companies tend to be established
companies which typically have several years of recorded experience as publicly
traded entities. Thus, information related to operating results over several
years and the public's reaction to those fluctuations in the progress of the
company is available for assessment. Dividends are not a consideration and
growth is viewed opportunistically. Few companies can grow at a high rate for an
extended period. Special strength in specific industries or product lines come
and go over varying lengths of time. We focus on the 2-3 year time frame. We do
not focus on any particular market capitalization, but will tend to own stocks
ranked among the largest 1000 companies.
These common stocks selected for purchase are primarily of companies
experiencing an improvement in profitability or earnings growth compared to
other companies. This improvement can be attributed to the specific company,
such as the influence of a new product cycle. It can also be a function of
economic conditions, such as the beginning or end of a recession, and the
company's sensitivity to these conditions. The fundamentals of a company (which
include earnings and cash flow history and outlook, balance sheet strength, and
the company's product and market position) are also a component of the analysis.
The Fund typically sells a stock when its fundamentals deteriorate, or the
stock falls short of the portfolio manager's expectations or no longer offers
good value relative to its future prospects.
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 Fund's investments depends on the ability of the
portfolio manager to correctly assess the potential of the stocks
purchased for the Fund; and
- loss of part or all of your money invested in the Fund.
6
<PAGE> 9
BAR CHART AND PERFORMANCE TABLE
The following bar chart and performance table provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual return compares with
that of a broad measure of market performance. Both the chart and the table
assume reinvestment of dividends and distributions. As with all mutual funds,
past performance is not a prediction of future performance.
During the six years ending December 31, 1999, the highest return for a quarter
was 19.89% for the quarter ended July 31, 1997 and the lowest return for a
quarter was -18.48% for the quarter ended August 31, 1998.
ANNUAL RETURNS (%)
7.23% 23.31% 20.56% 27.7% -4.13% -7.44%
- -------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
PERFORMANCE TABLE
(Average annual total returns as of December 31, 1999)
1 year 5 years Since Inception*
- -------------------------------------------------------------------------------
GROWTH FUND -7.44 10.99 11.65
RUSSELL 1000 GROWTH INDEX 33.16 32.41 25.62
S&P 500 STOCK INDEX 25.57 29.48 23.14
LIPPER MULTI-CAP GROWTH INDEX 46.35 28.76 22.51
The Russell 1000 Growth Index is a measure of 1000 companies with higher
price-to-book ratios and higher forecasted growth values. The S&P 500 Stock
Index is a major stock market index comprised of 500 companies representing a
broad range of industries. Unlike the Fund, these indices are unmanaged
indicators of financial performance and do not reflect any fees or expenses. The
Fund has selected the Russell 1000 Growth Index to replace the S&P 500 Stock
Index as its benchmark because the Russell 1000 Growth Index is more
representative of the Fund's profile.
The Russell 1000 Growth Index, the S&P 500 Stock Index and Lipper Multi-Cap
Growth Index are not sold as investments. The Lipper Multi-Cap Growth Index
provides information that shows how the Fund's performance compares with the
returns of an index of funds with similar investment objectives.
Prior to July 1, 1999, the Fund was named Fairport Midwest Growth Fund with at
least 65% of its assets invested in common stocks of companies which had
headquarters in the Midwest region.
*Inception date July 1, 1993.
PORTFOLIO MANAGER
John A. Karnuta, CFA
7
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GROWTH AND INCOME FUND
INVESTMENT GOALS
Capital appreciation and current income.
PRINCIPAL STRATEGY
The Fund invests principally in the common stocks of well established companies
with long-term growth potential and a history of paying dividends. The portfolio
managers seek growing companies with strong cash flow return that sell at a
discount to the S&P 500 Index. Companies selected must, in the manager's
opinion, have:
- a strong business strategy;
- a durable competitive advantage; and
- a record of paying dividends over time.
WHAT IS THE PRICE/EARNINGS RATIO?
A company's price/earnings ratio is a common measure of the value of a common
stock; it is simply the ratio of the stock's market price to its earnings per
share. For example, a common stock with the P/E of 12 means that its price per
share is twelve times its earnings per share.
The portfolio manager adheres to a value approach of investment management that
also requires a potential investment to meet other standards such as price/sales
ratios and historical price/earnings ratios relative to the S&P 500 Index and
industry peers. This value style of investing seeks to identify companies that
appear underpriced in regards to their intrinsic worth and future prospects. It
also takes into account the fundamentals of a company which include: earnings
and cash flow history and outlook, balance sheet strength, and the company's
product and market position.
The Fund typically sells a stock when its fundamentals deteriorate, or the stock
falls short of the portfolio manager's expectations, or no longer offers good
value.
PRINCIPAL RISKS
There are risks associated with any investment, but the particular risks
associated with your investment in the Fund include:
- stock market risk, or the risk that the price of securities held by the
Fund, as well as the broader stock market, will fall due to various
factors or unpredictable circumstances, 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 correctly assess the potential of the stocks
purchased for the Fund; and
- loss of part or all of your money invested in the Fund.
8
<PAGE> 11
BAR CHART AND PERFORMANCE TABLE
The following bar chart and performance table provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual return compares with
that of a broad measure of market performance. Both the chart and the table
assume reinvestment of dividends and distributions. As with all mutual funds,
past performance is not a prediction of future performance.
During the six years ending December 31, 1999, the highest return for a quarter
was 20.07% for the quarter ended December 31, 1998 and the lowest return for a
quarter was -18.35% for the quarter ended August 31, 1998.
ANNUAL RETURNS (%)
1.73% 28.87% 17.74% % 30.31% 6.28% -11.88%
- -------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
PERFORMANCE TABLE
(Average annual total returns as of December 31, 1999)
1 year 5 years Since Inception*
- -------------------------------------------------------------------------------
GROWTH AND INCOME FUND -11.88 13.11 11.08
RUSSELL 1000 VALUE INDEX 7.35 23.07 17.78
S&P 500 STOCK INDEX 25.57 29.48 23.14
LIPPER MULTI-CAP VALUE INDEX 5.94 17.82 14.62
The Russell 1000 Value Index is a measure of 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The S&P 500 Stock Index
is a major stock market index comprised of 500 companies representing a broad
range of industries. Unlike the Fund, these indices are unmanaged indicators of
financial performance and do not reflect any fees or expenses. The Fund has
selected the Russell 1000 Value Index to replace the S&P 500 Stock Index as its
benchmark because the Russell 1000 Value Index is more representative of the
Fund's profile.
The Russell 1000 Value Index, the S&P 500 Stock Index and the Lipper Multi-Cap
Value Index are unmanaged indicators of financial performance and are not sold
as investments. The Lipper Multi-Cap Value Index provides information that shows
how the Fund's performance compares with the returns of an index of funds with
similar investment objectives.
*Inception date July 1, 1993
CO-PORTFOLIO MANAGERS
Howard W. Harpster and Keith A. Vargo
9
<PAGE> 12
GOVERNMENT SECURITIES FUND
INVESTMENT GOALS
Current income consistent with preservation of capital.
PRINCIPAL STRATEGY
The Fund primarily invests in U.S. government and agency securities and expects
to maintain an average portfolio maturity of three to ten years. Normally, at
least 65% of the Fund's total assets are invested in U.S. government securities,
including:
- direct obligations issued by the U.S. Treasury;
- securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities, including mortgage-backed securities;
and
- repurchase agreements, backed by any of the foregoing securities.
The Fund may invest up to 35% of its total assets in corporate bonds and
privately issued mortgage-backed securities rated "BBB" or better by a
nationally recognized rating agency, or, if unrated, are determined by the
portfolio manager to be of like quality. The Fund may also use financial futures
contracts to protect its portfolio against possible adverse movements in
interest rates. For example, when interest rates are increasing and portfolio
values are falling, the Fund may enter into a financial futures contract whose
value will increase when interest rates fall in an attempt to offset a decline
in the value of the Fund's current portfolio securities.
The Fund expects that it may engage in active and frequent trading of portfolio
securities from time to time to achieve its principal strategy resulting in an
annual portfolio turnover rate which will exceed 100%. This is expected to
happen at times when the Fund is repositioning its portfolio and duration to
meet changing interest rate conditions resulting in portfolio turnover rates
which would be more in line with interest rate cycles. Frequent trading of
securities may increase transaction costs to the Fund and can produce capital
gains, which are taxable when distributed to investors in non-tax-sheltered
accounts.
PRINCIPAL RISKS
There are risks associated with any investment, but the particular risks
associated with your investment in the Fund include:
- interest rate risks which means that during periods of falling interest
rates, the value of fixed income securities generally rises;
conversely, during periods of rising interest rates, the value of such
securities generally declines;
- securities with longer maturities generally pay higher rates of
interest but they are also subject to greater price volatility due to
changes in interest rates;
- the success of a Fund's investments depends on the ability of the
portfolio manager to correctly assess the potential of the holdings
relative to the market climate and interest rate changes;
- while the U.S. government or its agencies guarantee the principal and
interest on such obligations, it does not guarantee the market price of
such securities;
10
<PAGE> 13
- credit risk, or the risk that the issuer of a debt obligation, such as
a bond, may default on its obligation to pay principal and/or interest
on such obligation when due or that the issuer may have its credit
rating downgraded which would likely adversely affect the market value
of such obligation;
- prepayment risk, or the risk that during periods of falling interest
rates, the underlying obligations of a mortgage-backed security may be
paid off and its principal repaid to the Fund more quickly than the
investment adviser anticipated and that the securities could decrease
in value. If such security was purchased at a premium the Fund could
also lose principal; and
- loss of part or all of your money invested in the Fund.
BAR CHART AND PERFORMANCE TABLE
The following bar chart and performance table provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual return compares with
that of a broad measure of market performance. Both the chart and the table
assume reinvestment of dividends and distributions. As with all mutual funds,
past performance is not a prediction of future performance.
During the six years ending December 31, 1999, the highest return for a quarter
was 6.45% for the quarter ended June 30, 1995 and the lowest return for a
quarter was -6.74% for the quarter ended April 30, 1994.
ANNUAL RETURNS (%)
-6.48% 17.90% 2.32% 7.51% 8.94% -2.40 %
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
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PERFORMANCE TABLE
(Average annual total returns as of December 31, 1999)
1 year 5 years Since Inception*
- --------------------------------------------------------------------------------
Government Securities Fund -2.40 6.58 4.32
Lehman U.S. Government/Corporate
Intermediate Bond Index 0.39 7.10 5.07
Merrill Lynch Intermediate
Government Bond Index 0.55 6.98 5.41
The Lehman U.S. Government/Corporate Bond Index (the "Lehman Index") includes
intermediate U.S. Government Treasuries and Agencies and publicly issued U.S.
Corporate Bonds that meet specified maturity, liquidity, and quality
requirements. The Merrill Lynch Intermediate Government Bond Index (the "Merrill
Index") includes all U.S. Treasury Notes and Bonds with at least $1 billion face
amount outstanding. Maturities are between one and ten years. Unlike the Fund,
these indices do not reflect any fees or expenses. The Fund has selected the
Lehman Index to replace the Merrill Index as the Fund's appropriate benchmark
because the Lehman Index includes corporate bonds, which the Merrill Index does
not, and in which the Fund intends to invest on a limited basis.
*Inception date July 1, 1993.
PORTFOLIO MANAGER
Robert P. Goodman
12
<PAGE> 15
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>
ROULSTON ROULSTON ROULSTON ROULSTON
EMERGING INTERNATIONAL ROULSTON GROWTH AND GOVERNMENT
GROWTH EQUITY GROWTH INCOME SECURITIES
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES(1):
(fees paid directly from
your investment) None None None None None
ANNUAL FUND OPERATING
EXPENSES:
(expenses that are deducted
from Fund assets)
MANAGEMENT FEES .75% .75% .75% .75% .25%
DISTRIBUTION AND SERVICE
(12b-1) FEES .25% .25% .25% .25% .25%
OTHER EXPENSES .82% .82% .57% .61% 1.84%
----- ----- ---- ---- -----
TOTAL ANNUAL OPERATING
EXPENSES 1.82%(3) 1.82%(3) 1.57%(2) 1.61%(2) 2.34%(2)
===== ===== ===== ===== =====
LESS FEE WAIVER AND/OR
EXPENSE REIMBURSEMENT (.00%) (.00%) (.19%) (.13%) (1.44%)
------ ------ ----- ----- -----
NET ANNUAL OPERATING EXPENSES 1.82%(5) 1.82%(5) 1.38 %(4) 1.48%(4) 0.90%(4)
====== ====== ===== ===== =====
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) A $9 wire redemption charge deducted from the amount of each redemption of
Fund shares you request by Federal Reserve wire.
(2) These are the gross fees and expenses that would have been incurred for the
fiscal year ended October 31, 1999 if Roulston & Company, Inc., the Adviser, did
not waive any fees and/or reimburse expenses.
(3) These are the gross fees and expenses that these Funds estimate they would
incur for the fiscal year ending October 31, 2000, if the Adviser does not waive
any fees and/or reimburse expenses. "Other Expenses" are based on estimated
amounts for the current fiscal year.
(4) These are the net fees and expenses that these Funds actually incurred for
the fiscal year ended October 31, 1999 because the Adviser had voluntarily
agreed to waive advisory fees and/or reimburse expenses. The Adviser has
contractually agreed to continue to waive advisory fees and/or reimburse
expenses for the Funds' fiscal year ending October 31, 2000, to the extent
necessary to maintain each Fund's Net Annual Operating Expenses at the levels
shown in the above table.
(5) These are the net fees and expenses that these Funds estimate that they will
incur for the fiscal year ending October 31, 2000. The Adviser has
contractually agreed to waive advisory fees and/or reimburse expenses during
that period to the extent necessary to maintain each such Fund's Net Annual
operating Expenses at no higher than 1.95%.
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<PAGE> 16
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, five year and ten year periods, as applicable, do not
reflect fee waivers and/or expenses assumed.
This example is for comparison purposes only. Actual return and expenses will be
different and each Fund's performance and expenses may be higher or lower. Based
on the above assumptions, your costs for each Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
EMERGING GROWTH FUND $185 $573 N/A N/A
INTERNATIONAL EQUITY FUND $185 $573 N/A N/A
GROWTH FUND $141 $477 $ 837 $1,851
GROWTH AND INCOME FUND $151 $495 $ 864 $1,900
GOVERNMENT SECURITIES FUND $ 92 $592 $1,119 $2,564
FURTHER INFORMATION ON INVESTMENT OBJECTIVES AND INVESTMENT STRATEGIES
INVESTMENT OBJECTIVES
The investment objectives of each of the Emerging Growth Fund and the
International Equity Fund may be changed by Roulston Funds' Board of Trustees
without the approval of that Fund's shareholders. The investment objectives of
the Growth Fund, Growth and Income Fund and Government Securities Fund may not
be changed without shareholder approval.
INVESTMENT STRATEGIES
Each Fund may also use certain derivative instruments, such as options and
futures, to protect its portfolio against possible adverse movements in
securities prices and/or interest rates or as a means to achieve exposure to
certain securities or segments of a market in a manner that may be more
efficient, in terms of time or price, than purchasing such securities directly.
OTHER SECURITIES AND RISKS
COMMON STOCKS AND ADRS GENERALLY. Each of the Funds, other than the Government
Securities Fund, will primarily invest in common stocks. Such 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; however, investing in warrants is not a
principal investment strategy for any Fund. These types of investments 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.
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<PAGE> 17
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 depository institution.
Unsponsored ADRs are issued only by the depository 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 depository 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 a Fund has on its books.
BONDS AND OTHER DEBT SECURITIES. Generally, the Government Securities Fund is
subject to interest rate risk, which is the risk that increases in market
interest rates may decrease the value of the bonds or other debt securities held
by that Fund. Usually the prices of bonds fall when interest rates increase, and
rise when interest rates decrease. Typically, the longer the maturity of a bond,
the more sensitive its price is to shifts in interest rates. Because the
Government Securities Fund invests principally in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, there is
very little risk that the principal of and interest on such securities will not
be paid when due. However, the Fund may also invest in corporate bonds and other
non-U.S. Government securities where there is more risk that the principal of
and interest on such securities may not be paid when due.
FOREIGN SECURITIES. Securities in which the International Equity Fund invests
are often 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, in addition to currency risk, not
applicable to investments in securities of U.S. issuers. Such risks include:
15
<PAGE> 18
- - 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 International Equity 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.
TEMPORARY DEFENSIVE POSITIONS. In response to economic, political or unusual
market conditions, each Fund may adopt a temporary defensive position. In such
an event, each Fund may invest up to 100% of its assets in cash or money market
instruments. Should this occur, the Fund taking the temporary defensive position
will not achieve its investment objective during that time.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund essentially is making
a short-term loan to a broker or bank (seller). The Fund buys securities that
the seller has agreed to buy back at a specific time and at a set price that
includes interest. There is a risk that the seller will be unable to buy back
the securities at the time required, and the Fund could experience delays in
recovering the amounts owed it.
MORTGAGE-BACKED SECURITIES. The Government Securities Fund is permitted to
invest in mortgage-backed securities, subject to the rating and quality
requirements described in the Principal Strategy section for the Fund. These
securities, which represent interests in pools of mortgages, may offer
attractive yields but generally carry additional risks. The prices and yields of
mortgage-backed securities typically assume that the securities will be repaid
at a given time before maturity. When interest rates fall substantially, these
securities usually are redeemed early because the underlying mortgages are often
prepaid. The Fund would then have to reinvest the money at a lower rate. The
16
<PAGE> 19
price or yield of mortgage-backed securities may fall or become more volatile if
they are repaid later than expected.
OPTIONS AND FUTURES CONTRACTS. Each Fund may use options and futures contracts
to gain exposure to a particular security or market segment more quickly and
efficiently than acquiring the security directly and for bona fide hedging
purposes to offset changes in the value of securities held or expected to be
acquired. Options are exchange-traded or private contracts involving the right
of a holder to deliver (a "put") or receive (a "call") certain assets (or a
money payment the change in value of certain assets or index) from another party
at a specified price within a specified time period. Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. Each Fund may also use index futures based on various securities indices.
Risks inherent in the use of options and futures contracts include: (i)
dependence on the portfolio manager's ability to predict correctly movements in
the direction of interest rates and/or securities prices; (ii) imperfect
correlation between the price of the options or futures contracts and movements
in the prices of the securities being hedged; (iii) the fact that skills needed
to use these strategies are different from those needed to select portfolio
securities; (iv) the absence of a liquid secondary market for any particular
option or contract at any time; (v) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences; and (vi) the
possible inability of a Fund to purchase or sell a portfolio security at a time
that otherwise would be favorable for it to do so, or the possible need for a
Fund to sell the security at a disadvantageous time, due to the requirement that
the Fund maintain "cover" or segregate securities in connection with hedging
transactions. The loss from investing in futures transactions and in writing
certain options is potentially unlimited.
MANAGEMENT OF THE FUNDS
Roulston, 3636 Euclid Avenue, Suite 3000, Cleveland, Ohio 44115, serves as the
investment adviser for each Fund. Roulston is a professional investment
management firm and registered investment adviser founded in 1963. In addition
to advising the Funds, Roulston provides advisory services to pension plans,
corporations, 401(k) plans, profit sharing plans, individual investors, trusts
and estates.
Roulston serves as the investment adviser for each Fund pursuant to an
investment advisory agreement. Roulston makes the investment decisions for the
assets of the Funds and continuously reviews, supervises and administers the
investment program of the Funds.
During the fiscal year ended October 31, 1999, the Growth Fund paid net advisory
fees of .56% of its average net assets (reflecting fee waivers of .19% or
$94,542), the Growth and Income Fund paid net advisory fees of .62% of its
average net assets (reflecting fee waivers of .13% or $52,290), and the
Government Securities Fund paid net advisory fees of 0.00% of its average net
assets (reflecting fee waivers of .25% or $13,251). For the Emerging Growth Fund
and International Equity Fund, Roulston is entitled to receive a fee, computed
daily and paid monthly, from each Fund at the annual rate of seventy-five on
hundredths of one percent (0.75%) of such Fund's average daily net assets.
17
<PAGE> 20
PORTFOLIO MANAGERS
GROWTH FUND
Since March 1, 1999, the Fund has been managed by John A. Karnuta. Mr. Karnuta
has over 30 years of investment experience including positions as a security
analyst for McDonald & Company Securities, Inc. and for Roulston & Company; the
Vice President - Manager of Employee Benefit Portfolios at the Society National
Bank Trust Department; and, for the eleven years ended in February 1999, as the
portfolio manager of growth equities for the BP America Pension Fund. He
graduated from John Carroll University, received an MBA from Case-Western
University, and attended National Trust School at Northwestern University. A
Chartered Financial Analyst and member of the Association for Investment
Research, Mr. Karnuta is also a former President of the Cleveland Society of
Security Analysts.
GOVERNMENT SECURITIES FUND
Since April 1, 1999, the Fund has been managed by Robert P. Goodman. Mr. Goodman
has over 17 years of investment management experience. Prior to joining
Roulston, Mr. Goodman managed the $1.1 billion Fixed Income portion of the BP
America Pension Fund for 10 years. He has spent his entire career in the
financial markets, where he has traded and invested all types of bonds,
including both domestic and foreign. Beginning in 1982, he served as a
Government Securities Trader with various primary dealerships, including a three
year assignment in London, England. A graduate of State University of New York
at Empire College, Mr. Goodman has actively written and spoken about the bond
market at numerous functions.
GROWTH AND INCOME FUND, EMERGING GROWTH FUND AND INTERNATIONAL EQUITY FUND Mr.
Howard W. Harpster and Mr. Keith A. Vargo are responsible for the day-to-day
management of the Growth and Income Fund. Mr. Harpster is responsible for the
day-to-day management of the Emerging Growth Fund and the International Equity
Fund. Mr. Harpster joined Roulston as Chief Investment Officer on May 15, 1999.
Prior to joining Roulston, Mr. Harpster served as Director of Pension
Investments with BP America, Inc. since 1989. Mr. Vargo joined Roulston in 1985
and has been a Vice President and a portfolio manager at Roulston & Company
since 1992. Mr. Vargo joined Mr. Harpster as Co-Portfolio Manager of the Fund
effective March 1, 2000.
PRIOR PERFORMANCE
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 described above in 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 described above in this Prospectus. These Funds are 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, the Internal Revenue Code of 1986 or related laws. Had the Accounts been
subject to such limitations and restrictions, their performance might
18
<PAGE> 21
have been adversely affected. The performance information in the table is not
the performance of the Funds and 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 & Company or
the Funds.
<TABLE>
<CAPTION>
PERFORMANCE DATA FROM BP IN-HOUSE ACCOUNTS
Total Return for the Years Ended December 31, 1998
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>
Average Annual Total Returns for the Years Ended December 31, 1998
<TABLE>
<CAPTION>
Since
1 Year 3 Years 5 Years January 1, 1991
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
BP America In-House
Venture Capital Account 25.6% 23.3% 26.4% 24.5%
BP America In-House
International Account 34.2% 22.8% 14.2% 14.2%
</TABLE>
*Total return for each of these Accounts is calculated using the Modified Dietz
method, which differs from the method that the Securities and Exchange
Commission requires mutual funds to use. These returns are net of all applicable
fees and expenses which are lower than those borne by the Funds. Had the
Accounts borne those expenses which are borne by the Funds, their performance
would have been lower. Total return for the Funds are 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 PFPC Inc., the Funds' transfer agent, and
19
<PAGE> 22
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. For fixed and variable income securities, the
pricing service may use a matrix system of valuation which considers factors
such as securities prices, yield features, call features, ratings and
developments related to a specific security. 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 that 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 PFPC Inc. 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 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 any 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.
Payment for shares may be made by check or readily available funds (e.g., by
federal funds wire). Purchases will be made in full and fractional shares of a
Fund calculated to three decimal places. Your account statement will be your
record of shares of the Funds owned by you. No share certificates will be
issued.
The Funds reserve the right to reject any purchase order. Checks that do not
clear will result in a cancellation of the purchase, and you could be liable for
any losses or fees incurred, including a $20 returned check fee.
RETIREMENT PLANS:
The Funds are eligible for investment by tax deferred retirement programs such
as 401(k) plans, traditional IRAs, spousal IRAs, Roth IRAs, Education IRAs, SEP
IRAs and SIMPLE IRAs. All accounts established under such plans must have all
dividends reinvested in the applicable Fund. For more information about
prototype plans or for an IRA application, please call 800-332-6459.
20
<PAGE> 23
<TABLE>
<CAPTION>
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
BY MAIL BY MAIL
Complete the application and mail the application and Fill out the subsequent investment stub from your
check made out to the Fund you wish to invest in to: account statement and mail with your check or other
negotiable bank draft with your account number on it to:
Roulston Funds
c/o PFPC Inc. Roulston Funds
211 South Gulph Road, P.O. Box 61503 c/o PFPC Inc.
King of Prussia, Pennsylvania 19406 211 South Gulph Road, P.O. Box 61767
King of Prussia, Pennsylvania 19406
Minimum initial investment for each Fund:
$250 for each account (including retirement accounts) Please make your check payable to the Fund you are
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
number. Call your bank with instructions to transmit Call 800-332-6459
funds to:
Boston Safe Deposit & Trust Follow the instructions under
ABA #: 011001234 "TO OPEN AN ACCOUNT - By Wire."
Credit (Insert Name of Your Fund)
Acct #: 005002
FBO: (Insert Shareholder name & acct. number)
Mail a completed account application to PFPC Inc. at the
above address.
Note: Your bank may charge you a wire fee.
- -----------------------------------------------------------------------------------------------------------------------
BY AUTOMATIC INVESTMENT BY AUTOMATIC INVESTMENT
Submit your AUTOMATIC INVESTMENT PLAN To add the AUTOMATIC INVESTMENT PLAN to an
(Section 7 of the application) with your initial existing account, call 800-332-6459 to request the form.
investment.
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 Roulston Fund exchanges, call 800-332-6459 to request an
- - Kemper's Cash Account Trust Money Market exchange of shares into:
Portfolio. For this exchange, you must first receive - Another Roulston Fund.
a prospectus. This may not be available in all states. - Kemper's Cash Account Trust Money Market
Portfolio. For this exchange, you must first
NOTE: No fee or charge will apply, but there may be a receive a prospectus. This may not be available
capital gain or loss. The exchange privilege is subject to in all states.
amendment or termination at any time upon sixty days prior
notice. NOTE: No fee or charge will apply, but 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>
21
<PAGE> 24
DISTRIBUTION ARRANGEMENTS
The Funds do not charge up-front or deferred sales charges. The Funds have
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:
<TABLE>
<CAPTION>
TO SELL FROM OR CLOSE AN ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
BY MAIL BY TELEPHONE
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 you previously selected: check, deposit to your bank
documents that may be required. account, or wire transfer (for wire transfers, a fee
will be charged)
Mail your request to:
Roulston Funds
c/o PFPC Inc.
211 South Gulph Road, P.O. Box 61503
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 Roulston 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>
22
<PAGE> 25
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 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.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past 5 years (or since such Fund began operations
if less than 5 years). Certain information reflects financial results for a
single fund share. The total returns in each table represent the rate that you
would have earned (or lost) on an investment in a Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by McCurdy &
Associates CPAs, Inc., whose report, along with the Funds' financial statements,
is included in the Funds' annual report, which is available upon request.
