As filed with the Securities and Exchange Commission on December 22, 1995
Registration Nos. 33-87488, 811-8908
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 2 [X]
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [X]
CRANBROOK MONEY MARKET FUND and
CRANBROOK TREASURY FUND
series of
CRANBROOK FUNDS
(Exact Name of Registrant as Specified in Charter)
100 Renaissance Center, 25th Floor
Detroit, Michigan 48243
(Address of Principal Executive Office)
(313) 259-2600
Registrant's Telephone Number, Including Area Code
Conrad W. Koski, President
Cranbrook Funds
100 Renaissance Center, 25th Floor
Detroit, Michigan 48243
(Name and Address of Agent for Service)
Copy to:
Paul R. Rentenbach
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
It is proposed that this filing will become effective (check appropriate
box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on January 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on , 19 pursuant to paragraph (a) of Rule 485
------------
The Registrant has previously registered an indefinite number of shares
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Registrant filed its Rule 24f-2 Notice for the fiscal year ending October
31, 1995, on December 21, 1995.
<PAGE>
Cross Reference Sheet Pursuant to Rule 481(a)
FORM N-1A PART A ITEM LOCATION IN PROSPECTUS
1. Cover Page.......................... Cover Page
2. Synopsis............................ Annual Fund Operating Expenses
3. Condensed Financial Information..... Annual Operating Expenses
4. General Description of Registrant... Cranbrook Funds; Investment
Objectives; Investment Restrictions;
Certain Other Matters
5. Management of the Fund.............. Management of the Fund
5a. Management's Discussion of Fund
Performance................... Not Applicable
6. Capital Stock and Other Securities.. Purchase of Shares; Certain Services
Provided to Shareholders; Redemption
of Shares; Dividends and
Distributions; Taxes; Certain Other
Matters
7. Purchase of Securities Being Offered Purchase of Shares
8. Redemption or Repurchase............ Redemption of Shares
9. Pending Legal Proceedings........... Not Applicable
LOCATION IN STATEMENT OF
FORM N-1A PART B ITEM ADDITIONAL INFORMATION
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
12. General Information and History.... Not Applicable
13. Investment Objectives and Policies. Investment Objectives and Policies
14. Management of the Fund............. Management of the Fund
15. Control Persons and Principal
Holders of Securities......... Control Persons and Principal
Holders of Securities
16. Investment Advisory and Other
Services...................... Management of the Fund
17. Brokerage Allocation and Other
Practices..................... Investment Objectives and Policies -
Portfolio Transactions
18. Capital Stock and Other Securities. Not Applicable
19. Purchase, Redemption and Pricing
of Securities Being Offered... Redemption of Shares of Securities;
Computation of Yield; Determination
of Net Asset Value Per Share and of
Net Investment Income
20. Tax Status......................... Not Applicable
21. Underwriters....................... Not Applicable
22. Calculation of Performance Data.... Not Applicable
23. Financial Statements............... Financial Statements
FORM N-1A PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment to
the Registration Statement.
<PAGE>
CRANBROOK FUNDS
consisting of the
CRANBROOK MONEY MARKET FUND
and
CRANBROOK TREASURY FUND
100 Renaissance Center, 25th Floor
Detroit, Michigan 48243
(313) 259-4321
Cranbrook Money Market Fund (the "Money Market Portfolio") and Cranbrook
Treasury Fund (the "Treasury Portfolio") are separate series of Cranbrook
Funds. Both funds seek to achieve a high level of current income consistent
with the preservation of capital and liquidity by investing in a portfolio
of high-quality, short-term "money market" instruments. The Money Market
Portfolio invests in short-term securities of United States and Canadian
Governments, in money market instruments and in such securities subject to
repurchase agreements. The Treasury Portfolio invests in a portfolio of
U.S. Treasury securities and in such securities subject to repurchase
agreements. Shares of the Money Market Portfolio and the Treasury Portfolio
are not insured or guaranteed by the U.S. Government or any governmental
agency and are not subject to the protection of the Securities Investor
Protection Corporation. Each Portfolio seeks to maintain a constant $1.00
net asset value per share, although this cannot be assured. Cranbrook Funds
may offer additional series in order to meet a wide range of investment
needs. Any additional series will represent a separate investment portfolio
with its own investment policies and objectives.
The date of this Prospectus is January 1, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the
Statement of Additional Information dated January 1, 1996 and, if given or
made, such information or representations may not be relied upon as having
been authorized by Cranbrook Funds, the Adviser, the Distributor or any
other person. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there by any sale of, these
securities in any state or jurisdiction in which such offer, solicitation or
sale would be unlawful. Cranbrook Funds reserves the right in its sole
discretion to withdraw all or any part of the offering made by this
Prospectus or to reject purchase orders. All orders to purchase shares are
subject to acceptance and are not binding until confirmed or accepted in
writing.
TABLE OF CONTENTS
Page
----
Annual Fund Operating Expenses . . . . . . . . . . . . . . . . 1
Cranbrook Funds . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives and Restrictions . . . . . . . . . . . . . 7
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . 9
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . 10
Certain Services Provided to Shareholders . . . . . . . . . . . 13
Dividends and Distribution . . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Management of the Fund . . . . . . . . . . . . . . . . . . . . . 15
Performance and Yield Information . . . . . . . . . . . . . . . 17
Certain Other Matters . . . . . . . . . . . . . . . . . . . . . 18
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT CRANBROOK FUNDS AND
TWO OF ITS PORTFOLIOS, CRANBROOK MONEY MARKET FUND AND CRANBROOK TREASURY
FUND, WHICH A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. IT IS
IMPORTANT THAT YOU READ IT CAREFULLY BEFORE YOU DECIDE TO INVEST. THIS
PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION ABOUT CRANBROOK FUNDS AND SUCH SERIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS INCORPORATED INTO THIS
PROSPECTUS BY REFERENCE. A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION
IS AVAILABLE WITHOUT CHARGE, UPON REQUEST TO THE ADDRESS OR TELEPHONE NUMBER
LISTED ON THE COVER.
<PAGE>
ANNUAL FUND OPERATING EXPENSES
Money Market Treasury
Portfolio Portfolio
(as a percentage of average net
assets)
Management fee (1) . . . . . . . . . . . 0.225% 0.225%
12b-1 distribution fee (2) . . . . . . . 0.25 0.25
Other expenses (3) . . . . . . . . . . . 0.23 0.23
----- -----
Total . . . . . . . . . . . . . . . 0.705%
0.705%
===== =====
----------------
(1) Represents advisory fee. See "Management of the Fund -
Investment Adviser".
(2) Represents fees payable to FoM under the Administration and
Distribution Agreement for distribution expenses. See
"Management of the Fund--Administrator, Distributor,
Transfer and Dividend Disbursing Agent". Under this
agreement, FoM performs both distribution and
administrative functions. Long-term shareholders may pay
more in 12b-1 fees than the economic equivalent of the
maximum front-end sales charges permitted by the rules of
the National Association of Securities Dealers, Inc.
(3) Represents all other expenses of the Fund, including fees
paid to NBD Bank ("NBD") as the Custodian, to FoM as
transfer and dividend disbursing agent and to FoM for
administrative services under the Administration and
Distribution Agreement.
As an example, assuming an investor maintains an average of $1,000
invested in the Money Market Portfolio or the Treasury Portfolio, based on
the estimates shown above the investor's indirect share of expenses paid by
the Fund would be 7.05 or 7.05, respectively, for as long as the investment
is maintained. If all dividends on an initial $1,000 investment are
reinvested, and assuming a 5% annual return, the investor's total indirect
share of expenses paid by the Fund would be as follows:
Money Market Treasury
Portfolio Portfolio
One year . . . . . . . . . $ 7.05 $ 7.05
Three years. . . . . . . $22.07 $22.07
Five years . . . . . . . . $38.41 $38.41
Ten years. . . . . . . . . $85.80 $85.80
The above table is provided to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear,
directly or indirectly. The percentages shown above expressing Other
Expenses are estimates based on amounts incurred by other similar funds for
which FoM has served as administrator, transfer agent and dividend
disbursing agent and for which NBD has served at custodian. The example
should not be considered a representation of the past or future performance
or expenses of the Fund. Actual expenses may be greater or lesser than
those shown.
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CRANBROOK FUNDS
The Fund and the Portfolios
Cranbrook Money Market Fund (the "Money Market Portfolio") and
Cranbrook Treasury Fund (the "Treasury Portfolio") (collectively, the
"Portfolios") are separate series of Cranbrook Funds (the "Fund"), which is
an unincorporated business trust organized under Massachusetts law on
November 30, 1994 and which commenced operations on March 1, 1995 Each
Portfolio of the Fund is an open-end, diversified management investment
company and the Fund is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended (the "1940
Act").
Investment Objectives
The investment objective of each Portfolio is to provide a high
level of current income consistent with the preservation of capital and
liquidity. This investment objective will not be changed without
shareholder approval. The Money Market Portfolio seeks to achieve its
investment objective by investing in short-term securities of the United
States and Canadian Governments, in money market instruments, and in such
securities subject to repurchase agreements. The Treasury Portfolio seeks
to achieve its investment objective by investing only in short-term
securities that are direct obligations of the U.S. Treasury and in such
securities subject to repurchase agreements. The Treasury Portfolio is
designed for investors seeking a higher degree of safety and capital
preservation and for investment by certain municipal governmental
authorities and financial institutions which are required to limit their
investments to such types of securities. Securities in which the Portfolios
invest may have lower yields than securities with longer maturities or lower
investment quality, or which generally have less liquidity. There can be no
assurance that either the Money Market Portfolio or the Treasury Portfolio
will achieve its investment objective.
Investment Adviser, Administrator and Distributor
The Investment Adviser for both Portfolios is Cranbrook Capital
Management, Inc. (the "Adviser"), which is a Michigan corporation
wholly-owned by First of Michigan Capital Corporation ("FMCC"). The
Adviser's principal office is located at 100 Renaissance Center, 25th Floor,
Detroit, Michigan 48243. The Administrator and Distributor of the
Portfolios is First of Michigan Corporation ("FoM"), which is a Delaware
corporation also wholly-owned by FMCC. FoM's principal office is located at
l00 Renaissance Center, 26th Floor, Detroit, Michigan 48243. Further
information about the duties and compensation of the Adviser and FoM is set
forth under the caption "Management of the Fund" in this Prospectus and in
the Statement of Additional Information.
Certain Risk Factors Which Investors Should Consider
Although shares of the Treasury Portfolio represent, and shares of
the Money Market Portfolio may partially represent, an interest in a
portfolio of securities issued or guaranteed by the United States Treasury
and investments secured by such securities, shares of the Portfolios are not
themselves guaranteed or sponsored by any government authority and are not
subject to the protection of the Securities Investor Protection Corporation.
Furthermore, neither the U.S. Government, nor any of its agencies and
instrumentalities, guarantees the market value of their securities.
Although the Fund seeks to maintain a net asset value of $l.00 per
share for each Portfolio for purposes of purchases and redemptions, there
can be no assurance that it will be able to do so on a
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<PAGE>
continuous basis, and under unusual circumstances the number of shares in
shareholder accounts may be reduced to maintain the net asset value at
$1.00. Information about the method by which net asset value per share is
determined is contained in the Statement of Additional Information. The
investment securities of each Portfolio will be affected by general changes
in interest rates resulting in increases or decreases in the value of the
obligations held by the Portfolio. The market value of the securities in a
Portfolio can be expected to vary inversely to the changes in prevailing
interest rates. Thus, if interest rates have increased from the time a
security was purchased, such security, if sold, might be sold at a price
less than its purchase cost. Similarly, if interest rates have declined from
the time a security was purchased, such security, if sold, might be sold at
a price greater than its purchase cost. In either instance, if the security
were held to maturity, no loss or gain would normally be realized as a
result of these fluctuations. Redemptions by shareholders could require the
sale of Portfolio investments by the Fund at a time when such a sale might
not otherwise be desirable.
Either Portfolio may purchase securities which permit the obligor
to prepay the principal balance in whole or in part prior to stated
maturity. Prepayments, if they occur, could adversely affect the yield
realized on the investment and could occur at a time when reinvestment of
proceeds by the Fund may not yield as much as the investment which was
prepaid.
Either Portfolio may acquire securities subject to repurchase
agreements, subject to certain limitations. Borrowings by either Portfolio
are subject to certain limitations. The Money Market Portfolio may invest
in U.S. dollar denominated securities issued by Canadian governmental or
corporate entities or foreign branches of U.S. banks, in time deposits, and
in variable rate master demand notes. The Money Market Portfolio may also
lend its securities to brokers, dealers, and financial institutions,
provided certain conditions are met. Such transactions may involve certain
risks. See "Investment Objective and Policies".
Shareholder Inquiries
The principal office of the Fund is 100 Renaissance Center, 25th
Floor, Detroit, Michigan 48243.
Phone number of the Fund: (313) 259-4321
24 hour yield information:
Within Michigan: (800) 482-2417
Outside of Michigan: (800) 521-1098
Purchase and Redemption Orders:
Within Michigan: (800) 482-2560
Outside of Michigan: (800) 521-1264
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of each Portfolio is to provide a high
level of current income consistent with the preservation of capital and
liquidity. The investment objective of a Portfolio will not be changed
without shareholder approval. Each Portfolio seeks to achieve its objective
by investing exclusively in United States dollar denominated obligations.
The dollar-weighted average maturity of each Portfolio will not exceed 90
days, and all securities purchased will have a maturity of 397 days or less
at the time of acquisition (except for securities underlying certain
repurchase agreements and certain variable rate and floating rate
instruments). Normally, each Portfolio will hold portfolio securities to
maturity but may dispose of any instrument if the Adviser deems the action
appropriate because of redemption requirements, reduction in
2
<PAGE>
credit quality, a reduction in the instrument's rating, or other reasons.
Even though most securities are expected to be held to maturity, the fact
that they will have maturities of 397 days or less will result in high
portfolio turnover.
Money Market Portfolio
The Money Market Portfolio may invest in the following "money
market" instruments:
1. Obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
2. U.S. Dollar denominated obligations issued or guaranteed by
the government of Canada, a Province of Canada, or an
instrumentality or political subdivision thereof.
3. Certificates of deposit, bankers' acceptances, and time
deposits of U.S. banks or other U.S. financial institutions
(including foreign branches of such banks and institutions) having
total assets in excess of $1 billion and which are members of the
Federal Reserve System or whose deposits are insured by the Federal
Deposit Insurance Corporation.
4. Certificates of deposit, bankers' acceptances, and time
deposits of American branches of foreign banks having assets in
excess of the equivalent of $1 billion.
5. Commercial paper, other short term obligations including
variable rate master demand notes, participation interests in loans
extended by banks, and bonds and other obligations having a
remaining maturity of less than one year.
6. Repurchase agreements involving any of the above types of
securities (see "Certain Investment Practices" below for a
discussion of repurchase agreements).