23
<PAGE> 26
<TABLE>
<CAPTION>
ROULSTON ROULSTON
EMERGING INTERNATIONAL
GROWTH FUND EQUITY FUND
----------- -----------
PERIOD ENDED PERIOD ENDED
10/31/99* 10/31/99*
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02) (0.01)
Net realized and unrealized gain on investments 9.37 0.24
---- ----
Total from investment operations 9.35 0.23
---- ----
LESS DISTRIBUTIONS:
From net investment income 0.00 0.00
From realized capital gains 0.00 0.00
---- ----
Total distributions 0.00 0.00
---- ----
NET ASSET VALUE, END OF PERIOD $19.35 $10.23
===== =====
TOTAL RETURN 93.30%** 2.30%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $3,284 $2,673
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser 11.54%*** 15.24%***
After reimbursement of expenses by Adviser 1.95%*** 1.95%***
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser (10.46)%*** (13.86)%***
After reimbursement of expenses by Adviser (0.87)%*** (0.57)%***
Portfolio turnover 79.91%** 51.26%**
* For the period 7/1/99 (the Fund's inception) to 10/31/99
** Not annualized.
*** Annualized.
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
ROULSTON GROWTH FUND
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.45 $18.88 $15.50 $13.55 $12.27
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.06) (0.03) (0.01) 0.02 0.04
Net realized and unrealized gain (loss) on investments (1.03) (1.30) 4.55 2.16 2.04
------ ----- ---- ---- ----
Total from investment operations (1.09) (1.33) 4.54 2.18 2.08
------ ----- ---- ---- ----
LESS DISTRIBUTIONS:
From net investment income 0.00 0.00 (0.01) (0.03) (0.04)
From realized capital gains (2.61) (1.10) (1.15) (0.20) (0.76)
------ ------ ------ ------ ------
Total distributions (2.61) (1.10) (1.16) (0.23) (0.80)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.75 $16.45 $18.88 $15.50 $13.55
====== ====== ====== ====== ======
TOTAL RETURN (9.18)% (7.73)% 31.00% 16.28% 18.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $36,412 $65,387 $77,017 $57,198 $49,408
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser 1.57% 1.43% 1.58% 1.69% 1.57%
After reimbursement of expenses by Adviser 1.38% 1.38% 1.38% 1.38% 1.41%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser (0.44)% (0.18)% (0.25)% (0.16)% 0.14%
After reimbursement of expenses by Adviser (0.26)% (0.13)% (0.05)% 0.15% 0.29%
Portfolio turnover 121.21% 52.23% 41.16% 58.01% 46.51%
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
ROULSTON GROWTH AND INCOME FUND
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.89 $17.87 $14.22 $12.29 $10.68
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.01 0.01 0.05 0.13 0.15
Net realized and unrealized gain (loss) on investments (0.08) (0.15) 4.83 2.04 1.68
------ ------ ---- ---- ----
Total from investment operations (0.07) (0.14) 4.88 2.17 1.83
------ ------ ---- ---- ----
LESS DISTRIBUTIONS:
From net investment income (0.01) 0.00 (0.09) (0.14) (0.12)
From realized capital gains (0.93) (1.84) (1.14) (0.10) (0.10)
------ ------ ------ ------ ------
Total distributions (0.94) (1.84) (1.23) (0.24) (0.22)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.88 $15.89 $17.87 $14.22 $12.29
====== ====== ====== ====== ======
TOTAL RETURN (1.07)% (1.20)% 36.61% 17.77% 17.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $29,870 $33,047 $30,841 $23,071 $23,082
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser 1.61% 1.53% 1.76% 1.83% 1.79%
After reimbursement of expenses by Adviser 1.48% 1.49% 1.50% 1.50% 1.50%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser (0.29)% (0.02)% 0.03% 0.58% 0.98%
After reimbursement of expenses by Adviser 0.04% 0.02% 0.29% 0.91% 1.26%
Portfolio turnover 126.99% 40.43% 42.45% 34.02% 13.36%
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
ROULSTON GOVERNMENT SECURITIES FUND
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.43 $9.90 $9.75 $9.84 $9.03
------ ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.47 0.49 0.49 0.49 0.49
Net realized and unrealized gain (loss) on investments (0.69) 0.53 0.15 (0.05) 0.81
------ ---- ---- ------ ----
Total from investment operations (0.22) 1.02 0.64 0.44 1.30
------ ---- ---- ---- ----
LESS DISTRIBUTIONS:
From net investment income (0.47) (0.49) (0.49) (0.53) (0.49)
From realized capital gains 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
Total distributions (0.47) (0.49) (0.49) (0.53) (0.49)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.74 $10.43 $9.90 $9.75 $9.84
===== ====== ===== ===== =====
TOTAL RETURN (2.09)% 10.61% 6.76% 4.58% 14.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $12,738 $5,057 $4,411 $5,752 $8,647
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser 2.34% 2.19% 2.70% 2.05% 2.16%
After reimbursement of expenses by Adviser 0.90% 0.90% 0.90% 0.90% 0.90%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS:
Before reimbursement of expenses by Adviser 3.38% 3.60% 3.23% 3.78% 3.89%
After reimbursement of expenses by Adviser 4.81% 4.89% 5.03% 4.93% 5.16%
Portfolio turnover 837.17% 89.89% 21.01% 21.23% 1.28%
</TABLE>
27
<PAGE> 30
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS & DISTRIBUTIONS
Dividends and distributions from the Fund(s) will be automatically used to
purchase additional shares of that Fund unless you have elected to receive
dividends and distributions in cash. If you participate in the systematic
withdrawal plan or any retirement plan, you must have your distributions
reinvested.
The Funds distribute substantially all of their net investment income in the
form of dividends and capital gains in the form of distributions. The Growth
Fund, the Growth and Income Fund, the Emerging Growth Fund and the International
Equity Fund generally pay dividends semi-annually. The Government Securities
Fund declares dividends daily and distributes them on a monthly basis. Any
capital gains realized by a Fund will be distributed at least annually.
TAX CONSEQUENCES
A Fund pays no federal income tax on earnings distributed to shareholders so
long as it meets the requirements for being a tax-qualified regulated investment
company, which each of the Funds has done in the past and intends to do in the
future. Any dividend or distribution you receive, whether in cash or reinvested,
is considered taxable income to you. Dividends of net investment income are
taxable to you as ordinary income. Capital gains distributions are taxed based
on how long the Fund held the assets that generated such gains. Net short term
capital gains are generally taxable to shareholders as ordinary income.
Distributions of net long term capital gains are taxable as long term capital
gains. Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made to them during the year. You are urged to
consult your tax advisor concerning the application of federal, state and local
taxes to your particular 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 IRAs or Retirement Accounts)
28
<PAGE> 31
<TABLE>
<CAPTION>
TAX FORM WHAT IS IT? WHEN IS IT?
MAILED?
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Year End Summary Statement Sent to shareholders detailing the activity in an January
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 which made January
distributions of dividends or capital gains during
the year.
- -------------------------------------------------------------------------------------------------------------------------------
1099 - B Sent to shareholders that have redeemed any shares January
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>
Roulston Emerging Growth Fund End of June Mid December
Semi-Annual Distributions
End of December
- -------------------------------------------------------------------------------------------------------------------------------
Roulston International Equity Fund End of June Mid December
Semi-Annual Distributions
End of December
- -------------------------------------------------------------------------------------------------------------------------------
Roulston Growth Fund End of June Mid December
SEMI-ANNUAL DISTRIBUTIONS
End of December
- -------------------------------------------------------------------------------------------------------------------------------
Roulston Growth and Income Fund End of June Mid December
SEMI-ANNUAL DISTRIBUTIONS
End of December
- -------------------------------------------------------------------------------------------------------------------------------
Roulston Government Securities Fund End of the Month Mid December
MONTHLY DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*There are no guarantees that either dividends or distributions will be declared
and the schedule is subject to change.
29
<PAGE> 32
Additional information about each Fund's investments is available in the Funds'
annual and semi-annual reports to shareholders. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during the last fiscal year.
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:
[lighthouse picture]
ROULSTON FUNDS
3636 Euclid Avenue, Suite 300
Cleveland, OH 44115
(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.roulstonfunds.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 an electronic request, along with a duplicating fee to
[email protected] or by writing the SEC's Public Reference Section, Washington
D.C. 20549-6009. (For information on the Public Reference Room, telephone
1-202-942-8090).
The Trust's SEC File No. is 811-8774.
30
<PAGE> 33
BACK COVER
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ADVISER:
Roulston & Company, Inc.
3636 Euclid Avenue, Suite 3000 ________________________
Cleveland, Ohio 44115
DISTRIBUTOR: The information provided on this cover page may be used in
Roulston Research Corp. conjunction with the offering of shares of any Roulston Funds
3636 Euclid Avenue, Suite 3000 only if accompanied or preceded by a current prospectus.
Cleveland, Ohio 44115
An investment in a mutual fund involves certain investment
ADMINISTRATOR & TRANSFER AGENT: risks, including the possible loss of principal.
PFPC Inc.
3200 Horizon Drive (C)2000 Roulston Research Corp.
King of Prussia, Pennsylvania 19406
LEGAL COUNSEL:
Baker & Hostetler LLP
65 E. State Street
Columbus, Ohio 43215
INDEPENDENT PUBLIC ACCOUNTANTS:
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, Ohio 44145
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOR INFORMATION, CALL 1-800-332-6459
OR VISIT US ONLINE AT www.roulstonfunds.com
Not a part of the prospectus
31
<PAGE> 34
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
ROULSTON EMERGING GROWTH FUND
ROULSTON INTERNATIONAL EQUITY FUND
ROULSTON GROWTH FUND
ROULSTON GROWTH AND INCOME FUND
ROULSTON GOVERNMENT SECURITIES FUND
Five Funds of
ROULSTON FUNDS
Investment Adviser:
ROULSTON & COMPANY, INC.
This Statement of Additional Information is not a prospectus and
relates to ROULSTON EMERGING GROWTH FUND (the "EMERGING GROWTH FUND"), ROULSTON
INTERNATIONAL EQUITY FUND (the "INTERNATIONAL EQUITY FUND"), ROULSTON GROWTH
FUND (the "GROWTH FUND"), ROULSTON GROWTH AND INCOME FUND (the "GROWTH AND
INCOME FUND"), and ROULSTON GOVERNMENT SECURITIES FUND (the "GOVERNMENT
SECURITIES FUND"), five separate series of Roulston Funds (the "Trust"). The
EMERGING GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH FUND, GROWTH AND INCOME
FUND, and GOVERNMENT SECURITIES FUND, are sometimes referred to individually as
a "Fund" and collectively as the "Funds".
This Statement of Additional Information is intended to provide
additional information regarding the activities and operations of the Funds and
the Trust and should be read in conjunction with the Funds' Prospectus dated
March 1, 2000. The Prospectus may be obtained without charge through the Funds'
Distributor, Roulston Research Corp., 3636 Euclid Avenue, Suite 3000, Cleveland,
Ohio 44115 (the "Distributor") by calling 1-800-332-6459.
The Funds' most recent Annual Report to Shareholders is a separate
document that is incorporated by reference into this Statement of Additional
Information. The Funds' Annual and Semi-Annual Reports to Shareholders are also
available without charge by calling the Distributor at 1-800-332-6459.
MARCH 1, 2000
<PAGE> 35
TABLE OF CONTENTS
-----------------
STATEMENT OF ADDITIONAL INFORMATION.....................................
THE TRUST...............................................................
INFORMATION ON PERMITTED INVESTMENTS AND RELATED RISK FACTORS...........
INVESTMENT LIMITATIONS OF THE FUNDS.....................................
MANAGEMENT OF THE TRUST.................................................
PRINCIPAL HOLDERS OF SECURITIES.........................................
INVESTMENT ADVISORY AND OTHER SERVICES..................................
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS........................
NET ASSET VALUE.........................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..........................
TAXES...................................................................
PERFORMANCE INFORMATION.................................................
SHARES OF BENEFICIAL INTEREST...........................................
FINANCIAL STATEMENTS....................................................
2
<PAGE> 36
THE TRUST
---------
ROULSTON 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." As of July 1, 1999, the
Trust changed its name to "Roulston 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).
On April 28, 1995, pursuant to an Agreement and Plan of Reorganization
and Liquidation with The Advisors' Inner Circle Fund, a Massachusetts business
trust ("Advisors"), the GROWTH FUND, the GROWTH AND INCOME FUND and the
GOVERNMENT SECURITIES FUND of the Trust acquired all of the assets of each of
the Roulston Midwest Growth Fund, the Roulston Growth and Income Fund, and the
Roulston Government Securities Fund of Advisors (collectively, the "Acquired
Funds"), respectively, in exchange for the assumption of such Acquired Fund's
liabilities and a number of full and fractional shares of the corresponding Fund
of the Trust having an aggregate net asset value equal to such Acquired Fund's
net assets (the "Reorganization"). The performance and financial information
included in this Statement of Additional Information relates to both the
operations of the Acquired Funds prior to the Reorganization and to the Funds of
the Trust since the Reorganization. For accounting and advertising information
purposes, the Acquired Funds were considered to the survivors of the
Reorganization.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in shares of a Fund should be made without first reading the
Prospectus.
INFORMATION ON PERMITTED INVESTMENTS
------------------------------------
AND RELATED RISK FACTORS
------------------------
AMERICAN DEPOSITORY RECEIPTS ("ADRS)"
ADRs are typically issued by a U.S. financial institution and are
evidence ownership of underlying securities issued by a foreign issuer.
Sponsored ADRs are a joint arrangement between the foreign issuer and the U.S.
financial institution acting depository and tend to be more liquid than
unsponsored ADRs. Also, generally more information is available about the
underlying issuer to holders of sponsored ADRs than for unsponsored ADRs. Each
Fund, other than the Government Securities Fund, may invest in sponsored or
unsponsored ADRs.
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.
3
<PAGE> 37
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.
CONVERTIBLE SECURITIES
Convertible securities are securities such as rights, bonds, notes and
preferred stocks which are convertible into or exchangeable for common stocks.
Convertible securities have characteristics similar to both fixed income and
equity securities. Because of the conversion feature, the market value of
convertible securities tends to move together with the market value of the
underlying common stock. As a result, a Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer, and any call provisions. Both the GROWTH FUND and the GROWTH AND
INCOME FUND may invest in convertible securities.
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, including U.S. Treasury inflation index-linked securities 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 Student Loan Marketing Association ("SLMA"), and the
Federal Home Loan Mortgage Corporation ("FHLMC"). 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;
4
<PAGE> 38
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. The GOVERNMENT
SECURITIES FUND invests primarily in U.S. Government securities. Each of the
other 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 & Company 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.
CORPORATE DEBT SECURITIES
The GOVERNMENT SECURITIES FUND'S investments in these securities are
limited to corporate obligations of domestic issuers. Generally, the GOVERNMENT
SECURITIES FUND will only invest in corporate obligations rated within the four
highest rating categories by a nationally recognized rating agency such as
Standard & Poor's Rating Group or Moody's Investor Services ("rating agency").
However, the Fund may also invest up to 5% of its total assets in corporate
obligations rated "B" or "BB" by such rating agencies. For a description of such
rating categories, see the Appendix to this Statement of Additional Information.
Securities which are rated in the fourth highest rating category by a
rating agency (e.g., BBB or Baa) are considered to be "medium grade" securities.
Medium grade securities, although deemed to be investment grade, have
speculative characteristics and may be subject to greater fluctuations in value
than higher-rated securities. In addition, the issuers of medium grade
securities may be more vulnerable to adverse economic conditions or changing
circumstances than issuers of higher-rated securities.
Securities that rated "BB" or "B" are commonly known as "high yield" or
"junk" bonds. Such securities will usually have higher yields than higher rated
securities. However, there is more risk associated with these investments. This
is because of reduced creditworthiness and increased risk of default. Under
rating agency guidelines, such lower rated securities will likely have some
quality and protective characteristics that are outweighed by large
uncertainties or major risk exposures to adverse conditions. Lower rated
securities are considered to have extremely poor prospects of ever attaining any
real investment standing, to have a current identifiable vulnerability to
default, and to be unlikely to have the capacity to make required interest
payments and repay principal when due in the event of adverse business,
financial or economic conditions. The foregoing factors may, under certain
circumstances, reduce the value of securities held by the Fund and thus affect
the value of the Fund's shares.
5
<PAGE> 39
After purchase by the GOVERNMENT SECURITIES FUND, a security may cease
to be rated or its rating may be reduced below the minimum required for
investment by the Fund. Neither event will require a sale of such security by
the Fund. However, the portfolio manager will consider such event in his
determination of whether the Fund should continue to hold the security. To the
extent the ratings given by a rating agency may change as a result of changes in
such organization's rating systems, the Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in the Prospectus and in this Statement of Additional Information.
MORTGAGE-BACKED SECURITIES
The GOVERNMENT SECURITIES FUND is permitted to invest in
mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or by non-governmental entities which are rated,
at the time of purchase, within the four highest rating categories by one or
more rating agency. Due to scheduled and unscheduled principal payments on the
underlying obligations, such securities have a shorter average maturity and,
therefore, less principal volatility than a bond with a comparable maturity.
Since prepayment rates vary widely, it is not possible to accurately predict the
average maturity of a particular pool of mortgages. The scheduled monthly
interest and principal payments relating to mortgages in the pool will be
"passed through" to investors. Such mortgage-backed securities differ from
conventional bonds in that principal is paid back to the certificate holders
over the life of the loan rather than at maturity. As a result, there will be
monthly scheduled payments of principal and interest. In addition, there may be
unscheduled principal payments representing prepayments on the underlying
mortgages. Early repayment of principal on mortgage pass-through securities
arising from prepayments of principal on the underlying obligations (due to
sale, refinancing, or foreclosure of the underlying property, net of fees and
costs which may be incurred) may expose the Fund to a lower rate of return upon
reinvestment of such principal. Also, if a mortgage-related security subject to
prepayment has been purchased at a premium (i.e., a price in excess of the
principal amount) in the event of accelerated prepayments, the Fund may risk
loss of principal because the premium may not have been fully amortized at the
time the security was paid. The opposite is true for mortgage-backed securities
purchased at a discount. Like other fixed-income securities, when interest rates
rise, the value of mortgage-backed securities generally will decline; however,
when interest rates decline, the value of mortgage-backed securities with
prepayment features may not increase as much as other fixed-income securities.
Prepayment rates will be used to determine a mortgage-backed security's
estimated average life and the GOVERNMENT SECURITY FUND'S dollar-weighted
average portfolio maturity.
1. GOVERNMENT ISSUED MORTGAGE-RELATED SECURITIES
Securities issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities are considered to be "mortgage-related securities"
because they represent ownership in a pool of federally insured mortgage loans
with maturities of up to 30 years. Although mortgage-related securities may
offer yields higher than those available from other types of U.S. Government
securities, such securities may be less effective than other types of securities
as a means of "locking in" attractive long-term rates because of the prepayment
feature.
2. PRIVATE ISSUED MORTGAGE-RELATED SECURITIES
Mortgage pass-through securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary
6
<PAGE> 40
market issuers) may be supported by various forms of insurance or guarantees
issued by governmental entities as well as private entities.
3. COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs")
CMOs are debt obligations collateralized by residential or commercial
mortgage loans or residential or commercial mortgage pass-through securities.
Interest and prepaid principal are generally paid monthly. CMOs may be
collateralized by whole mortgage loans or private mortgage pass-through
securities but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC or FNMA. The issuer of a
series of CMOs may elect to be treated for tax purposes as a Real Estate
Mortgage Investment Conduit ("REMIC"). All future references to CMOs shall also
be deemed to include REMICs.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Monthly payment of principal received from the pool of
underlying mortgages, including prepayments, is first returned to investors
holding the shortest maturity class. Investors holding the longer maturity
classes usually receive principal only after shorter maturity classes have been
retired. An investor may be partially protected against a sooner than desired
return of principal because of the sequential payments.
Certain issuers of CMOs are not considered investment companies
pursuant to a rule adopted by the Securities and Exchange Commission ("SEC"),
and the Fund may invest in the securities of such issuers without the
limitations imposed by the Investment Company Act of 1940 (the "1940 Act") on
investments by the Fund in other investment companies. In addition, in reliance
on an earlier SEC interpretation, the Fund's investments in certain other
qualifying CMOs, which cannot or do not rely on the rule, are also not subject
to the limitation of the 1940 Act on acquiring interests in other investment
companies. In order to be able to rely on the SEC's interpretation, issuers of
these CMOs must be unmanaged, fixed asset issuers that (a) invest primarily in
mortgage-backed securities, (b) do not issue redeemable securities, (c) operate
under general exemptive orders exempting them from all provisions of the 1940
Act, and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that the Fund selects CMOs that cannot rely on the rule
or do not meet the above requirements, the Fund's investments in such securities
will be subject to the limitations described below with respect to its
investments in other investment companies.
4. ADJUSTABLE RATE MORTGAGE SECURITIES
Adjustable rate mortgage securities ("ARMs") are pass-through
securities collateralized by mortgages with adjustable, rather than fixed rates
of interest. ARMs eligible for inclusion in a mortgage pool generally provide
for a fixed initial mortgage interest rate for either the first three, six,
twelve, thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes to a
designated benchmark index.
The ARMs generally contain maximum and minimum rates beyond which the
mortgage interest rate may not vary over the lifetime of the mortgage. In
addition, certain ARMs provide for additional limitations on the maximum amount
by which the mortgage interest may be adjusted for any single adjustment period.
In the event that market rates of interest rise to levels above that of the
ARM's maximum rate, the ARM's coupon may represent a below market rate of
interest. In these circumstances, the market value of the ARM security will
likely fall.
7
<PAGE> 41
Some ARMs contain limitations on changes in the required monthly
payment. In the event that a monthly payment is not sufficient to pay the
interest accruing on an ARM, any such excess interest is added to the principal
balance of the mortgage loan, which is repaid through future monthly payments.
If the monthly payment for such an instrument exceeds the sum of the interest
accrued at the applicable mortgage interest rate and the principal payment
required at such point to amortize the outstanding principal balance over the
remaining term of the loan, the excess is then utilized to reduce the
outstanding principal balance of the ARM.
ASSET-BACKED SECURITIES
The GOVERNMENT SECURITIES FUND is permitted to invest in asset-backed
securities. Asset-backed securities have structural characteristics similar to
mortgage-backed securities and a similar risk of prepayment. However,
asset-backed securities involve certain risks that are not posed by
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest in
the related collateral. The underlying assets include assets such as motor
vehicle installment sales contracts, other installment loan contracts and
receivables from credit card and other revolving credit arrangements. For
example, credit card receivables generally are unsecured and the debtors are
entitled to the protection of a number of state and Federal consumer credit
laws, some of which may reduce the ability of the Fund, as an investor, to
obtain full payment in the event of default or insolvency. In the case of
automobile receivables, due to various legal and economic factors, proceeds from
repossessed collateral may not always be sufficient to support payments on these
securities. The risks associated with asset-backed securities are often reduced
by the addition of credit enhancements such as a letter of credit from a bank,
excess collateral or a third-party guarantee. With respect to an asset-backed
security arising from secured debt (such as automobile receivables), there is a
risk that parties other than the originator and servicer of the loan may acquire
a security interest superior to that of the security's holders.
TEMPORARY DEFENSIVE POSITIONS
When any of the Funds takes a temporary defensive position, it may
invest up to 100% of its assets as cash or money market instruments, including
bankers' acceptances, certificates of deposit, high quality commercial paper,
short-term U.S. Government securities, money market mutual funds and repurchase
agreements.
VARIABLE AMOUNT MASTER DEMAND NOTES
Variable amount master demand notes, in which the Funds may invest, are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time within 30 days. While such notes are not typically
rated by credit rating agencies, issuers of variable amount master demand notes
(which are normally manufacturing, retail, financial and other business
concerns), must be considered to be of comparable quality to the issuers of
commercial paper that could be purchased for such Fund. Roulston & Company will
consider the earning power, cash flow, and other liquidity ratios of the issuers
of such notes and will continuously monitor their financial status and ability
to meet payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the longer of the period of time remaining until the next interest rate
adjustment or the period of time remaining until the principal amount can be
recovered from the issuer through demand. In
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the event that the period of time remaining until the principal amount can be
recovered under a variable master demand note exceeds seven days, a Fund will
treat such note as illiquid for purposes of its limitations on investments in
illiquid securities.
VARIABLE AND FLOATING RATE SECURITIES
Each Fund may acquire variable and floating rate securities, subject to
such Fund's investment objectives, policies and restrictions. A variable rate
security is one whose terms provide for the adjustment of its interest rate on
set dates and which, upon such adjustment, can reasonably be expected to have a
market value that approximates its par value. A floating rate security is one
whose terms provide for the adjustment of its interest rate whenever a specified
interest rate changes and which, at any time, can reasonably be expected to have
a market value that approximates its par value. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period. The
Funds intend to invest in variable and floating rate securities whose market
value upon reset of the interest rate will approximate par value because their
interest rates will be tied to short-term rates. However, there is a risk that
the current interest rate on such obligations may not accurately reflect
existing market rates, and therefore that upon such interest rate reset, the
instrument may decline in value.
Such securities frequently are not rated by credit rating agencies;
however, unrated variable and floating rate securities purchased by a Fund must
be determined by Roulston & Company to be of comparable quality at the time of
purchase to rated instruments eligible for purchase under that Fund's investment
policies. In making such determinations, Roulston & Company will consider the
earning power, cash flow and other liquidity ratios of the issuers of such notes
(such issuers include governmental agencies, and financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate security purchased by a Fund, the Fund may
resell the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for the Fund to dispose of a variable
or floating rate security in the event the issuer of the note defaulted on its
payment obligations and the Fund could, as a result or for other reasons, suffer
a loss to the extent of the default. To the extent that a Fund is not entitled
to receive the principal amount of a note within seven days and there is no
established market for such security, such a security will be treated as an
illiquid security for purposes of calculation of the 15% limitation on such
Fund's investment in illiquid securities.
INITIAL PUBLIC OFFERINGS
The EMERGING GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH FUND, and
GROWTH AND INCOME FUND, may each invest from time to time, and the EMERGING
GROWTH FUND invests a substantial portion of its total assets, in the securities
of selected new issuers, or initial public offerings (IPOs). The Funds will only
invest in securities which Roulston & Company 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
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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
Section 4(2) securities are issued by corporations without registration
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance on an
exemption from registration which is afforded by Section 4(2) of the 1933 Act.
Section 4(2) securities are 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, Roulston &
Company 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 & Company 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. Each Fund may each invest in restricted, or
Section 4(2), 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 & Company deems creditworthy, 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% of the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, the Fund would suffer a loss to
the extent that the proceeds from a sale of the underlying portfolio securities
were less than the repurchase price under the agreement, or to the extent that
the disposition of such securities by the Fund were delayed pending court
action. Additionally, there is no controlling legal precedent confirming that
the Fund would be entitled, as against a claim by such seller or its receiver or
trustee in bankruptcy, to retain the underlying securities, although the Board
of Trustees 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
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Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
FOREIGN INVESTMENT
Investment in foreign securities, including ADRs, is subject to special
investment risks that differ in some respects from those related to investments
in securities of U.S. domestic issuers. Since investments in the securities of
foreign issuers may involve currencies of foreign countries, a Fund may be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations and may incur costs in connection with conversions between
various currencies.
Since foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a U.S. company. Securities of
many foreign companies are less liquid and more volatile than securities of
comparable U.S. companies.
In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect a Fund's investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
The GOVERNMENT SECURITIES FUND may invest in U.S. dollar denominated
securities issued or guaranteed by supranational entities, foreign governments,
their political subdivisions, agencies or instrumentalities.
A Fund will acquire such securities only when Roulston & Company
believes the risks associated with such investments are minimal.
OPTIONS TRADING
Each Fund may purchase put and call options for various securities and
securities indices that are traded on national securities exchanges, from time
to time, as Roulston & Company deems appropriate. Each of the Funds may also
engage in writing (i.e., selling) put and call options from time to time as
Roulston & Company deems appropriate. A Fund will write only call options that
are covered (options on securities owned by that Fund). A call option gives the
purchaser of the option the right to buy, and the writer has the obligation to
sell, the underlying security at the stated exercise price at any time prior to
the expiration of the option, regardless of the market price of the security. A
put option gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying security at the stated exercise price at any time prior
to the expiration date of the option, regardless of the market price of the
security. The premium paid to the writer is consideration for undertaking the
obligations under the option contract. Put and call options purchased by the
Funds will be valued at the last sale price, or in the absence of such a price,
at the mean between bid and asked price.
Each of the EMERGING GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH
FUND, and the GROWTH AND INCOME FUND may purchase and sell options on stocks and
stock indices, while the GOVERNMENT SECURITIES FUND may purchase and sell
options on fixed income securities and fixed income securities
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indices. OPTIONS WILL BE USED ONLY FOR HEDGING PURPOSES AND WILL NOT BE ENGAGED
IN FOR SPECULATIVE PURPOSES.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by a Fund is included in the liability
section of a Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the average of the
closing bid and asked prices. If an option expires on the stipulated expiration
date or if a Fund enters into a closing purchase transaction, it will realize a
gain (or a loss if the cost of a closing purchase transaction exceeds the net
premium received when the option is sold) and the deferred credit related to
such option will be eliminated. If a call option is exercised, a Fund may
deliver the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received
and a Fund will realize a gain or loss. In addition, when a Fund writes a
covered call option and such option is exercised, that Fund will forego the
appreciation, if any, on the underlying security in excess of the exercise
price. If a put option is exercised, the Fund will be obligated to purchase the
security.
In order to close out an option it has written, a Fund will enter into
a "closing purchase transaction" -- the purchase of an option on the same
security with the same exercise price and expiration date as the option which
that Fund previously wrote on any particular securities. When a portfolio
security subject to a call option is sold, the Fund which wrote the call will
effect a closing purchase transaction to close out any existing call option on
that security. There is no assurance of liquidity in the secondary market for
purposes of closing out options positions. If that Fund is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
security until the option expires or such Fund delivers the underlying security
upon exercise. When a Fund writes a put option, it will set aside cash and/or
appropriate liquid assets in a segregated custodial account as required to do so
by SEC rules.
Each Fund may purchase or write both OTC (over-the-counter) options and
options traded on U.S. Exchanges. Exchange-traded options are issued by a
clearing organization affiliated with the exchange on which the option is listed
that, in effect, guarantees completion of every exchange-traded option
transaction. OTC options are contracts between the Fund and the counterparty
(usually a securities dealer or a bank) with no clearing organization guarantee.
Thus, when the Fund purchases or writes an OTC option, it relies on the
counterparty to make or take delivery of the underlying investment upon exercise
of the option. Failure by the counterparty to do so would result in the loss of
any premium paid by the Fund as well as the loss of any expected benefit of the
transaction. Although a Fund will enter into OTC options only with
counterparties that are expected to be capable of entering into closing
transactions with such Fund, there is no assurance that such Fund will in fact
be able to close out an OTC option at a favorable price prior to expiration. In
the event of insolvency of the counterparty, a Fund might be unable to close out
an OTC option position prior to its expiration. All or a portion of any assets
used as cover for OTC options written by a Fund would be considered "illiquid"
for purposes of that Fund's limitation on investments in illiquid securities,
which is described below under "Non-fundamental Restrictions."
Although a Fund will engage in option transactions only as hedging
transactions and not for speculative purposes, there are risks associated with
such investment including the following: (i) the success of a hedging strategy
may depend on the ability of Roulston & Company to predict movements in the
prices of the individual securities, fluctuations in markets and movements in
interest rates; (ii) there may be an
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imperfect correlation between the changes in market value of the securities held
by a Fund and the prices of options; (iii) there may not be a liquid secondary
market for options; and (iv) while a Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market value
of the underlying security.
The Funds may also purchase or sell index options. Index options (or
options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
FUTURES TRADING
Each Fund may attempt to reduce the risk of investment in securities by
hedging a portion of its portfolio through the use of certain futures
transactions. In attempting to hedge, each Fund may purchase or sell contracts
for the future delivery of the specific financial instruments or securities in
which that Fund may invest, and contracts relating to indices based upon the
types of securities in which that Fund may invest, and engage in related closing
transactions. The Funds will use these instruments primarily as a hedge against
changes resulting from market conditions in the values of securities held in its
portfolio or which it intends to purchase. The Funds may also use future
contracts to obtain exposure to such securities in lieu of owning such
securities directly.
When a futures contract is executed, each party deposits with a broker
or in a segregated custodial account up to 5% or more of the contract amount,
called the "initial margin," and during the term of the contract, the amount of
the deposit is adjusted based on the current value of the futures contract by
payments of variation margin to or from the broker or segregated account.
During a market decline or when Roulston & Company anticipates a
decline, each Fund may hedge a portion of its portfolio by selling futures
contracts in order to limit exposure to the decline. This provides an
alternative to liquidation of securities positions and the corresponding costs
of such liquidation. Conversely, during a market advance or when Roulston &
Company anticipates an advance, each Fund may hedge a portion of its portfolio
by purchasing futures. This affords a hedge against a Fund's not participating
in a market advance at a time when it is not fully invested and serves as a
temporary substitute for the purchase of individual securities which may later
be purchased in a more advantageous manner.
These Funds are permitted to engage in bona fide hedging transactions
(as defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures which are not for bona
fide hedging purposes may be used provided the total amount of the initial
margin and any option premiums attributable to such positions does not exceed 5%
of a Funds' liquidation value after taking into account unrealized profits and
unrealized losses, and excluding any in-the-money option premiums paid. A Fund
will not market, and are not marketing, themselves as a commodity pool or
otherwise as a vehicle for trading in futures and related options. Each Fund
will segregate liquid assets such as cash, U.S. Government securities or other
liquid securities to cover its positions in futures.
There are several risks associated with the use of futures contracts as
hedging techniques. A purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in a
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Fund's securities being hedged. In addition, there are significant differences
between the securities and futures markets that could result in an imperfect
correlation between the markets, causing a given hedge not to achieve its
objectives. The degree of imperfection of correlation depends on circumstances
such as variations in speculative market demand for futures, including technical
influences in futures trading, and differences between the financial instruments
being hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities. and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out a futures contract, and that Fund would remain
obligated to meet margin requirements until the position is closed. In addition,
many of the contracts discussed above are relatively new instruments without a
significant trading history. As a result, there can be no assurance that an
active secondary market will develop or continue to exist.
WARRANTS
These instruments give holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period. The EMERGING
GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH FUND, and GROWTH AND INCOME FUND
are permitted to invest in warrants.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The GROWTH FUND, GROWTH AND INCOME FUND, and GOVERNMENT SECURITIES FUND
may purchase securities on a "when-issued" or "delayed-delivery" basis (i.e.,
for delivery beyond the normal settlement date at a stated price and yield).
These transactions involve the purchase of securities subject to settlement and
delivery beyond the normal settlement date. The price and yield on these
securities is fixed as of the purchase date, and no interest accrues to a Fund
before settlement. These securities are therefore subject to market rise due to
changes in interest rates, and/or market prices, and, although the purchase of
securities on a when-issued basis is not considered leveraging, it has the
effect of leveraging a Fund's assets.
When a Fund agrees to purchase securities on a "when-issued" or
"delayed-delivery" basis, the Fund's custodian will set aside in a separate
account cash or liquid securities equal to the amount of the Fund's commitment.
Normally, the custodian will set aside portfolio securities to satisfy the
purchase commitment, and in such a case, a Fund may be required subsequently to
place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of such Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. In addition, because a Fund will
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set aside cash or liquid securities to satisfy its purchase commitments in the
manner described above, such Fund's liquidity and the ability of Roulston &
Company to manage it might be affected in the event its commitments to purchase
"when-issued" or "delayed-delivery" securities ever exceeded 25% of the value of
its assets. Under normal market conditions, however, a Fund's commitments to
purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of
the value of its assets.
The purchase of securities on a when-issued or delayed-delivery basis
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date or if the seller fails to complete the transaction
and a Fund, as a result, misses a price or yield considered to be advantageous.
A Fund will engage in "when-issued" or "delayed-delivery" transactions only for
the purpose of acquiring portfolio securities consistent with such Fund's
investment objectives and policies and not for investment leverage.
INVESTMENT COMPANY SHARES
Each Fund may invest up to 10% of the value of its total assets in
securities of other investment companies, including securities of money market
mutual funds. Each Fund intends to invest in money market mutual funds for
purposes of short-term cash management. The Funds intend to invest in the
securities of other investment companies to the extent that Roulston & Company
believes that such investment will assist that Fund in meeting its investment
objective. 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, a Fund owns more than 3% of the total voting
stock of the acquired investment company; more than 5% of a Fund's total assets
are invested in securities issued by any one investment company; or more than
10% of the total assets of a Fund in the aggregate are invested in securities of
investment companies as a group.
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 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
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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 & Company'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.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of that Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose remaining maturities at the time of acquisition were one
year or less.
The portfolio turnover rates for the fiscal years ended October 31,
1999 and 1998 for the GROWTH FUND were 121.21% and 52.23%, respectively; for the
GROWTH AND INCOME FUND were 126.99% and 40.43%, respectively; and for the
GOVERNMENT SECURITIES FUND were 837.17% and 89.89%, respectively. The portfolio
turnover rates for EMERGING GROWTH FUND and INTERNATIONAL EQUITY FUND for the
period July 1, 1999 (commencement of operations) through October 31, 1999 were
79.91% and 51.26%, respectively.
ROULSTON GOVERNMENT SECURITIES FUND has recently experienced a
significant increase in portfolio turnover rate due to the new portfolio
manager's restructuring of the portfolio in response to changes in interest
rates and his more active management style and partially due to the size and
small holdings in the Fund. Although the Fund's annual portfolio turnover rate
cannot be accurately predicted, it is estimated this rate will not exceed 300%
for the current fiscal year.
High rates of portfolio turnover (100% or more) entail certain costs,
including increased taxable income for the Fund's shareholders and higher
overall transaction costs. Roulston & Company takes these costs into account,
since they affect the Fund's overall investment performance and reduce
shareholders' return. 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.
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INVESTMENT LIMITATIONS OF THE FUNDS
-----------------------------------
The investment objective or objectives of the GROWTH FUND, GROWTH AND
INCOME FUND and GOVERNMENT SECURITIES FUND are fundamental policies of those
Funds. The investment objective of the EMERGING GROWTH FUND and INTERNATIONAL
EQUITY FUND are not fundamental, meaning that they may be amended by the Board
of Trustees without shareholder approval.
The investment limitations described immediately below are fundamental
policies of the Funds. Fundamental objectives and policies cannot be changed
with respect to a Fund without the "vote of a majority of the outstanding
shares" of that Fund as that term is defined below under "SHARES OF BENEFICIAL
INTEREST -- Voting Rights."
No Fund may:
1. Purchase securities of any one issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements involving such securities) if as a result
more than 5% of the value of the total assets of the Fund would be
invested in the securities of such issuer or the Fund would hold more
than 10% of the outstanding voting securities of such issuer. This
restriction applies to 75% of a Fund's total assets.
2. Purchase any securities which would cause 25% or more of the total
assets of a Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry; provided that this limitation does not apply to investments
in obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities and repurchase agreements involving such
securities. For purposes of this limitation, (i) utility companies will
be divided according to their services; for example, gas distribution,
gas transmission, electric and telephone will each be considered a
separate industry, and (ii) financial service companies will be
classified according to the end users of their services; for example,
automobile finance, bank finance and diversified finance will each be
considered a separate industry.
3. Borrow money or issue senior securities, except that a Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts not exceeding 10% of the value of its total assets
and except as permitted by rule, regulation or order of the SEC. A Fund
will not purchase securities while its borrowings (including reverse
repurchase agreements) exceed 5% of its total assets.
3. Make loans, except that a Fund may purchase or hold debt instruments
and make time deposits with financial institutions in accordance with
its investment objectives and policies, and a Fund may enter into
repurchase agreements and engage in securities lending.
4. 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);
17
<PAGE> 51
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 Board of Trustees without shareholder
approval. A Fund may not:
1. Purchase or otherwise acquire any securities, if as a result, more than
15% of that Fund's net assets would be invested in securities that are
illiquid;
2. Engage in any short sales;
3. Pledge, mortgage or hypothecate assets in excess of one third of the
Fund's total assets;
4. Purchase securities of other investment companies except (a) in
connection with a merger, consolidation, acquisition or reorganization,
and (b) to the extent permitted by the 1940 Act and the rules and
regulations thereunder or pursuant to any exemptions therefrom;
If any percentage restriction or requirement described above is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction or requirement. However, should a change in net
asset value or other external events cause a Fund's investments in illiquid
securities, including repurchase agreements with maturities in excess of seven
days, to exceed the limit set forth above for such Fund's investment in illiquid
securities, a 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 a Fund would suffer a loss on the sale of such securities.
None of the Funds currently intends to enter into reverse repurchase
agreements during the current fiscal year.
MANAGEMENT OF THE TRUST
-----------------------
TRUSTEES AND OFFICERS OF THE TRUST
Overall responsibility for the management of the Trust and the Funds is
vested in the Board of Trustees, 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
Board of 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
18
<PAGE> 52
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 Board of 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 & Company 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 &
3636 Euclid Avenue Company, Inc. and Roulston Research
Suite 3000 Corp. since 1990.
Cleveland, Ohio 44115
Age: 42
- -------------------------------------------------------------------------------------------------------
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
Age: 53 facilities consulting).
- -------------------------------------------------------------------------------------------------------
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,
Age: 47 Inc. (management consulting firm)
since December, 1994.
- -------------------------------------------------------------------------------------------------------
Charles A. Kiraly Secretary Since May, 1997, Manager of Mutual
3636 Euclid Avenue Fund Administration and an employee of
Suite 3000 Roulston & Company, Inc. since April,
Cleveland, Ohio 44115 1996; prior thereto, Senior Dealer
Services Representative at BISYS Fund
Age: 30 Services, Ohio, Inc. (mutual fund
services company).
- -------------------------------------------------------------------------------------------------------
Kevin M. Crotty Treasurer Since June, 1997, Director of Finance
3636 Euclid Avenue of Roulston & Company, Inc. and an
- -------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 53
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Suite 3000 employee of Roulston & Company, Inc.
Cleveland, Ohio 44115 since November, 1996; from October,
1993 to October, 1996, Accounting
Age: 38 Manager of Philanthropic and Tax
Planning Department of Premier
Industrial Corporation (electronic
component distributor).
- -------------------------------------------------------------------------------------------------------
Kenneth J. Coleman Assistant Treasurer Joined Roulston & Company in January
3636 Euclid Avenue 1999, becoming Chief Operating Officer
Suite 3000 in September 1999. From August 1997
Cleveland, Ohio 44115 to December 1998, President of
National City Corporation's Insurance
Services Group. For ten years prior,
Executive at Capitol American
Financial Corporation.
- -------------------------------------------------------------------------------------------------------
</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 & Company receive compensation from
Roulston & Company.
The following table sets forth information regarding the total
compensation paid by the Trust to its Board of Trustees for their services as
Trustees during the fiscal year ended October 31, 1999. The Trust has no pension
or retirement plans.
COMPENSATION TABLE:
<TABLE>
<CAPTION>
================================================================================
AGGREGATE TOTAL COMPENSATION
NAME AND POSITION COMPENSATION FROM THE TRUST AND
WITH THE TRUST FROM THE TRUST THE FUND COMPLEX *
----------------- -------------- ----------------
================================================================================
<S> <C> <C>
Scott D. Roulston,
Chairman $0 $0
- --------------------------------------------------------------------------------
Thomas V. Chema,
Trustee $11,000 $11,000
- --------------------------------------------------------------------------------
David B. Gale
Trustee $9,000 $9,000
- --------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 54
* For purposes of this Table, Fund Complex means one or more mutual
funds, including the Funds, which have a common investment adviser or
affiliated investment advisers or which hold themselves out to the
public as being related. The Funds are currently the only members of
their Fund Complex.
As of February 25, 2000, Mr. Roulston owned approximately 1.1% of the
EMERGING GROWTH 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 February 14, 2000, owned of record or beneficially 5% or
more of the shares of any 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 organizations could have the ability to
approve or reject those matters submitted to the shareholders of such Fund for
their approval.
ROULSTON EMERGING GROWTH FUND:
- -----------------------------
SHAREHOLDER(S) PERCENTAGE OWNED
Fish Furniture Shop, Inc. 6.42%
2929 Glenmore Rd. (of record)
Shaker Heights, OH 44122
ROULSTON INTERNATIONAL EQUITY FUND:
- ----------------------------------
SHAREHOLDER(S) PERCENTAGE OWNED
Fifth Third Bank 14.59%
FBO James Sankey (of record)
PO Box 630074
Cincinnati, OH 45263
ROULSTON GROWTH AND INCOME FUND:
- -------------------------------
SHAREHOLDER(S) PERCENTAGE OWNED
Saxon Company 20.53%
P. O. Box 7780-1888 (of record)
Philadelphia, Pennsylvania 19182
21
<PAGE> 55
Charles Schwab & Co., Inc. 4.90%
Special Custody Account (of record)
ATTN: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
ROULSTON GOVERNMENT SECURITIES FUND:
- -----------------------------------
SHAREHOLDER(S) PERCENTAGE OWNED
National City 13.73%
FBO Martha Barr (of record)
DTD 03/09/1989
Attn: Trst Mutual Funds 137R362007
PO Box 94984
Cleveland, OH 44101-4984
Key Trust Co. 6.07%
FBO R W Sidley (of record)
DTD 09/30/86
PO Box 94871
Cleveland, OH 44101-4871
INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------
THE INVESTMENT ADVISER
Roulston & Company is controlled directly and indirectly by Thomas H.
Roulston and members of his immediate family. Thomas Roulston is the Chairman of
Roulston & Company. Scott D. Roulston, Trustee, Chairman and President of the
Trust, is President and a Director of Roulston & Company. Roulston Research
Corp., the distributor of the Funds, is a wholly-owned subsidiary of Roulston &
Company.
For the fiscal year ended October 31, 1999, Roulston & Company earned
and voluntarily waived the amounts indicated below with respect to its
investment advisory services to the Funds.
<TABLE>
<CAPTION>
================================================================================
GROSS ADVISORY NET
ADVISORY FEES ADVISORY
FUND FEES EARNED WAIVED FEES RECEIVED
---- ----------- -------- -------------
<S> <C> <C> <C>
================================================================================
</TABLE>
22
<PAGE> 56
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EMERGING GROWTH FUND* $1,546 $37,312 $(35,766)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND* $1,142 $37,824 $(36,682)
- --------------------------------------------------------------------------------
GROWTH FUND $396,732 $95,408 $301,324
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND $293,462 $50,413 $243,049
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND $11,952 $64,230 $(52,278)
- --------------------------------------------------------------------------------
TOTALS $704,834 $285,187 $419,647
- --------------------------------------------------------------------------------
*Such Funds commenced operations July 1, 1999.
</TABLE>
For the fiscal year ended October 31, 1998, Roulston & Company earned
and voluntarily waived the amounts indicated below with respect to its
investment advisory services to the Growth, Growth and Income and Government
Securities Funds.
<TABLE>
<CAPTION>
================================================================================
GROSS ADVISORY NET
ADVISORY FEES ADVISORY
FUND FEES EARNED WAIVED FEES RECEIVED
---- ----------- -------- -------------
================================================================================
<S> <C> <C> <C>
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 & Company earned
and voluntarily waived the amounts indicated below with respect to its
investment advisory services to the Growth, Growth and Income and Government
Securities Funds.
<TABLE>
<CAPTION>
================================================================================
GROSS ADVISORY NET
ADVISORY FEES ADVISORY
FUND FEES EARNED WAIVED FEES RECEIVED
---- ----------- -------- -------------
================================================================================
<S> <C> <C> <C>
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>
Roulston & Company 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 GROWTH FUND, 1.50% for the GROWTH AND
INCOME FUND, 0.90% for the GOVERNMENT SECURITIES FUND and 1.95% for the EMERGING
23
<PAGE> 57
GROWTH FUND and INTERNATIONAL EQUITY FUND. Waivers and reimbursements will
continue until further notice to shareholders.
THE DISTRIBUTOR
Roulston Research Corp., 3636 Euclid Avenue, Suite 3000, Cleveland, OH
44115 (the "Distributor") is a wholly owned subsidiary of Roulston & Company,
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 customers and
shares purchased and held by customers of the Distributor directly, including,
but not limited to, answering shareholder questions concerning the Funds,
marketing of the Funds, providing information to shareholders on their
investments in the Funds and providing such personnel and communication
equipment as is necessary and appropriate to accomplish such matters. Fees paid
are borne solely by the applicable Fund. Such fees may exceed the actual costs
incurred by the Distributor in providing such services.
As required by Rule 12b-1, the Plan was approved by the initial sole
shareholder of the Growth, Growth and Income and Government Securities Funds and
for each Fund 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 Board of 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 Board of 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
24
<PAGE> 58
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 Board of 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 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.
For the fiscal year ended October 31, 1999, such fees totaled $237,003,
all of which were paid to the Distributor for the services described above. The
amounts incurred with respect to each Fund, net of any fee waiver or expense
reimbursement, during such period are set forth below:
<TABLE>
<CAPTION>
================================================================================
AMOUNTS
INCURRED
PURSUANT
FUND TO 12b-1 PLAN
---- -------------
================================================================================
<S> <C>
EMERGING GROWTH FUND* $993
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND* $993
- --------------------------------------------------------------------------------
GROWTH FUND $132,244
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND $90,821
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND $11,952
- --------------------------------------------------------------------------------
TOTAL $237,003
- --------------------------------------------------------------------------------
* Such Funds commenced operations July 1, 1999.
</TABLE>
In addition, the Distributor has entered into Rule 12b-1 Agreements
with selected dealers pursuant to which such dealers agree to provide certain
shareholder services and distribution assistance including, but not limited to,
those discussed above.
THE ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTANT
PFPC Inc. ("PFPC"), 3200 Horizon Drive, King of Prussia, Pennsylvania
19406, serves as the Administrator for the Funds and the Trust. Pursuant to the
terms of a Services Agreement, PFPC assists in supervising all operations of
each Fund (other than those performed by Roulston & Company, by UMB Bank, n.a.
as the custodian for each of the Funds other than the International Equity Fund,
and by The Bank of New York as the custodian for the International Equity Fund).
Under the Services Agreement, PFPC has agreed to furnish statistical
and research data, clerical, and certain bookkeeping services; prepare the
periodic reports to the SEC on Form N-SAR or any replacement
25
<PAGE> 59
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 SEC 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 & Company, by UMB Bank, n.a. as custodian to
each Fund, other than the International Equity Fund, and by The Bank of New York
as custodian for the International Equity Fund.
PFPC 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 PFPC 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.
For the fiscal years indicated below, PFPC, or First Investor Services
Group (predecessor of PFPC) earned the following amounts with respect to
administration, fund accounting and transfer agency services provided to the
Funds:
<TABLE>
<CAPTION>
================================================================================
11/01/98 11/01/97 11/01/96
TO TO TO
FUND 10/31/99 10/31/98 10/31/97
----
================================================================================
<S> <C> <C> <C>
GROWTH FUND $120,769 $135,256 $128,421
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND 99,988 70,148 61,979
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND 42,656 29,610 31,371
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND* 10,154 -- --
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND* 12,376 -- --
- --------------------------------------------------------------------------------
TOTAL $285,943 $235,014 $221,771
- --------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 60
* Such Funds commenced operations July 1, 1999.
THE CUSTODIANS
UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri 64141, serves
as each of the Funds' Custodian, except for the International Equity Fund,
pursuant to a Custody Agreement. The Bank of New York, One Wall Street, New York
New York 10286, serves as the International Equity Fund's custodian. In such
capacity, the UMB Bank, n.a. and The Bank of New York hold or arrange for the
holding of all portfolio securities and other assets of the Funds.
INDEPENDENT AUDITORS
McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, OH
44145, serves as independent auditors for the Funds. The audited financial
statements and notes thereto for the Funds contained in the Annual Report to
Shareholders dated October 31, 1999, are incorporated by reference into this
Statement of Additional Information and have been audited by McCurdy &
Associates CPA's, Inc., whose report also appears in the Annual Report and is
also incorporated by reference herein. No other parts of the Annual Report are
incorporated by reference herein. Such financial statements and notes thereto
have been incorporated herein in reliance on the report of McCurdy & Associates
CPA's, Inc., independent auditors, given on the authority of said firm as
experts in auditing and accounting.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
------------------------------------------------
PORTFOLIO TRANSACTIONS
Roulston & Company is authorized to select brokers and dealers to
effect securities transactions for the Funds. Roulston & Company 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 & Company
generally seeks reasonably competitive spreads or commissions, a Fund will not
necessarily be paying the lowest spread or commission available. Roulston &
Company seeks to select brokers or dealers that offer a Fund best price and
execution or other services which are of benefit to the Trust.
BROKERAGE COMMISSIONS
Roulston & Company may, consistent with the interests of the Funds,
select brokers on the basis of the research services they provide to Roulston &
Company. 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 & Company will be in addition to and not in
lieu of the services required to be performed by Roulston & Company under the
Advisory Agreement. If, in the judgment of Roulston & Company, a Fund or other
accounts managed by Roulston & Company will be benefited by supplemental
research services, Roulston & Company 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
27
<PAGE> 61
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 &
Company 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 & Company will find all of such services of value in
advising the Funds.
Roulston & Company has an arrangement with Thompson Institutional
Services, Inc. ("Thompson") whereby Roulston & Company receives specific
research products known as First Call, ALERT, Research Direct, Baseline, HOLT,
STOCK VAL, and Muller Data in exchange for placing trades on behalf of privately
managed accounts and the Funds. During the period November 1, 1998 through
October 31, 1999, the following transactions were placed with Merrill
Lynch/Dayton (MLDAYTON), the executing broker-dealer for Thompson during such
period. The GROWTH FUND placed 24 trades for shares totaling 101,485 with a
commission rate of $.06 per share for a total commission of $6,089 with
MLDAYTON. The GROWTH & INCOME FUND placed 23 trades for shares totaling 191,400
with a commission rate of $.06 per share for a total commission of $11,484 with
MLDAYTON.
In addition, a Fund may direct commission business to one or more
designated broker/dealers, in connection with such broker/dealer's payment of
certain of a Fund's or the Trust's expenses.
For the fiscal years ended October 31, 1999, 1998, and 1997, the total
brokerage commissions attributable to each Fund are set forth below.
<TABLE>
<CAPTION>
================================================================================
11/01/98 11/01/97 11/01/96
TO TO TO
FUND 10/31/99 10/31/98 10/31/97
---- -------- -------- --------
================================================================================
<S> <C> <C> <C>
GROWTH FUND $168,308 $150,490 $74,304
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND $164,854 $47,652 $33,625
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND $0 $0 $0
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND* $1,216 -- --
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND* $3,222 -- --
- --------------------------------------------------------------------------------
TOTALS $337,600 $198,142 $107,929
- --------------------------------------------------------------------------------
</TABLE>
* Such Funds commenced operations July 1, 1999.
NET ASSET VALUE
- ---------------
As indicated in the Prospectus, the net asset value of each Fund is
determined and the shares of each Fund are priced as of the earlier of 4:00
p.m., Eastern Time, or the close of regular trading on the New York Stock
Exchange (the "Exchange"), on each Business Day. A "Business Day" is any day the
Exchange is open for regular business. Currently the Exchange is closed in
observance of the following holidays: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
28
<PAGE> 62
Valuations of securities purchased by the Funds are supplied by
independent pricing services used by PFPC, as administrator and fund accountant,
which have been approved by the Board of Trustees. 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 and equity securities traded only in the over-the-counter market
will be valued at their closing bid prices obtained from one or more dealers
making markets for such securities or, if market quotations are not readily
available, at their fair value as determined in good faith by the Board of
Trustees.
Valuations of fixed and variable income securities ("debt securities")
are based upon a consideration of yields or prices of obligations of comparable
quality, coupon, maturity and type, indications as to value from recognized
dealers, and general market conditions. The pricing services may use electronic
data processing techniques and/or a computerized matrix system to determine
valuations. Debt securities for which market quotations are readily available
are valued based upon those quotations.
The procedures used by the pricing service are reviewed by the officers
of the Trust under the general supervision of the Board of Trustees. The Board
of 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 security. In such instances the security will be valued at fair value as
determined in good faith by or under the direction of the Board of 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 SEC, (b) the Exchange is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency exists as a result of which
(i) disposal by the Trust of
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<PAGE> 63
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 any Fund fails to qualify as a regulated
investment company under the Code, the Fund would be required to pay federal
income taxes like a corporation.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, such
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.
Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which
30
<PAGE> 64
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 the 70% dividends received
deduction. The amount so designated may not exceed the amount received by that
Fund for its taxable year that qualifies for the dividends received deduction.
Foreign taxes may be imposed on a Fund by foreign countries with
respect to its income from foreign securities. If less than 50% in value of a
Fund's total assets at the end of its fiscal year are invested in stocks
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<PAGE> 65
or securities of foreign corporations, such Fund will not be entitled under the
Code to pass through to its shareholders their pro-rata share of the foreign
taxes paid by the Fund. These taxes will be taken as a deduction by such Fund.
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. If more than 50% in value of its total assets at the close of
its taxable year consists of securities of foreign corporations, 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 gross 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.
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<PAGE> 66
Information set forth in the Prospectus and this Statement of
Additional Information which relates to Federal taxation is only a summary of
some of the important Federal tax considerations generally affecting purchasers
of shares of a Fund. No attempt has been made to present a detailed explanation
of the Federal income tax treatment of a Fund or its shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, 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.