Obligations issued or guaranteed by foreign branches of United
States banks (commonly known as "Eurodollar" obligations) or United States
branches of foreign banks (commonly known as "Yankeedollar" obligations) may
be general obligations of the parent bank or obligations only of the issuing
branch. Where the obligation is only that of the issuing branch, the parent
bank has no legal duty to pay such obligation. Such obligations would thus
be subject to risks comparable to those which would be present if the
issuing branch were a separate bank. The Money Market Portfolio will not
invest in a Eurodollar obligation if upon making such investment the total
of Eurodollar obligations which are not general obligations of domestic
parent banks would thereby exceed 25% of the total assets of the Money
Market Portfolio. Investments in securities of foreign governments,
corporations, or foreign branches of United States banks involve
considerations which are not ordinarily associated with investing in
domestic securities. These considerations include currency exchange control
regulations, the possibility of expropriation, seizure, or nationalization
of foreign deposits, less liquidity and more volatility in foreign
securities markets, and the impact of political, social, or diplomatic
developments or the adoption of other foreign government restrictions that
might adversely affect the payment of principal and interest on securities
in the Money Market Portfolio.
United States and foreign bank obligations include time deposits,
which are non-negotiable, interest-bearing deposits maintained in a banking
institution. Substantial forfeiture of accrued interest of a time deposit
can result if the Money Market Portfolio should make a withdrawal of amounts
deposited before
3
<PAGE>
the stated maturity. Time deposits maturing in more than seven days,
together with other "illiquid" investments, may not exceed 10% of the total
assets of the Money Market Portfolio.
Variable rate master demand notes are direct lending arrangements
between the lender (the Money Market Portfolio) and a borrower.
Participation interests in loans extended by banks represent the Money
Market Portfolio's interest in a lending arrangement between a bank and its
borrower. It is not generally contemplated that such instruments will be
traded. There is no secondary market for variable rate master demand notes
although they are redeemable (and thus immediately repayable by the
borrower) at face value, plus accrued interest, at any time and are
therefore under normal circumstances not considered by the Money Market
Portfolio to be illiquid investments. In connection with master demand note
arrangements, the Adviser will consider, on an ongoing basis, the earning
power, cash flow, and other liquidity ratios of the borrower and the
borrower's ability to pay principal and interest on demand. The quality of
the Money Market Portfolio investments in variable rate master demand notes
is also reviewed by the Trustees at least quarterly.
Commercial paper, including variable rate notes and other short
term corporate obligations, must be rated not less than A2 by Standard &
Poor's Corporation ("S&P") or Prime-2 by Moody's Investors Service, Inc.
("Moody's") or, if not rated, must have been independently determined by the
Trustees to be investments of high quality and minimal credit risk and be
issued by a corporation having an outstanding bond issue rated A or better
by S&P or Moody's. Bonds and other short term obligations (if not rated as
commercial paper) must be rated AA or Aa or better by S&P or Moody's,
respectively, or be, in the judgment of the Adviser and Portfolio Manager,
of equivalent investment quality. A description of the ratings of
commercial paper and bonds is contained in the Statement of Additional
Information.
Treasury Portfolio
The Treasury Portfolio may invest in the following types of
securities:
1. Treasury bills, notes and bonds which are direct
obligations of the U.S. Treasury, including purchases and sales of
such U.S. Government securities on a when-issued basis.
2. Repurchase agreements involving such U.S. Government
securities with any member bank of the Federal Reserve System or
primary dealers in Treasury securities, but the Treasury Portfolio
may not invest more than 10% of its total assets with any one such
bank or dealer. This limitation on the Treasury Portfolio's
investment in obligations subject to repurchase agreements may
adversely affect the Treasury Portfolio's yield under certain
market conditions (see "Certain Investment Practices" below for a
discussion of repurchase agreements).
Certain Investment Practices
In addition to its other investment policies, each Portfolio
complies with the quality and diversification requirements of Rule 2a-7
under the 1940 Act. Under Rule 2a-7, each Portfolio may only purchase
United States dollar-denominated instruments that are determined to present
minimal credit risk and that are at the time of acquisition "eligible
securities" as defined in Rule 2a-7. An eligible security is a security
that is rated in the top two rating categories by the required number of
nationally recognized statistical rating organizations (at least two or, if
only one such organization has rated the security, that one organization)
or, if unrated, are deemed comparable in quality. Securities, other than
U.S. government securities and repurchase agreements of such securities, may
not be purchased if the purchase would cause a Portfolio to
4
<PAGE>
have more than 5% of its assets in securities of any one issuer or in
eligible securities that have not been rated in the. highest category by the
required number of rating organizations or, if unrated, have not been deemed
of comparable quality.
In pursuit of its investment objective, either Portfolio may engage
in repurchase agreement transactions, and the Money Market Portfolio may
from time to time entirely comprise securities subject to repurchase
agreements. Under the terms of a typical repurchase agreement, the
Portfolio acquires an underlying debt obligation for a relatively short
period (usually not more than one week) subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the
Portfolio's holding period. This arrangement results in a fixed rate of
return that is not subject to market fluctuations during the Portfolio's
holding period. Repurchase agreements are considered loans collateralized
by the underlying securities. Either Portfolio may enter into repurchase
agreements with respect to its portfolio securities with brokers, dealers,
and commercial banks. The Portfolios will engage in such transactions only
with institutions included on the Federal Reserve System's list of
institutions, commonly referred to as "primary dealers", with whom the
Federal Reserve open market desk will do business. Under each repurchase
agreement the selling institution will be required to maintain the value of
the securities subject to the repurchase agreement at not less than 102% of
their repurchase price. Repurchase agreements could involve certain risks
in the event of default or insolvency of the other party, including possible
delays or restrictions upon a Portfolio's ability to dispose of the
underlying securities. The Adviser, acting under the supervision of the
Trustees, reviews the creditworthiness of institutions with whom a Portfolio
enters into repurchase agreements to evaluate these risks, and also monitors
the status of repurchase agreements to insure that the value of the
collateral equals or exceeds 102% of the amount of the repurchase obligation
and in the event of a shortfall takes such action as it deems appropriate
(which may include a demand for additional collateral from the selling
institution and will include such a demand if the value of the collateral
has fallen below 100% of the amount of the repurchase obligation).
The Money Market Portfolio (but not the Treasury Portfolio) may
also lend its portfolio securities to brokers, dealers, and financial
institutions provided that cash or cash equivalent collateral, or letters of
credit to the extent permitted by law, equal to at least 100% of the market
value of the securities loaned, is maintained by the borrower with the
Portfolio. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the
Fund's Board of Trustees.
Change in Policies
The Trustees have no present plan to change the policies with
regard to the types or maturities of securities in which either Portfolio
can invest. However, if they determine that a Portfolio's investment
objectives can best be achieved by a change in investment policy or
strategy, they may do so without shareholder approval provided that such a
change is not prohibited by such Portfolio's investment restrictions or
applicable law. For example, the Trustees could, as a matter of policy or
strategy, decide not to enter into certain types of transactions described
above. Any material change will first be disclosed in a current prospectus
or proxy statement.
5
<PAGE>
Certain Investment Restrictions
The following investment restrictions have been declared by the
Fund to be "fundamental investment policies", which means that they may not
be changed without approval by holders of a "majority" of the outstanding
shares (as defined in the 1940 Act) of the affected Portfolio:
-- The Money Market Portfolio may not purchase the securities
of issuers conducting their principal business activity in the same
industry if the value of the Money Market Portfolio's investments
in such industry would exceed 25% of the value of such Portfolio's
total assets, provided that gas, electric, water, and telephone
utilities are considered to be separate industries, the personal
credit and business credit businesses are considered separate
industries and there is no limitation with respect to or arising
out of investments in obligations issued or guaranteed by the
United States government, its agencies and instrumentalities, or
negotiable certificates of deposit, bankers' acceptances or time
deposits issued by domestic banks. For purposes of this
restriction, securities issued by the government of Canada, a
Province of Canada or an instrumentality or political subdivision
therof are considered to be an "industry" subject to this 25%
limit.
-- The Money Market Portfolio may not borrow money, except
from banks for temporary or emergency purposes, and then only in
amounts not exceeding at any one time 20% of the value of the
Portfolio's total assets at the time of the borrowings.
-- The Money Market Portfolio may not invest more than 5% of
its total assets in the securities of any one issuer, except
securities issued or guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities.
-- Neither Portfolio may invest more than 10% of its net
assets in securities restricted as to disposition under the federal
securities laws or which are otherwise considered to be "illiquid"
investments, such as restricted securities, securities having no
readily available market quotations, non-negotiable time deposits
maturing in more than seven days, and repurchase agreements with
maturities of more than seven days.
-- The Treasury Portfolio will invest 100% of its assets in
securities that are direct obligations of the U.S. Treasury or
which are repurchase obligations with respect to such Treasury
securities. The Treasury Portfolio may not (1) enter into
repurchase agreements if immediately thereafter more than 10% of
the value of its total assets would be invested in repurchase
agreements with any one qualifying bank or primary dealer in such
securities or (2) borrow money except from banks for temporary or
emergency purposes and then only in an amount not exceeding 10% of
the value of its total assets at the time of the borrowings, or
mortgage, pledge or hypothecate that Portfolio's assets except in
connection with any such borrowing and in amounts not in excess of
the dollar amounts borrowed.
Further Information
The Statement of Additional Information contains more information
with respect to the Fund's investment policies, information about Rule 2a-7,
and a complete list of those fundamental investment policies which cannot be
changed without approval of a majority of the shareholders of the affected
Portfolio.
6
<PAGE>
PURCHASE OF SHARES
The Fund has established a minimum initial investment of $1,000 and
$100 for subsequent investments in each Portfolio. Customers of FoM in
states where Fund shares are qualified to be sold are afforded a "sweep"
privilege, whereby uninvested cash is automatically invested in Fund shares.
Minimum investment amounts do not apply to the FoM "sweep" privilege, but
uninvested amounts of $500 or more are "swept" on a daily basis and
uninvested amounts of $1.00 or more, but less than $500, are "swept" weekly,
on every Monday. There is no front-end or deferred sales charge by the
Fund.
The Fund's shares are sold to the general public through FoM, the
Administrator and Distributor, on a continuing basis at their net asset
value next determined after receipt of an order to purchase shares by FoM.
An order to purchase shares will be deemed to have been received by FoM only
when Federal Funds with respect thereto are available to the Custodian for
investment. Federal Funds are monies credited to a bank's account within a
Federal Reserve Bank. Payment for an order to purchase shares that is
transmitted by Federal Funds wire will be available the same day for
investment, if received prior to the last valuation time on that day.
Payments transmitted by other means (such as by check drawn on a bank that
is a member of the Federal Reserve System) will normally be converted into
Federal Funds within two banking days after receipt. Orders by wire
transfer of Federal Funds received by FoM for purchase of shares will be
effected, and the investor will begin to earn dividends, on the day of
receipt if FoM has received confirmation of receipt of such funds prior to
11:00 a.m., Detroit time. Otherwise, such purchase will be effected, and
the investor will begin to earn dividends, on the following business day.
Orders by wire transfer of funds that are not immediately available Federal
Funds will be effected, and the investor will begin to earn dividends, on
the day following receipt of the wire transfer. Shareholders will receive
confirmation of each purchase other than purchase by automatic reinvestment
of dividends.
As used in this Prospectus, the term "business day" refers to those
days on which both FoM and NBD, the Fund's Custodian, are open for business.
If payment is wired in Federal Funds, the payment should be
directed to "Comerica Bank (ABA #072000096), for the account of First of
Michigan Corporation re: Cranbrook Funds, Account Number 2000014379"; and
should identify the customer name and account number. If payment is to be
wired, call FoM prior to wiring the funds at (800) 521-1264 (outside of
Michigan) and (800) 482-2560 (within Michigan).
Valuation of Shares
The net asset value of each Portfolio is determined as of 2:00 p.m.
and as of 5:00 p.m., Detroit time, on each business day, on any other day on
which the New York Stock Exchange is open for business, and on any other day
on which there is a sufficient degree of trading in the Portfolio's
investment securities that the current net asset value of the Portfolio's
shares might be materially affected, and is computed by dividing the value
of the net assets of each Portfolio by the total number of shares of such
Portfolio which are outstanding. Each Portfolio's assets are valued on the
basis of amortized cost, which involves valuing a portfolio investment at
its cost initially and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. The Fund attempts to
maintain a constant net asset value of $1.00 per share for each Portfolio.
Further information regarding the Fund's valuation policies, including a
list of holidays on which the New York Stock Exchange and either NBD or FoM,
or both, are not open for business, is contained in the Statement of
Additional Information.
7
<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem shares of either Portfolio at the net
asset value next determined after receipt of a proper notice of redemption
in accordance with one of the procedures set forth below. The Fund or FoM
may change the following procedures at their discretion.
The shareholder will not be credited with dividends on those shares
being redeemed for the day on which the shares are redeemed by the Fund. A
check for the proceeds of redemption will normally be mailed on the same
business day following receipt of any redemption request received by FoM
prior to 11:00 a.m., and on the next business day following receipt of any
redemption request received after 11:00 a.m., but in any event, except as
discussed in the Statement of Additional Information, within seven calendar
days of the redemption by the Fund.
If a shareholder wishes to redeem his entire shareholding in a
Portfolio, he will receive, in addition to the net asset value of the
shares, all declared but unpaid dividends thereon. The manner of
determining net asset value per share is discussed in the Statement of
Additional Information.
Regu1ar Redemption
Upon receipt by FoM prior to 11:00 a.m., Detroit time, of a written
or oral request by a shareholder to redeem all or a portion of the shares
then owned by the shareholder, the Fund will disburse redemption proceeds on
the same business day. Upon receipt of a request after 11:00 a.m., the Fund
will disburse redemption proceeds on the next business day, and in any event
within seven calendar days. If shares are requested to be redeemed which
were purchased by check, the Fund will disburse redemption proceeds upon
clearance of the check used for the purchase of such shares, which may take
up to 15 or more days. Such delays can be avoided by wiring Federal Funds
in effecting share purchases.
Shareholders wishing to place redemption orders by telephone cannot
be assured that open lines will be available during periods of heavy
telephone calls. In addition to the telephone numbers listed under the
caption "Cranbrook Funds - Shareholder Inquiries", a shareholder may also
phone the general telephone number of FoM, (313) 259-2600, and ask for the
"Cranbrook Funds Department". The Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Such
procedures may include, among others, requiring some form of personal
identification prior to acting upon telephonic instructions, providing
written confirmations of all such transactions, and/or tape recording all
telephonic instructions. IF PROCEDURES SUCH AS THE ABOVE ARE NOT FOLLOWED,
FoM AND THE FUND MAY BE LIABLE FOR LOSSES, COSTS, OR EXPENSES FOR ACTING
UPON A SHAREHOLDER'S TELEPHONE INSTRUCTIONS OR FOR ANY UNAUTHORIZED
TELEPHONE REDEMPTION. As a result of this policy, the shareholder will bear
the risk of any loss unless the Fund has failed to follow procedures such as
the above.