For the 30-day period ended October 31, 1999, the yields for the
EMERGING GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH FUND, GROWTH AND INCOME
FUND, and GOVERNMENT SECURITIES FUND, were 18.44%, 5.14%, 4.77%, 1.85% and .03%,
respectively.
CALCULATION OF TOTAL RETURN
Each quotation of average annual total return will be computed by
finding the average annual compounded rate of return over that period which
would equate the value of an initial amount of $1,000 invested in a Fund equal
to the ending redeemable value, according to the following formula:
P(T + 1) to the nth power = ERV
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<PAGE> 67
Where: P = a hypothetical initial payment of $1,000, T = average annual
total return, n = number of years, and ERV = ending redeemable value of a
hypothetical $1,000 payment at the beginning of the period at the end of the
period for which average annual total return is being calculated assuming a
complete redemption. The calculation of average annual total return assumes the
deduction of the maximum sales charge, if any, from the initial investment of
$1,000, assumes the reinvestment of all dividends and distributions at the price
stated in the then effective Prospectus on the reinvestment dates during the
period and includes all recurring fees that are charged to all shareholder
accounts assuming such Fund's average account size.
A Fund, however, may also advertise aggregate total return in addition
to or in lieu of average annual total return. Aggregate total return is a
measure of the change in value of an investment in a Fund over the relevant
period and is calculated similarly to average annual total return except that
the result is not annualized.
For the following periods ended October 31, 1999, the average annual
total returns for the Funds were as follows:
<TABLE>
<CAPTION>
================================================================================
FUND SINCE
---- 1 YEAR 5 YEAR INCEPTION
------ ------ ---------
================================================================================
<S> <C> <C> <C>
EMERGING GROWTH FUND* N/A N/A 606.95%
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND* N/A N/A 6.98%
- --------------------------------------------------------------------------------
GROWTH FUND** (9.18)% 8.56% 10.24%
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND** (1.07)% 13.03% 11.64%
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND** (2.09)% 6.77% 4.56%
- --------------------------------------------------------------------------------
</TABLE>
* Funds commenced operations on July 1, 1999.
** Funds commenced operations on July 1, 1993.
For the period of July 1, 1999 (commencement of operations) through
October 31, 1999, the aggregate total returns for the Emerging Growth Fund and
the International Equity Fund were 93.30% and 2.30%, respectively.
The performance figures above reflect Roulston & Company's voluntary
fee waivers and expense reimbursements. Absent such fee waivers and expense
reimbursements, the yield and total returns of the Funds would have been lower.
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
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<PAGE> 68
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, which
represent interests in the Funds. The Trust's Declaration of Trust authorizes
the Board of Trustees to divide or redivide any unissued shares of the Trust
into one or more additional series by setting or changing in any one or more
respects their respective preferences, conversion or other rights, voting power,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, a Fund's shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Fund, of any general assets not
belonging to any particular Fund which are available for distribution. As used
in the Prospectus and in this Statement of Additional Information, "assets
belonging to a Fund" means the consideration received by a Fund upon the
issuance or sale of shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
asset of the Trust not readily identified as belonging to a particular Fund that
is allocated to the Fund by the 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 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
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<PAGE> 69
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 SEC that the Board of 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 trustee.
A "vote of a majority of the outstanding shares" of a Fund means the
affirmative vote, at a meeting of shareholders duly called, of the lesser of (a)
67% or more of the votes of shareholders of that Fund present at a meeting at
which the holders of more than 50% of the votes attributable to shareholders of
record of that Fund are represented in person or by proxy, or (b) the holders of
more than 50% of the outstanding votes of shareholders of that Fund.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a series will be required in
connection with a matter, a series will be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical, or that the matter does not affect any interest of the series. Under
Rule 18f-2, the approval of any amendment to the Advisory Agreement or any
change in investment policy submitted to shareholders would be effectively acted
upon with respect to a series only if approved by a majority of the outstanding
shares of such series. However, Rule 18f-2 also provides that the ratification
of independent public accountants, the approval of principal underwriting
contracts, and the election of trustees may be effectively acted upon by
shareholders of the Trust voting without regard to series.
FINANCIAL STATEMENTS
--------------------
The audited financial statements and notes thereto for each Fund,
contained in the Annual Report to Shareholders dated October 31, 1999, are
incorporated by reference into this Statement of Additional Information and have
been audited by McCurdy & Associates CPA's, Inc., whose report also appears in
the Annual Report and is also incorporated by reference herein. No other parts
of the Annual Report are incorporated by reference herein.
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<PAGE> 70
APPENDIX "A"
------------
DESCRIPTIONS OF SECURITIES RATINGS
37
<PAGE> 71
APPENDIX "A"
RATINGS OF SECURITIES
---------------------
COMMERCIAL PAPER RATINGS
STANDARD & POOR'S CORPORATION:
Commercial paper ratings of Standard & Poor's Corporation ("S&P") are current
assessments of the likelihood of timely payment of debts having original
maturities of no more than 365 days. Commercial paper rated "A-1" by S&P
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted "A-1+." Commercial paper rated "A-2" by S&P
indicates that capacity for timely payment on issues is strong. However, the
relative degree of safety is not as high as for issues designated "A-1."
MOODY'S INVESTORS SERVICE, INC.:
The rating "Prime-1" is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated "Prime-2" (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations.
This will normally be evidenced by many of the characteristics of "Prime-1"
rated issuers, but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variations. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
FITCH IBCA:
Commercial paper rated "F-1" by Fitch IBCA ("Fitch") is regarded as having the
strongest degree of assurance for timely payments. Commercial paper rated "F-2"
by Fitch is regarded as having an assurance of timely payment only slightly less
than the strongest rating, I.E., "F-1." The plus (+) sign is used after a rating
symbol to designate the relative position of an issuer within the rating
category.
CORPORATE DEBT RATINGS
STANDARD & POOR'S CORPORATION:
An S&P corporate debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. Debt rated "AAA" has the
highest rating assigned by S&P. Capacity to pay interest and repay principal is
extremely strong. Debt rated "AA has a very strong capacity to pay interest and
to repay principal and differs from the highest rated issues only in small
degree. Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories. Debt
rated "BBB" is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate
38
<PAGE> 72
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories. Debt rated "BB" and
"B" is regarded as having predominantly speculative characteristics with respect
to capacity to pay interest and repay principal. "BB" indicates the least degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions. Debt rated "BB" has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB" rating. Debt rated "B" has a
greater vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating.
MOODY'S INVESTORS SERVICE, INC.:
The following summarizes the six highest ratings used by Moody's for corporate
debt. Bonds that are rated "Aaa" by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Bonds
that are rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in "Aaa" securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities. Bonds that
are rated "A" by Moody's possess many favorable investment attributes and are to
be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Bonds that
are rated "Baa" by Moody's are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds that are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Moody's applies
numerical modifiers (1, 2, and 3) with respect to bonds rated "Aa" through "B."
The modifier 1 indicates that the bond being rated ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the bond ranks in the lower end of its generic
rating category.
39
<PAGE> 73
DUFF & PHELPS, INC.:
The following summarizes the six highest long-term debt ratings by Duff &
Phelps, Inc. ("Duff"). Debt rated "AAA" has the highest credit quality. The risk
factors are negligible being only slightly more than for risk-free U.S. Treasury
debt. Debt rated "AA" has a high credit quality and protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions. Debt rated "A" has protection factors that are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress. Debt rated "BBB" has below average protection factors but is
still considered sufficient for prudent investment. However, there is
considerable variability in risk during economic cycles. Debt rated "BB" is
below investment-grade but deemed likely to meet obligations when due. Present
or prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within this category. Debt rated "B" is below investment-grade and possesses
risk that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade. To provide more detailed
indications of credit quality, the ratings from "AA" to "B" may be modified by
the addition of a plus (+) or minus (-) sign to show relative standing within
this major rating category.
FITCH IBCA:
The following summarizes the six highest long-term debt ratings by Fitch
IBCA(except for "AAA" ratings, plus(+) or minus (-) signs are used with a rating
symbol to indicate the relative position of the credit within the rating
category). Bonds rated "AAA" are considered to be investment-grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated "AA" are considered to be investment-grade and
of very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issues
is generally rated "F-1+." Bonds rated as "A" are considered to be
investment-grade and of high credit quality. The obligor's ability to pay
interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances than
bonds with higher ratings. Bonds rated "BBB" are considered to be
investment-grade and of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore, impair timely payment. The
likelihood that the ratings for these bonds will fall below investment-grade is
higher than for bonds with higher ratings. Bonds rated "BBB" are considered
speculative. The obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in satisfying its
debt service requirements. Bonds rated "B" are considered highly speculative.
While bonds in this class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue.
40
<PAGE> 74
THOMPSON BANKWATCH, INC.:
The following summarizes the six highest long-term debt ratings by Thompson
BankWatch, Inc. ("Thompson"). "AAA" is the highest category and indicates that
the ability to repay principal and interest on a timely basis is very high. "AA"
is the second highest category and indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category. "A" is the third highest category and
indicates the ability to repay principal and interest is strong. Issues rated
"A" could be more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings. "BBB" is the lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings. While not investment-grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations. Issuer rated "B" show a higher degree of uncertainty
and therefore greater likelihood of default that higher rated issuers. Adverse
developments could well negatively affect the payment of interest and principal
on a timely basis. Thomson may include a plus (+) or minus (-) designation to
indicate where within the respective category the issue is placed.
41
<PAGE> 75
REGISTRATION STATEMENT
OF ROULSTON 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 -- incorporated
herein by reference to Post-Effective Amendment No. 6 to
Registration Statement #33-84186 filed via Edgar on April
16, 1999.
(iii) Amendment to ARTICLE I, Section 1.1 and ARTICLE IV, Section
4.2 of the Declaration of Trust, effective as of July 1,
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 amended as of July 1, 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 amended as of July 1, 1999,
between Registrant and Roulston Research Corp. -- filed
herewith.
<PAGE> 76
(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; Capital Analysts Incorporated; Titan
Value Equities Group, Inc.; Maxwell Securities, Inc.;
Advanced Clearing, Inc.; Vestax; and American Express.
(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
-- incorporated herein by reference to Post-Effective
Amendment No. 6 to Registration Statement #33-84186
filed via Edgar on April 16, 1999.
2
<PAGE> 77
(C) Amendment dated as of January 1, 1999, to Operating
Agreement dated October 25, 1996, between Charles
Schwab & Co., Inc. and the Fund Company --
incorporated herein by = reference to Post-Effective
Amendment No. 6 to Registration Statement #33-84186
filed via Edgar on April 16, 1999.
(D) Amendment dated as of December 24, 1999, to Operating
Agreement dated October 25, 1996, between Charles
Schwab & Co., Inc. and the Fund Company - filed
herewith.
(E) Amendment dated as of October 18, 1999, to Operating
Agreement dated October 25, 1996, between Charles
Schwab & Co., Inc. and the Fund Company - filed
herewith.
(iv) Services Agreement dated July 31, 1997, between Charles
Schwab & Co., Inc. and the Fund Company and Amendment dated
October 18, 1999 to Services Agreement dated July 31, 1997
- 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 Agreement between Registrant and The Bank of New
York dated July 1, 1999 -- filed herewith.
(iii) Foreign Custody Manager Agreement between Registrant, on
behalf of Roulston International Equity Fund, and The Bank
of New York dated October 29, 1999 -- filed herewith.
(h) (i) Services Agreement dated July 1, 1999, between Registrant
and First Data Investor Services Group, Inc. - filed
herewith.
(ii) Agreement and Plan of Reorganization and Liquidation dated
November 23, 1994, between
3
<PAGE> 78
Registrant and The Advisers' Inner Circle Fund is
incorporated by reference to Exhibit (9) (d) of
Pre-Effective Amendment No. 1 to Registrant's Registration
Statement (No. 33-84186) filed on January 19, 1995.
(i) Opinion of Counsel with respect to shares of the Trust - -
incorporated herein by reference to Post-Effective Amendment No. 6
to Registration Statement #33-84186 filed via EDGAR on April 16,
1999.
(j) Consent of McCurdy & Associates CPA's, Inc. -- filed herewith.
(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 to
Registration Statement #33-84186 filed via EDGAR on
February 29, 1996. -- see (e)(ii), (e)(iii) and (e)(iv)
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.
4
<PAGE> 79
(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 -- incorporated herein by reference to
Post-Effective Amendment No. 6 to Registration Statement
#33-84186 filed via Edgar on April 16, 1999.
(n) None.
(o) None.
(p) Financial Data Schedules - - filed herewith.
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 (e)(i) hereto, Section 8(a) of
the Custody Agreement filed as Exhibit (g)(i) hereto, Article XVIII of
the Custody Agreement filed as Exhibit (g)(ii) hereto, Section 5 of the
Investment Advisory Agreement filed as Exhibit (d) hereto, and Article
9 of the Services Agreement filed as Exhibit (h)(i) 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
5
<PAGE> 80
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 the Prospectus and "MANAGEMENT OF THE TRUST" in the
Statement of Additional Information which are a part of this
Registration Statement is hereby incorporated herein by reference. To
the knowledge of Registrant, none of the directors or officers of
Roulston & Company, Inc., except those set forth below, is or has been
at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature.
Set forth below are the names, principal businesses and addresses of
those businesses of the directors and officers of Roulston & Company,
Inc. who are or have been engaged in any other business, profession,
vocation or employment of a substantial nature during the past two
fiscal years.
6
<PAGE> 81
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
OFFICERS AND DIRECTORS POSITION WITH NAME AND ADDRESS NATURE OF
OF ROULSTON & ROULSTON OF OTHER BUSINESS CONNECTION TO
COMPANY, INC. OTHER BUSINESS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Stone Industries,
Thomas H. Roulston Chairman; Inc. Chairman and Director
Director 8705 Quarry Road
Amherst, OH 44001
------------------------------ ---------------------
Roulston Investment Trust
Limited Partnership General Partner
3636 Euclid Avenue, Suite
3000
Cleveland, OH 44115
------------------------------ ---------------------
Roulston Ventures Limited
Partnership General Partner
3636 Euclid Avenue, Suite
3000
Cleveland, OH 44115
------------------------------ ---------------------
Roulston Venture Capital,
Limited Partnership General Partner
3636 Euclid Avenue, Suite
3000
Cleveland, OH 44115
------------------------------ ---------------------
MJM Industries
1200 East Street Chairman and Director
Fairport Harbor, OH 44077
------------------------------ ---------------------
RB Mfg Co.
4101 Venice Road Chairman and Director
Sandusky, OH 44870
- ----------------------------------------------------------------------------------- ---------------------
Scott D. Roulston Director; President; Roulston Capital Partners General Partner
Chief Executive V,LP
Officer 3636 Euclid Ave. #3000
Cleveland, OH 44115
- ----------------------------------------------------------------------------------- ---------------------
</TABLE>
7
<PAGE> 82
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------- ---------------------
<S> <C> <C> <C>
University Club
Heather R. Ettinger Director; Secretary Of Cleveland Director
3813 Euclid Avenue
Cleveland, Ohio 44115
------------------------------ ---------------------
RB Manufacturing Company
2620 West Monroe Director
Sandusky, OH 44870
------------------------------ ---------------------
- ----------------------------------------------------------------------------------- ---------------------
</TABLE>
8
<PAGE> 83
<TABLE>
<CAPTION>
=====================================================================================
NAME AND NATURE OF
OFFICERS AND DIRECTORS POSITION WITH ADDRESS OF CONNECTION
OF ROULSTON & ROULSTON & COMPANY, INC. OTHER TO OTHER
COMPANY, INC. INC. BUSINESS BUSINESS
=====================================================================================
<S> <C> <C> <C>
Kevin M. Crotty Treasurer
- -------------------------------------------------------------------------------------
Kenneth J. Coleman Executive Vice President
- -------------------------------------------------------------------------------------
Howard W. Harpster Executive Vice President
- -------------------------------------------------------------------------------------
George W. Sievila Senior Vice President
- -------------------------------------------------------------------------------------
Emily A. Drake Senior Vice President
- -------------------------------------------------------------------------------------
Robert P. Goodman Vice President
- -------------------------------------------------------------------------------------
Keith A. Vargo Vice President
- -------------------------------------------------------------------------------------
H. Ty Hunt Vice President
- -------------------------------------------------------------------------------------
John A. Karnuta Vice President
- -------------------------------------------------------------------------------------
Patricia A. Kosmach Vice President
- -------------------------------------------------------------------------------------
D. Keith Lockyer Vice President
- -------------------------------------------------------------------------------------
Cynthia M. Kemsuzian Assistant Vice President
- -------------------------------------------------------------------------------------
Theresa D. Miller Assistant Vice President
- -------------------------------------------------------------------------------------
Laurel A. Lawrence Assistant Vice President
- -------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 84
Item 27 PRINCIPAL UNDERWRITER
(a) None.
(b) The Directors and Officers of Roulston Research Corp. and their
positions with Registrant are as follows:
======================================================================
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
======================================================================
Scott D. Roulston Director; President Trustee; President
3636 Euclid Avenue,
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
Kenneth J. Coleman Executive Vice President Assistant Treasurer
3636 Euclid Avenue,
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
Howard W. Harpster Executive Vice President
3636 Euclid Avenue,
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
Keith A. Vargo Vice President
3636 Euclid Avenue,
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
Charles A. Kiraly Vice President
3636 Euclid Avenue,
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
Heather R. Ettinger Secretary
3636 Euclid Avenue,
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
Kevin M. Crotty Treasurer; Assistant Treasurer
3636 Euclid Avenue, Secretary
Suite 3000
Cleveland, OH 44115
----------------------------------------------------------------------
(c) None.
10
<PAGE> 85
Item 28 LOCATION OF ACCOUNTS AND RECORDS
(a) Roulston & Company, Inc., 3636 Euclid Avenue, Suite 3000,
Cleveland, Ohio 44115 (records relating to its functions as
investment adviser).
(b) Roulston Research Corp., 3636 Euclid Avenue, Suite 3000,
Cleveland, Ohio 44115 (records relating to its function as
distributor).
(c) PFPC 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).
(d) UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri 64141
(records relating to its functions as custodian).
(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.
11
<PAGE> 86
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment No. 7 to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and Registrant has duly caused this Post-Effective Amendment No. 7 to
its Registration Statement under the Securities Act of 1933 and Amendment No. 8
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 28th day of February, 2000.
ROULSTON 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
- ---------------------
Scott D. Roulston Executive Officer) and Trustee February 28, 2000
/s/ Kevin M. Crotty Treasurer February 28, 2000
- -------------------
Kevin M. Crotty
* /s/ Thomas V. Chema Trustee February 28, 2000
- ---------------------
Thomas V. Chema
* /s/ David B. Gale Trustee February 28, 2000
- ------------------------
David B. Gale
*By /s/ Michelle A. Whalen
-----------------------
Michelle A. Whalen, Attorney-In-Fact
12
<PAGE> 87
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(a)(iii) Amendment to Article I, Section 1.1, and Article IV, Section 4.2
of the Declaration of Trust, effective as of July 1, 1999.
(d) Investment Advisory Agreement dated January 20, 1995, as amended
as of July 1, 1999, between Registrant and Roulston & Company,
Inc.
(e)(i) Distribution Agreement dated January 20, 1995, as amended as of
July 1, 1999, between Registrant and Roulston Research Corp.
(e)(iii)(D) Amendment dated as of December 24, 1999, to Operating Agreement
dated October 25, 1996, between Charles Schwab & Co., Inc. and
the Fund Company.
(e)(iii)(E) Amendment dated as of October 18, 1999, to Operating Agreement
dated October 25, 1996, between Charles Schwab & Co., Inc. and
the Fund Company.
(e)(iv) Services Agreement dated July 31, 1997, between Charles Schwab &
Co., Inc. and the Fund Company and Amendment dated October 18,
1999 to Services Agreement dated July 31, 1997.
(g)(ii) Custody Agreement between Registrant and The Bank of New York
dated July 1, 1999.
(g)(iii) Foreign Custody Manager Agreement between Registrant, on behalf
of Roulston International Equity Fund, and The Bank of New York
dated October 29, 1999.
(h)(i) Services Agreement dated July 1, 1999, between Registrant and
First Data Investor Services Group, Inc.
(j) Consent of McCurdy & Associates CPA's, Inc.
(p) Financial Data Schedules.
13
<PAGE> 1
Exhibit 99(a)(iii)
Roulston Funds
Amendment to Declaration of Trust
Amended: July 1, 1999
ARTICLE I, Section 1.1 of the Trust's Declaration of Trust dated as of
September 16, 1994, as amended to date, be, and the same hereby is, amended
further, effective July 1, 1999, by deleting such ARTICLE I, Section 1.1 in its
entirety and substituting in place thereof the following new ARTICLE I, Section
1.1:
"Section 1.1. Name and Principal Office. The Trust shall be known as `Roulston
Funds' and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine. The principal office
of the Trust is located in Cleveland, Ohio."
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, be, and
the same hereby is, amended further, effective July 1, 1999, 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 Roulston
Growth Fund, Series B, which shall represent interests in Roulston Growth and
Income Fund, and Series C, which shall represent interests in Roulston
Government Securities Fund, and there are further established and designated
additional series of Shares designated Series D, which shall represent interests
in Roulston Emerging Growth Fund, and Series E, which shall represent interests
in Roulston 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 any governmental
authority pertaining to the investment advisory activities of the
Adviser;
<PAGE> 2
(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.
<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.
<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.
--------------
<PAGE> 5
Dated July 1, 1999
Schedule A
to the
Investment Advisory Agreement
between Roulston Funds and
Roulston & Company, Inc.
dated as of January 20, 1995
Name of Fund Compensation*
- ------------ ------------
Roulston 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.
Roulston 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.
Roulston Government Securities Fund Annual rate of twenty-five
one-hundredths of one percent (.25%) of
the average daily net assets of such
Fund up to $100 Million and one hundred
twenty-five one thousandths of one
percent (0.125%) of the average daily
net assets of such Fund of $100 Million
or more.
Roulston Emerging Growth Fund Annual rate of seventy-five
one-hundredths of one percent (0.75%) of
the average daily net assets of such
Fund.
<PAGE> 6
Roulston 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. ROULSTON FUNDS
By /s/ Kevin M. Crotty By /s/ Scott D. Roulston
------------------------- ---------------------------
Name Kevin M. Crotty Name Scott D. Roulston
----------------------- -------------------------
Title Title President
---------------------- ------------------------
- --------------------
* All fees are computed and paid monthly.
<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
<PAGE> 2
Investment Company Act of 1940, as amended ("1940 Act"), and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), by the Securities and
Exchange Commission (the "Commission") or any securities association registered
under the 1934 Act.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust and
the Funds.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) quarterly earnings statements prepared by
the Trust, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional information regarding the financial
condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that all registration
statements and prospectuses filed by the Trust with the Commission under the
1933 Act with respect to the Shares have been carefully 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
<PAGE> 3
regulations of the Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of the Shares. The Trust may but shall not be
obligated to propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus as,
in the light of future developments, may, in the opinion of the Trust's counsel,
be necessary or advisable. If the Trust shall not propose such amendment or
amendments and/or supplement or supplements within fifteen days after receipt by
the Trust of a written request from Distributor to do so, Distributor may, at
its option, terminate this agreement. The Trust shall not file any amendment to
any registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus
in the form most recently furnished in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its directors,
shareholders and employees, and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its shareholders,
directors and employees, or any such controlling person, may incur under the
1933 Act or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or 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
<PAGE> 4
agreement to indemnify Distributor, its shareholders, directors and employees,
and any such controlling person, as aforesaid, is expressly conditioned upon the
Trust's being notified of any action brought against Distributor, its
shareholders, directors or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Cleveland, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
paragraph 1.11. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by Distributor, which approval shall not be unreasonably withheld. In
the event the Trust elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Trust does not elect to assume the defense of any
such suit, or in case Distributor reasonably does not approve of counsel chosen
by the Trust, the Trust will reimburse Distributor, its shareholders, directors
and employees, or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
Distributor or them. The Trust's indemnification agreement contained in this
paragraph 1.11 and the Trust's representations 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.
<PAGE> 5
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.
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 l0(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;
<PAGE> 6
(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 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.
<PAGE> 7
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.
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
------------------------
<PAGE> 8
Dated: July 1, 1999
Schedule A
to the
Distribution Agreement
between Roulston Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 4, 1996
Name of Fund Date
- ------------ ----
Roulston Growth Fund January 20, 1995
Roulston Growth and Income Fund January 20, 1995
Roulston Government Securities Fund January 20, 1995
Roulston Emerging Growth Fund July 1, 1999
Roulston International Equity Fund July 1, 1999
ROULSTON FUNDS
By /s/ Scott D. Roulston
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By /s/ Kevin M. Crotty
Kevin M. Crotty, Treasurer
<PAGE> 9
Dated: July 1, 1999
Schedule B
to the
Distribution Agreement
between Roulston Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 4, 1996
Name of Plan Fund Date
- ----------------- ----
Roulston Growth Fund January 20, 1995
Roulston Growth and Income Fund January 20, 1995
Roulston Government Securities Fund January 20, 1995
Roulston Emerging Growth Fund July 1, 1999
Roulston International Equity Fund July 1, 1999
ROULSTON FUNDS
By: /s/ Scott D. Roulston
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By: /s/ Kevin M. Crotty
Kevin M. Crotty, Treasurer
<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 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.
<PAGE> 11
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.
<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
<PAGE> 2
Investment Company Act of 1940, as amended ("1940 Act"), and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), by the Securities and
Exchange Commission (the "Commission") or any securities association registered
under the 1934 Act.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust and
the Funds.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) quarterly earnings statements prepared by
the Trust, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional information regarding the financial
condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that all registration
statements and prospectuses filed by the Trust with the Commission under the
1933 Act with respect to the Shares have been carefully 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
<PAGE> 3
regulations of the Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of the Shares. The Trust may but shall not be
obligated to propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus as,
in the light of future developments, may, in the opinion of the Trust's counsel,
be necessary or advisable. If the Trust shall not propose such amendment or
amendments and/or supplement or supplements within fifteen days after receipt by
the Trust of a written request from Distributor to do so, Distributor may, at
its option, terminate this agreement. The Trust shall not file any amendment to
any registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus
in the form most recently furnished in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its directors,
shareholders and employees, and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its shareholders,
directors and employees, or any such controlling person, may incur under the
1933 Act or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or 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
<PAGE> 4
agreement to indemnify Distributor, its shareholders, directors and employees,
and any such controlling person, as aforesaid, is expressly conditioned upon the
Trust's being notified of any action brought against Distributor, its
shareholders, directors or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Cleveland, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
paragraph 1.11. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by Distributor, which approval shall not be unreasonably withheld. In
the event the Trust elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Trust does not elect to assume the defense of any
such suit, or in case Distributor reasonably does not approve of counsel chosen
by the Trust, the Trust will reimburse Distributor, its shareholders, directors
and employees, or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
Distributor or them. The Trust's indemnification agreement contained in this
paragraph 1.11 and the Trust's representations 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.
<PAGE> 5
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.
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 l0(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;
<PAGE> 6
(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 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.
<PAGE> 7
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.
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
------------------------
<PAGE> 8
Dated: July 1, 1999
Schedule A
to the
Distribution Agreement
between Roulston Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 4, 1996
Name of Fund Date
- ------------ ----
Roulston Growth Fund January 20, 1995
Roulston Growth and Income Fund January 20, 1995
Roulston Government Securities Fund January 20, 1995
Roulston Emerging Growth Fund July 1, 1999
Roulston International Equity Fund July 1, 1999
ROULSTON FUNDS
By /s/ Scott D. Roulston
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By /s/ Kevin M. Crotty
Kevin M. Crotty, Treasurer
<PAGE> 9
Dated: July 1, 1999
Schedule B
to the
Distribution Agreement
between Roulston Funds and
Roulston Research Corp.
dated January 20, 1995 as amended
as of June 4, 1996
Name of Plan Fund Date
- ----------------- ----
Roulston Growth Fund January 20, 1995
Roulston Growth and Income Fund January 20, 1995
Roulston Government Securities Fund January 20, 1995
Roulston Emerging Growth Fund July 1, 1999
Roulston International Equity Fund July 1, 1999
ROULSTON FUNDS
By: /s/ Scott D. Roulston
Scott D. Roulston, President
ROULSTON RESEARCH CORP.
By: /s/ Kevin M. Crotty
Kevin M. Crotty, Treasurer
<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 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.
<PAGE> 11
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.
<PAGE> 1
EXHIBIT 99(e)(iii)(E)
AMENDMENT TO OPERATING AGREEMENT
This Amendment ("Amendment") is made as of October 18, 1999, by and
between Charles Schwab & Co., Inc. ("Schwab"), a California corporation, and
each registered investment company ("Fund Company") executing this Amendment on
its own behalf and on behalf of each of its series or classes of shares
("Fund(s)") listed on Schedule I hereto, and amends the Operating Agreement
between the parties, made as of October 25, 1996, as amended thereafter
("Operating Agreement"). All capitalized terms used in the Amendment and not
defined herein shall have the meaning ascribed to them in the Operating
Agreement.
WHEREAS, the parties wish to amend Schedule I to the Operating
Agreement; and
WHEREAS, the parties wish to institute the payment of Account
establishment and maintenance fees to be paid by each Fund for which the
effective date of such Fund on Schedule 1 is on or after the date on which this
Amendment is made, such fees to be set forth on a Schedule II.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:
1. The following Section 4 is hereby inserted as Section 4 of the
Operating Agreement. Sections 4 through 12 are renumbered as Section 5 through
13, respectively.
4. Account Establishment and Maintenance Fees
Fund Company shall pay to Schwab such fees as are set
forth on Schedule II hereto to reimburse Schwab for its costs in
establishing and maintaining Account(s) for each Fund that is
designated "FEE 2" on Schedule I and for which the effective date of
such Fund is October 18, 1999, or any date thereafter. The fee shall be
paid at the time and in the manner set forth in Schedule II.
2. Schedule I to the Operating Agreement shall be deleted in its
entirety and the Schedule I attached hereto shall be inserted in lieu thereof.
3. The attached Schedule II is hereby inserted as Schedule II to the
Operating Agreement.
4. Schedule II may be amended by Schwab on forty (40) days' written
notice to Fund Company or such earlier time as shall be agreed to by the
parties.
5. Except as specifically set forth herein, all other provisions of the
Operating Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
CHARLES SCHWAB & CO., INC. ROULSTON FUNDS (previously named Fairport
Funds), on its own behalf and on behalf
of each Fund listed on Schedule I hereto.
By: /s/ Fred Potts By:
-------------------------------- ---------------------------------------
Fred Potts
Vice President/Mutual Funds Name:
Operations Administration -------------------------------------
Title:
------------------------------------
Date:
----------------------------- Date:
-------------------------------------
<PAGE> 2
SCHEDULE I
TO THE OPERATING AGREEMENT
Fund Company/Funds Effective Date
- ------------------ --------------
Roulston Funds (previously named Fairport Funds)
Roulston Emerging Growth Fund* FEE 2 10/18/99
Roulston Government Securities Fund* 11/19/96
Roulston Growth & Income Fund* 11/19/96
Roulston Growth Fund* 11/19/96
Roulston International Equity Fund* FEE 2 10/18199
* Indicates that Fund is a "no-load" or "no sales charge" Fund as defined
in Rule 2830 of the NASDR.
SI Indicates that Fund is available only to MFMP investors through Schwab
Institutional or another advice program offered or made available by
financial institutions clearing transactions through Schwab.
FEE 2 Indicates that Fund is subject to Account Establishment and
Maintenance Fees and the terms thereof as set forth on Schedule II.
Accepted by:
CHARLES SCHWAB & CO., INC. ROULSTON FUNDS (previously named Fairport
Funds), on its own behalf and on behalf
of each Fund listed on Schedule I hereto.
By: /s/ Fred Potts By:
-------------------------------- --------------------------------------
Fred Potts
Vice President/Mutual Funds Name:
Operations Administration ------------------------------------
Title:
-----------------------------------
Date:
------------------------------- Date:
------------------------------------
<PAGE> 3
SCHEDULE II
TO THE OPERATING AGREEMENT
Fees to Establish and Maintain Account(s) for a Fund
Establishment Fee
The Establishment Fee for the Account(s) for each Fund for which the
effective date of such Fund on Schedule I is October 18, 1999, or any date
thereafter, is $6,000. The Establishment Fee for each Fund shall be paid prior
to establishment of the Account(s) for such Fund.
Maintenance Fee
a. The Maintenance Fee as to the Account(s) for each Fund for which the
effective date of such Fund on Schedule I is October 18, 1999, Or any date
thereafter, shall be billed in arrears on February 28 (or February 29 in a leap
year) and August 31 (each an "Assessment Date") commencing on the first
Assessment Date after the establishment of the Account(s) for the Fund on the
Schwab system. The Maintenance Fee as to the Account(s) of a Fund shall continue
to be paid as long as there are any shares held in the Account(s). The
Maintenance Fee shall be paid by wire transfer within thirty (30) days after
Fund Company's receipt of the invoice. Such wire transfers shall be separate
from wire transfers of redemption proceeds or distributions under this
Agreement.
b. The Maintenance Fee as to the Account(s) for a Fund is $1,000 per
full month of establishment on Schwab's system since the previous Assessment
Date unless the assets held in the Account(s) for the Fund are in excess of $5
million on the Assessment Date. If the assets held in the Account(s) for a Fund
are in excess of $5 million on the Assessment Date, then the Maintenance Fee as
to the Account(s) for the Fund for such period is $0.
c. For purposes of this calculation, the value of the shares of each
Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any Assessment Date unless such error is corrected
and the corrected net asset value per share is reported to Schwab before 5
o'clock, p.m., San Francisco time, on the next business day after the Assessment
Date to which the error relates. For purposes of this Exhibit, a "Business Day"
is any day the New York Stock Exchange is open for trading.
<PAGE> 4
CHARLES SCHWAB
MUTUAL FUND MARKETPLACE(R)
Exhibit B
Fund Information
This exhibit must be completed for each Fund participating in Schwab's Mutual
Fund Marketplace(R).
A. General Information
1. a. Name of Fund Company: Roulston Funds
--------------
b. Name of Fund: Roulston Emerging Growth Fund
-----------------------------
c. Name of family of funds (if applicable)
-----------------------
d. Inception date of Fund
----------------------------------------
2. The investment objective of the Fund is (circle one)
NOTE: IF THERE IS A DIFFERENCE, OBJECTIVE IN PARENTHESIS INDICATES
OBJECTIVE THAT WILL APPEAR IN MUTUAL FUNDS PERFORMANCE GUIDE(R).
EQUITY FUNDS
a. Small Capitalization Growth
b. Small Capitalization Value
c. Small Capitalization Blend
d. Medium Capitalization Growth
e. Medium Capitalization Value
f. Medium Capitalization Blend
g. Large Capitalization Growth
h. Large Capitalization Value
i. Large Capitalization Blend
j. Index.
k. Precious Metals/Gold
1. Specialty/Sector
m. Foreign Stock
n. World Stock
o. European Stock
p. Japan Stock
q. Pacific Stock
r. Diversified Pacific Stock
s. Latin America
t. Diversified Emerging Markets
<PAGE> 5
If you circled One of the categories above, your investment philosophy is based
on: (circle one)
a. Value
b. Growth
HYBRID FUNDS
a. Domestic Hybrid
b. International Hybrid
TAXABLE BOND FUNDS
a. Ultra-Short-Term Corporate Bond
b. Short-Term Corporate Bond
c. Intermediate-Term Corporate Bond
d. Long-Term Corporate Bond
e. Short-Term Government Bond
f. Intermediate-Term Government Bond
g. Long-Term Government Bond
h. High Yield Bond
i. Convertible Bonds
j. Multi-Sector Bonds
k. International Bonds
MUNICIPAL BOND FUNDS
a. Muni (short-term)
b. Muni (intermediate-term)
c. Muni (long-term)
d. Muni Single-State (short-term)
e. Muni Single-State (long-term)
Please describe the fund's investment orientation in 200 characters or less.
This information will be used in the Charles Schwab Funds Performance Guide and
the internal mutual fund screen accessed by our registered representatives.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Please provide the Schwab Omnibus Account Number(s) for this fund.
-----------------------------------------------------------------------
4. Cusip Number
-----------------------------------------------------------
5. NASDAQ Quote Symbol
----------------------------------------------------
6. Does the Fund provide daily quotations to quotation vendors?
(yes or no)
------------------------------------------------------------
<PAGE> 6
7. Is Fund price listed in the Wall Street Journal? (yes or no)
-----------------------------------------------------------------------
8. Assets in Fund ($) (as of date)
----------------- -----------------------
9. Number of Shareholders (as of date)
---------------- --------------------
10. We will be using Schwab's minimum investment requirement if the Fund's
minimums are less. Schwab's Brokerage Account minimums are $2500 for
initial investments and $500 for subsequents. Schwab's IRA account
minimums are $1000 for initial investments and $500 for subsequents.
Schwab's custodial account minimums are $1000 for initial investments
and $100 for subsequents.
11. Does the Fund impose any load or other charges that result in different
prices for purchases and redemptions? (yes or no)
----------------------
If yes, please indicate the type and amount of charges incurred when
purchasing or redeeming shares.
a. Front-end load (yes or no) If yes, %
---------- ------------
b. Back-end load (yes or no) If yes, %
--------- --------------
c. Is back-end load a contingent deferred load? (yes or no)
-----------------------------------------------------------
If yes, please explain
----------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
d. Redemption fee (yes or no) If yes, %
----------- -----------
e. Is redemption fee based on age? (yes or no)
----------------
If yes, please explain
----------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
f. 12b-1 fee (yes or no) If yes, %
------------- --------------
12. If the Fund charges loads, are there any privileged accounts (such as
accounts managed by an investment advisor or accounts for employee
trusts, pension, profit-sharing, or other employee benefit plans that
qualify under Sections 401, 403(b)(7), or 457 of the Internal Revenue
Code) that are not subject to a sales charge? (yes or no)
--------------
<PAGE> 7
If yes, please list those accounts, their requirements and
their special privileges
--------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
13. Schwab places its usual customer purchase orders in dollars at the
Fund. On an exception basis, is it necessary to place orders in shares
to reconcile share differences. Does the Fund allow purchase orders in
shares? (yes or no)
----------------------------------------------------
Does the Fund allow redemption orders in dollars? (yes or no)
----------
14. Does the Fund and/or the transfer agent charge any special fees,
outside of wiring fees, in connection with any transaction?
(yes or no)
------------------------------------------------------------
If yes, please explain
-------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
15. Will Schwab be allowed to place telephone purchases and redemptions?
(yes or no) If yes, where can the language in the prospectus be located
that allows for telephone transactions? (page number)
----------- --------
16. Are there limits on the number of redemptions or round trips among
funds in fund family? (yes or no)
--------------------------------------
If answer to 16 is yes, Fund Company agrees 1) to waive those
limits for investors purchasing and redeeming Fund shares
through Schwab, and 2) to adequately disclose in its
prospectus the Fund's ability to waive these limits.
17. Does the Fund offer any exchange transaction privileges?
(yes or no )
-----------------------------------------------------------
If yes, is there a fee charged for this transaction?
(yes or no )
-----------------------------------------------------------
If yes, please explain
-------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
18. Does the Fund reserve the right to redeem in kind? (yes or no)
---------
If no, please skip to # 19. If yes, please answer the following:
a. Where can the language in the prospectus disclosing the
reservation of the right to redeem in kind be located? (page
number)
-------------------------------------------------------
b. Has the Fund filed an election on Form N-18F-l with the SEC
limiting its right to redeem in kind? (yes or no)
-------------
<PAGE> 8
19. Is the Fund qualified for sale in all 50 states and the District of
Columbia? (yes or no)
--------------------------------------------------
If no, please list those states where share of the Fund cannot be
offered for sale or sold.
----------------------------------------------
Is the Fund qualified for sale in Puerto Rico (yes or no)
--------------
Has the Fund authorized the sale of its shares in Virgin Islands?
(yes or no)
------------------------------------------------------------
If yes, please list and explain any restriction on such sale.
----------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Is the Fund qualified for sale in any other U.S. territory
(yes or no)
------------------------------------------------------------
If yes, please list those territories
----------------------------------
20. Is the Fund registered for sale in any foreign country? (yes or no)
----
If yes, please list
----------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Are there any restrictions on such sales? (yes or no)
------------------
If yes, please explain
-------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
THE FUND AGREES TO IMMEDIATELY NOTIFY SCHWAB OF ANY CHANGES TO THE
ABOVE REGISTRATION INFORMATION.
21. Does the Fund prospectus contain the disclosure that a broker may
charge a transaction fee if shares are purchased and/or redeemed
through a broker? (yes or no)
------------------------------------------
On what page number is the disclosure mentioned?
-----------------------
22. What is the date of the current Fund prospectus?
-----------------------
23. What is the anticipated date of the next prospectus?
-------------------
24. If the prospectus incorporates more than one fund and/or class of
shares, please explain.
25. Date of the Fund supplements, If any.
26. Date of all states specific supplements, if any, and the name(s) of
each state.
-----------------------------------------------------------------------
<PAGE> 9
B. Distribution Information
Questions 81-85 should be completed for all funds.
1. How many decimal places is the dividend rate?
2. At what interval in which month(s) does the fund pay dividends (i.e.,
monthly, quarterly, semi-annually, annually etc.)?
a. Are distributions declared and paid on a regular schedule?
(yes or no)
---------------------------------------------------
If so, what is the schedule used to determine future
payments?
---------------------------------------------------
---------------------------------------------------
c. On what date are reinvested dividend shares posted to
accounts? (ex-date, payable date, other?)
3. Does the Fund pay its capital gain in December? (yes or no)
------------
If no, in what month is it paid?
---------------------------------------
4. Are distributions reinvested at the net asset value or public offering
price?
5. At what day's price is dividend reinvestment calculated (ex-date,
payable date, other?)
a. What time of day is the reinvestment available?
C. Daily Dividend Fund Information
Questions C1-C12 are for daily dividend funds only.
1. Distribution Accrual Period: For each dividend accrual period,
dividends are accrued beginning on the______ day of the ______
(month/quarter) and ending on the _____ day of the (month/quarter).
2. Distribution Payable Date: On what day of the month arc dividends
payable?
3. Daily Rate: To what number of decimal places is the daily dividend rate
calculated:
------------------------------------------------------------
At what time of day is the daily dividend rates available?
-------------
<PAGE> 10
4. Does the Fund compound daily?
------------------------------------------
5. Purchases begin accruing dividends on which days? (trade date plus one
calendar day, trade date plus one business day, settlement date,
settlement date plus one, other)
---------------------------------------
-----------------------------------------------------------------------
6. Redemptions accrue dividends up to and including which date? (trade
date minus One calendar day trade date minus one business day, trade
date, settlement date)
-------------------------------------------------
7. Does the Fund process weekend cumulative rates on Friday or Monday?
-----------------------------------------------------------------------
8. Does the Fund split its weekend rate (Friday/Saturday, Sunday/Monday)?
-----------------------------------------------------------------------
9. If the accrual period ends on a weekend or holiday. how does this
affect the Fund's accrual period?
--------------------------------------
10. At what day's price is dividend reinvestment calculated (payable,
other)?
----------------------------------------------------------------
11. On which day of the Fund's accrual period do reinvested dividends and
capital gains begin accruing interest? (payable, payable date plus one
calendar day, payable date plus one business day)
----------------------
12. On a transfer of shares from an individual account to Schwab's omnibus
account, does the accrual: (Check appropriate item)
a. _____ Follow the transferred shares
b. _____ Remain with the direct customer account as an accrual and
reinvested the next at the next payable date
c. _____ Remain at the customer account as an accrual to be paid in
cash at the next payable date
d. _____ Other (please explain)
----------------------------------------
<PAGE> 1
EXHIBIT 99(e)(iv) - PART 1
SERVICES AGREEMENT
This Agreement is made as of July 31, 1997, between Charles Schwab &
Co., Inc. ("Schwab"), a California corporation, each registered investment
company ("Fund Company " ) executing this Agreement, on its own behalf and on
behalf of each of its series or classes of shares listed on Schedule I, as
amended from time to time (such series or classes being referred to as the
"Fund(s)"), and each Fund Affiliate (defined below) that has executed this
Agreement. Fund Company and each Fund Affiliate are collectively referred to
herein as "Fund Parties." In the event that there are no series or classes of
shares listed on Schedule I, the term "Fund(s)" shall mean "Fund Company" .
WHEREAS Fund Affiliate is either (i) an investment adviser to or
administrator for the Funds and/or (ii) the principal underwriter or distributor
for the Funds.
WHEREAS Fund Parties wish to have Schwab perform certain recordkeeping,
shareholder communication, and other services for each Fund; and
WHEREAS Schwab is willing to perform such services on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows :
1. SERVICES
a. During the term of this Agreement, Schwab shall perform the
services set forth on Exhibit A hereto, as such exhibit may be amended from time
to time by mutual consent of the parties (the "Services").
b. The parties agree that the Operating Agreement, dated as of
October 25, 1996, between Schwab and Fund Company, as amended from time to time
("Operating Agreement"), is incorporated herein by this reference. In processing
purchase, redemption, transfer and exchange orders placed by Schwab on behalf of
its customers, and in order to facilitate Schwab's performance of Services, all
terms and conditions of the Operating Agreement shall be binding as between
Schwab and Fund Parties, and the references to Fund Company therein shall be
deemed to mean Fund Parties for the purposes of this Agreement. In the event of
any inconsistency between the Operating Agreement and this Agreement, this
Agreement shall control.
2. FEES
For the Services, Schwab shall receive a fee (the "Fee") which
shall be calculated and paid in accordance with Exhibit B hereto.
Schedule II reflects the portion of the Fee that each Fund Party has
agreed, as between them, to pay. Should Exhibit A be amended to revise
the Services, the parties shall also amend Exhibit B and Schedule II,
if necessary, in order to reflect any changes in the Fee.
3. TRANSACTION CHARGES
The parties acknowledge and agree that Schwab may collect
transaction fees from certain customers (including" Active Traders," as
Schwab may define that term) for certain services and from other
customers upon such other customers , redemption of certain shares.
<PAGE> 2
4. INDEMNIFICATION
a. Schwab shall indemnify and hold harmless Fund Parties and
their directors or trustees, officers, employees, and agents ("Indemnified
Parties") from and against any and all losses, claims, liabilities and expenses
(including reasonable attorney's fees) ("Losses") incurred by any of them
arising out of (i) Schwab's dissemination of information regarding Fund Parties
or a Fund that contains an untrue statement of material fact or any omission of
a material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading and that was not
published or provided to Schwab by or on behalf of Fund Company or its
affiliated persons (" Affiliates " ) as defined under the Investment Company Act
of 1940, as amended (the " 1940 Act"), or accurately derived from information
published or provided by or on behalf of Fund Company or any Affiliate, (ii) any
breach by Schwab of any representation, warranty or agreement contained in this
Agreement, or (iii) any willful misconduct or negligence by Schwab in the
performance of, or failure to perform, its obligations under this Agreement,
except to the extent such Losses are caused by Fund Company or Fund's breach of
this Agreement or Fund Company or Fund's willful misconduct or negligence in the
performance, or failure to perform, its obligations under this Agreement. This
Section 4(a) shall survive termination of this Agreement.
b. In any event, no party shall be liable for any special,
consequential or incidental damages.
5. ROLE AND RELATIONSHIP OF SCHWAB
The parties acknowledge and agree that the Services under this
Agreement are recordkeeping, shareholder communication and related
services only and are not the services of an underwriter or a principal
underwriter of any Fund within the meaning of the Securities Act of
1933, as amended, or the 1940 Act. This Agreement does not grant Schwab
any right to purchase shares from any Fund (although it does not
preclude Schwab from purchasing any such shares), nor does it
constitute Schwab an agent of Fund Parties or any Fund for purposes of
selling shares of any Fund to any dealer or the public. To the extent
Schwab is involved in the purchase of shares of any Fund by Schwab's
customers, such involvement will be as agent of such customer only.
6. INFORMATION TO BE PROVIDED
Fund Parties shall provide to Schwab prior to the
effectiveness of this Agreement or as soon thereafter as practicable,
two (2) copies of the then-current prospectus and statement of
additional information of each Fund. Fund Party shall provide Schwab
with written copies of any amendments to or changes in the Fund's
prospectus or statement of additional information immediately upon
their effective date.
<PAGE> 3
7. REPRESENTATIONS AND WARRANTIES
a. Each Fund Party represents and warrants that it has
obtained certified resolutions of its board of directors authorizing
such Fund Party to enter into this Agreement.
b. Each Fund Party represents and warrants that the person
signing this Agreement on its behalf is an officer authorized to execute this
Agreement on behalf of such Fund Party.
8. NOTICES
All notices required by this Agreement ( excluding the
Operating Agreement) shall be in writing and
delivered personally or sent by fIrst class mail.
Such notices will be deemed to have been received as
of the earlier of actual physical receipt or three
(3) days after deposit, first class postage prepaid,
in the United States mail. All such notices shall be
made:
if to Schwab, to: Charles Schwab & Co., Inc.
101 Montgomery Street San Francisco, CA 94104
Attention: Matthew L. Sadler
Vice President/Mutual Funds
with a copy to: General Counsel, at the same address; if to Fund Party,
to the address given below in the signature block.
9. NONEXCLUSIVITY
Each Party acknowledges that the other may enter into
agreements similar to this Agreement with other parties for the
performance of services similar to those to be provided under this
Agreement, unless otherwise agreed to in writing by the parties.
10. ASSIGNABILITY
This Agreement is not assignable by any party without the
other parties' prior written consents and any attempted assignment in
contravention hereof shall be null and void; provided, however, that
Schwab may, without the consent of Fund Parties, assign its rights and
obligations under this Agreement to any Affiliate that controls, is
controlled by, or is under common control with Schwab.
11. EXHIBITS AND SCHEDULES: ENTIRE AGREEMENT
All Exhibits and Schedules to this Agreement, as they may be
amended from time to time, are by this reference incorporated into and
made a part of this Agreement. This Agreement (including the Exhibits
and Schedules hereto) , together with the Operating Agreement,
<PAGE> 4
constitute the entire agreement between the parties as to the subject
matter hereof and supersede any and all agreements , representations
and warranties, written or oral, regarding such subject matter made
prior to the time at which this Agreement has been executed and
delivered by Schwab and Fund Parties .
12. NO WAIVER
The failure of either party to insist upon exercising any
right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such party's right to assert or rely
upon such provision or right in any other instance.
13. AMENDMENT
This Agreement and the Exhibits and Schedules hereto may be
amended only by a writing executed by each party hereto that is to be
bound by such amendment.
14. GOVERNING LAW
This Agreement shall be governed by and interpreted under the
laws of the State of California, applicable to contracts between
California residents entered into and to be performed entirely within
the state.
15. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which together shall
constitute one and the same instrument.
16. EFFECTIVENESS OF AGREEMENT: TERMINATION
a. Upon Schwab's acceptance of Schedule I, as amended from time
to time, the effective date of this Agreement as to any Fund shall be the later
of the date on which this Agreement is made or the date set forth opposite the
name of the Fund on Schedule I.
b. This Agreement may be terminated as to a Fund by any party (i)
upon ninety (90) days' written notice to the other parties or (ii) upon such
shorter notice as is required by law, order, or instruction by a court of
competent jurisdiction or a regulatory body or self-regulatory organization with
jurisdiction over the terminating party or (iii) immediately, effective on the
day following the termination of any plan of distribution/shareholder servicing
("Rule 12b-1 Plan") adopted and maintained pursuant to Rule 12b-1 under the 1940
Act by any Fund that has a Rule 12b-1 Plan in effect as of the effective date of
this Agreement, provided that a portion of the Fee is paid pursuant to the Rule
12b-1 Plan.
c. After the date of termination as to a Fund, Fund Parties will
not be obligated to pay the Fee with respect to any shares of the Fund that are
first held in Schwab customer accounts after the date of such termination.
However , notwithstanding any such termination, Fund Affiliates will remain
obligated to pay Schwab the Fee as to each share of the Fund that was considered
in the calculation of the Fee as of the date of termination (a "Pre- Termination
Share" ), for so long as such Pre- Termination Share is held in any Schwab
brokerage account and Schwab continues to perform substantially all of the
Services as to such Pre- Termination Share. Further , for so long as Schwab
continues to perform the Services as to any Pre- Termination Shares, this
Agreement, as between Schwab and Fund Affiliates, will otherwise remain in full
force and effect as to such Pre- Termination Shares. Fund Affiliates
<PAGE> 5
shall reimburse Schwab promptly for any reasonable expenses Schwab incurs in
effecting any termination of this Agreement, including delivery to a Fund Party
of any records, instruments, or documents reasonably requested by the Fund
Party.The parties hereto agree that, upon termination of this Agreement as to a
Fund, neither the Fund nor the Fund Company with respect to such Fund shall have
any further obligations under this Agreement whatsoever .
IN WITNESS WHEREOF, the parties have executed this Agreement by a duly
authorized representative of the parties hereto .
CHARLES SCHWAB & CO., INC. FAIRPORT FUNDS, on its own
behalf and on behalf of
each Fund Company listed on
Schedule I hereto.
By: /s/Matthews L. Sandler
----------------------
Matthew L. Sandler
Vice President/Mutual Funds By: /s/ Scott Roulston
------------------------
Name: Scott Roulston
----------------------
Date: 8/16/97
----------------------
Title: President
---------------------
Date: 7/28/97
----------------------
Address:4000 Chester Avenue
-------------------
Cleveland, OH 44103
Attn:
----------------------
ROULSTON & COMPANY ROULSTON RESEARCH CORP.
(Fund Affiliate) (Fund Affiliate)
By: /s/ Scott Roulston By: /s/ Scott Roulston
------------------------ ------------------------
Name: Scott Roulston Name: Scott Roulston
----------------------- ----------------------
Title: President Title: President
---------------------- ---------------------
Date: 7/28/97 Date: 7/28/97
----------------------- ----------------------
Address: 4000 Chester Avenue Address:4000 Chester Avenue
-------------------- -------------------
Cleveland, OH 44103 Cleveland, OH 44103
- ---------------------------- ---------------------------
Attn: Attn:
----------------------- ----------------------
<PAGE> 6
EXHIBIT A
SERVICES
1. RECORD MAINTENANCE
Schwab shall maintain the following records with respect to a
Fund for each customer who holds Fund shares in a Schwab brokerage
account:
a. Number of shares;
b. Date, price and amount of purchases and redemptions
(including dividend reinvestments) and dates and amounts of dividends
paid for at least the current year to date;
c. Name and address of the customer, including zip codes
and social security numbers or taxpayers identification numbers;
d. Records of distributions and dividend payments;
e. Any transfers of shares; and
f. Overall control records.
2. SHAREHOLDER COMMUNICATIONS
Schwab shall:
a. Provide to a shareholder mailing agent for the purpose of
mailing certain Fund-related materials the names and addresses of all
Schwab customers who hold shares of such Fund in their Schwab brokerage
accounts. The shareholder mailing agent shall be a person or entity
with whom the Fund has arranged for the distribution of certain
Fund-related material in accordance with the Operating Agreement. The
Fund-related materials shall consist of updated prospectuses and-any
supplements and amendments thereto, annual and other periodic reports,
proxy or information statements and other appropriate shareholder
communications. In the alternative, in accordance with the Operating
Agreement, Schwab may distribute the Fund-related materials to its
customers .
b. Mail current Fund prospectuses and statements of additional
information and annual and other periodic reports upon customer request
and, as applicable, with confirmation statements;
c. Mail statements to customers on a monthly basis (or, as to
accounts in which there has been no activity in a particular month, no
less frequently than quarterly) showing, among other things, the number
<PAGE> 7
of shares of each Fund owned by such customer and the net asset value
of such Fund as of a recent date;
d. Produce and mail to customers confirmation statements
reflecting purchases and redemptions of shares of each Fund in Schwab
brokerage accounts;
e. Respond to customer inquiries regarding, among other
things, share prices, account balances, dividend amounts and dividend
payment dates; and
f. With respect to Fund shares purchased by customers after
the effective date of this Agreement, provide average cost basis
reporting to the customers to assist them in preparation of income tax
returns .
3. TRANSACTIONAL SERVICES
Schwab shall communicate, as to shares of each Fund, purchase,
redemption and exchange orders reflecting the orders it receives from
its customers. Schwab shall also communicate, as to shares of each
Fund, mergers, splits and other reorganization activities.