8
<PAGE>
Redemption by Mail
A shareholder may redeem shares by mail by submitting a written
redemption request to:
First of Michigan Corporation
Attn: Cranbrook Funds
100 Renaissance Center, 26th Floor
Detroit, Michigan 48243
The request for redemption should include the name of the Portfolio and the
account number and should be signed by all registered owners of the shares
in the exact names in which they are registered. Each request should
specify the number or dollar amount of shares to be redeemed or that all
shares in the account are to be redeemed.
Option to Make Systematic Withdrawals
An owner of $5,000 or more of shares of either Portfolio may
provide for the payment from his account of any requested dollar amount to
him or his designated payee monthly, quarterly, or annually. Shares will be
redeemed so that the payee will receive payment approximately the first of
the month. A sufficient number of shares will be redeemed to make the
designated payment.
Redemption Draft Privileges
The Fund will provide each shareholder, upon request, with drafts
("Redemption Drafts") drawn on a Portfolio of the Fund that will clear
through NBD. Redemption Drafts may be made payable to the order of any
person in any amount. This privilege does not constitute a banking
function, and owning Fund shares is not equivalent to a bank checking
account. When such a Redemption Draft is presented for payment, a
sufficient number of whole and fractional shares in the shareholder's
account in the Portfolio to which the Redemption Draft relates will be
redeemed to cover the amount of the Redemption Draft. A shareholder wishing
to use this method of redemption must complete and file an authorization
form which is available from FoM, and an initial supply of Redemption Drafts
should be received within three weeks thereafter. If the shares to be
redeemed were purchased by check, the Fund may delay transmittal of
redemption proceeds only until such time as it is reasonably assured that
good payment has been collected for the purchase of such shares, which may
be up to 15 or more days.
The Fund may refuse to honor Redemption Drafts whenever the right
of redemption has been suspended or postponed or whenever the account is
otherwise impaired. A $10 service fee will be charged when a Redemption
Draft is presented to redeem shares of a Portfolio in excess of the value of
the shareholder's account in the Portfolio. At the date of this Prospectus,
there is no other service fee associated with the Redemption Draft
privilege.
Further Redemption Information
The Fund reserves the right to modify any of the methods of
redemption or to charge fees for providing these services which are not
otherwise disclosed in this Prospectus upon 30 days' written notice to
shareholders.
Due to the high cost of maintaining accounts of less than $500, the
Fund reserves the right to redeem shares involuntarily in any such account
at their then current net asset value. Shareholders will first be
9
<PAGE>
notified and allowed 30 days to make additional share purchases to bring
their accounts to more than $500. Involuntary redemptions will not be made
if the decline in an account balance is due to market fluctuations.
Under certain circumstances, the right of redemption may be
suspended, or the redemption may be satisfied by distribution of portfolio
securities rather than cash. Information as to these matters is set forth
in the Statement of Additional Information.
CERTAIN SERVICES PROVIDED TO SHAREHOLDERS
Statements of Account
Statements of account will be sent to each shareholder at least
quarterly; statements reflecting transactions other than automatic
reinvestment of dividends or systematic withdrawals will be sent monthly.
Fiduciaries and other shareholders who need monthly statements may make a
written request to the Fund for such statements.
Dividend Election
A shareholder may elect to receive dividends in shares or in cash.
If no election is made, dividends will automatically be credited to the
shareholder's account in additional shares of the Portfolio to which such
dividend relates.
Exchange Privilege
Shares of the Money Market Portfolio and the Treasury Portfolio may
be exchanged for each other at their relative net asset values if the shares
to be exchanged have been owned at least 30 days. The total value of shares
being exchanged must at least equal the minimum investment requirement of
the Portfolio into which they are being exchanged Exchanges are made based
on the relative dollar values of the shares involved in the exchange. Only
one exchange in any 30-day period is permitted. Exchanges will be effected
by redemption of shares of the Portfolio he1d and purchase of shares of the
other Portfolio. For Federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss, if any, will be realized,
depending upon whether the value of the shares being exchanged is more or
less than the shareholder's adjusted cost basis. Shareholders wishing to
make an exchange should contact FoM at (800) 521-1260 (outside of Michigan)
or (800) 482-2560 (within Michigan). Exchange requests in the form required
by FoM and received by FoM prior to 3:00 p.m., Detroit time, will be
effected on the next business day after receipt, and will be made at the net
asset values next determined after receipt.
10
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
On each business day that the New York Stock Exchange is open, each
Portfolio's net investment income will be declared at the close of the
Exchange as a daily dividend to shareholders of record prior to such close.
Shareholders will receive dividends in additional shares of the applicable
Portfolio unless they elect to receive cash. Reinvestment or payment of
dividends will be effected monthly at the net asset value of the applicable
Portfolio on the date effected and will include fractional shares if
necessary. If cash payment is requested, checks will be mailed within five
business days after the last day of each month. If a shareholder wishes to
redeem his entire shareholding in a Portfolio, all dividends accrued to the
time of redemption will be paid to him at that time.
TAXES
Federal
The Fund will elect to be taxed as a "regulated investment company"
under Subchapter M of the Internal Revenue Code (the "Code").
Dividends (other than distributions of long-term capital gains) are
taxable to shareholders as ordinary income, whether received in shares or
cash. The Fund does not expect to incur any long-term gains on investments.
Because none of the Fund's net investment income is expected to be derived
from dividends, no part of any distribution will be eligible for the
dividends received deduction for corporations.
Federal income tax may be required to be withheld at a rate of 31%
of distributions ("backup withholding") if a shareholder fails to furnish
the Fund with such shareholder's taxpayer identification number under oath.
Dividends to shareholders who are non-resident aliens may be subject to a
30% United States withholding tax unless a reduced rate of withholding
exemption is provided by treaty. Non-resident investors are urged to
consult their own tax advisers concerning the applicability of the United
States withholding tax.
Each regulated investment company is required to pay a
nondeductible 4% excise tax to the extent it is not deemed to have
distributed 98% of its ordinary income and 98% of its net capital gain
income, determined on an annual basis. The Fund intends to distribute
substantially all of its net investment income prior to each year end, does
not expect to have capital gain income, and therefore does not expect to be
subject to this excise tax.
State and Local Tax
The Fund may be subject to state or local taxes in jurisdictions in
which the Fund may be deemed to be doing business. In addition, in those
states or localities which have income tax laws, the treatment of the Fund
and its shareholders under such laws may differ from treatment under Federal
income tax laws. Shareholders should consult their own tax advisers
concerning these matters. In certain states, review with a shareholder's
tax adviser of the effect of investments in portfolio repurchase agreements
upon state income taxation may be appropriate.
The foregoing discussion of tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, which are subject
to change by legislative or administrative action.
11
<PAGE>
MANAGEMENT OF THE FUND
Trustees and Officers
The Trustees and executive officers of the Fund and their principal
occupations for the last five years are set forth below. The address of each
Trustee and executive officer is c/o Cranbrook Funds, 100 Renaissance
Center, 25th Floor, Detroit, Michigan 48243.
*CONRAD W. KOSKI, President and Trustee
Executive Vice President and Treasurer of FMCC and FoM;
Secretary-Treasurer of FoM Advisers, Inc., a wholly-owned
subsidiary of FMCC; Director of the Adviser.
CHARLES M. GRIMLEY, Treasurer and Secretary
Financial Vice President of FoM.
DAVID BROPHY, Trustee
Professor of Finance at the University of Michigan School
of Business Administration; Director of River Place
Financial Corporation (1984 to present).
ERNEST L. GROVE, JR., Trustee
Retired; formerly Vice Chairman of the Board and Chief
Financial Officer of The Detroit Edison Company (until
October 1989); Director of Standard Federal Bank (1986 to
present); Chairman of the Board (since December 1993) and
Director (since 1987) of Fretter, Inc., retailer; Director,
McLouth Steel Products Corporation (since 1988).
ROBERT L. HANNON, JR., Trustee
Retired; formerly President and Chief Executive Officer and
Chairman of the Board of Johnson & Higgins (Michigan),
insurance agents/brokers, and Director of Johnson &
Higgins.
*JOHN G. MARTIN, Trustee
Retired; formerly President and Chief Executive Officer of
FMCC and FoM, and Director of FMCC and FoM.
------------
*"Interested person" as defined in the 1940 Act.
Investment Adviser
The investment adviser for the Fund is Cranbrook Capital
Management, Inc. (the "Adviser"), a Michigan corporation which is a
wholly-owned subsidiary of First of Michigan Capital Corporation. The
Adviser is engaged in providing investment advisory services to a wide range
of personal, corporate, municipal and institutional clients, in addition to
the Fund. The Adviser currently employs nine full time professionals who
are actively engaged in this type of work, two of whom are dedicated to
fixed income money management.
Under its Advisory Agreement with the Fund, the Adviser is subject
to the general supervision of the Fund's Board of Trustees and manages each
Portfolio in conformance with the stated policies of the Fund.
12
<PAGE>
In this regard, it is the responsibility of the Adviser to make investment
decisions for the Fund and to place the purchase and sale orders for the
portfolio transactions of the Fund.
The Fund pays a fee to the Adviser that is computed daily and
payable monthly, at an annual rate of 0.225% of the Fund's first $500
million of average net assets and 0.20% of average net assets in excess of
$500 million. Fees paid to the Adviser under the Advisory Agreement are
allocated between the Portfolios based on their relative net asset values.
Custodian
NBD serves as the Fund's custodian, for which it is compensated
under a separate agreement. Its fees are computed on the basis of the
number of transactions occuring monthly. NBD is also compensated for
postage and other out-of-pocket expenses in connection with the above duties
and also receives compensation from the Fund for costs associated with
clearing redemption drafts through NBD, and for its standard bank charges
for processing lock box deposits, processing redemption drafts, and
performing other banking services for the Fund.
Administrator, Distributor, Transfer and Dividend Disbursing Agent
First of Michigan Corporation (FoM) is the administrator of the
Fund and distributor of the shares of each Portfolio. It is engaged in the
securities underwriting and securities and commodities brokerage business
and is a member of the New York Stock Exchange, Inc., other major securities
and commodities exchanges, and the National Association of Securities
Dealers, Inc. FoM participates as a member of various selling groups or as
agent of other investment companies, executes orders on behalf of investment
companies for the purchase and sale of their securities, and sells
securities to such companies as a broker or dealer in securities. On
September 29, 1995, FoM had a net worth of approximately $36,624,000.
As Administrator, FoM administers the Fund's corporate affairs,
subject to the supervision of the Fund's Trustees and, in connection
therewith, furnishes the Fund with office facilities, together with ordinary
clerical and shareholder services. FoM has authorized any of its directors,
officers, and employees who have been elected as officers or Trustees of the
Fund to serve in the capacities to which they have been elected. All
services furnished to the Fund by FoM may be furnished through the medium of
any directors, officers, or employees of FoM. FoM bears the salaries and
expenses of all FoM personnel providing services to the Fund and all
expenses incurred by FoM in connection with administering the ordinary
course of the Fund's business, other than those assumed by the Fund as
described under "Fund Expenses" below.
FoM also acts as Distributor of the Fund's shares pursuant to the
Administration and Distribution Agreement with the Fund dated as of December
15, 1994. FoM does not receive any front-end or deferred sales charge in
connection with the sale of shares of either Portfolio and bears the cost of
advertising incurred by it in connection with its distribution of such
shares.
The Trustees have approved a plan which authorizes the Fund to
incur distribution expenses, i.e., expenses primarily intended to result in
the sale of shares of the Fund. There has been no specific determination as
to whether expenses incurred by investment dealers such as FoM in providing
administration services, which as a practical matter result in additional
Fund shares being sold, are distribution expenses, and the Trustees and FoM
are unable to determine precisely what portion of the payments to be made
under the Administration and Distribution Agreement are for "distribution"
as opposed to other services. Consequently all payments to FoM are treated
as being made under the plan for purposes of
13
<PAGE>
required Trustee monitoring and approval. The staff of the Securities and
Exchange Commission is presently reviewing the distribution practices of the
investment company industry with a view to defining more precisely which
types of distribution plans are permissible.
The Administration and Distribution Agreement provides for
compensation to FoM for its services as Administrator and Distributor of an
amount equal on an annual basis to 0.25% of the Fund's first $500 million of
average net assets, 0.225% of the next $500 million of average net assets,
and 0.20% of average net assets in excess of $l billion. Amounts payable to
FoM under this agreement are allocated between the Money Market Portfolio
and the Treasury Portfolio based on their relative net asset values. FoM
also serves the Fund as its transfer and dividend disbursing agent, for
which it is compensated under a separate agreement. Its fees for this
service are equal to $0.7178 per shareholder account per month, and will be
paid monthly.
Mr. Conrad W. Koski, President and a Trustee of the Fund, is an
Executive Vice President and Treasurer of FoM.
Fund Expenses
The Fund is responsible for the payment of its expenses. These
include, for example, fees payable to the Adviser or expenses otherwise
incurred by the Fund in connection with the management of the investment of
the Fund's assets, the fees and expenses of NBD as the Fund's Custodian and
of FoM as its Transfer and Dividend Disbursing Agent, the fees payable to
FoM under the Administration and Distribution Agreement, the fees and
expenses of Trustees who are not affiliated with FoM, and various other
business expenses of the Fund. Expenses attributable to a particular
Portfolio are allocated to that Portfolio, and other expenses are allocated
in such manner as the Trustees deem fair and equitable. The Statement of
Additional Information describes in more detail the fees and expenses borne
by the Fund.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders,
the performance and yields of a Portfolio may be quoted and compared to
those of other mutual funds with similar investment objectives and to stock
or other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of
mutual funds. For example, the yields of the Money Market Portfolio and
Treasury Portfolio may be compared to the Donoghue's Money Fund Average and
the Donoghue's Treasury Money Fund Average, respectively, which are averages
compiled by IBC/Donoghue's Money Fund Report, a widely recognized
independent publication that monitors the performance of money market funds,
or to the average yields reported by the Bank Rate Monitor for money market
deposit accounts offered by the 50 leading banks and thrift institutions in
the top five standard metropolitan statistical areas. Performance and yield
data as reported in national financial publications including, but not
limited to, Money Magazine, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may
also be used in comparing the performance and yields of the Portfolios.
The "yield" of a Portfolio will refer to the income generated in
the Portfolio over a seven-day period identified in the advertisement. This
income is annualized, i.e., the income during a particular week is assumed
to be generated each week over a 52-week period and is shown as a percentage
of the investment. Each Portfolio may also advertise its "effective yield"
which is calculated similarly but, when annualized,
14
<PAGE>
income is assumed to be reinvested, thereby making the "effective yield"
slightly higher because of the compounding effect of the assumed
reinvestment.
The Portfolios' yields are based on historical earnings and will
fluctuate and should not be considered as representative of future
performance. Since yields fluctuate, yield data cannot necessarily be used
to compare an investment in a Portfolio's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed
or guaranteed fixed yield for a stated period of time. Performance and
yield are generally functions of kind and quality of the instruments held in
a portfolio, portfolio maturity, operating expenses, and market conditions.