4. TAX INFORMATION RETURNS AND REPORTS
Schwab shall prepare and file with the appropriate governmental
agencies, such information, returns and reports as are required to be so filed
for reporting (i) dividends and other distributions made, (ii) amounts withheld
on dividends and other distributions and payments under applicable federal and
state laws, rules and regulations, and (iii) gross proceeds of sales
transactions as required.
5. FUND COMMUNICATIONS
Schwab shall, on a daily basis and for each Fund, report the
number of shares on which the Fee is to be paid
pursuant to this Agreement and the number of shares on
which no such Fee is to be paid. Schwab shall also
provide each Fund with monthly summaries of reports.
Such summaries shall be expressed in both shares and
dollar amounts.
<PAGE> 8
EXHIBIT B
CALCULATION OF FEE
1. The Fee shall be calculated by multiplying the Daily Value of
Qualifying Shares (defined below) times 35 basis points per annum. The Fee shall
be computed daily and paid monthly in arrears.
2. The Daily Value of Qualifying Shares is the aggregate daily value of
all shares of the Fund held in Schwab brokerage accounts, subject to the
following exclusions ("Qualifying Shares"). There shall be excluded from the
shares (i) shares held in a Schwab brokerage account prior to the effective date
of this Agreement as to the Fund and (ii) shares first held in a Schwab
brokerage account after the termination of this Agreement as to the Fund.
3. For purposes of this Exhibit, the daily value of the shares of each
Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any day unless such error is corrected and the
corrected net asset value per share is reported to Schwab before 5 o'clock,
p.m., San Francisco time, on the first business day after the day to which the
error relates.
4. At the request of Fund Parties, Schwab shall provide, on each
business day, a statement detailing the calculation for each Fund and the
aggregate value of the Qualifying Shares of each Fund. As soon as practicable
after the end of the month, Schwab shall also provide to Fund Parties an invoice
for the amount of the Fee due for each Fund. In the calculation of such Fee,
Schwab's records shall govern unless an error can be shown in the number of
shares used in such calculation.
5. Fund Parties shall pay Schwab the Fee within thirty (30) days after
Fund Parties I receipt of such statement. Such payment shall be by wire
transfer, unless the amount thereof is less than $250. Such wire transfers shall
be separate from wire transfers of redemption proceeds or distributions under
the Operating Agreement. Amounts less than $250 may, at Fund Parties'
discretion, be paid by check.
<PAGE> 9
SCHEDULE I
TO THE SERVICES AGREEMENT
FUND COMPANY/FUND(S) EFFECTIVE DATE
Fairport Funds
Fairport Midwest Growth Fund* 7/31/97
Fairport Government & Income Fund* 7/31/97
Fairport Government Securities* 7/31/97
* Indicates that Fund is a "no-load" or "no sales
charge" Fund as defined in Rule 2830 of the Conduct
Rules of the National Association of Securities
Dealers, Inc..
SI Indicates that Fund is available only to Schwab Institutional customers.
Accepted by:
CHARLES SCHWAB & CO., INC. FAIRPORT FUNDS, on its own
behalf and on behalf of
each Fund Company listed on
Schedule I.
By:/s/ Matthew L. Sandler
----------------------
Matthew L. Sandler
Vice President Mutual Funds By: /s/ Scott Roulston
------------------------
Name: Scott Roulston
----------------------
Date: 8/16/97
----------------------
Title: President
---------------------
Date: 7/28/97
---------------------
Acknowledged by:
ROULSTON & COMPANY ROULSTON RESEARCH CORP.
(Fund Affiliate) (Fund Affiliate)
By: /s/ Scott Roulston By: /s/ Scott Roulston
------------------------- -----------------------
Name: Scott Roulston Name: Scott Roulston
------------------------- ----------------------
Title: President Title: President
------------------------ ---------------------
Date: 7/28/97 Date: 7/28/97
------------------------- ---------------------
<PAGE> 10
SCHEDULE II
TO THE SERVICES AGREEMENT
Fund Company:
Fairport Funds 0.00%
- -----------------------
(name)
Fund Affiliate:
Roulston Research Corp. 0.25%
Roulston & Company, Inc. 0.10%
- ------------------------
(name)
Fee Rate Percentage Per Annum on 0.35%
All Qualifying Shares
<PAGE> 11
EXHIBIT 99(e)(iv) - PART 2
AMENDMENT TO SERVICES AGREEMENT
This Amendment ("Amendment") is made as of October 18, 1999, by and
between Charles Schwab & Co., Inc. ("Schwab"), a California corporation, each
registered investment company ("Fund Company") executing this Amendment on its
own behalf and on behalf of its series or classes of shares ("Fund(s)") listed
On Schedule I hereto, Roulston & Company. Inc. and Roulston Research Corp. (each
a "Fund Affiliate"), and amends the Services Agreement made as of July 31, 1997,
as amended thereafter ("Services Agreement"). All capitalized terms used in the
Amendment and not defined herein shall have the meaning ascribed to them in the
Services Agreement.
WHEREAS, the parties wish to amend Exhibit B to implement a minimum
monthly Fee for each Fund for which the effective date of such Fund on Schedule
I is on or after the date on which this Amendment is made, and to implement new
Fee payment terms; and
WHEREAS, the parties wish to amend Schedule I and Schedule II to the
Services Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises set
forth below, the parties agree as follows:
1. Sections 1 and 5 of Exhibit B to the Services Agreement shall be
deleted in their entirety and the following Sections 1 and 5 shall be inserted
in lieu thereof.
1. The Fee shall be calculated each month by multiplying the
average Daily Value of Qualifying Shares (defined below) for the month
times 35 basis points per annum. Notwithstanding the foregoing, the
minimum Fee for each Fund for which the effective date of such Fund on
Schedule I is October 18, 1999, or any date thereafter, and which is
designated "MIN" on Schedule I ("MINFund"), shall be $2,000 per month
commencing with the first full month and terminating with the last full
month such Fund is effective under this Agreement. Any Maintenance Fee
set forth on Schedule II as to the Account(s) of a MIN Fund which would
otherwise be assessed under the Operating Agreement shall be waived for
any month for which this Agreement is in effect as to such Fund. The
Fee shall be billed monthly in arrears and paid in accordance with
Section 5 below.
5. The Fee is due and payable by Fund Parties upon receipt of
the invoice setting forth the Fee. Payment shall be made by wire
transfer. Such wire transfer shall be separate from wire transfers of
redemption proceeds or distributions under the Operating Agreement. The
amount of the Fee shall accrue interest from the date of the invoice,
and Schwab shall be entitled to charge Fund Parties with payment of such
accrued interest with respect to any
<PAGE> 12
outstanding amount in the event that Schwab has not received full
payment by the last business day of the month in which such invoice is
rendered. The rate of interest shall be the Federal Funds "offered"
rate for each day as published in The Wall Street Journal, and shall be
billed by Schwab in the following month's invoice. Schwab shall not be
entitled to charge Fund Parties with payment of such accrued interest
with respect to any amount for which Schwab has received payment by the
last business day of the month in which such invoice is rendered.
2. Schedule I to the Services Agreement shall be deleted in its
entirety and Schedule I attached hereto shall be inserted in lieu thereof.
3. Schedule II to the Services Agreement shall be deleted in its
entirety and Schedule II attached hereto shall be inserted in lieu thereof.
4. Except as specifically set forth herein, all other provisions of the
Services Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
CHARLES SCHWAB & CO., INC.ROULSTON FUNDS (previously named
Fairport Funds), on its own behalf and on behalf of each
By: Fund listed on Schedule I hereto.
---------------------------
Dennis P. Clark
Senior Vice President By:
Mutual Funds ------------------------
Name:
----------------------
Date:
---------------------------
Title:
---------------------
Date:
----------------------
ROULSTON RESEARCH CORP.
By:
-----------------------------
ROULSTON & COMPANY, INC.
Name:
---------------------------
By:
------------------------
Title:
--------------------------
Name:
----------------------
Date:
---------------------------
Title:
---------------------
Date:
----------------------
<PAGE> 13
SCHEDULE I
TO THE SERVICES AGREEMENT
FUND COMPANY/FUNDS EFFECTIVE DATE
Roulston Funds (previously named Fairport Funds)
Roulston Emerging Growth Fund* MIN 10/18/99
Roulston Government Securities Fund* 7/31/97
Roulston Growth & Income Fund* 7/31/97
Roulston Growth Fund* 7/31/97
Roulston International Equity Fund* MIN 10/18/99
* Indicates that Fund is a "no-load" or "no sales charge" Fund as defined
in Rule 2830 of the NASDR.
SI Indicates that Fund is available only to MFMP investors through Schwab
Institutional or another advice program offered or made available by
financial institutions clearing transactions through Schwab.
MIN Indicates that Fund is subject to the minimum monthly fee as set forth
on Exhibit B.
Accepted by:
CHARLES SCHWAB & CO., INC.ROULSTON FUNDS
(previously named Fairport Funds), on its own behalf and on behalf of
each
By: Fund listed on Schedule I
hereto.
Dennis P. Clark
Senior Vice President By:
Mutual Funds ------------------------
Name:
----------------------
Date:
--------------------
Title:
---------------------
Date:
----------------------
Acknowledged By:
ROULSTON RESEARCH CORP.
By: Acknowledged By:
------------------------- ROULSTON & COMPANY, INC.
Name:
-----------------------
By:
------------------------
Title:
----------------------
Name:
----------------------
Date:
-----------------------
Title:
---------------------
Date:
----------------------
<PAGE> 14
SCHEDULE II
TO THE SERVICES AGREEMENT
Qualifying
Shares Fee Rate Minimum Fee
Fund Company:
Roulston Funds 0 bps $__________
Fund Affiliate:
Roulston Research Corp. 25 bps $__________
Roulston & Company, Inc. 10 bps $__________
__________
Total 35 bps $2,000
<PAGE> 1
EXHIBIT 99(g)(ii)
CUSTODY AGREEMENT
<PAGE> 2
CUSTODY AGREEMENT
-----------------
Agreement made as of this 1st day of July, 1999, between ROULSTON
FUNDS, an Ohio business trust organized and existing under the laws of the State
of Ohio, having its principal office and place of business at 4000 Chester
Avenue, Cleveland, Ohio 44103 (hereinafter called the "Fund"), and THE BANK OF
NEW YORK, a New York corporation authorized to do a banking business, having its
principal office and place of business at One Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
WITNESSETH:
WHEREAS, the Fund represents that pursuant to the Services Agreement
(as hereinafter defined) between First Data Investors Services Group, Inc.
("FDISG") and the Fund, FDISG (a) has agreed to perform certain administrative
functions which may include the functions of administrator, transfer agent and
accounting services agent and (b) has been appointed by the Fund to act as its
agent in respect of certain transactions contemplated in this Agreement; and
WHEREAS, the Fund represents that (a) FDISG has agreed to act as Fund's
agent in respect of certain transactions contemplated in this Agreement and (b)
the Custodian is authorized and directed to rely upon and follow Certificates
and Instructions given by FDISG, the Fund's agent, in respect of transactions
contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Administrator" shall mean FDISG and such successors or permitted
assigns as may succeed and perform its duties under the Services Agreement.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
<PAGE> 3
-2-
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Officers, and the term Certificate shall also include
Instructions communicated to the Custodian by the Administrator.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S.
<PAGE> 4
-3-
Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an agreed upon
price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contract.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Officer and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant
<PAGE> 5
-4-
Treasurer, and any other person or persons, including officers or employees of
the Administrator, whether or not any such other person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
listed in the Certificate annexed hereto as Appendix A or such other Certificate
as may be received by the Custodian from time to time.
20. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably believed
by the Custodian to be an Officer.
22. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
24. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
25. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
<PAGE> 6
-5-
26. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the Fund
and listed on Appendix B hereto as amended from time to time.
27. "Services Agreement" shall mean that certain separate agreement
entitled "Services Agreement" dated as of July 1, 1999 between the Fund and
FDISG.
28. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.
29. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
30. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by a Series during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by a Series, at any time during the period of
this Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is
<PAGE> 7
-6-
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Trustees, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, the Series account from which payment
is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
<PAGE> 8
-7-
3. Promptly after the close of business on each day, the Custodian
shall furnish the Administrator with confirmations and a summary, on a per
Series basis, of all transfers to or from the account of the Fund for a Series,
either hereunder or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securities are transferred
to the account of the Fund for a Series, the Custodian shall also by book-entry
or otherwise identify as belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of the Custodian (or its
nominee) or shown on the Custodian's account on the books of the Book-Entry
System or the Depository. At least monthly and from time to time, the Custodian
shall furnish the Administrator with a detailed statement, on a per Series
basis, of the Securities and money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish or cause to be furnished to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository any Securities which it may hold
hereunder and which may from time to time be registered in the name of the Fund.
The Custodian shall hold all such Securities specifically allocated to a Series
which are not held in the Book-Entry System or in the Depository in a separate
account in the name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall promptly and diligently with respect
to all Securities held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) collect all income due or payable;
(b) present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix C annexed hereto, which may be amended at
any time by the Custodian without the prior notification or consent of the Fund;
(c) present for payment and collect the amount payable upon all
Securities which mature;
<PAGE> 9
-8-
(d) surrender Securities in temporary form for definitive Securities;
(e) execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
(f) hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any conversion privilege and receive and hold hereunder specifically allocated
to such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund or any Series thereof; and
(e) present for payment and collect the amount payable upon Securities
not described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
<PAGE> 10
-9-
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing-out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing-out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin Account
and payments with respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are available, the
Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver or cause the Administrator to deliver to the Custodian (i)
with respect to each purchase of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate or Oral Instructions, specifying with respect
to each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c)
<PAGE> 11
-10-
the number of shares or the principal amount purchased and accrued interest, if
any; (d) the date of purchase and settlement; (e) the purchase price per unit;
(f) the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of the money held for
the account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver or cause the Administrator to
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, a Certificate, and (ii) with respect to each sale
of Money Market Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the
total amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate against
payment upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each Option purchased: (a) the Series to
which such Option is specifically allocated; (b) the type of Option (put or
call); (c) the name of the issuer and the title and number of shares subject to
such Option or, in the case of a Stock Index Option, the stock index to which
such Option relates and the number of Stock Index Options purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in connection with such
purchase; (h) the name of the Clearing Member through whom such Option was
purchased; and (i) the name of the broker to whom payment is to be made. The
Custodian shall pay, upon receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered
<PAGE> 12
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nominee of the Custodian) as custodian for the Fund, out of money held for the
account of the Series to which such Option is to be specifically allocated, the
total amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically allocated; (b) the
type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options sold; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such sale; and (h) the
name of the Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph 1 of this
Article with respect to such Option against payment to the Custodian of the
total amount payable to the Fund, provided that the same conforms to the total
amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Call Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Call Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing Member through
whom such Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of the money
held for the account of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the total amount
payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Put Option: (a) the Series to which such Put Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing Member through
whom such Put Option was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or direct
<PAGE> 13
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the Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series to which such Stock
Index Option was specifically allocated; (b) the type of Stock Index Option (put
or call); (c) the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such exercise;
and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the Series for which
such Covered Call Option was written; (b) the name of the issuer and the title
and number of shares for which the Covered Call Option was written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through whom the premium is to
be received. The Custodian shall deliver or cause to be delivered, in exchange
for receipt of the premium specified in the Certificate with respect to such
Covered Call Option, such receipts as are required in accordance with the
customs prevailing among Clearing Members dealing in Covered Call Options and
shall impose, or direct the Depository to impose, upon the underlying Securities
specified in the Certificate specifically allocated to such Series such
restrictions as may be required by such receipts. Notwithstanding the foregoing,
the Custodian has the right, upon prior written notification to the Fund, at any
time to refuse to issue any receipts for Securities in the possession of the
Custodian and not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate instructing
the Custodian to deliver, or to direct the Depository to deliver, the Securities
subject to such Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing Member
to whom the underlying Securities are to be delivered; and (d) the total amount
payable to the Fund upon such delivery. Upon the return and/or cancellation of
any receipts delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the underlying Securities as
specified in the Certificate against payment of the amount to be received as set
forth in such Certificate.
<PAGE> 14
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8. Whenever the Fund writes a Put Option, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the Series for which such Put Option was
written; (b) the name of the issuer and the title and number of shares for which
the Put Option is written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Put Option is written; (g) the name of the Clearing Member through whom the
premium is to be received and to whom a Put Option guarantee letter is to be
delivered; (h) the amount of cash, and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; and (i) the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the Certificate, issue a
Put Option guarantee letter substantially in the form utilized by the Custodian
on the date thereof, and deliver the same to the Clearing Member specified in
the Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying: (a) the
Series to which such Put Option was written; (b) the name of the issuer and
title and number of shares subject to the Put Option; (c) the Clearing Member
from whom the underlying Securities are to be received; (d) the total amount
payable by the Fund upon such delivery; (e) the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to be withdrawn
from the Collateral Account for such Series; and (f) the amount of cash and/or
the amount and kind of Securities, specifically allocated to such Series, if
any, to be withdrawn from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar document issued by
the Custodian in connection with such Put Option, the Custodian shall pay out of
the money held for the account of the Series to which such Put Option was
specifically allocated the total amount payable to the Clearing Member specified
in the Certificate as set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the Series for which
such Stock Index Option was written; (b) whether such Stock Index Option is a
put or a call; (c) the number of options written; (d) the stock index to which
such Option relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such Option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; (j) the amount of cash and/or the
amount and kind of
<PAGE> 15
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Securities, if any, specifically allocated to such Series to be deposited in the
Collateral Account for such Series; and (k) the amount of cash and/or the amount
and kind of Securities, if any, specifically allocated to such Series to be
deposited in a Margin Account, and the name in which such account is to be or
has been established. The Custodian shall, upon receipt of the premium specified
in the Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) such information as may be necessary to identify
the Stock Index Option being exercised; (c) the Clearing Member through whom
such Stock Index Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to the Fund; (e) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Margin Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for such
Series and the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account for such Series. Upon the return
and/or cancellation of the receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay out of the money held for the
account of the Series to which such Stock Index Option was specifically
allocated to the Clearing Member specified in the Certificate the total amount
payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate specifying with
respect to the Option being purchased: (a) that the transaction is a Closing
Purchase Transaction; (b) the Series for which the Option was written; (c) the
name of the issuer and the title and number of shares subject to the Option, or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of the Clearing Member to
whom the premium is to be paid; and (j) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account for such Series. Upon
the Custodian's payment of the premium and the return and/or cancellation of any
receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to
the Option being liquidated through the Closing Purchase
<PAGE> 16
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Transaction, the Custodian shall remove, or direct the Depository to remove, the
previously imposed restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Futures Contract (or with respect to
any number of identical Futures Contract(s)): (a) the Series for which the
Futures Contract is being entered; (b) the category of Futures Contract (the
name of the underlying stock index or financial instrument); (c) the number of
identical Futures Contracts entered into; (d) the delivery or settlement date of
the Futures Contract(s); (e) the date the Futures Contract(s) was (were) entered
into and the maturity date; (f) whether the Fund is buying (going long) or
selling (going short) on such Futures Contract(s); (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer, or futures
commission merchant through whom the Futures Contract was entered into; and (i)
the amount of fee or commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the money specifically allocated to such Series of the
fee or commission, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding
<PAGE> 17
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Futures Contract, shall be received and dealt with by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and the Series to
which the same relates; (b) with respect to a Stock Index Futures Contract, the
total cash settlement amount to be paid or received, and with respect to a
Financial Futures Contract, the Securities and/or amount of cash to be delivered
or received; (c) the broker, dealer, or futures commission merchant to or from
whom payment or delivery is to be made or received; and (d) the amount of cash
and/or Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying:
(a) the items of information required in a Certificate described in paragraph 1
of this Article, and (b) the Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated to such Series of the fee
or commission, if any, specified in the Certificate and delete the Futures
Contract being offset from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein, and make such withdrawals from the Senior
Security Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund or the
Administrator specifying: (a) the name of the futures commission merchant; (b)
the specific cash and Securities to be delivered; (c) the date of such delivery;
and (d) the date of the agreement between the Fund and such futures commission
merchant entered pursuant to Rule 17f-6 under the Investment Company Act 1940,
as amended. Each delivery of such a Certificate by the Fund shall constitute (x)
a representation and warranty by the Fund that the Rule 17f-6 agreement has been
duly authorized, executed and delivered by the Fund and the futures commission
merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the
Custodian shall not be liable for the acts or omissions of any such futures
commission merchant.
<PAGE> 18
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ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Futures Contract Option:
(a) the Series to which such Option is specifically allocated; (b) the type of
Futures Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the expiration date; (e)
the exercise price; (f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the name of the broker or
futures commission merchant through whom such option was purchased; and (i) the
name of the broker or futures commission merchant to whom payment is to be made.
The Custodian shall pay out of the money specifically allocated to such Series,
the total amount to be paid upon such purchase to the broker or futures
commissions merchant through whom the purchase was made, provided that the same
conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to each such sale: (a) Series to which such Futures Contract Option was
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option; (d) the
date of sale; (e) the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of the broker or
futures commission merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being closed against
payment to the Custodian of the total amount payable to the Fund, provided the
same conforms to the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option (put or call) being exercised; (c) the type
of Futures Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission merchant through whom
the Futures Contract Option is exercised; (f) the net total amount, if any,
payable by the Fund; (g) the amount, if any, to be received by the Fund; and (h)
the amount of cash and/or the amount and kind of Securities to be withdrawn in
the Senior Security Account for such Series. The Custodian shall make, out of
the money and Securities specifically allocated to such Series, the payments, if
any, and the withdrawals, if any, into the Senior Security Account as specified
in the
<PAGE> 19
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Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series for
which such Futures Contract Option was written; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the exercise price; (f)
the premium to be received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in the Senior Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of the money and
Securities specifically allocated to such Series the deposits into the Senior
Security Account, if any, as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon its receipt of the
net total amount payable to the Fund, if any, specified in such Certificate make
the payments, if any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying: (a) the Series to which
such Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount and
kind of Securities and/or cash to be withdrawn from or deposited in, the Senior
Security Account
<PAGE> 20
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for such Series, if any. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the Certificate, make out of
the money and Securities specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to the Futures Contract Option being
purchased: (a) the Series to which such Option is specifically allocated; (b)
that the transaction is a closing transaction; (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein, and (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund or the
Administrator specifying: (a) the name of the futures commission merchant; (b)
the specific cash and Securities to be delivered; (c) the date of such delivery;
and (d) the date of the agreement between the Fund and such futures commission
merchant entered pursuant to Rule 17f-6 under the Investment Company Act 1940,
as amended. Each delivery of such a Certificate by the Fund shall constitute (x)
a representation and warranty by the Fund that the Rule 17f-6 agreement has been
duly authorized, executed and delivered by the Fund and the futures commission
<PAGE> 21
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merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the
Custodian shall not be liable for the acts or omissions of any such futures
commission merchant.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale was made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or principal amount sold, and accrued interest or dividends, if any; (d) the
dates of the sale and settlement; (e) the sale price per unit; (f) the total
amount credited to the Fund upon such sale, if any; (g) the amount of cash
and/or the amount and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has been or is to be
established; (h) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in a Senior Security Account, and (i) the name of the
broker through whom such short sale was made. The Custodian shall upon its
receipt of a statement from such broker confirming such sale and that the total
amount credited to the Fund upon such sale, if any, as specified in the
Certificate is held by such broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Senior Security Account specified in
the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to each such closing-out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
money held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
<PAGE> 22
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ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder, the Fund
shall deliver or cause the Administrator to deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions specifying: (a) the Series for
which the Reverse Repurchase Agreement is entered; (b) the total amount payable
to the Fund in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer or financial
institution through or with whom the Reverse Repurchase Agreement is entered;
(d) the amount and kind of Securities to be delivered by the Fund to such broker
or dealer or financial institution; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in a Senior
Security Account for such Series in connection with such Reverse Repurchase
Agreement. The Custodian shall, upon receipt of the total amount payable to the
Fund specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer or financial institution, and the deposits, if any, to the
Senior Security Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall deliver or cause the
Administrator to deliver a Certificate or, in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker
or dealer or financial institution with or through whom the Reverse Repurchase
Agreement is to be terminated; and (1) the amount of cash and/or the amount and
kind of Securities to be withdrawn from the Senior Securities Account for such
Series. The Custodian shall, upon receipt of the amount and kind of Securities
to be received by the Fund specified in the Certificate or Oral Instructions,
make the payment to the broker or dealer or financial institution, and the
withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to each such loan: (a) the
<PAGE> 23
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Series to which the loaned Securities are specifically allocated; (b) the name
of the issuer and the title of the Securities, (c) the number of shares or the
principal amount loaned, (d) the date of loan and delivery, (e) the total amount
to be delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately identified,
and (f) the name of the broker, dealer, or financial institution to which the
loan was made. The Custodian shall deliver the Securities thus designated to the
broker, dealer or financial institution to which the loan was made upon receipt
of the total amount designated as to be delivered against the loan of
Securities. The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds and may deliver Securities in
accordance with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each such loan termination
and return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned; (c) the number of shares or the principal amount to
be returned; (d) the date of termination; (e) the total amount to be delivered
by the Custodian (including the cash collateral for such Securities minus any
offsetting credits as described in said Certificate); and (f) the name of the
broker, dealer, or financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were loaned and upon
receipt thereof shall pay, out of the money held for the account of the Fund,
the total amount payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Certificate fails to specify the Series, the name of the
issuer, the title and the number of shares or the principal amount of any
particular Securities to be deposited by the Custodian into, or withdrawn from,
a Senior Securities Account, the Custodian shall be under no obligation to make
any such deposit or withdrawal and shall so notify the Administrator.
<PAGE> 24
-23-
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Administrator with a statement with respect to
such Collateral Account specifying the amount of cash and/or the amount and kind
of Securities held therein. No later than the close of business next succeeding
the delivery to the Fund of such statement, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying the then
market value of the Securities described in such statement. In the event such
then market value is indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option guarantee letter or similar document, the
Fund shall promptly specify or cause the Administrator to promptly specify in a
Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
<PAGE> 25
-24-
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to deliver to the
Custodian a copy of the resolution of the Board of Trustees of the Fund,
certified by the Secretary, or any Assistant Secretary, either (i) setting forth
with respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the money held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause
the Administrator to deliver to the Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price; and
(b) the amount of money to be received by the Custodian for the sale of
such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the transfer agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in
<PAGE> 26
-25-
connection with such issuance upon the receipt of a Certificate specifying the
amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the transfer agent of an advice setting forth the
Series and number of Shares received by the transfer agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the transfer agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate delivered
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series (except a borrowing for investment or for temporary or
emergency purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a loan made by the Custodian to
the Fund for such Series payable on demand and shall bear interest from the date
incurred at a rate per annum (based on a 360-day year for the actual number of
days involved) equal to 1/2% over Custodian's prime commercial lending rate in
effect from time to time, such rate to be adjusted on the
<PAGE> 27
-26-
effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum, or at such other rate per annum, if any, as
the Fund and the Custodian may agree upon in writing from time to time. In
addition, the Fund hereby agrees that the Custodian shall have a continuing lien
and security interest in and to any property specifically allocated to such
Series at any time held by it for the benefit of such Series or in which such
Series may have an interest which is then in the Custodian's possession or
control or in possession or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole discretion, at any time
to charge any such overdraft or indebtedness together with interest due thereon
against any balance of account standing to such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that on each Business
Day on which either it intends to enter a Reverse Repurchase Agreement and/or
otherwise borrow from a third party, or which next succeeds a Business Day on
which at the close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City time,
advise the Custodian, in writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur any indebtedness not so
specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund will cause to be promptly
delivered to the Custodian a Certificate specifying with respect to each such
borrowing: (a) the Series to which such borrowing relates; (b) the name of the
bank, (c) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such collateral shall
be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from
<PAGE> 28
-27-
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the Custodian to the Fund
in order for the Fund to transmit Instructions to the Custodian (the
"Software"), the Custodian grants to the Fund a personal, nontransferable and
nonexclusive license to use the Software solely for the purpose of transmitting
Instructions to, and receiving communications from, the Custodian in connection
with its account(s). The Fund shall use the Software solely for its own internal
and proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Fund acknowledges that the Custodian
and its suppliers have title and exclusive proprietary rights to the Software,
including any trade secrets or other ideas, concepts, know how, methodologies,
or information incorporated therein and the exclusive rights to any copyrights,
trademarks and patents (including registrations and applications for
registration of either) or statutory or legal protections available with respect
thereof. The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action with respect to
the Software inconsistent with the foregoing acknowledgments, nor shall the Fund
attempt to decompile, reverse engineer or modify the Software. The Fund may not
copy, sell, lease or provide, directly or indirectly, any of the Software or any
portion thereof to any other person or entity without the Custodian's prior
written consent. The Fund may not remove any statutory copyright notice, or
other notice including the software or on any media containing the Software. The
Fund shall reproduce any such notice on any reproduction of the Software and
shall add statutory copyright notice or other notice to the Software or media
upon the Custodian's request. The Custodian agrees to provide reasonable
training, instruction manuals and access to the Custodian's "help desk" in
connection with the Fund's user support necessary to use of the Software. At the
Fund's request, the Custodian agrees to permit reasonable testing of the
Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian
<PAGE> 29
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shall not be responsible for the reliability, compatibility with the Software or
availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Fund shall install new
releases of the Software as the Custodian may direct. The Fund agrees not to
modify or attempt to modify the Software without the Custodian's prior written
consent. The Fund acknowledges that any modifications to the Software, whether
by the Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no warranties
or representations of any kind with regard to the Software or the method(s) by
which the Fund may transmit Instructions to the Custodian, express or implied,
including but not limited to any implied warranties of merchantability or
fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND
OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
<PAGE> 30
-29-
7. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks associated with the various methods
of transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Trustees, and that its transmission of Instructions pursuant hereto shall at all
times comply with the Investment Company Act of 1940, as amended.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
11. The Custodian will indemnify and hold harmless the Fund with
respect to any liability, damages, loss or claim incurred by or brought against
the Fund by reason any claim or infringement against any patent, copyright,
license or other property right arising out or by reason of the Fund's use of
the Software in the form provided under this Section. The Custodian at its own
expense will defend such action or claim brought against the Fund to the extent
that it is based on a claim that the Software in the form provided by the
Custodian infringes any patents, copyrights, license or other property
<PAGE> 31
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right, provided that the Custodian is provided with reasonable written notice of
such claim, provided that the Fund has not settled, compromised or confessed any
such claim without the Custodian's written consent, in which event the Custodian
shall have no liability or obligation hereunder, and provided the Fund
cooperates with and assists the Custodian in the defense of such claim. The
Custodian shall have the right to control the defense of all such claims,
lawsuits and other proceedings. If, as a result of any claim of infringement
against any patent, copyright, license or other property right, the Custodian is
enjoined from using the Software, or if the Custodian believes that the System
is likely to become the subject of a claim of infringement, the Custodian at its
option may in its sole discretion either (a) at its expenses procure the right
for the Fund to continue to use the Software, or (b), replace or modify the
Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to the Fund.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the foreign
banking institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Trustees, or its third
party foreign custody manager as defined in Rule 17f-5 under the Investment
Company Act of 1940, as amended, if any, has determined that use of such Foreign
Sub-Custodian satisfies the requirements of such Investment Company Act of 1940
and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
<PAGE> 32
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4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-Custodian. It is
expressly understood and agreed that the Custodian's sole responsibility and
liability shall be limited to amounts so recovered from the Foreign
Sub-Custodian.
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver or cause the Administrator to deliver to the Custodian a
Certificate or Oral Instructions specifying with respect to such FX Transaction:
(c) the Series to which such FX Transaction is specifically allocated; (b) the
type and amount of Currency to be purchased by the Fund; (c) the type and amount
of Currency to be sold by the Fund; (d)
<PAGE> 33
-32-
the date on which the Currency to be purchased is to be delivered; (e) the date
on which the Currency to be sold is to be delivered; and (f) the name of the
person from whom or through whom such currencies are to be purchased and sold.
Unless otherwise instructed by a Certificate or Oral Instructions, the Custodian
shall deliver, or shall instruct a Foreign Sub-Custodian to deliver, the
Currency to be sold on the date on which such delivery is to be made, as set
forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian
to receive, the Currency to be purchased on the date as set forth in the
Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI
neither the Custodian nor its nominee shall be liable for any loss or damage,
including reasonable
<PAGE> 34
-33-
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. The Custodian
agrees to indemnify and hold harmless the Fund and the Fund's Trustees and
officers to the extent described below against any loss as a result of any
breach or violation of this Agreement by the Custodian or its officers,
employees and agents or its nominees, resulting from their negligence or willful
misconduct. The Custodian may, with respect to questions of law arising
hereunder or under any Margin Account Agreement, apply for and obtain the advice
and opinion of counsel to the Fund, or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to anything done or omitted by
it in good faith in conformity with such advice or opinion. The Custodian shall
be liable to the Fund for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any negligence or
willful misconduct on the part of the Custodian or any of its employees or
agents. Notwithstanding the foregoing, or any other provision contained in this
Agreement, in no event shall the Custodian be liable to the Fund, its Trustees
or officers, or any third party, for special, indirect or consequential damages,
or lost profits or loss of business, arising under or in connection with this
Agreement, even if previously informed of the possibility of such damages and
regardless of the form of action.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend
by the Fund;
(d) the legality of any borrowing by the Fund using Securities
as collateral;
(e) the legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer
<PAGE> 35
-34-
or financial institution to which portfolio Securities of the Fund are lent
pursuant to Article XIV of this Agreement makes payment to it of any dividends
or interest which are payable to or for the account of the Fund during the
period of such loan or at the termination of such loan, provided, however, that
the Custodian shall promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action, suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
<PAGE> 36
-35-
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by a Series, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Fund
represents that the Administrator has agreed to pay such compensation and
expenses promptly upon receipt of statements therefor, and hereby directs the
Custodian to (i) send all statements for compensation to its attention care of
FDISG at the following address: FDISG Services, Inc., 3200 Horizon Drive, King
of Prussia, PA 19406-0903, Attention: Mr. Elmer Gardner, Senior Vice President,
and (ii) accept all payments made by the Administrator in the Fund's name as if
such payments were made directly by the Fund. The Fund shall pay to FDISG fees
for services (including custodian services provided by the Custodian) in
accordance with the Services Agreement. The Custodian's compensation for
services rendered hereunder is set forth in a separate agreement between the
Custodian and FDISG. Should FDISG fail to pay or remit such compensation to the
Custodian within 20 days of the date the same is due and payable, Custodian
shall notify the Fund. If such payment or remittance is not received from FDISG
within 15 days of such notice, then the Custodian will be entitled to debit the
Custody Account directly for such compensation. The Custodian may charge
compensation with respect to which it has properly sent a notice to the Fund
with respect to a Series, as provided in the preceding sentence, and any
expenses with respect to a Series incurred by the Custodian in the performance
of its duties pursuant to such agreement against any money specifically
allocated to such Series. Unless and until the Fund or the Administrator
instructs the
<PAGE> 37
-36-
Custodian by a Certificate to apportion any loss, damage, liability or expense
among the Series in a specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Series such Series' pro
rata share (based on such Series, net asset value at the time of the charge to
the aggregate net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this Agreement. The
expenses for which the Custodian shall be entitled to reimbursement hereunder
shall include, but are not limited to, the expenses of sub-custodians and
foreign branches of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian as
provided for this Agreement. The Fund agrees to forward or cause the
Administrator to forward to the Custodian a Certificate or facsimile thereof
confirming such Oral Instructions in such manner so that such Certificate or
facsimile thereof is received by the Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of business of
the same day that such Oral Instructions are given to the Custodian. The Fund
agrees that the fact that such confirming instructions are not received by the
Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its
<PAGE> 38
-37-
expenses of providing such copies. Upon reasonable request of the Fund, the
Custodian shall provide in hard copy or on micro-film, whichever the Custodian
elects, any records included in any such delivery which are maintained by the
Custodian on a computer disc, or are similarly maintained, and the Fund shall
reimburse the Custodian for its expenses of providing such hard copy or
micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct. For any legal proceeding giving rise to the indemnification set
forth above in this paragraph, the Fund shall be entitled to defend or prosecute
any claim in the name of the Custodian at its own expense and through counsel of
its own choosing reasonably acceptable to the Custodian if it gives written
notice to the Custodian within ten (10) Business days of receiving notice of
such claim. Notwithstanding the foregoing, the Custodian may participate in the
litigation at its own expense and with counsel of its own choosing.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may deliver and
receive Securities, and receipts with respect to such Securities, and arrange
for payments to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to Certificates or instructions of the Fund or the
Administrator which responsibility and liability shall continue until final
payment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Fund that the Fund is
no longer utilizing the services of the Administrator, then the Custodian shall
furnish or give to the Fund the statements or notices described above as to be
furnished or given to the Administrator.
17. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian. Without
<PAGE> 39
-38-
limiting the generality of the foregoing, the Custodian shall have no duties or
responsibilities by reason of any terms or provisions in the Services Agreement,
and if such Services Agreement shall cease to be in effect the Custodian shall
have no additional duties hereunder, except as provided in the preceding
paragraph 16 of this Article.
ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice, provided, however, that if such notice is sent by the Fund and recites
that it is being given contemporaneously with a termination of the Services
Agreement with FDISG, such notice may specify any date of termination selected
by the Fund. In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant
Clerk, electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. In
the event such notice is given by the Custodian, the Fund shall, on or before
the termination date, deliver to the Custodian a copy of a resolution of the
Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
<PAGE> 40
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ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate, signed by two of the
present Officers of the Fund, setting forth the names and the signatures of the
present Officers. The Fund agrees to furnish to the Custodian a new Certificate
in similar form in the event that any such present Officer ceases to be an
Officer or in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the present Officers as set forth in the last
delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing, and any notice or other instrument in writing
authorized or required to be given to the Administrator shall be sufficiently
given if addressed to the Administrator at such address as the Administrator may
from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
<PAGE> 41
-40-
7. 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.
8. Roulston Funds is 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 "Roulston 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 Fund personally,
but bind only the assets of the Fund, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Series of the Fund must
look solely to the assets of the Fund belonging to such Series for the
enforcement of any claims against the Fund.
<PAGE> 42
-41-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
ROULSTON FUNDS
By: /s/ Scott D. Roulston
------------------------------
Scott D. Roulston, President
Attest:
/s/ Charles A. Kiraly
- ------------------------------
Charles A. Kiraly, Secretary
THE BANK OF NEW YORK
By: /s/ Jorge E. Ramos
------------------------------
Jorge E. Ramos, VP
[SEAL]
Attest:
/s/ Nicholas A. Deliso
- ------------------------------
<PAGE> 43
APPENDIX A
I, Scott D. Roulston, President and I, Charles A. Kiraly, Secretary of
ROULSTON FUNDS, an Ohio business trust (the "Fund"), do hereby certify that:
The following individuals, who are officers and employees the
Administrator, have been duly authorized by the Board of Trustees of the Fund in
conformity with the Fund's Declaration of Trust and By-Laws to give Certificates
or Oral Instructions on behalf of the Fund, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name Signature
---- ---------
Elmer Gardner /s/ Elmer Gardner
Bill Drourr /s/ Bill Drourr
Janet Cleary /s/ Janet Cleary
Joseph Gessner /s/ Joseph Gessner
K. Pittaoulis /s/ K. Pittaoulis
Kathy Nace /s/ Kathy Nace
Dated: as of July 1, 1999
/s/ Scott D. Roulston
------------------------------
Scott D. Roulston
President
/s/ Charles A. Kiraly
------------------------------
Charles A. Kiraly
Secretary
<PAGE> 44
APPENDIX B
SERIES
Name of Series Date
- -------------- ----
Roulston International Equity Fund July 1, 1999
ROULSTON FUNDS
By: /s/ Scott D. Roulston
------------------------------
THE BANK OF NEW YORK
By: /s/ Jorge E. Ramos
------------------------------
Jorge E. Ramos, VP
<PAGE> 45
APPENDIX C
I, Nicholas A. Deliso, an Asst Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
Dated: as of July 1, 1999
/s/ Nicholas A. Deliso
------------------------------
Asst Vice President
<PAGE> 46
EXHIBIT A
CERTIFICATION
The undersigned, Scott D. Roulston, hereby certifies that he or she is
the duly elected and acting President of ROULSTON FUNDS, an Ohio business trust
(the "Fund"), and further certifies that the following resolution was adopted by
the Board of Trustees of the Fund at a meeting duly held on June 22, 1999, at
which a quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of July 1, 1999, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry System,
as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 1st day of
July, 1999.
/s/ Scott D. Roulston
------------------------------
Scott D. Roulston
<PAGE> 47
EXHIBIT B
CERTIFICATION
The undersigned, Scott D. Roulston, hereby certifies that he is the
duly elected and acting President of ROULSTON FUNDS, an Ohio business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on June 22, 1999, at which
a quorum was at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of July 1, 1999 (the "Custody Agreement"), is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series to
which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 1st day of
July, 1999.
/s/ Scott D. Roulston
------------------------------
Scott D. Roulston
<PAGE> 48
EXHIBIT B-1
CERTIFICATION
The undersigned, Scott D. Roulston, hereby certifies that he is the
duly elected and acting President of ROULSTON FUNDS, an Ohio business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on June 22, 1999, at which
a quorum was at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of July 1, 1999 (the "Custody Agreement"), is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Participants Trust Company as Depository, as defined in
the Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated,
and to utilize the Participants Trust Company to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 1st day of
July, 1999.
/s/ Scott D. Roulston
------------------------------
Scott D. Roulston
<PAGE> 49
EXHIBIT C
CERTIFICATION
The undersigned, Scott D. Roulston, hereby certifies that he is the
duly elected and acting President of ROULSTON FUNDS, an Ohio business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on June 22, 1999, at which
a quorum was at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of July 1, 1999, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations
for Options and transaction in Options, regardless of the Series to
which the same are specifically allocated, as such terms are defined in
the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 1st day of
July, 1999.
/s/ Scott D. Roulston
------------------------------
Scott D. Roulston
<PAGE> 50
EXHIBIT D
The undersigned, Scott D. Roulston, hereby certifies that he is the
duly elected and acting President of ROULSTON FUNDS, an Ohio business trust (the
"Fund"), further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on June 22, 1999, at which
a quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
the Custody Agreement between The Bank of New York and the Fund dated
as of July 1, 1999 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to act in accordance with,
and to rely on Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Officers of the Fund as defined in the
Custody Agreement, shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of user and
access codes, passwords and authentication keys, and shall use
Instructions only in a manner that does not contravene the Investment
Company Act of 1940, as amended, or the rules and regulations
thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 1st day of
July, 1999.
/s/ Scott D. Roulston
------------------------------
Scott D. Roulston
<PAGE> 1
Exhibit 99(g)(iii)
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of October 29, 1999, between Roulston Funds (the
"Fund"), on behalf of one of its Series, Roulston International Equity Fund, and
The Bank of New York ("BNY").
W I T N E S S E T H:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager
on the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform
the duties set forth herein on the terms and condition contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and BNY hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "BOARD" shall mean the board of directors or board of trustees, as
the case may be, of the Fund.
2. "ELIGIBLE FOREIGN CUSTODIAN" shall have the meaning provided in the
Rule.
3. "MONITORING SYSTEM" shall mean a system established by BNY to
fulfill the Responsibilities specified in clauses l(d) and l(e) of Artic1e III
of this Agreement.
4. "QUALIFIED FOREIGN BANK" shall have the meaning provided in the
Rule.
5. "RESPONSIBILITIES" shall mean the responsibilities delegated to BNY
as a Foreign Custody Manager with respect to each Specified County and each
Eligible Foreign Custodian selected by BNY , as such responsibilities are more
fully described in Article III of this Agreement.
<PAGE> 2
6. "RULE" shall mean Rule 17f-5 under the Investment Company Act of
1940, as amended, as such Rule became effective on June 16, 1997.
<PAGE> 3
7. "SECURITIES DEPOSITORY" shall mean any securities depository or
clearing agency within the meaning of Section (a)(1)(ii) or (a)(l)(iii) of the
Rule.
8. "SPECIFIED COUNTRY" shall mean each country listed on Schedule I
attached hereto and each country, other than the United States, constituting the
primary market for a security with respect to which the Fund has given
settlement instructions to The Bank of New York as custodian (the "Custodian")
under its Custody Agreement with the Fund.
ARTICLE II.
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect
to each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect
to each Specified Country and agrees in performing the Responsibilities as a
Foreign Custody Manager to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of the Fund's assets would
exercise.
3. BNY shall provide to the Board at such times as the Board deems
reasonable and appropriate based on the circumstances of the Fund's foreign
custody arrangements written reports notifying the Board of the placement of
assets of the Fund with a particular Eligible Foreign Custodian within a
Specified Country and of any material change in the arrangements (including, in
the case of Qualified Foreign Banks, any material change in any contract
governing such arrangements and in the case of Securities Depositories, any
material change in the established practices or procedures of such Securities
Depositories) with respect to assets of the Fund with any such Eligible Foreign
Custodian.
ARTICLE III.
RESPONSIBILITIES
1.SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, BNY SHALL WITH RESPECT
TO EACH SPECIFIED COUNTRY SELECT AN ELIGIBLE FOREIGN CUSTODIAN. IN CONNECTION
THEREWITH, BNY SHALL: (a) DETERMINE THAT ASSETS OF THE FUND HELD BY SUCH
ELIGIBLE FOREIGN CUSTODIAN WILL BE SUBJECT TO REASONABLE CARE, BASED ON THE
STANDARDS APPLICABLE TO CUSTODIANS IN THE RELEVANT MARKET IN WHICH SUCH ELIGIBLE
FOREIGN CUSTODIAN OPERATES, AFTER CONSIDERING ALL FACTORS RELEVANT TO THE
SAFEKEEPING OF SUCH ASSETS, INCLUDING, WITHOUT LIMITATION, THOSE CONTAINED IN
PARAGRAPH (c)(l) OF THE RULE; (b) DETERMINE THAT THE FUND'S FOREIGN CUSTODY
ARRANGEMENTS WITH EACH QUALIFIED FOREIGN BANK ARE GOVERNED BY A WRITTEN CONTRACT
WITH THE CUSTODIAN (OR, IN THE CASE OF A SECURITIES DEPOSITORY, BY SUCH A
CONTRACT, BY THE RULES OR ESTABLISHED PRACTICES OR PROCEDURES OF THE SECURITIES
DEPOSITORY, OR BY ANY COMBINATION OF THE FOREGOING) WHICH WILL PROVIDE
REASONABLE CARE FOR THE FUND'S ASSETS BASED ON THE STANDARDS SPECIFIED IN
PARAGRAPH (c)(I) OF THE RULE; (c) DETERMINE THAT EACH CONTRACT WITH A QUALIFIED
FOREIGN BANK SHALL INCLUDE THE PROVISIONS SPECIFIED IN PARAGRAPH (c)(2)(i)(A)
THROUGH (F) OF THE RULE OR, ALTERNATIVELY, IN LIEU OF ANY OR ALL OF SUCH
(c)(2)(i)(A) THROUGH (F) PROVISIONS, SUCH OTHER PROVISIONS AS BNY DETERMINES
WILL PROVIDE, IN THEIR ENTIRETY, THE SAME OR A GREATER LEVEL OF CARE AND
PROTECTION FOR THE ASSETS OF THE FUND AS SUCH SPECIFIED PROVISIONS; (d) MONITOR
PURSUANT TO THE MONITORING SYSTEM THE APPROPRIATENESS OF MAINTAINING THE ASSETS
OF THE FUND WITH A PARTICULAR ELIGIBLE FOREIGN CUSTODIAN PURSUANT TO PARAGRAPH
(c)(1)
<PAGE> 4
OF THE RULE AND IN THE CASE OF A QUALIFIED FOREIGN BANK, ANY MATERIAL CHANGE IN
THE CONTRACT GOVERNING SUCH ARRANGEMENT AND IN THE CASE OF A SECURITIES
DEPOSITORY, ANY MATERIAL CHANGE IN THE ESTABLISHED PRACTICES OR PROCEDURES OF
SUCH SECURITIES DEPOSITORY; AND (e) ADVISE THE FUND WHENEVER AN ARRANGEMENT
(INCLUDING, IN THE CASE OF A QUALIFIED FOREIGN BANK, ANY MATERIAL CHANGE IN THE
CONTRACT GOVERNING SUCH ARRANGEMENT AND IN THE CASE OF A SECURITIES DEPOSITORY,
ANY MATERIAL CHANGE IN THE ESTABLISHED PRACTICES OR PROCEDURES OF SUCH
SECURITIES DEPOSITORY) DESCRIBED IN PRECEDING CLAUSE (d) NO LONGER MEETS THE
REQUIREMENTS OF THE RULE. ANYTHING IN THIS AGREEMENT TO THE CONTRARY
NOTWITHSTANDING, BNY SHALL IN NO EVENT BE DEEMED TO HAVE SELECTED ANY SECURITIES
DEPOSITORY THE USE OF WHICH IS MANDATORY BY LAW OR REGULATION OR BECAUSE
SECURITIES CANNOT BE WITHDRAWN FROM SUCH SECURITIES DEPOSITORY, OR BECAUSE
MAINTAINING SECURITIES OUTSIDE THE SECURITIES DEPOSITORY IS NOT CONSISTENT WITH
PREVAILING CUSTODIAL PRACTICES IN THE RELEVANT MARKET (EACH, A "COMPULSORY
DEPOSITORY"); IT BEING UNDERSTOOD HOWEVER. THAT FOR EACH COMPULSORY DEPOSITORY
UTILIZED OR INTENDED TO BE UTILIZED BY THE FUND, BNY SHALL PROVIDE THE FUND FROM
TIME TO TIME WITH INFORMATION ADDRESSING THE FACTORS SET FORTH IN SECTION (c)(l)
OF THE RULE AND BNY'S OPINIONS WITH RESPECT THERETO SO THAT THE FUND MAY
DETERMINE THE APPROPRIATENESS OF PLACING FUND ASSETS THEREIN.
2. (a) For purposes of Clauses (a) and (b) of preceding Section 1 of
this Article, with respect to Securities Depositories, it is understood that
such determination shall be made on the basis of, and limited by, information
gathered through BNY's subcustodian network, or through publicly available
information otherwise obtained with respect to each such Securities Depository.
(b) For purposes of clause (d) of preceding Section 1 of this
Article, BNY's determination of appropriateness shall not
include, nor be deemed to include, any evaluation of Country
Risks associated with investment in a particular country. For
purposes hereof, "Country Risks" shall mean systemic risks of
holding assets in a particular country including, but not
limited to, (a) the use of Compulsory Depositories, (b) such
country's financial infrastructure, (c) such country's
prevailing custody and settlement practices, (d)
nationalization, expropriation or other governmental actions,
(e) regulation of the banking or securities industry, (f)
currency controls, restrictions, devaluations or fluctuations,
and (g) market conditions which affect the orderly execution
of securities transactions or affect the value of securities.
<PAGE> 5
ARTICLE IV.
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and legally
binding obligation of the Fund enforceable in accordance with its terms, and no
statute, regulation. rule, order, judgment or contract binding on the Fund
prohibits the Fund's execution or performance of this Agreement; (b) this
Agreement has been approved and ratified by the Board at a meeting duly called
and at which a quorum was at all times present; and (c) the Board or its
investment advisor has considered the Country Risks associated with investment
in each Specified Country and will have considered such risks prior to any
settlement instructions being given to the Custodian with respect to any other
Specified Country.
2. BNY hereby represents that: (a) BNY is duly organized and existing
under the laws of the State of New York, with full power to carry on its
businesses as now conducted, and to enter into this Agreement and to perform its
obligations hereunder; (b) this Agreement has been duly authorized, executed and
delivered by BNY, constitutes a valid and legally binding obligation of BNY
enforceable in accordance with its terms, and no statute, regulation, rule,
order, judgment or contract binding on BNY prohibits BNY's execution or
performance of this Agreement; and (c) BNY has established the Monitoring
System.
ARTICLE V.
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys' and accountants' fees, sustained or
incurred by, or asserted against, the Fund except to the extent the same arises
out of the failure of BNY to exercise the care, prudence and diligence required
by Section 2 of Article II hereof. In no event shall BNY be liable to the Fund,
the Board, or any third party for special, indirect or consequential damages, or
for lost profits or loss of business, arising in connection with this Agreement.
2. The Fund shall indemnify BNY and hold it harmless from and against
any and all costs, expenses, damages, liabilities or claims, including
attorneys' and accountants' fees, sustained or incurred by, or asserted against,
BNY by reason or as a result of any action or inaction, or arising out of BNY's
performance hereunder, provided that the Fund shall not indemnify BNY to the
extent any such costs, expenses, damages, liabilities or claims arises out of
BNY's failure to exercise the reasonable care, prudence and diligence required
by Section 2 of Article II hereof.
<PAGE> 6
3. For its services hereunder, the Fund agrees to pay to BNY such
compensation and out-of-pocket expenses as shall be mutually agreed.
4. BNY shall have only such duties as are expressly set forth herein.
In no event shall BNY be liable for any Country Risks associated with
investments in a particular country.
ARTICLE VI.
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and
BNY, and no provision in the Custody Agreement between the Fund and the
Custodian shall affect the duties and obligations of BNY hereunder, nor shall
any provision in this Agreement affect the duties or obligations of the
Custodian under the Custody Agreement.
2. Any notice or other instrument in writing. authorized or required by
this Agreement to be given to BNY, shall be sufficiently given if received by it
at its offices at 90 Washington Street, New York, New York 10286, or at such
other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if received
by it at its offices at 4000 Chester Avenue, Cleveland, Ohio 44103 or at such
other place as the Fund may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors and
assigns; provided however, that this Agreement shall not be assignable by either
party without the written consent of the other.
5. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and BNY hereby consent to the jurisdiction of a state or
federal court situated in New York City. New York in connection with any dispute
arising hereunder. The Fund hereby irrevocably waives, to the fullest extent
permitted by applicable law. Any objection which it may now or hereafter have to
the laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. The Fund and BNY each hereby irrevocably waives any and all rights to
trial by jury in any legal proceeding arising out of or relating to this
Agreement.
<PAGE> 7
6. The parties hereto agree that in performing hereunder, BNY is acting
solely on behalf of the Fund and no contractual or service relationship shall be
deemed to be established hereby between BNY and any other person.
7. 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.
8. This Agreement shall terminate simultaneously with the termination
of the Custody Agreement between the Fund and the Custodian, and may otherwise
be terminated by either party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than thirty
(30) days after the date of such notice.
9. Roulston Funds is 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 al1 amendments thereto so filed or hereafter
filed. The obligations of "Roulston 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 Fund personally,
but bind only the assets of the Fund, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Series of the Fund must
look solely to the assets of the Fund belonging to such Series for the
enforcement of any claims against the Fund.
<PAGE> 8
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be executed
by their respective officers, thereunto duly authorized, as of the date first
above written.
ROULSTON FUNDS
By: /s/ Scott Roulston
------------------
Title:
Tax Identification No.:
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
-----------------------
Title: Vice President
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE I
- ---------------------- -------------------------------- ------------------- ----------------------------------
Country/ Country/
Market Sub-custodian(s) Market Sub-custodian(s)
- ---------------------- -------------------------------- ------------------- ----------------------------------
<S> <C> <C> <C>
Argentina BankBoston, N.A. Hungary Citibank Budapest Rt.
Australia Commonwealth Bank of Australia/ Iceland Landsbanki Islands
National Australia Bank Limited
Austria Bank Austria AG India HSBC / Deutsche Bank AG
Bahrain The British Bank of the Middle Indonesia HSBC
East
Bangladesh Standard Chartered Bank Ireland Allied Irish Banks, plc
Belgium Banque Bruxelles Lambert Israel Bank Leumi LE - Israel B.M.
Bermuda Bank of Bermuda Limited Italy Banca Commerciale Italiana /
Banque Paribas S.A.
Bolivia Citibank, N.A. Ivory Coast Societe Generale de Banques en
Cote d'Ivoire
Botswana Stanbic Bank Botswana Limited Jamaica CIBC Trust & Merchant Bank
Jamaica Ltd.