The fees which may be imposed by Institutions or other financial
intermediaries on their customers for cash management and other services are
not reflected in the Portfolios' calculations of yields.
CERTAIN OTHER MATTERS
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional to issue shares and to create an unlimited
number of series of shares ("Series"). The Money Market Portfolio and the
Treasury Portfolio are the only present Series. Each share is entitled to
one vote on all matters submitted for a vote, and shares have equal voting
rights, except that only shares of a particular Series are entitled to vote
on matters affecting only that Series. Shares do not have cumulative voting
rights.
The Trustees are responsible for the management of the business and
affairs of the Fund. The Trustees meet quarterly to review the performance
of the Fund with the Administrator and Distributor and with the Adviser.
Extensions of the Advisory Agreement, the Administration and Distribution
Agreement, and the Plan of Distribution are subject to Trustee approval
annually. The Trustees also select the Fund's independent auditors
annually.
The Fund does not as a rule hold annual meetings. The term of
office of each Trustee is of unlimited duration, subject to certain removal
procedures, including certain procedures which may be initiated by
shareholders. Further information about such procedures is contained in the
Statement of Additional Information. Trustees may appoint their own
successors, provided that the appointment of Trustees who are not
"interested persons" as defined in the Investment Company Act of 1940 is
committed to the discretion of those Trustees who are also not interested
persons. No appointment of a Trustee by other Trustees may be made if such
appointment would create a body of Trustees more than one-third of which has
not been elected by the shareholders of the Fund, and a special meeting of
shareholders must be called to elect Trustees if at any time less than a
majority of the current Trustees has been elected by shareholders of the
Fund.
Under the laws of certain jurisdictions, the shareholders of a
business trust may, under certain circumstances, be held personally liable
for its obligations. Therefore, the Declaration of Trust for the Fund
contains an express disclaimer of shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation, or instrument entered into or executed by the
Fund or the Trustees. In addition, upon payment of any such liability, a
shareholder will be entitled to reimbursement from the general assets of the
Portfolio in which that shareholder has an interest. In the event a
Portfolio was unable to meet its obligations, the remaining Portfolios would
assume the unsatisfied obligation of that Portfolio. The Trustees intend to
conduct the operations of the Fund, with the advice of counsel, in such a
way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund or any of its Portfolios.
15
<PAGE>
(BACK COVER)
FIRST OF MICHIGAN CORPORATION
Members:
New York Stock Exchange, Inc. and other principal stock and options
exchanges
EXECUTIVE OFFICES
Detroit, MI 48243-1182 New York, NY 10005-3794
100 Renaissance Center/26th Floor 100 Wall Street/21st Floor
(313) 259-2600 (212) 344-1144
MICHIGAN OFFICES
Adrian 49221-2703 Jackson 49201-1227
123 East Maumee Street 333 Louis Glick Hwy., West
(517) 263-8570 (517) 782-0405
Ann Arbor 48104-2200 Kalamazoo 49007-3923
301 East Liberty Street/Suite 200 259 East Michigan Avenue
(313) 747-8040 (616) 382-2600
Auburn Hills 48326 Lapeer 48446-3810
2701 University Drive/Suite 425 25 West Nepessing
(810) 475-1700 (810) 664-0050
Battle Creek 49017-3611 Midland 48640-5189
29 West Michigan Mall 200 East Main Street
(616) 962-4034 (517) 631-0620
Bay City 48708-5731 Mt. Clemens 48043-8600
723 Washington Avenue 7 North Main/Suite 108
(517) 894-5757 (810) 469-4930
Birmingham 48009-5301
280 North Woodward
(810) 647-1400
Bloomfield Hills 48304 Port Huron 48059-4101
1533 North Woodward/Suite 150 3899 24th Avenue
(810) 540-2787 (810) 987-1500
Coldwater 49036-1966 Saginaw 48602-3498
150 North Willowbrook Road 3210 Davenport Avenue
(517) 278-7189 (517) 792-2346
Dearborn 48124-1979 St. Joseph 49085
23400 Michigan Avenue/Suite 103 2900 South State Street
(313) 277-0300 (616) 983-2587
East Lansing 48823-2433 Southfield 48076-4241
1427 West Saginaw 26555 Evergreen Road/Suite 1020
(517) 332-8000 (810) 358-3290
Frankenmuth 48734-1532 Southgate 48195-1300
108 West School Street 13219 Eureka Road
(517) 652-3251 (313) 285-2000
Grand Blanc 48439-7002 Sterling Heights 48313-1149
2240 East Hill Road/Suite A 12900 Hall Road/Suite 100
(810) 694-2980 (810) 726-5000
Grand Rapids 49503-2373 Traverse City 49684-5552
300 Ottawa, N.W./Suite 200 10850 Traverse Highway/Suite 1103
(616) 774-0141 (616) 947-2200
Grosse Pointe 48230-1559 Troy 48099-1057
16980 Kercheval 1719 West Big Beaver Road
(313) 886-1200 (810) 643-9100
Grosse Pointe Woods 48236-1821 West Bloomfield 48322-2394
20155 Mack Avenue 6230 Orchard Lake Road
(313) 884-9600 (810) 855-2100
Harbor Springs 49740-1532 Holland 49243-3546
115 East Third Street 100 East Eighth Street/Suite 280
(616) 526-2193 (616) 392-7986
<PAGE>
CRANBROOK FUNDS
consisting of the
Cranbrook Money Market Fund
and
Cranbrook Treasury Fund
ADMINISTRATOR AND DISTRIBUTOR--
FIRST OF MICHIGAN CORPORATION
100 Renaissance Center
26th Floor
Detroit, Michigan 48243
INVESTMENT ADVISER--
CRANBROOK CAPITAL MANAGEMENT, INC.
100 Renaissance Center
25th Floor
Detroit, Michigan 48243
CUSTODIAN--
NBD BANK
Detroit, Michigan 48226
TRANSFER AND DIVIDEND DISBURSING AGENT--
FIRST OF MICHIGAN CORPORATION
Detroit, Michigan 48243
COUNSEL--
Dykema Gossett PLLC
Detroit, Michigan 48243
AUDITORS--
Ernst & Young LLP
Detroit, Michigan 48226
PROSPECTUS DATED
January 1, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CRANBROOK MONEY MARKET FUND
and
CRANBROOK TREASURY FUND
each a series of
CRANBROOK FUNDS
100 Renaissance Center, 25th Floor
Detroit, MI 48243
This Statement of Additional Information expands and supplements
the information contained in the Prospectus dated January 1, 1996 (the
"Prospectus") of Cranbrook Funds (the "Fund") and should be read in
conjunction with the Prospectus. The Prospectus may be obtained from any
office of First of Michigan Corporation ("FoM") or by writing or calling FoM
or the Fund. This Statement of Additional Information is not a prospectus
but is incorporated by reference in the Prospectus in its entirety.
TABLE OF CONTENTS
Introduction.......................................................... 2
Investment Objectives and Policies.................................... 2
Ratings of Commercial Paper and Bonds................................. 8
Management of the Fund................................................ 9
Computation of Yield; Determination of
Net Asset Value Per Share and of Net
Investment Income; Expenses......................................... 12
Redemption of Shares.................................................. 15
Legal Matters......................................................... 15
Certain Other Matters................................................. 16
Financial Statements.................................................. 19
Dated: January 1, 1996
<PAGE>
INTRODUCTION
This Statement of Additional Information supplements the
description of the Fund contained in the Prospectus and provides additional
information about the Fund and its activities which may be of interest to
investors. The following brief summary of the Fund's organization and
management is provided for convenience. The Statement of Additional
Information is not a prospectus and should be read in conjunction with the
Prospectus which has been filed with the Securities and Exchange Commission
and is available upon oral or written request, without charge, to the Fund,
100 Renaissance Center, 25th Floor, Detroit, Michigan, 48243, (800) 482-2560
(within Michigan) or (800) 521-1264 (outside of Michigan).
The Fund and the Portfolios
Cranbrook Money Market Fund (the "Money Market Portfolio") and
Cranbrook Treasury Fund (the "Treasury Portfolio") (collectively, the
"Portfolios") are separate series of the Fund. The Fund is an open-end,
diversified management investment company. It is not a bank, nor does it
offer fiduciary or trust services. The Fund may in the future be comprised
of additional series of shares, each of which will constitute a separate
series and have its own separate portfolio of investment securities and its
own investment objectives and policies, which may be different than those of
the existing Portfolios. At the date of this Statement of Additional
Information, the Portfolios are the only existing series of the Fund.
Management of the Fund
First of Michigan Corporation ("FoM"), a wholly-owned subsidiary of
First of Michigan Capital Corporation ("FMCC"), is the Administrator and
Distributor for the Fund. FoM also serves as the Fund's Transfer and
Dividend Disbursing Agent, and receives compensation from the Fund for these
services in addition to fees as Administrator and Distributor. Cranbrook
Capital Management, Inc., also a wholly-owned subsidiary of FMCC, is the
Investment Adviser (the "Adviser") for the Fund and provides the day-to-day
advice and portfolio management of each Portfolio pursuant to an Advisory
Agreement with the Fund. NBD Bank, a Michigan banking corporation, serves
as the Fund's Custodian.
NBD, the Adviser and FoM are subject to the overall management and
supervisory responsibility of the Fund's officers and its Board of Trustees.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Prospectus, the investment objective of each
Portfolio is to provide a high level of current income consistent with the
preservation of capital and liquidity. A description of the types of
securities purchased by each Portfolio is contained in the Prospectus under
the caption "Investment Objectives and Policies".
Portfolio Transactions
The Fund has no obligation to deal with any dealer or group of
dealers in the execution of investment security transactions. Subject to
policy established by the Trustees and the guidance and direction of the
Fund, the Adviser is primarily responsible for the Fund's portfolio
decisions and the placing of portfolio transactions. In placing orders, it
is the policy of the Fund to obtain the best net results taking into account
such factors as price (including the applicable dealer spread), the size,
type, and difficulty of the transaction involved, a firm's general execution
and operational facilities, and a firm's risk in positioning the securities
involved. The Adviser may make bulk purchases of securities for the Fund
and for other customer accounts, in which case the Fund will be charged a
pro rata share of the transaction costs incurred in making the bulk
purchase. Once purchased, however, the securities will be owned by the Fund
individually, and not jointly with the Adviser or any other person or
entity. The Adviser will not make bulk purchases for the Fund and for its
own investment portfolio.
The Fund generally does not expect to incur costs for brokerage
commissions or transfer taxes since money market securities are generally
traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. However, typically at any moment the price
at which such securities may be bought is higher than the price at which
they may be sold, and trading in money market securities thus indirectly
imposes costs on the Fund.
Dealers who provide supplemental investment research to the Adviser
may receive orders for transactions by the Fund, although orders will not be
allocated to dealers based upon such research. The Adviser will seek to
obtain the best price and execution for each transaction and is not
authorized to approve the payment of excess commissions in recognition of
brokerage or research services provided by a broker. Any investment
research information which the Adviser receives in this way will be in
addition to and not in lieu of the services which it is required to perform
for the Fund. The expenses of the Adviser will not necessarily be reduced
as a result of the receipt of such supplemental information.
The money market securities in which each Portfolio invests are
traded primarily in the over-the-counter market. Where possible, the Fund
will deal directly with dealers who make a market in the securities involved
except in those circumstances where better prices and execution are
available elsewhere. Such dealers usually are acting as principal for their
own account. On occasion, securities may be purchased directly from the
issuer.
Under the Investment Company Act of 1940, persons affiliated with
the Fund are prohibited from dealing with the Fund as principals in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the Securities and Exchange Commission. Since
over-the-counter transactions are usually principal transactions, affiliated
persons of the Fund, including FoM, may not serve as dealers for the Fund in
connection with such transactions. FoM, in addition, will not serve as the
Fund's broker in over-the-counter transactions conducted on an agency basis.
The Fund will not purchase securities from any underwriting syndicate of
which FoM is the manager.
The Fund may from time to time purchase commercial paper or other
investment securities issued by dealers with whom the Fund regularly does
business.
Neither Portfolio will write, purchase, or sell puts (except as
permitted by Rule 2a-7 under the Investment Company Act of 1940), calls,
straddles, spreads, or combinations thereof. Shareholders will be notified
in writing prior to any change of this policy.
Loans of Securities
As described in the Prospectus, the Money Market Portfolio (but not
the Treasury Portfolio) may loan portfolio securities to brokers, dealers,
and other financial institutions. During the time when securities are on
loan, the borrower will pay any income accrued thereon and the Money Market
Portfolio may invest the cash collateral and earn additional income, or may
receive an agreed upon fee from the borrower. Loans will be subject to
termination at the Money Market Portfolio's or the borrower's option. The
Money Market Portfolio may pay reasonable fees to persons unaffiliated with
it in connection with such loans. In determining whether to lend securities
to a particular broker, dealer, or financial institution, the Adviser will
consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer, or institution. The Money Market
Portfolio will not enter into any securities lending agreement having a
duration greater than one year; and any securities with maturities in excess
of one year that the Money Market Portfolio may receive as collateral for a
particular loan will not become part of the Portfolio either at the time of
the loan or in the event the borrower defaults on its obligation to return
the loaned securities.
Determination of Maturity
As described in the Prospectus, a security will not be purchased by
a Portfolio unless its maturity is 397 days or less from the date of
purchase, and the dollar-weighted average maturity of each Portfolio is not
to exceed 90 days. The maturity of a Portfolio investment security is
determined pursuant to Rule 2a-7 under the Investment Company Act of 1940.
Rule 2a-7 provides that the maturity of an instrument will be deemed to be
the period remaining until the date noted on the face of the instrument as
the date on which the principal amount must be paid or, in the case of an
instrument called for redemption, the date on which the redemption payment
must be made, except as follows:
(i) Certain U.S. Government Instruments. An instrument that is
issued or guaranteed by the United States Government or an agency thereof
which has a variable rate of interest readjusted no less frequently than
every 762 days will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate.
(ii) Variable Rate Instruments. A "variable rate instrument"
(defined as an instrument the terms of which provide for establishment of a
new interest rate on set dates and which, upon such adjustment, can
reasonably be expected to have a market value that approximates its par
value), the principal amount of which is scheduled on the face of the
instrument to be paid in 397 calendar days or less, will be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate.
(iii) Variable Rate Instruments Subject to Demand Feature. A
variable rate instrument that is subject to a demand feature will be deemed
to have a maturity equal to the longer of the period remaining until the
next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
(iv) Floating Rate Instruments Subject to Demand Feature. A
"floating rate instrument" (defined as an instrument the terms of which
provide for adjustment of the 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) that is subject to a demand
feature will be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand.
(v) Repurchase Agreements. A repurchase agreement will be
treated as having a maturity equal to the period remaining until the date on
which the repurchase of the underlying securities is scheduled to occur, or
where no date is specified but the agreement is subject to demand, the
notice period applicable to a demand for the repurchase of the securities.