Brazil BankBoston, N.A. Japan The Bank of Tokyo-Mitsubishi
Limited/
The Fuji Bank, Limited
Bulgaria ING Bank Jordan The British Bank of the Middle
East
Canada Royal Bank of Canada Kazakhstan ABN/AMRO
Chile BankBoston, N.A. Kenya Stanbic Bank Kenya Limited
China Standard Chartered Bank Latvia Societe Generale Riga
Colombia Cititrust Colombia S.A. Lebanon The British Bank of the Middle
East
Costa Rica Banco BCT Lithuania Vilniaus Bankas
Croatia Privredna Banka Zagreb d.d. Luxembourg Banque et Caisse d'Epargne de
l'Etat
Cyprus Bank of Cyprus Malaysia HongKong Bank Malaysia Berhad
Czech Republic Ceskoslovenska Obchodni Banka Malta Mid-Med Bank
A.S.
Denmark Den Danske Bank Mauritius HSBC
EASDAQ Banque Bruxelles Lambert Mexico Banco Nacional de Mexico
Ecuador Citibank, N.A. Morocco Banque Commerciale du Maroc
Egypt Citibank, N.A. Namibia Stanbic Bank Namibia Limited
Estonia Hansabank Limited Netherlands MeesPierson
Euromarket Cedelbank New Zealand Australia and New Zealand
Banking Group
Euromarket Euroclear Nigeria Stanbic Merchant Bank Nigeria
Limited
Finland Merita Bank plc Norway Den norske Bank ASA
France Banque Paribas S.A./ Oman The British Bank of the Middle
Credit Commercial de France East
Germany Dresdner Bank AG Pakistan Standard Chartered Bank
Ghana Merchant Bank (Ghana) Limited Peru Citibank, N.A.
Greece National Bank of Greece SA Philippines HSBC
Hong Kong HSBC Poland Bank Handlowy W Warszawie S.A.
Portugal Banco Comercial Portugues Switzerland Union Bank of Switzerland /
Credit Suisse First Boston
Romania ING Bank Taiwan HSBC
Russia Vneshtorgbank (Min Fin Bonds Thailand Standard Chartered Bank/
only)/ Bangkok Bank Public Company
Credit Suisse First Boston AO Limited
Singapore United Overseas Bank Limited/ Tunisia Banque Internationale Arabe de
The Development Bank of Tunisie
Singapore Ltd.
Slovakia Ceskoslovenska Obchodni Banka, Turkey Osmanli Bankasi A.S. (Ottoman
a.s. Bank)
Slovenia Bank Austria Creditanstalt Ukraine ING Bank
d.d. Ljubljana
South Africa The Standard Bank of South United Kingdom The Bank of New York, N.A. /
Africa Limited First Chicago Clearing Center
South Korea Standard Chartered Bank United States The Bank of New York, N.A.
Spain Banco Bilbao Vizcaya Uruguay BankBoston, N.A.
Sri Lanka Standard Chartered Bank Venezuela Citibank, N.A.
Swaziland Stanbic Bank Swaziland Limited Zambia Stanbic Bank Zambia Limited
Sweden Skandinaviska Enskilda Banken Zimbabwe Stanbic Bank Zimbabwe Limited
- ---------------------- -------------------------------- -------------------- ---------------------------------
</TABLE>
<PAGE> 10
SCHEDLUE 1
NAME OF FUND
Roulston International Equity Fund
<PAGE> 11
SCHEDULE 2
Europe:
United Kingdom
France
Germany
Italy
Spain
Switzerland
Netherlands
Austria
Belgium
Denmark
Finland
Ireland
Norway
Portugal
Sweden
Pacific:
Japan
Australia
Hong Kong
Singapore
New Zealand
Malaysia
<PAGE> 1
Exhibit 99(h)(i)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 1st day of July, 1999 (the "Effective Date")
between ROULSTON FUNDS (the "Fund"), an Ohio business trust having its principal
place of business at 4000 Chester Avenue, Cleveland, Ohio 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 13;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its administrator, custody 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.
<PAGE> 2
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to
this Agreement.
(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, of each respective
Portfolio of the Fund, or class thereof, 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 transfer agent and dividend disbursing agent for
Shares of each respective Portfolio of the Fund and as administrator, custody
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.
<PAGE> 3
Article 3 DUTIES OF INVESTOR SERVICES GROUP.
3.1 Investor Services Group shall be responsible for providing all
services described in Schedule B, including:
(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.
(c) Performing the services of an administrator, including
corporate secretarial, treasury and blue sky services, custody
administration 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 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
<PAGE> 4
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.
3.3 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 any rules thereunder, 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.
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.
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
<PAGE> 5
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 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.
6.6 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 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 6.6
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 INVESTOR SERVICES GROUP SYSTEM.
<PAGE> 6
7.1 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").
7.2 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.
7.3 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 8 REPRESENTATIONS AND WARRANTIES.
8.1 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;
(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;
(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; and
(f) all equipment and software provided or used by Investor
Services Group or any of its subsidiaries or divisions in connection
with rendering services to the Fund under the terms of this Agreement,
include or shall include design and performance capabilities so that
prior to, during, and after December 31, 1999 (the "Millennium Date
Change") they will not malfunction, produce invalid or incorrect
results, cause an
<PAGE> 7
interruption in or diminish the quality of the services provided to the
Fund, or abnormally cease to function due to the Millennium Date
Change. Such design and performance capabilities shall include without
limitation the ability to recognize and process the Year 2000 and
thereafter and to manage and manipulate data involving dates, including
without limitation, (i) single century and multi-century formulas and
date values without resulting in the generation of incorrect values
involving such dates or causing an abnormal ending, (ii) date data
interfaces with functionalities and data fields that indicate the
century, and (iii) date-related functions that indicate the century.
8.2 The Fund represents and warrants to Investor Services Group
that:
(a) it is duly organized and existing 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, with respect to all
Shares of the Fund being offered for sale; and
(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.
Article 9 INDEMNIFICATION.
9.1 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), 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, in the
performance of Investor Services Group's duties and obligations
hereunder;
<PAGE> 8
(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 ; if Investor Services Group
has relied on the Fund's instructions to file notices in such states
and has done so 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.
9.2 The Fund shall not be responsible for and Investor
Services Group shall indemnify and hold the Fund harmless from and against any
and all Claims which result from the negligence, bad faith or willful misconduct
of Investor Services Group in the performance of its duties hereunder.
9.3 In any case in which the either party (the "Indemnifying Party")
may be asked to indemnify or hold the other (the "Indemnified Party") harmless,
the Indemnified Party will notify the Indemnifying Party promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnifying Party although the
failure to do so shall not prevent recovery by the Indemnified Party and shall
keep the Indemnifying Party advised with respect to all developments concerning
such situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying Party
shall take over complete defense of the Claim and the Indemnified Party shall
sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 9 shall survive the termination of this
Agreement.
9.4 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.
<PAGE> 9
9.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 9 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 9 may apply.
Article 10 STANDARD OF CARE.
10.1 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.
10.2 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 11 CONSEQUENTIAL DAMAGES.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR LOST PROFITS, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES.
As used in the preceding paragraph "indirect or consequential damages"
means damages which do not flow directly from the act of the party or which
arise from the intervention of special circumstances not ordinarily predictable,
and does NOT include direct damages which arise naturally or ordinarily from a
breach of contract.
Article 12 TERM AND TERMINATION.
12.1 This Agreement shall be effective on the date first written above
and shall continue for a period of one (1) year (the "Initial Term").
12.2 Upon the expiration of the Initial Term, this Agreement shall,
subject to annual review and adjustment, 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.
12.3 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 service provider will be borne by the Fund.
12.4 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
<PAGE> 10
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.
12.5 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 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 13 ADDITIONAL PORTFOLIOS
13.1 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 service provider
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, Schedule A shall be amended to include such additional Portfolios.
Article 14 CONFIDENTIALITY.
14.1 The parties agree that the Proprietary Information (defined below)
(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,
regulators, and
<PAGE> 11
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 14.1.
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.
14.2 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, client or customer relationships, client or
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, inventions, know-how and trade secrets,
whether or not patentable or copyrightable.
14.3 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.
14.4 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
<PAGE> 12
(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 15 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 16 ASSIGNMENT AND SUBCONTRACTING.
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;
provided, however, that the engaging of any such subcontractor shall not affect
or alter Investor Services Group's responsibilities or liabilities under this
Agreement.
Article 17 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 Funds
4000 Chester Ave
Cleveland OH 44103
Attention: Scott Roulston, President
<PAGE> 13
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 18 GOVERNING LAW/VENUE.
The laws of the State of Ohio, 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 Cleveland, and Investor Services
Group and the Fund hereby submit themselves to the exclusive jurisdiction of
those courts.
Article 19 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 20 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 21 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 22 RELATIONSHIP OF PARTIES/NON-SOLICITATION.
22.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
22.2 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 23 ENTIRE AGREEMENT; SEVERABILITY.
<PAGE> 14
23.1 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.
23.2 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,
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 24 MISCELLANEOUS.
"Roulston 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 "Roulston 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 Fund personally,
but bind only the assets of the Fund, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any Portfolio of the Fund must look
solely to the assets of the Fund belonging to such Portfolio for the enforcement
of any claims against the Fund.
<PAGE> 15
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.
ROULSTON FUNDS
By: /s/Scott Roulston
-----------------
Scott Roulston
Title: President
---------
FIRST DATA INVESTOR SERVICES GROUP,
INC.
By: /s/Kenneth J. Kempf
-------------------
Kenneth J Kempf
Title: Senior Vice President
----------------------
<PAGE> 16
SCHEDULE A
----------
ROULSTON GROWTH AND INCOME FUND
ROULSTON GROWTH FUND
ROULSTON GOVERNMENT SECURITIES FUND
ROULSTON INTERNATIONAL EQUITY FUND
ROULSTON EMERGING GROWTH FUND
<PAGE> 17
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 Fund
using Investor Services Group's standard agents for pricing
domestic equity and bond securities as approved y the Fund's
Board of Trustees.
- If necessary, enter limited number of manual prices supplied
by the Fund.
- 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 the Fund. Verify U.S. dollar security prices
exceeding variance levels by notifying the Fund and pricing
sources of noted variance.
- Review for ex-dividend items indicated by pricing sources;
trace to general ledger for agreement.
- Communicate required pricing information (NAV) to the Fund,
Transfer Agent and, electronically, to NASDAQ.
2) DETERMINE AND REPORT CASH AVAILABILITY TO FUND BY APPROXIMATELY 9:30 AM
EASTERN TIME:
- Receive daily cash and transaction statements from the
Custodian by 8:30 AM Eastern time.
- Receive previous day shareholder activity reports from the
Fund's Transfer Agent by 8:30 AM Eastern time.
- Fax hard copy Cash Availability calculations with all details
to Fund.
- Supply Fund with 5-day cash projection report.
- Prepare and complete daily bank cash reconciliation's
including documentation of any reconciling items and notify
the Custodian and the Fund.
3) RECONCILE AND RECORD ALL DAILY EXPENSE ACCRUALS:
- Accrue expenses based on Fund supplied budget either as
percentage of Fund's net assets or specific dollar amounts.
- If applicable, monitor expense limitations established by
Fund.
- If applicable, accrue daily amortization of Organizational
Expense.
- If applicable, complete daily accrual of 12b-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 SECURITIES HELD FOR CASH DIVIDENDS:
Monitor corporate actions and capital changes such as splits,
mergers, spinoffs, etc. and process appropriately.
- Monitor electronically received information from pricing
vendors for all 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 THE FUND.
- 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.
<PAGE> 18
- Provide complete broker commission reporting.
7) ENTER ALL TRUST SHARE TRANSACTIONS:
- Process activity identified on the Transfer Agent reports.
- 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 THE FUND: (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 the Fund by 10th business day.
2) SUBMISSION OF MONTHLY REPORTS TO THE FUND:
- 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 and
the Fund.
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 THE FUND:
- SEC yield reporting (non-money market funds).
- Income by state reporting.
<PAGE> 19
- Standard Industry Code Valuation Report.
- Alternative Minimum Tax Income segregation schedule.
<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
REGULATORY COMPLIANCE
- ---------------------
A. Compliance - 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 filing of notices to sell Shares of
the Fund 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
<PAGE> 21
state provided by the dealer at the point of
sale. Trades by omnibus accounts 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 file notices to sell 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, including
payments of Fund expenses, and
expense caps
4. approve and authorize payment of
expenses
5. projection of income
6. checking account reconciliation
<PAGE> 22
7. calculation of advisory fee, 12b-1
fee and reimbursement to Fund( if
applicable)
8. authorize the recording and
amortization of orgnaizational
costs pre-paid expenses (supplied
by the Advisor), for start-up funds
and reorgnaizations
9. calculation of average net assets
10. expense ratio calculation
B. Distributions to Shareholders
1. Projections and calculation of
distribution amounts
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
3. book/Tax identification and
adjustments at required
distribution periods(in conjuction
with the Fund and their auditors)
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 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:
<PAGE> 23
A. Shareholder File Services
1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and NSCC - Fund/SERV - Networking
transmissions.
2. 100% quality of new account information, including verification of
initial investment.
* 3. Systematic linkage of shareholder accounts with exact matches on SSN
and address for the purpose of consolidated account history reporting.
Periodic production of laser printed combined statements.
* 4. Production of household mailing labels which enable the Fund to do
special mailings to each address in the Fund Group rather than each
account.
5. Maintain account and customer file records based on shareholder
request and routine quality review.
6. Maintain tax ID certification and NRA records for each account,
including backup withholding.
7. Provide written confirmation of address changes.
8. Produce shareholder statements for daily activity, dividends,
on-request, third party, and periodic mailings.
* 9. Produce shareholder lists, labels and ad hoc reports to Fund
management as requested.
10. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
11. Image all applications, account documents, data changes,
correspondence, monetary transactions, and other pertinent shareholder
documents.
B. Shareholder Services
1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research and
correspondence representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals, pre-authorized drafts, FundSERV and
wire order trades, problem solving and process telephone transactions.
3. Silent monitoring of shareholder calls by the phone supervisor to
ensure exceptional customer service.
4. Record and maintain tape recordings of all shareholder calls for a six
month period.
5. Phone Supervisor produces daily management reports of shareholder
calls which track volumes, length of calls, average wait time and
abandoned call rates to ensure quality service.
6. Phone representatives are thoroughly trained through in house training
programs on the techniques of providing Exceptional Customer Service.
7. Customer inquiries received by letter or telephone are thoroughly
researched by a correspondence team member. These inquires include
such items, as account/customer file information, complete historical
account information, stop payments on checks, transaction details, and
lost certificates.
C. Investment Processing
1. Initial investment (checks or Fed wires).
<PAGE> 24
2. Subsequent investments (checks or Fed wires) processed through lock
box.
3. Pre-authorized investments (PAD) through ACH system.
4. Government allotments through ACH system.
5. Prepare and process telephone purchase transactions.
* 6. NSCC-FundSERV trades.
D. Redemption Processing
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal File and process automated
transactions on monthly basis.
4. Issue checkbooks and process checkbook redemptions through agent bank.
5. Redemptions proceeds distributed to shareholder by check, Fed wire or
ACH processing.
* 6. Provide NSCC - FundSERV trade processing.
E. Exchange & Transfer Processing
1. Process legal transfers.
2. Issue and cancel certificates.
3. Replace certificates through surety bonds (separate charge to
shareholder).
4. Process exchange transactions (letter and telephone request).
5. Process ACATS transfers.
F. Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70-1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRA's and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
<PAGE> 25
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
G. Settlement & Control
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Fund's
Accounting Agent by 10:00 a.m. EST.
2. Preparation of daily cash movement information to be passed to the
Fund's Accounting Agent and Custodian Bank by 10:00 a.m. EST for use
in determining Fund's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to include the proper notification of
any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of Fund's declared dividends and capital gains
to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rate used and the NAV
price of reinvest date to ensure dividend was posted properly.
c. Distribute copies to the Fund's Accounting Agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement information for the cash portion of
the dividend payment on payable date.
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all FPS clients. Monthly deposits to the IRS
of all types withhold from shareholder disbursements, distributions
and foreign account distributions. Correspond with the IRS concerning
any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV activity.
H. Year End Processing
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid Tax IDs. This includes initiating 31%
backup withholding and notifying shareholders of their tax status and
the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
<PAGE> 26
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year end activity with client. Activities include producing
year end statements, scheduling record dates for year dividends and
capital gains, production of combined statements and printing of
inserts to be mailed with tax forms.
6. Distribute Dividend Letter to funds for them to sign off on all
distributions paid year to date. Dates and rates must be authorized so
that they can be used for reporting to the IRS.
7. Coordinate the ordering of form stock and envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year end statements and tax forms.
9. Match and settle tax reporting totals to fund records and on-line data
from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.
12. Prepare IRS magnetic tapes and appropriate forms for the filing of all
reportable activity to the Internal Revenue Service.
I. Client Services
1. An Account Manager is assigned to each relationship. The Account
Manager acts as the liaison between the Fund and the Transfer Agency.
Responsibilities include scheduling of events, system enhancement
implementation, special promotion/event implementation and follow-up,
and constant fund interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailing and special
mailings.
b. Coordinate with the Fund the shipment of materials for scheduled
mailings.
c. Liaison between the Fund and support services for preparation of
proofs and eventual printing of statement forms, certificates,
proxy cards, envelopes, etc.
d. Handle all notification to the client regarding proxy tabulation
through the meeting. Coordinate scheduling of materials,
including voted cards, tabulation letters, and shareholder list,
to be available for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
f. Implement any new operational procedures, i.e., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions, etc.
g. Coordinate with systems, services and operations any special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings, additional
mail files, etc.
h. Prepare standard operating procedures and review prospectuses for
new start up funds and our current client base. Coordinate
implementation of suggested changes with the Fund.
i. Liaison between the Fund and the Transfer Agency staff regarding
all service and operational issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and mailroom.
c. Provide daily report totals to Account Manager for client
notification.
<PAGE> 27
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Fund's direction.
b. Provide daily and monthly reports to enable the Fund to do
necessary state filings.
J. Cash Management Services.
1. 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.
2. 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.
3. 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.
K. 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
<PAGE> 28
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.
- 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
<PAGE> 29
which such accounts are maintained after such benefits are first applied
towards banking service fees charged to the Fund by such institution.
- - Give instructions and pay the Fund's fees and expenses, under each of the
Fund's Custody/Custodian Agreements, as agent for the Fund.
- - Coordinate with each Custodian the payment of Fund dividends, distributions
under each of the Fund's Custody/Custodian Agreements and otherwise fulfill
the Fund's duties and responsibilities under each Agreement.
<PAGE> 30
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 1.00 n/a n/a
--------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
----------------- ---------------- ----------------
Muller Data Interactive J.J. Kenny
Security Types Corp.* Data Corp.* Co., Inc.*
--------------------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
Month)
--------------------------------------------------- ----------------- ---------------- ----------------
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.
<PAGE> 32
Specific costs will be identified based upon options selected by
the Trust and will be billed monthly.
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.
<PAGE> 33
CUSTODY OF FOREIGN SECURITIES PER GLOBAL PORTFOLIO
(Bank of New York Custody Schedule)
<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
--------------------------------------- ------------------------- -------------------------
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS) (USD)
------------------------- -------------------------
<S> <C> <C>
Israel 79 60
--------------------------------------- ------------------------- -------------------------
Italy 5 95
--------------------------------------- ------------------------- -------------------------
Japan (bonds) 5 15
--------------------------------------- ------------------------- -------------------------
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
--------------------------------------- ------------------------- -------------------------
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS) (USD)
------------------------- -------------------------
<S> <C> <C>
Turkey 34 105
--------------------------------------- ------------------------- -------------------------
United Kingdom 4 40
--------------------------------------- ------------------------- -------------------------
United Kingdom (gilts) 4 55
--------------------------------------- ------------------------- -------------------------
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*
<PAGE> 36
* 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 Fees.
(a) Standard Pricing:
IMPLEMENTATION FEE: $ 5000.00 (Waived for conversion)
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
<PAGE> 37
FOLDING (MACHINE): $18/K
FOLDING (HAND): $.12 each
PRESORT CHARGE: postage rate
$0.035 per piece
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
<PAGE> 38
$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
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
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
<PAGE> 39
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
- Pricing services (or services used to determine Fund NAV)
- Vendor set-up charges for Blue Sky and other services
- Blue Sky filing or registration fees
- EDGAR filing fees
- Vendor pricing comparison
- 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.
<PAGE> 1
Exhibit 99(j)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Post-Effective Amendment Number 7 to the Roulston Funds Registration Statement
of all references to our firm included in or made a part of this Post-Effective
Amendment.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
February 24, 2000
<PAGE> 1
[ARTICLE] 6
[CIK] 0000930363
[NAME] ROULSTON FUNDS
[SERIES]
[NUMBER] 4
[NAME] EMERGING GROWTH FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 3,221,938
[INVESTMENTS-AT-VALUE] 3,737,287
[RECEIVABLES] 17,494
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,754,781
[PAYABLE-FOR-SECURITIES] 461,532
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 9,745
[TOTAL-LIABILITIES] 471,277
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,570,922
[SHARES-COMMON-STOCK] 169,648
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (3,688)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 200,921
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 515,349
[NET-ASSETS] 3,283,504
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4,562
[OTHER-INCOME] 0
[EXPENSES-NET] 8,250
[NET-INVESTMENT-INCOME] (3,688)
[REALIZED-GAINS-CURRENT] 200,921
[APPREC-INCREASE-CURRENT] 515,349
[NET-CHANGE-FROM-OPS] 712,582
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 174,830
[NUMBER-OF-SHARES-REDEEMED] 5,182
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3,283,504
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,173
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 48,845
[AVERAGE-NET-ASSETS] 1,255,507
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] (0.02)
[PER-SHARE-GAIN-APPREC] 9.37
[PER-SHARE-DIVIDEND] (0.00)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 19.35
[EXPENSE-RATIO] 0.22
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000930363
[NAME] ROULSTON FUNDS
[SERIES]
[NUMBER] 5
[NAME] INTERNATIONAL EQUITY FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 2,855,604
[INVESTMENTS-AT-VALUE] 2,954,930
[RECEIVABLES] 305,670
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,260,600
[PAYABLE-FOR-SECURITIES] 578,372
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 9,544
[TOTAL-LIABILITIES] 587,916
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,555,641
[SHARES-COMMON-STOCK] 261,300
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (1,733)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 19,450
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 99,326
[NET-ASSETS] 2,672,684
[DIVIDEND-INCOME] 2,288
[INTEREST-INCOME] 1,935
[OTHER-INCOME] 0
[EXPENSES-NET] 5,956
[NET-INVESTMENT-INCOME] (1,733)
[REALIZED-GAINS-CURRENT] 19,450
[APPREC-INCREASE-CURRENT] 99,326
[NET-CHANGE-FROM-OPS] 117,043
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 263,309
[NUMBER-OF-SHARES-REDEEMED] 2,009
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 2,672,684
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,291
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 46,557
[AVERAGE-NET-ASSETS] 906,389
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] (0.01)
[PER-SHARE-GAIN-APPREC] 0.24
[PER-SHARE-DIVIDEND] (0.00)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.23
[EXPENSE-RATIO] .22
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000930363
[NAME] ROULSTON FUNDS
[SERIES]
[NUMBER] 1
[NAME] GROWTH FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 33,925,663
[INVESTMENTS-AT-VALUE] 36,960,895
[RECEIVABLES] 774,236
[ASSETS-OTHER] 2,157
[OTHER-ITEMS-ASSETS] 1,550
[TOTAL-ASSETS] 37,738,838
[PAYABLE-FOR-SECURITIES] 1,214,362
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 112,929
[TOTAL-LIABILITIES] 1,327,291
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 33,125,947
[SHARES-COMMON-STOCK] 2,855,486
[SHARES-COMMON-PRIOR] 3,975,342
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 323,462
[ACCUMULATED-NET-GAINS] 572,306
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,036,756
[NET-ASSETS] 36,411,547
[DIVIDEND-INCOME] 480,678
[INTEREST-INCOME] 88,276
[OTHER-INCOME] 0
[EXPENSES-NET] 698,493
[NET-INVESTMENT-INCOME] (129,539)
[REALIZED-GAINS-CURRENT] 1,202,908
[APPREC-INCREASE-CURRENT] (5,781,566)
[NET-CHANGE-FROM-OPS] (4,708,197)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (10,062,251)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,222,425
[NUMBER-OF-SHARES-REDEEMED] 2,956,848
[SHARES-REINVESTED] 614,567
[NET-CHANGE-IN-ASSETS] (28,975,584)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 9,431,649
[OVERDISTRIB-NII-PRIOR] 193,923
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 379,616
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 793,035
[AVERAGE-NET-ASSETS] 50,486,529
[PER-SHARE-NAV-BEGIN] 16.45
[PER-SHARE-NII] (0.06)
[PER-SHARE-GAIN-APPREC] (1.03)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 2.61
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 12.75
[EXPENSE-RATIO] 1.38
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000930363
[NAME] ROULSTON FUNDS
[SERIES]
[NUMBER] 2
[NAME] GROWTH AND INCOME FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 28,935,038
[INVESTMENTS-AT-VALUE] 30,796,695
[RECEIVABLES] 933,484
[ASSETS-OTHER] 1,444
[OTHER-ITEMS-ASSETS] 1,550
[TOTAL-ASSETS] 31,733,173
[PAYABLE-FOR-SECURITIES] 1,784,655
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 78,344
[TOTAL-LIABILITIES] 1,862,999
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 23,327,453
[SHARES-COMMON-STOCK] 2,007,932
[SHARES-COMMON-PRIOR] 2,079,854
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 28,583
[ACCUMULATED-NET-GAINS] 4,709,647
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1,861,657
[NET-ASSETS] 29,870,174
[DIVIDEND-INCOME] 519,534
[INTEREST-INCOME] 70,460
[OTHER-INCOME] 0
[EXPENSES-NET] 574,693
[NET-INVESTMENT-INCOME] 15,301
[REALIZED-GAINS-CURRENT] 5,434,280
[APPREC-INCREASE-CURRENT] (5,371,568)
[NET-CHANGE-FROM-OPS] 78,013
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (22,171)
[DISTRIBUTIONS-OF-GAINS] (2,716,374)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,445,258
[NUMBER-OF-SHARES-REDEEMED] 1,626,151
[SHARES-REINVESTED] 108,971
[NET-CHANGE-IN-ASSETS] (3,176,764)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 1,991,741
[OVERDISTRIB-NII-PRIOR] 21,713
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 292,957
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 626,983
[AVERAGE-NET-ASSETS] 38,953,918
[PER-SHARE-NAV-BEGIN] 15.89
[PER-SHARE-NII] 0.01
[PER-SHARE-GAIN-APPREC] (0.08)
[PER-SHARE-DIVIDEND] 0.01
[PER-SHARE-DISTRIBUTIONS] 0.93
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 14.88
[EXPENSE-RATIO] 1.48
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000930363
[NAME] ROULSTON FUNDS
[SERIES]
[NUMBER] 3
[NAME] GOVERNMENT SECURITIES FUND
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[INVESTMENTS-AT-COST] 14,929,796
[INVESTMENTS-AT-VALUE] 14,925,877
[RECEIVABLES] 339,703
[ASSETS-OTHER] 204
[OTHER-ITEMS-ASSETS] 1,550
[TOTAL-ASSETS] 15,267,334
[PAYABLE-FOR-SECURITIES] 2,496,975
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 32,112
[TOTAL-LIABILITIES] 2,529,087
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 12,879,605
[SHARES-COMMON-STOCK] 1,308,065
[SHARES-COMMON-PRIOR] 484,955
[ACCUMULATED-NII-CURRENT] (15)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (137,424)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (3,919)
[NET-ASSETS] 12,738,247
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 301,688
[OTHER-INCOME] 0
[EXPENSES-NET] 47,703
[NET-INVESTMENT-INCOME] 253,985
[REALIZED-GAINS-CURRENT] (118,323)
[APPREC-INCREASE-CURRENT] (226,890)
[NET-CHANGE-FROM-OPS] (91,228)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (253,966)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,224,142
[NUMBER-OF-SHARES-REDEEMED] 423,245
[SHARES-REINVESTED] 22,213
[NET-CHANGE-IN-ASSETS] 7,681,491
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (19,101)
[OVERDISTRIB-NII-PRIOR] 34
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 13,251
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 123,527
[AVERAGE-NET-ASSETS] 5,289,292
[PER-SHARE-NAV-BEGIN] 10.43
[PER-SHARE-NII] 0.47
[PER-SHARE-GAIN-APPREC] (0.69)
[PER-SHARE-DIVIDEND] 0.47
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 9.74
[EXPENSE-RATIO] 0.90
</TABLE>