(vi) Portfolio Lending Agreements. A portfolio lending
agreement will be treated as having a maturity equal to the period remaining
until the date on which the loaned securities are scheduled to be returned,
or where no date is specified but the agreement is subject to demand, the
notice period applicable to a demand for the return of the loaned
securities.
A "demand feature" is defined in Rule 2a-7 as a put that entitles
the holder to receive the principal amount of the underlying security or
securities and which may be exercised either (a) at any time on no more than
30 days' notice or (b) at specified intervals not exceeding 397 days and
upon no more than 30 days' notice.
Because the Fund intends to utilize the procedures specified in
Rule 2a-7 to determine the maturity of its portfolio instruments, further
revision of Rule 2a-7 or pronouncements clarifying or interpreting the scope
of its application may affect the Fund's method for determining maturity of
its portfolio instruments.
Fundamental Policies
The investment restrictions on the Fund's investment activities
with respect to the Money Market Portfolio and the Treasury Portfolio were
approved by a majority of the Trustees and by shareholders of the Fund at a
shareholder meeting held on December 15, 1994. These are fundamental
policies and may not be changed without approval by the holders of the
majority of the outstanding shares of the affected Portfolio. As used
herein when referring to approvals to be obtained from shareholders, the
term "majority" means the vote of the lesser of (1) 67% of the shares of the
Fund or the applicable Portfolio present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Fund or the applicable
Portfolio. Certain of these restrictions are also described in the
Prospectus but are repeated here in full for convenience. Under the
existing investment restrictions, a Portfolio may not:
(1) Change its investment objective.
(2) With respect to the Money Market Portfolio,
purchase the securities of issuers conducting their principal
business activity in the same industry if the value of such
Portfolio's investments in such industry would exceed 25% of the
value of such Portfolio's total assets, provided that (a) gas,
electric, water, and telephone utilities are be considered separate
industries, (b) the personal credit and business credit businesses
are considered separate industries and (c) there is no limitation
with respect to or arising out of investments in obligations issued
or guaranteed by the U.S. Government, its agencies and
instrumentalities or negotiable certificates of deposit, bankers'
acceptances or time deposits issued by domestic banks. For
purposes of this restriction, securities issued by the government
of Canada, a Province of Canada or an instrumentality or political
subdivision therof are considered to be an "industry" subject to
this 25% limit.
(3) In the case of the Money Market Portfolio, invest
more than 5% of its total assets in the securities of any one
issuer, except securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities.
(4) In the case of the Treasury Portfolio, purchase
securities which are not U.S Treasury bills, notes and other
obligations issued or guaranteed as to principal and interest by
the U.S. Government.
(5) In the case of the Treasury Portfolio, (a) enter
into repurchase agreements if immediately thereafter more than 10%
of that Portfolio's total assets would be invested in repurchase
agreements with any qualifying bank or primary dealer in such
securities and (b) borrow money except from banks for temporary
purposes and then only in amounts not exceeding at any one time 10%
of the value of the Portfolio's net assets at the time of the
borrowings, or mortgage, pledge or hypothecate that Portfolio's
assets in connection with such borrowing and in amounts not in
excess of the dollar amounts borrowed. See also the provisions of
policy (7) below.
(6) Make loans, except through the purchase of debt
obligations in accordance with each Portfolio's investment
objective and policies, through repurchase agreements with banks,
brokers, dealers, and other financial institutions, and through the
lending of portfolio securities to brokers, dealers, and financial
institutions.
(7) Borrow money, except from banks for temporary or
emergency purposes and then only in amounts not exceeding at any
one time 20% of the value of the Money Market Portfolio's total
assets, or 10% of the Treasury Portfolio's total assets, at the
time of the borrowings. This provision, and policy (5) above, are
solely to facilitate the orderly sale of securities should
abnormally heavy redemption requests occur or for other
extraordinary or emergency purposes and are not for investment
purposes, and borrowings by a Portfolio are not expected to occur
in the ordinary course of operations. If for any reason the
current value of a Portfolio's total assets falls below an amount
equal to the applicable multiple of the amount of its indebtedness
for money borrowed (5 times in the case of the Money Market
Portfolio or 10 times in the case of the Treasury Portfolio), that
Portfolio will, within three business days, reduce its indebtedness
to the extent necessary to restore the ratio of assets to
indebtedness to at least five to one. To do this, a Portfolio may
have to sell a portion of its investments at a time when it may be
disadvantageous to do so. If, at any time, the outstanding
borrowings with respect to either Portfolio exceed 5% of its total
assets, that Portfolio will purchase no additional investment
securities until such time as the borrowings are reduced to less
than 5% of the total assets of the Portfolio. Under no
circumstances will one Portfolio engage in lending or borrowing
transactions with the other Portfolio.
(8) Purchase or sell real estate, although it may
invest in securities which are secured by real estate and
securities of issuers which invest or deal in real estate; purchase
or sell securities issued by real estate investment trusts;
purchase or sell commodities, commodity contracts, or oil and gas
interests; acquire securities of other investment companies; or
purchase any voting securities or invest in companies for the
purpose of exercising control or management.
(9) Act as an underwriter of securities, purchase
securities on margin, make short sales of securities, or maintain a
short position in any security.
(10) Purchase securities of any issuer employing, as an
officer, any person serving as an officer or Trustee of the Fund;
or purchase or retain the securities of any issuer if those
officers, directors, or Trustees of the Fund or its Adviser who
individually own beneficially more than 0.5% of the outstanding
securities of such issuer, together own beneficially more than 5%
of such outstanding securities.
(11) Invest more than 10% of a Portfolio's net assets in
securities restricted as to disposition under the federal
securities laws or which are otherwise considered to be "illiquid"
investments, such as restricted securities described in the
preceding clause, securities having no readily available market
quotations, non-negotiable time deposits maturing in more than
seven days, and repurchase agreements with maturities of more than
seven days.
(12) Issue senior securities as defined in the
Investment Company Act of 1940 except to the extent such issuance
might be involved with respect to borrowings pursuant to reverse
repurchase transactions or as otherwise set forth under (5) above.
In order to permit the sale of shares of either Portfolio in
certain states, the Trustees may, in their sole discretion, adopt more
restrictive limitations than those described above. Should the Trustees
determine after doing so that any such more restrictive policy is no longer
in the best interest of such Portfolio and its shareholders, the Fund may
cease offering shares in the state involved, and the Trustees may revoke the
more restrictive limitations. Moreover, if the states involved shall no
longer require any such more restrictive limitations, the Trustees may, in
their sole discretion, revoke them.
RATINGS OF COMMERCIAL PAPER AND BONDS
Commercial Paper Ratings
A Moody's Investors Service, Inc. ("Moody's") commercial paper
rating is an opinion of the ability of the issuer to repay punctually
promissory obligations. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime 1 -- Highest Quality; Prime 2 -- Higher
Quality; Prime 3 -- High Quality.
A Standard & Poor's Corporation ("S&P") commercial paper rating is
a current assessment of the likelihood of timely payment. Ratings are
graded into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues assigned the highest rating, A,
are regarded as having the greatest capacity for timely payment. Issues in
this category are further refined with the designations 1, 2, and 3 to
indicate the relative degree of safety. The designation A-1 indicates that
the degree of safety regarding timely payment is very strong. Capacity for
timely payment on issues with the designation A-2 is strong. However, the
relative degree of safety is not as overwhelming as for issues designated
A-1. Issues carrying the designation A-3 have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
Bond Ratings
Moody's -- Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". 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 positions of
such issues. Bonds which 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 which are rated A 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 sometime in the future.
S&P -- Bonds rated AAA are highest grade obligations. They possess
the ultimate degree of protection as to principal and interest. Bonds rated
AA also qualify as high grade obligations, and in the majority of instances
differ from AAA issues only in small degree. Bonds rated A are regarded as
upper medium grade. They have considerable investment strength but are not
entirely free from adverse effects of changes in economic and trade
conditions. Interest and principal are regarded as safe.
MANAGEMENT OF THE FUND
Trustees and Officers
The Trustees and executive officers of the Fund and their principal
occupations for the last five years are set forth below. The address of each
Trustee and executive officer is c/o Cranbrook Funds, 100 Renaissance
Center, 25th Floor, Detroit, Michigan 48243.
*CONRAD W. KOSKI, Trustee and President of the Fund.
Executive Vice President and Treasurer of FMCC and FoM;
Secretary-Treasurer of FoM Advisers, Inc., a wholly-owned
subsidiary of FMCC; Director of the Adviser.
*CHARLES M. GRIMLEY, Trustee, Treasurer and Secretary of the Fund
Financial Vice President of FoM.
DAVID BROPHY, Trustee
Professor of Finance at the University of Michigan School
of Business Administration; Director of River Place
Financial Corporation (1984 to present).
ERNEST L. GROVE, JR., Trustee
Retired; formerly Vice Chairman of the Board and Chief
Financial Officer of The Detroit Edison Company (until
October 1989); Director of Standard Federal Bank (1986 to
present); Chairman of the Board (since December 1993) and
Director (since 1987) of Fretter, Inc., retailer; Director,
McLouth Steel Products Corporation (since 1988).
ROBERT L. HANNON, JR., Trustee
Retired; formerly President and Chief Executive Officer and
Chairman of the Board of Johnson & Higgins (Michigan),
insurance agents/brokers, and Director of Johnson &
Higgins.
*JOHN G. MARTIN, Trustee
Retired, formerly President and Chief Executive Officer of
FMCC and FoM.
------------
*"Interested person" as defined in the 1940 Act
The Fund pays each Trustee, other than Trustees who are employees
of FoM, an annual fee of $6,000 and a fee of $1,000 for each meeting of the
Board of Trustees attended. All Trustees are reimbursed for out-of-pocket
expenses incurred in connection with attendance at meetings. Trustees and
officers of the Fund receive no other compensation from the Fund. Meetings
of the Trustees are held at least quarterly.
Investment Adviser and Portfolio Manager
Information about the Adviser and its duties and compensation as
Investment Adviser is contained in the Prospectus.
The Fund will not purchase securities from or sell portfolio
securities to the Adviser and will not invest in commercial paper, debt
obligations, certificates of deposit, or bankers' acceptances of the Adviser
or any affiliate of the Adviser.
The Adviser's own investment portfolio may include bank
certificates of deposit, bankers' acceptances, and corporate debt
obligations, any of which may also be purchased by the Fund. Joint purchase
of investments for the Fund and for the Adviser's own investment portfolio
will not be made. Investment decisions for the Fund and other fiduciary
accounts are made by the Adviser solely from the standpoint of the
independent interests of the Fund and such other fiduciary accounts. The
Adviser performs independent analyses of publicly available information, the
results of which are not made publicly available. In making investment
decisions for the Fund, personnel of the Adviser do not obtain information
from any other division or department of FoM or otherwise which is not
publicly available. The Adviser executes transactions for the Fund only
with unaffiliated dealers, but such dealers may be customers of other
divisions of the FoM. The Adviser may make bulk purchases of securities for
the Fund and for other customer accounts (but not for its own investment
portfolio), in which case the Fund will be charged a pro rata share of the
transaction costs incurred in making the bulk purchase. See "Investment
Objective and Policies - Portfolio Transactions" above.
The Adviser and FoM have agreed that they will each reimburse the
Fund in equal amounts such portions of their fees as may be required to
satisfy any expense limitations imposed by state securities laws or other
applicable laws. At present the most restrictive expense limitation imposed
on the Fund requires that annual expenses not exceed 2-1/2% of the first $30
million of average net assets, 2% of the next $70 million of average net
assets, and 1-1/2% of the remaining average net assets. More restrictive
limitations could be imposed on the Fund as a result of changes in current
state laws and regulations in those states where the Fund has qualified its
shares, or by a decision of the Trustees to qualify the shares in other
states having more restrictive expense limitations. Prospectuses and sales
material for the Fund can be obtained only from FoM as the Underwriter and
Distributor of the Fund's shares.
Custodian
As Custodian for the Fund, NBD (i) maintains a separate account or
accounts in the name of each Portfolio of the Fund, (ii) collects and makes
disbursements of money on behalf of each Portfolio of the Fund, (iii)
collects and receives all income and other payments and distributions on
account of the portfolio securities of each Portfolio, and (iv) makes
periodic reports to the Trustees concerning the Fund's operations.
For its custodial services NBD is paid by the Fund an annual fee of
$2,400, a market value fee of $.0001 per $1,000,000 of assets under custody,
as calculated as of the end of the month and a fee of $20.00 for each
clearing and settlement transaction.
Transfer and Dividend Disbursement Agent
As Transfer and Dividend Disbursement Agent for the Fund, FoM (i)
issues and redeems shares of each Portfolio of the Fund, (ii) addresses and
mails all communications by the Fund to its shareholders, including reports
to shareholders, dividend and distribution notices, and proxy materials for
any meeting of shareholders, (iii) maintains shareholder accounts, and (iv)
maintains on-line computer capability for determining the status of
shareholder accounts. For its services as Transfer and Dividend Disbursing
Agent, FoM is paid at the rate of $0.7178 per monthly customer statement.
FoM is also be reimbursed for direct out-of-pocket expenses incurred in
connection with its duties, except for postage and other costs associated
with the normal monthly mailing of shareholder statements.
Administrator and Distributor
The Fund's shares are offered on a continuous basis through FoM,
which, as described out in the Prospectus, acts under the Administration and
Distribution Agreement as Administrator and Distributor for the Fund. The
fees for its services, the review of such fees under the Fund's plan for the
payment of distribution expenses approved by the Fund's shareholders at a
meeting held December 14, 1994, and the services provided by FoM are
described in the Prospectus.
COMPUTATION OF YIELD; DETERMINATION OF NET ASSET
VALUE PER SHARE AND OF NET INVESTMENT INCOME; EXPENSES
Computation of Yield
Each Portfolio's standard yield quotations as they appear in
advertising and sales materials, and as disclosed in the Prospectus, are
calculated by a standard method prescribed by rules of the Securities and
Exchange Commission. Under that method, the yield quotation is based on a
recent seven-day period and computed as follows: a Portfolio's average daily
net investment income per share during the seven-day period is divided by
the average daily price per share (expected to remain constant at $1.00)
during the period. The result is then multiplied by 365 with the resulting
annualized yield figure carried to the nearest one-hundredth of one percent.
"Effective Yield" is computed in the same manner except that when annualized
the income earned by the Portfolio is assumed to be reinvested, thus
resulting in a higher return because of the compounding effect. A
Portfolio's average daily net investment income for this purpose consists of
accrued income on such Portfolio's investment securities, plus or minus
amortized purchase discount or premium, less accrued expenses. Realized
capital gains or losses and unrealized appreciation or depreciation of a
Portfolio's investment securities are not included in the calculation. Any
fee charged to all shareholder accounts, such as a fixed monthly shareholder
service fee, will be included in the accrued expenses of the Portfolio (the
Fund does not currently expect to charge such fees), and the average price
per share of a Portfolio will include any changes in net asset value during
the seven-day period.
Because the Fund values its portfolio on an amortized cost basis,
it does not believe that there is likely to be any material difference
between net income for dividend and standardized yield quotation purposes.
The yield on each Portfolio will fluctuate daily as the income
earned on the investments of the Portfolio changes at certain times.
Accordingly, there is no assurance that the yield quoted on any given
occasion will remain in effect for any period of time. The yield should not
be compared to other open-end investment companies, or to bank time deposits
and other debt securities which provide for a fixed yield for a given period
of time and which may have a different method of computation.
Determination of Net Asset Value Per Share
As stated in the Prospectus, the net asset value of each Portfolio
is determined as of 2:00 p.m. and as of 5:00 p.m., Detroit time, on each
business day (defined as days on which both FoM and NBD are open for
business) and on any other day on which the New York Stock Exchange is open
for business. The New York Stock Exchange and either FoM or NBD, or both,
are closed on each of the following holidays: New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Thanksgiving Day, and Christmas
Day. For the purpose of determining the price at which shares of a
Portfolio are issued and redeemed, the net asset value per share is
calculated by: (a) valuing all securities and instruments of such Portfolio
as set forth below; (b) deducting the Fund's liabilities, all of which are
allocated to the separate Portfolios either directly, if applicable, or in
such manner as the Trustees shall deem fair and equitable; and (c) dividing
the resulting amount by the number of shares outstanding. As discussed
below, it is the intention of the Fund to maintain a net asset value per
share of $1.00 for each Portfolio.
Each Portfolio values its investment securities based upon their
amortized cost in accordance with Rule 2a-7 of the Securities and Exchange
Commission under the Investment Company Act of 1940. This involves valuing
a security at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method
provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price
the Portfolio would receive if it sold the securities.
Pursuant to Rule 2a-7, the Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, to purchase
securities having remaining maturities of 397 days or less only, to invest
only in securities determined by the Trustees to present minimal credit
risks and to invest only in securities which are "eligible securities" as
defined in Rule 2a-7. A discussion of the manner in which the maturity of
investment securities is determined is set forth under the caption
"Investment Objective and Policies - Determination of Maturity" in this
Statement of Additional Information.
The Trustees have established procedures designated to stabilize,
to the extent reasonably possible, each Portfolio's price per share as
computed for the purpose of sales and redemptions at $1.00.
These procedures include review of the investment holdings by the
Trustees, at such intervals as they may deem appropriate, to determine
whether a Portfolio's net asset value calculated by using available market
quotations deviates from $1.00 per share based on amortized cost. The
extent of any deviation will be examined by the Trustees. If the deviation
exceeds 1/2 of 1%, the Trustees will promptly consider what action, if any,
will be initiated.
In the event the Trustees determine that a deviation exists which
may result in material dilution or other unfair results to investors or
existing shareholders, they have agreed to take such corrective actions as
they deem necessary and appropriate. These actions may include selling
investment securities prior to maturity to realize capital gains or losses
or to shorten a Portfolio's average maturity, withholding dividends,
splitting, combining, or otherwise recapitalizing outstanding shares or
establishing a net asset value per share by using available market
quotations.
Determination of Net Investment Income
Each Portfolio calculates its dividends based on its daily net
investment income. For this purpose, the net investment income of a
Portfolio consists of (1) accrued interest income plus or minus amortized
purchase discount or premium, (2) plus or minus all realized gains and
losses on portfolio assets, and (3) minus accrued expenses allocated to that
Portfolio. Expenses of each Portfolio are accrued each day. As each
Portfolio's investment securities are normally valued at amortized cost,
unrealized gains or losses on such securities based on their market values
will not normally be recognized. However, should the net asset value
deviate significantly from market value, the Trustees could decide to value
the securities at market value and then unrealized gains and losses would be
included in net investment income.
Expenses
Expenses for which the Fund is responsible and for which an accrual
is made to the extent necessary include, for example: (a) the fees payable
to Cranbrook Capital Management, Inc., as the Fund's Adviser, or expenses
otherwise incurred by the Fund in connection with the management of the
investment of the Fund's assets, and the fees and expenses of NBD as the
Fund's Custodian and of FoM as its Transfer and Dividend Disbursing Agent,
(b) the administration and distribution fees payable to FoM, (c) the fees
and expenses of Trustees who are not affiliated with FoM, (d) the charges
and expenses of the Fund's legal counsel and auditors, (e) brokers'
commissions and any issue or transfer taxes chargeable to the Fund in
connection with its securities transactions, (f) all taxes and corporate
fees payable by the Fund to governmental agencies, (g) the fees of any trade
association of which the Fund is a member, (h) the fees and expenses
involved in registering and maintaining registrations of the Fund and of its
shares with the Securities and Exchange Commission and registering the Fund
as a broker or dealer and qualifying its shares under state securities laws,
including the preparation and printing of the Fund's registration statements
and prospectuses, (i) allocable communications expenses with respect to
investor services and all expenses of shareholders' and Trustees' meetings
and of preparing and printing reports to shareholders, (j) all expenses or
losses arising out of any liability or claim for damages or other relief
asserted against the Fund for violation of any law, and (k) expenses of an
extraordinary nature which are not incurred in the ordinary course of the
Fund's business.
The organizational expenses of the Fund (amounting to approximately
$175,000) will be assumed and paid by the Adviser, at no cost to the Fund.
If additional Series are added to the Fund, the organizational expenses will
be allocated among the Series in a manner deemed equitable by the Trustees.
REDEMPTION OF SHARES
The Prospectus describes the requirements for effecting redemption
by oral or written request, by systematic withdrawal, and by use of
redemption drafts.
The Fund may suspend the right of redemption or delay payment more
than seven days (a) during any period when the New York Stock Exchange is
closed (other than a customary weekend and holiday closing), (b) when
trading on the New York Stock Exchange is restricted, or an emergency exists
as determined by the Securities and Exchange Commission or the Fund so that
disposal of the Fund's investments or determination of the net asset values
of either Portfolio is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit for
protection of either Portfolio's shareholders.
The Fund normally redeems shares for cash. However, the Trustees
can determine that conditions exist making cash payments undesirable. If
they should so determine, redemption payments could be made in securities
valued at the value used in determining net asset value. There may be
brokerage and other costs incurred by the redeeming shareholder in selling
such securities. The Fund has elected to be governed by Rule 18f-1 under
the Investment Company Act, pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of net asset
value during any 90-day period for any one shareholder.
LEGAL MATTERS
From time to time, certain state administrative agencies have
raised questions as to whether the activities of money market funds
constitute banking under the laws of their states. The Fund believes that
none of its activities constitutes banking under the laws of any state, and
it expects to litigate any finding to the contrary and to fully contest and
resist any regulatory challenges to the Fund. Final adverse rulings that
the activities of the Fund constitute unauthorized banking in any state
could force the Fund to liquidate shares of residents in that state, to
cease offering new shares in that state, or to discontinue or change certain
services currently available to shareholders in that state.
The operations of the Fund could be affected by Federal regulatory
developments. For example, from March to July 1980, money market funds were
subject to non-interest bearing special deposit requirements imposed by the
Board of Governors of the Federal Reserve System. There can be no assurance
that similar deposit requirements will not be imposed on money market funds
in the future.
CERTAIN OTHER MATTERS
Liability of Trustees and Others
The Declaration of Trust provides that the Trustees, officers,
employees, and agents of the Fund will not be liable to the Fund or to a
shareholder, nor will any such person be liable to any third party in
connection with the affairs of the Fund, except as such liability may arise
from his or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of duties. It also provides that all third parties shall
look solely to the Fund property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee, or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Fund.
Description of Series and Shares
The Declaration of Trust provides that the Fund shall be comprised
of separate series of shares ("Series"). The proceeds of sale of each
Series will be invested in separate portfolios of securities. The Trustees
are authorized to create an unlimited number of Series and, with respect to
each Series, to issue an unlimited number of full and fractional shares of a
single class and to divide or combine the shares into a greater or lesser
number of shares without changing the proportion of beneficial interests in
the Series.
All shares have equal voting rights, except that only shares of a
particular Series are entitled to vote on matters concerning only that
Series. Each issued and outstanding share is entitled to one vote, to
participate equally in dividends and distributions declared by the
respective Series, and, upon liquidation or dissolution, to share in the net
assets of such Series remaining after satisfaction of outstanding
liabilities. In the event a Series should be unable to meet its
obligations, the remaining Series would assume the unsatisfied obligations
of that Series. All shares issued and outstanding are fully paid and
nonassessable by the Fund. The Fund is not required to issue share
certificates.
The shares of each Series have no preference, preemptive,
conversion or similar rights. In the event the Trustees create one or more
additional Series, shareholders may be given the right to exchange shares of
a Portfolio for shares of such other Series.
Rule 18f-2 under the Investment Company Act of 1940 provides that
any matter required to be submitted by the provisions of that Act or
applicable state law, or otherwise, to the holders of the outstanding voting
securities of an investment company such as the Fund shall not be deemed to
have been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each class affected by the matter.
Rule 18f-2 further provides that a class shall be deemed to be affected by a
matter unless it is clear that the interests of each class in the matter are
identical or that the matter does not affect any interest of the class.
Under the Rule, the approval of an investment advisory agreement or any
change in investment policy would be effectively acted upon with respect to
a class of shares only if approved by a majority of the outstanding voting
securities of such class. However, the Rule also provides that the
ratification of independent public accountants, the approval of principal
underwriting contracts, and the election of Trustees are not subject to the
separate voting requirements and may be effectively acted upon by
shareholders of the investment company voting without regard to class.
As permitted by Massachusetts law, the Trustees may determine not
to hold shareholders meetings for the election of Trustees, subject,
however, to the requirement that a special meeting of shareholders be called
for the purpose of electing Trustees within 60 days if at any time less than
a majority of the current Trustees have been elected by shareholders of the
Fund. Because shares do not have cumulative voting rights, 50% of the
voting shares can, if they choose, elect all Trustees being selected while
the holders of the remaining shares would be unable to elect any Trustees.
The Trustees will call a special meeting of shareholders for the purpose of
voting on the question of removal of a Trustee or Trustees if shareholders
of record of 10% or more of the Fund's outstanding shares make a written
request so to do. Any 10 or more shareholders who have been shareholders
for more than 6 months and who hold in the aggregate the lesser of 1% of the
outstanding shares or shares with a net asset value of $25,000 may advise
the Trustees that they wish to communicate with other shareholders for the
purpose of obtaining signatures requesting Trustees to call such a meeting.
The Trustees must thereupon afford access to the list of Fund shareholders
or offer to mail such solicitations at the shareholder's cost. If a
majority of the Trustees object to the contents of the solicitation, the
Trustees may request a determination of the Securities and Exchange
Commission as to the obligation to mail such material.
Any change in the Declaration of Trust, the Advisory Agreement, the
Administration and Distribution Agreement if it has the effect of increasing
distribution costs, or in the fundamental investment restrictions of the
Fund must be approved by a majority of the shareholders before it can become
effective. A "majority" means the vote of the lesser of (1) 67% of the
shares of the Fund or the applicable Portfolio present at a meeting if the
holders of more than 50% of the outstanding shares are present in person or
by proxy, or (2) more than 50% of the outstanding shares of the Fund or the
applicable Portfolio.
At a meeting of shareholders on December 14, 1994, a majority of
shareholders ratified and approved the Administration and Distribution
Agreement, the Advisory Agreement, and the Fund's plan of distribution of
its shares.
Counsel and Independent Public Accountants
The legality of the shares offered by the Fund has been passed upon
by Dykema Gossett PLLC, Detroit, Michigan, counsel to the Fund. Ernst &
Young LLP, independent auditors, are auditors of the Fund.
Registration Statement
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement filed with the
Securities and Exchange Commission. Copies of the Registration Statement,
including items omitted therefrom and from the Prospectus, may be obtained
from the Commission by paying the charges prescribed under its rules and
regulations.
Statements contained in the Prospectus and herein as to the
contents of any contact or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement
of which the Prospectus and this Statement of Additional Information form a
part, each such statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The report of Ernst & Young LLP, independent auditors, and the
financial statements of the Fund contained in the Fund's Annual Report to
Shareholders sent to shareholders of the Fund pursuant to Section 30(d) of
the Investment Company Act of 1940 and previously filed with the Securities
and Exchange Commission, are hereby incorporated by reference into this
Statement of Additional Information. The Fund will furnish a copy of any of
such Annual Report to Shareholders, without charge, upon request made to the
Fund, l00 Renaissance Center, 26th Floor, Detroit, Michigan 48243 (telephone
(313 259-2600).
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statement and Exhibits
(a) Financial Statements:
The following audited financial statements of the Registrant,
together with the related notes thereto, are incorporated by
reference in the Statement of Additional Information, Part B to
this Registration Statement, from the Fund's Annual Report to
Shareholders for the period ended October 31, 1995:
(1) Cranbrook Money Market Fund
Statement of Assets and Liabilities as of October 31, 1995
Statement of Operations for the eight months ended October 31,
1995
Statement of Changes in Net Assets for the eight months ended
October 31, 1995
Schedule of Investments as of October 31, 1995
(2) Cranbrook Treasury Fund
Statement of Assets and Liabilities as of October 31, 1995
Statement of Operations for the eight months ended October 31,
1995
Statement of Changes in Net Assets for the eight months ended
October 31, 1995
Schedule of Investments as of October 31, 1995
(3) Notes to Financial Statements
(4) Financial Highlights
(b) Exhibits: all filed herewith
1 Declaration of Trust, dated November 30, 1994
2 Bylaws
3 None
4 None
5 Advisory Agreement, dated as of December 15, 1994, between the
Registrant and Cranbrook Capital Management, Inc.
6 Administration and Distribution Agreement, dated as of
December 15, 1994, between the Registrant and First of Michigan Corporation
7 None
8 Custodian Agreement, dated as of February 1, 1995, between the
Registrant and NBD Bank
9 Agency Agreement, dated as of December 15, 1994, between the
Registrant and First of Michigan Corporation
10 Opinion of Dykema Gossett PLLC, counsel for the Registrant
(including consent)
11 Consent of Ernst & Young LLP, independent auditors for the
Registrant
12 None
13 Purchase Agreement, dated as of December 15, 1994, between the
Registrant and First of Michigan Corporation relating to the Registrant's
initial capital
14 None
15 Plan of Distribution pursuant to Rule 12b-1
16 None
27.1 Financial Data Schedule for Cranbrook Money Market Fund (EDGAR
filing only)
27.2 Financial Data Schedule for Cranbrook Treasury Fund (EDGAR
filing only)
Item 25. Persons Controlled by or Under Common Control with Registrant.
Not Applicable.
Item 26. Number of Holders of Securities
The following table sets forth information as to all record holders
of Registrant's securities as of October 31, 1995:
Number of
Title of Class Record Holders
Cranbrook Money Market Fund, shares of beneficial
interest, par value $0.01 per share....... 111,976
Cranbrook Treasury Fund, shares of beneficial
interest, par value $0.01 per share....... 7,441
Item 27. Indemnification
The Declaration of Trust and Bylaws of the Registrant contain
provisions covering indemnification of the officers and trustees. The
following are summaries of the applicable provisions.
The Registrant's Declaration of Trust provides that every person
who is or has been a trustee, officer, employee or agent of the Registrant
and every person who serves at the trustees request as director, officer,
employee or agent of another enterprise will be indemnified by the
Registrant to the fullest extent permitted by law against all liabilities
and against all expenses reasonably incurred or paid by him in connection
with any debt, claim, action, demand, suit, proceeding, judgment, decree,
liability or obligation of any kind in which he becomes involved as a party
or otherwise or is threatened by virtue of his being or having been a
trustee, officer, employee or agent of the Registrant or of another
enterprise at the request of the Registrant and against amounts paid or
incurred by him in the compromise or settlement hereof.
No indemnification will be provided to a trustee or officer: (i)
against any liability to the Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office ("disabling conduct"); (ii)
with respect to any matter as to which he shall, by the court or other body
by or before which the proceeding was brought or engaged, have been finally
adjudicated to be liable by reason of disabling conduct; (iii) in the
absence of a final adjudication on the merits that such trustee or officer
did not engage in disabling conduct, unless a reasonable determination based
upon a review of the facts that the person to be indemnified is not liable
by reason of such conduct, is made by vote of a majority of a quorum of the
trustees who are neither interested persons nor parties to the proceedings,
or by independent legal counsel, in a written opinion.
The rights of indemnification may be insured against by policies
maintained by the Registrant, will be severable, will not affect any other
rights to which any trustee, officer, employee or agent may now or hereafter
be entitled, will continue as to a person who has ceased to be such trustee,
officer, employee, or agent and will inure to the benefit of the heirs,
executors and administrators of such a persons; provided, however, that no
person may satisfy any right of indemnity or reimbursement except out of the
property of the Registrant, and no other person will be personally liable to
provide indemnity or reimbursement (except an insurer or surety or person
otherwise bound by contract).
Article XIV of the Registrants Bylaws provides that the Registrant
will indemnify each trustee and officer to the full extent permitted by
applicable federal, state and local statutes, rules and regulations and the
Declaration of Trust, as amended from time to time. With respect to a
proceeding against a trustee or officer brought by or on behalf of the
Registrant to obtain a judgment or decree in its favor, the Registrant will
provide the officer or trustee with the same indemnification, after the same
determination, as it is required to provide with respect to a proceeding not
brought by or on behalf of the Registrant.
This indemnification will be provided with respect to an action,
suit proceeding arising from an act or omission or alleged act or omission,
whether occurring before or after the adoption of Article XIV of the
Registrant's Bylaws.
Item 28. Business and Other Connections with Investment Advisor
The Fund's Adviser, Cranbrook Capital Management, Inc., also serves
as adviser to numerous other individual, corporate and institutional
clients. At October 31, 1995, the Adviser had agreements in effect with
clients other than the Fund to manage in excess of $509 million of assets.
Information concerning the business, profession, vocation, or employment of
a substantial nature during the past two fiscal years of each officer and
director of the Adviser that also serves as an officer and/or director of
the Registrant is set forth in Part B of this Registration Statement under
the heading "Management of the Fund". The following chart summarizes the
business, profession, vocation, or employment of a substantial nature in
which each other officer and director of the Adviser is or has been, at any
time during the past two fiscal years, engaged:
Position Business, Profession,
Name with Adviser Vocation, or Employment
Steve Gasper, Jr. Chairman and President and Chief Executive
Director Officer of First of Michigan
Capital Corporation ("FMCC")
and First of Michigan
Corporation since April 1994
James T. Foran President and Officer and Director of
Director Adviser
Stephen J. Seymour Executive Vice Officer and Director of
President and Adviser
Director
Robert J. Murphy Vice President Officer of Adviser
Christopher M. Caputo Secretary Officer of Adviser
Rajesh U. Kothari Treasurer Officer of Adviser
William H. Cuddy Director Chairman of FMCC; Director of
FoM
Conrad W. Koski Director Executive Vice President of
FoM; Chairman and Trustee of
Registrant
Jeffrey D. Plopa Director Vice President/Legal Compliance
of FOM
Joseph M. Mengden Director Officer of Adviser
Item 29. Principal Underwriters
First of Michigan Corporation ("FoM") the Registrant's Distributor,
currently acts as a principal underwriter and distributor for the Woodward
Funds, a registered investment company. FoM does not currently serve as a
depositer or investment adviser for any other investment company.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by the
Registrant are maintained by the Administrator and Distributor, First of
Michigan Corporation, 100 Renaissance Center, 26th Floor, Detroit, Michigan
48243.
Item 31. Management Services
There are no management-related service contracts not discussed in
Part A or Part B of this Registration Statement.
Item 32. Undertakings
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this post-effective amendment
pursuant to Rule 485(b) promulgated under the Securities Act of 1933 and the
Registrant has duly caused this post-effective amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Detroit, and State of Michigan, on the 22nd day
of December, 1995.
CRANBROOK FUNDS
By: /S/ CONRAD W. KOSKI
Conrad W. Koski, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to such Registration Statement or amendment thereto
has been signed below by the following persons in the capacities indicated
on December 22, 1995.
/S/ CONRAD W. KOSKI President and Trustee
Conrad W. Koski (Principal Executive Officer)
/S/ CHARLES M. GRIMLEY Treasurer and Secretary
Charles M. Grimley (Principal Financial and Accounting
Officer)
* Trustee
John G. Martin
Trustee
David Brophy
* Trustee
Ernest L. Grove, Jr.
Trustee
Robert L. Hannon, Jr.
*Executed on behalf of the indicated person by the undersigned.
/S/ CONRAD W. KOSKI
Conrad W. Koski
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit
1 Declaration of Trust, dated November 30, 1994
2 Bylaws
3 None
4 None
5 Advisory Agreement, dated as of December 15, 1994, between the
Registrant and Cranbrook Capital Management, Inc.
6 Administration and Distribution Agreement, dated as of December 15,
1994, between the Registrant and First of Michigan Corporation
7 None
8 Custodian Agreement, dated as of February 1, 1995, between the
Registrant and NBD Bank
9 Agency Agreement, dated as of December 15, 1995, between the
Registrant and First of Michigan Corporation
10 Opinion of Dykema Gossett PLLC, counsel for the Registrant
(including consent)
11 Consent of Ernst & Young LLP
12 None
13 Purchase Agreement, dated as of December 15, 1995, between the
Registrant and First of Michigan Corporation relating to the
Registrant's initial capital
14 None
15 Plan of Distribution pursuant to Rule 12b-1
16 None
27.1 Financial Data Schedule for Cranbrook Money Market Fund (EDGAR
filing only)
27.2 Financial Data Schedule for Cranbrook Treasury Fund (EDGAR filing
only)
CRANBROOK FUNDS
DECLARATION OF TRUST
THIS DECLARATION OF TRUST of Cranbrook Funds is made as of the 30th
day of November, 1994 by the parties signatory hereto, as trustees (such
persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with
the provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
WHEREAS, the Trustees hereby established a trust fund under the
laws of Massachusetts for the investment and reinvestment of funds
contributed thereto under this Declaration of Trust;
NOW, THEREFORE, the Trustees hereby declare that all money and
property contributed to the trust fund under said Declaration of Trust shall
be held and managed under this Declaration of Trust as herein set forth
below.
ARTICLE I
The Fund
1.1. Name. The name of the trust created hereby (the "Fund",
which term shall be deemed to include any Series of the Fund when the
context requires) shall be "Cranbrook Funds", and so far as may be
practicable the Trustees shall conduct the activities of the Fund, execute
all documents and sue or be sued under that name, which name (and the word
"Fund" wherever hereinafter used) shall refer to the Trustees as Trustees,
and not individually, and shall not refer to the officers, agents, employees
or Shareholders of the Fund or any Series thereof. Each Series of the Fund
which shall be established and designated by the Trustees pursuant to
Section 6.2 shall conduct its activities under such name as the Trustees
shall determine and set forth in the instrument establishing such Series.
Should the Trustees determine that the use of the name of the Fund or any
Series is not advisable, they may select such other name for the Fund or
such Series as they deem proper and the Fund or Series may conduct its
activities under such other name. Any name change shall be effective upon
the execution by a majority of the then Trustees of an instrument setting
forth the new name. Any such instrument shall have the status of an
amendment to this Declaration.
1.2. Definitions. As used in this Declaration, the following
terms have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Investment Adviser", "Majority Shareholder" (the 67%
or 50%, requirement of the third sentence of Section 2(a)(42) of the 1940
Act, whichever may be applicable) and "Principal Underwriter" shall have the
meanings given them in the 1940 Act.
"Bylaws" shall mean the Bylaws of the Fund as amended from time to
time.
"Class" shall mean the separate classes into which the Shares of
any Series may be divided as provided in Section 6.2.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Declaration" shall mean this Declaration of Fund as amended from
time to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to the Declaration rather
than the article or section in which such words appear.
"Fund" shall have the meaning set forth in Article I, Section 1.1
hereof.
"Fund Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Fund, any Series thereof or the
Trustees.
"Net Asset Value" shall mean the net asset value of each Series or
Class of the Fund determined in the manner provided in Article IX, Section
9.1 hereof.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of any
Series or Class of the Fund under the Securities Act of 1933, as amended.
"Series" shall mean the separate series that may be established
and designated pursuant to Section 6.2.
"Shareholders" shall mean as of any particular time all holders of
record of outstanding Shares at such time.
"Shares" shall mean the transferable units of interest into which
the beneficial interest in any Series or Class of the Fund shall be divided
from time to time and includes fractions of Shares as well as whole Shares.
All reference to Shares shall be deemed to be Shares of any or all Series or
Classes as the context may require.
"Trustees" shall mean the signatories to this Declaration of Trust,
so long as they shall continue in office in accordance with the terms
hereof, and all other persons who at the time in question have been duly
elected or appointed and have qualified as trustees in accordance with the
provisions hereof and are then in office, and reference in this Declaration
to a Trustee or Trustees shall refer to such person or persons in their
capacity as Trustees hereunder.
"1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, as amended from time to time
including exemptions granted therefrom.
1.3. Purpose. The Fund is a Massachusetts business trust of the
type described in Chapter 102 Section 1 of the General Law of the
Commonwealth of Massachusetts formed for the purpose of acting as a
management investment company under the 1940 Act; provided, however, that
the Fund may exercise all powers which are ordinarily exercised by or
permissible for Massachusetts business trusts.
ARTICLE II
Trustees
2.1. Management of the Fund. The business and affairs of the
Fund shall be managed by the Trustees, and they shall have all powers
necessary and desirable to carry out that responsibility. Each Trustee
named herein (or his successor appointed hereunder) shall serve until the
election of Trustees at the first meeting of Shareholders of the Fund called
for the purpose of electing Trustees after the date hereof, and until his
successor is elected and qualified, or until he sooner dies, resigns or is
removed.
2.2. Election of Trustees. Shareholders of the Fund shall elect
Trustees at Shareholder meetings called for that purpose. The Trustees need
not be elected annually or at regular intervals. Except as provided in
Section 10.2, the Trustees shall not be required to call a meeting of
Shareholders for the purpose of electing Trustees, provided, however, that
in the event that at any time, other than the time preceding the first
meeting of Shareholders for the purpose of electing Trustees, less than a
majority of the Trustees holding office at that time were elected by the
Shareholders, a meeting of the Shareholders for the purpose of electing
Trustees shall be held promptly and in any event within 60 days (unless the
Commission shall by order extend such period). No election of a Trustee
shall become effective, however, until the person elected shall have
accepted such election and agreed in writing to be bound by the terms of
this Declaration. If re-elected, a Trustee may succeed himself. Trustees
need not own Shares. During any period in which the Fund may act as
distributor of the securities of which it is the issuer, the selection and
nomination of Trustees who are not interested persons shall be made by
disinterested Trustees in accordance with the 1940 Act.
2.3. Term of Office of Trustees. Each Trustee shall hold office
during the lifetime of this Fund and until its termination as hereinafter
provided or, if sooner, until the next meeting of Shareholders called for
the purpose of electing Trustees and the election and qualification of his
successor; except (a) that any Trustee may resign his trust by written
instrument signed by him and delivered to the other Trustees, which shall
take effect upon such delivery or upon such later date as is specified
therein; (b) that any Trustee may be removed at any time by written
instrument signed by at least two-thirds of the number of Trustees prior to
such removal, specifying the date when such removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has become
mentally or physically incapacitated may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; and (d) a Trustee may be removed at any meeting of Shareholders
of the Fund by a vote of two-thirds of the aggregate outstanding Shares of
all Series of the Fund.
2.4. Termination of Service and Appointment of Trustees. In case
of death, resignation, retirement, removal or mental or physical incapacity
of any of the Trustees, or in case a vacancy shall, by reason of an increase
in number, or for any other reason, exist, the remaining Trustees shall fill
such vacancy by appointing for the remaining term of the predecessor Trustee
such other person as they in their discretion shall see fit. Such
appointment shall be effective upon the signing of a written instrument by a
majority of the Trustees in office and the written acceptance to this
Declaration by the appointee. An appointment of a Trustee may be made by
the Trustees then in office in anticipation of a vacancy to occur by reason
of retirement, resignation or increase in number of Trustees effective at a
later date, provided that said appointment shall become effective only at or
after the effective date of said retirement, resignation or increase in
number of Trustees and the written-acceptance of this Declaration by the
appointee. As soon as any Trustee so appointed shall have accepted this
trust, the trust estate shall vest in the new Trustee or Trustees, together
with the continuing Trustees, without any further act or conveyance, and he
shall be deemed a Trustee hereunder. Any appointment authorized by this
Section 2.4 is subject to the provisions of Section 16(a) of the 1940 Act.
2.5. Temporary Absence of Trustee. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any
one time to any other Trustee or Trustees, provided that in no case shall
less than two of the Trustees personally exercise the power hereunder except
as herein otherwise expressly provided.
2.6. Number of Trustees. The number of Trustees serving
hereunder at any time shall be determined by the Trustees themselves, but
shall not be less than three (3) nor more than fifteen (15).
2.7. Vacancy in Board of Trustees. Whenever a vacancy on the
Board of Trustees shall occur and until such vacancy is filled, or while any
Trustee is physically or mentally incapacitated by reason of disease or
otherwise, the other Trustees, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties
imposed upon them by this Declaration. The certificate of the other
Trustees of such vacancy or incapacity shall be conclusive.
2.8. Effect of Death, Resignation etc. of a Trustee. The death,
resignation, retirement, removal, or mental or physical incapacity of the
Trustees, or any one of them, shall not operate to annul the Fund or to
revoke any existing agency created pursuant to the terms of this
Declaration.
2.9. Ownership of the Fund. The assets of the Fund shall be
held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or by any successor
Trustees. All of the assets of the Fund shall at all times be considered as
vested in the Trustees. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Fund or any right of partition or
possession thereof, but each Shareholder shall have a proportionate
undivided beneficial interest in the Fund, or in a particular Series of the
Fund.
2.10. Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman, if any, the President, the Secretary
or any two Trustees. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed by the Bylaws or by resolution of
the Trustees. Notice of any other meeting shall be mailed or otherwise given
not less than 48 hours before the meeting but may be waived in person or in
writing by any Trustee either before or after such meeting. The attendance
of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting
has not been lawfully called or convened. The Trustees may act with or
without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration,
any action of the Trustees may be taken at a meeting by vote of a majority
of the Trustees present (a quorum being present) or without a meeting by
written consents of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if
any, may act with or without a meeting. A quorum for all meetings of any
such committee shall be a majority of the members thereof. Unless provided
otherwise in this Declaration, any action of any such committee may be taken
at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority of the
members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Fund within the meaning
of Section 1.2 hereof or otherwise interested in any action to be taken may
be counted for quorum purposes under this Section and shall be entitled to
vote to the extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other and participation in a meeting pursuant
to such communications systems shall constitute presence in person at such
meeting.
2.11. Officers. The Trustees shall annually elect a President, a
Secretary and a Treasurer and may elect a Chairman. The Trustees may elect
or appoint or authorize the Chairman, if any, or President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. The Chairman and President shall be and the Secretary and
Treasurer may, but need not, be a Trustee.
2.12. Bylaws. The Trustees may adopt, and from time to time
amend or repeal, Bylaws for the conduct of the business of the Fund.
2.13. Other Activities of Trustees. Trustees may also serve as
officers, employees, and agents of the Fund, and may hold multiple offices
within the Fund; and may hold any office or be employed by any other
business entity, and engage in any other business activity.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders.
The Trustees shall have full power and authority to do any and all acts and
to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Fund. The Trustees shall not be bound or limited by present or future laws
or customs with regard to investment by Trustees or fiduciaries. The
enumeration of any specific power herein shall not be construed as limiting
the aforesaid powers.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company, including any activity incidental to the business of an
investment company or conducive to or expedient for the benefit or
protection of the Fund or its Shareholders;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, lend,
mortgage, hypothecate, purchase or sell options on, lease, distribute or
otherwise deal in or dispose of any or all of the assets of the Fund,
including, but not limited to, cash, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of deposit
or indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, equity securities, option contracts, futures contracts, indices
of securities and other securities, including, without limitation, those
issued, guaranteed or sponsored by any state, territory or possession of the
United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities, or by the United States Government or its
agencies or instrumentalities, or international instrumentalities, or by any
bank, savings institution, corporation or other business entity organized
under the laws of the United States or organized under foreign laws; and to
exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to vote, execute and deliver
proxies or powers of attorney, consent and otherwise act with respect
thereto, with power to designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments;
(c) hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Fund or in the name of a
custodian, sub-custodian or other depositary or a nominee or nominees or
otherwise;
(d) consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security or property of which is or was held in the Fund; to consent to any
contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security
held in the Fund;
(e) join with other security holders in acting through
a committee, depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(f) act as distributor of Shares, and as underwriter
of, or broker or dealer in, securities or other property.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Fund or any Series or Class,
nor shall the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal title to all the Fund Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Fund Property to be held by or in the name
of one or more of the Trustees, or in the name of the Fund or any Series
thereof, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest therein of the Fund or
any Series thereof is appropriately protected.
The right, title and interest of the Trustees in the Fund Property
shall vest automatically in each person who may hereafter become a Trustee
upon his due election and qualification. Upon the resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Fund Property, and the right, title and interest of
such Trustee in the Fund Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.
3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, dispose of, transfer, and otherwise deal in, Shares, including
shares in fractional denominations, and, subject to the more detailed
provisions set forth in Articles VIII and IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares
any funds or property of the applicable Series of the Fund.
3.5. Borrow Money. The Trustees shall have power to borrow
money or otherwise obtain credit and to secure the same by mortgaging,
pledging or otherwise subjecting as security the assets of the Fund or any
Series thereof, including the lending of portfolio securities, and to
endorse, guarantee, or undertake the performance of any obligation, contract
or engagement of any other person, firm, association or corporation.
3.6. Delegation: Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Fund and the Fund Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Fund the doing of
such things and the execution of such instruments either in the name of the
Fund or the names of the Trustees or otherwise as the Trustees may deem
expedient. The Trustees may appoint committees consisting in each case of
such number of Trustees (but not less than the minimum required by any
applicable law) and having and exercising, to the extent permitted by law,
such powers as the Trustees may determine in the resolution appointing any
such committees. The Trustees shall have power to appoint members and
alternate members of any such committee, and, to the extent permitted by
law, at any time to change the members, alternate members, and powers of any
such committee.
3.7. Collection and Payment. The Trustees shall have power to
collect all property due to the Fund or any Series thereof; to pay all
claims, including taxes, against the Fund Property; to prosecute, defend,
compromise or abandon any claims relating to the Fund Property; to foreclose
any security interest securing any obligations, by virtue of which any
property is owed to the Fund or any Series thereof; and to enter into
releases, agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and pay
any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Fund to themselves as
Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal, underwriting, syndicating and
brokerage services, as they in good faith may deem reasonable and
reimbursement for expenses reasonably incurred by themselves on behalf of
the Fund.
3.9. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Fund or any Series or
Class thereof; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) purchase, and pay for out of Fund
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisors, distributors, selected dealers or
independent contractors of the Fund or any Series or Class thereof against
all claims arising by reason of holding any such position or by reason of
any action taken or omitted by any such Person in such capacity, whether or
not constituting negligence, or whether or not the Fund would have the power
to indemnify such Person against such liability; (d) establish pension,
profit-sharing, share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Fund; (e) make
donations, irrespective of benefit to the Fund, for charitable, religious,
educational, scientific, civic or similar purposes; (f) guarantee
indebtedness or contractual obligations of others; (g) determine and change
the fiscal year of the Fund and the method in which its accounts shall be
kept; (h) act as distributor of Shares and as underwriter of, or broker or
dealer in, securities or other property; (i) determine in accordance with
generally accepted accounting principles and practices what constitutes net
profits or net earnings and to determine what accounting periods shall be
used by the Fund for any purpose, whether annual or any other period,
including daily; (j) remove officers and terminate agents as the Trustees
deem appropriate; (k) adopt a seal for the Fund but the absence of such seal
shall not impair the validity of any instrument executed on behalf of the
Fund; and (l) engage in any other lawful activity in which trusts organized
under Massachusetts General Laws, Chapter 182, or any successor statute
thereto, may engage.
3.10. Further Powers. The Trustees shall have power to conduct
the business of the Fund or any Series thereof and carry on its operations
in any and all of its branches and maintain offices both within and without
the Commonwealth of Massachusetts, in any and all states of the United
States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote
the interests of the Fund or any Series or Class thereof although such
things are not herein specifically mentioned. Any determination as to what
is in the interests of the Fund or any Series or Class thereof made by the
Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to
the Trustees. The Trustees will not be required to obtain any court order
to deal with the Fund Property. No Trustee shall be required to give any
bond or other security for the performance of any of his duties hereunder.
3.11. Ownership of Shares by Trustees, Officers, and Agents. Any
Trustee, officer or other agent of the Fund may acquire, own and dispose of
Shares to the same extent as if he were not a Trustee, officer or agent; and
the Trustees may issue and sell or cause to be issued and sold Shares to and
buy such Shares from any such person or any firm or company in which he is
interested, subject only to the general limitations herein contained as to
the sale and purchase of such Shares; and all subject to any restrictions
which may be contained in the ByLaws.
ARTICLE IV
Advisory, Service, Management and
Distribution Arrangements
4.1. Advisory, Service, and Management Arrangements. The
Trustees may in their discretion from time to time enter into advisory,
service, administration or management contracts whereby the other party to
such contract shall undertake to furnish the Trustees such advisory,
administrative, management or other services, with respect to one or more
Series or Classes as the Trustees shall from time to time consider desirable
and all upon such terms and conditions as the Trustees may in their
discretion determine, subject to Majority Shareholder Vote to the extent
required by the 1940 Act. The investment advisor may enter into a
sub-investment advisory contract to receive investment advice from a
sub-investment advisor upon such terms and conditions and for such
compensation as the Trustees may in their discretion approve, subject to
Majority Shareholder Vote to the extent required by the 1940 Act.
Notwithstanding any provisions of this Declaration, the Trustees may
authorize any advisor sub-investment advisor, administrator or manager
(subject to such general or specific instructions as the Trustees may from
time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of any Series of the Fund on behalf of the Trustees or
may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such advisor,
sub-investment advisor, administrator or manager (and all without further
action by the Trustees). Any such purchases, sales, loans and exchanges
shall be deemed to have been authorized by all of the Trustees.
4.2. Distribution Arrangements. The Trustees may in their
discretion from time to time enter into a contract, providing for the sale
of the Shares of the Fund or any Series or Class of the Fund to net the Fund
not less, than the par value per share, whereby the Fund may either agree to
sell the Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the contract shall
be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Article IV or the
Bylaws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Fund and may
provide that such other party may enter into selected dealer agreements with
registered securities dealers to further the purpose of the distribution or
repurchase of the Shares.
4.3. Parties to Contract. Any contract of the character
described in Sections 4.1 and 4.2 of this Article IV or in Article VII
hereof may be entered into with any corporation, firm, trust or association,
although one or more of the Trustees or officers of the Fund may be an
officer, director, Trustee, shareholder, or member of such other party to
the contract, and no such contract shall be invalidated or rendered voidable
by reason of the existence of any such relationship, nor shall any person
holding such relationship be liable merely by reason of such relationship
for any loss or expense to the Fund under or by reason of said contract or
accountable for any profit realized directly or indirectly therefrom,
provided that the contract when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the Bylaws. The same
person (including a firm, corporation, trust, or association) may be the
other party to contracts entered into pursuant to Sections 4.1 and 4.2 above
or Article VII, and any individual may be financially interested or
otherwise affiliated with persons who are parties to any or all of the
contracts mentioned in this Section 4.3.
4.4. Provisions and Amendments. Any contract entered into
pursuant to Sections 4.1 and 4.2 of this Article IV shall be consistent with
and subject to the requirements of the 1940 Act with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and any amendment to any
contract entered into pursuant to Section 4.1 shall be assented to by a
Majority Shareholder Vote of the applicable Series or Class to the extent
required by the 1940 Act.
ARTICLE V
Limitations of Liability of
Shareholders, Trustees and Others
5.1. Limitation of Personal Liability and Indemnification of
Shareholders. The Trustees, officers, employees or agents of the Fund shall
have no power to bind any shareholder personally or to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever,
other than such as the Shareholder may at any time agree to pay by way of
subscription to any Shares or otherwise.
No Shareholder or former shareholder of the Fund shall be liable
solely by reason of his being or having been a Shareholder for any debt,
claim, action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind, against, or with respect to, the Fund arising out of
any action taken or omitted for or on behalf of the Fund, and the Fund shall
be solely liable therefor and resort shall be had solely to the Fund
property for the payment or performance thereof.
Each Shareholder or former Shareholder of the Fund (or their heirs,
executors, administrators or other legal representatives or, in case of a
corporate entity, its corporate or general successor) shall be entitled to
indemnity and reimbursement out of the Fund Property to the full extent of
such liability and the costs of any litigation or other proceedings in which
such liability shall have been determined, including, without limitation,
the fees and disbursements of counsel if, contrary to the provisions hereof,
such Shareholder or former shareholder of the Fund shall be held to personal
liability.
5.2. Limitation of Personal Liability of Trustees, Officers,
Employees or Agents of the Fund. No Trustee, officer, employee or agent of
the Fund shall have the power to bind any other Trustee, officer, employee
or agent of the Fund personally. The Trustees, officers, employees or
agents of the Fund in incurring any debts, liabilities or obligations, or in
taking or omitting any other actions for or in connection with the Fund,
are, and each shall be deemed to be, acting as Trustee, officer, employee or
agent of the Fund and not in his own individual capacity.
Provided they have acted under the belief that their actions are in
the best interest of the Fund, the Trustees and officers shall not be
responsible for or liable in any event for neglect or wrongdoing by them or
any officer, agent, employee, investment advisor or principal underwriter of
the Fund or of any entity providing administrative services for the Fund,
but nothing herein contained shall protect any Trustee or officer against
any liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
5.3. Express Exculpatory Clauses and Instruments. The Trustees
shall use every reasonable means to assure that all persons having dealings
with the Fund shall be informed that the property of the Shareholders and
the Trustees, officers, employees and agents of the Fund shall not be
subject to claims against or obligations of the Fund to any extent
whatsoever. The Trustees shall cause to be inserted in any written
agreement, undertaking or obligation made or issued on behalf of the Fund
(including certificates, if any, for Shares of the Fund) an appropriate
reference to this Declaration, providing that neither the Shareholders, the
Trustees, the officers, the employees nor any agent of the Fund shall be
liable thereunder, and that the other parties to such instrument shall look
solely to the Fund Property for the payment of any claim thereunder or for
the performance thereof; but the omission of such provisions from any such
instrument shall not render any Shareholder, Trustee, officer, employee or
agent liable, nor shall the Trustees, or any officer, agent or employee of
the Fund be liable, to anyone for such omission. If, notwithstanding this
provision, any Shareholder, Trustee, officer, employee or agent shall be
held liable to any other person by reason of the omission of such provision
from any such agreement, undertaking or obligation, the Shareholder,
Trustee, officer, employee or agent shall be entitled to indemnity and
reimbursement out of the Fund Property, as provided in this Article V.
5.4. Mandatory Indemnification.
(a) Subject only to the provisions hereof, every person
who is or has been a Trustee, officer, employee or agent of the Fund and
every person who serves at the Trustees request as director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise shall be indemnified by the Fund to the fullest extent
permitted by law against all liabilities and against all expenses reasonably
incurred or paid by him in connection with any debt, claim, action, demand,
suit, proceeding, judgment, decree, liability or obligation of any kind in
which he becomes involved as a party or otherwise or is threatened by virtue
of his being or having been a Trustee, officer, employee or agent of the
Fund or of another corporation, partnership, joint venture, trust or other
enterprise at the request of the Fund and against amounts paid or incurred
by him in the compromise or settlement thereof.
(b) The words "claim", "action", "suit", or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative, legislative, investigative or other,
including appeals), actual or threatened, and the words "liabilities" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(c) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Fund or the
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct");
(ii) with respect to any matter as to which he
shall, by the court or other body by or before which the proceeding
was brought or engaged, have been finally adjudicated to be liable
by reason of disabling conduct;
(iii) in the absence of a final adjudication on
the merits that such Trustee or officer did not engage in disabling
conduct, unless a reasonable determination, based upon a review of
the facts that the person to be indemnified is not liable by reason
of such conduct, is made:
(A) by vote of a majority of a quorum
of the Trustees who are neither Interested Persons nor
parties to the proceedings; or
(B) by independent legal counsel, in a
written opinion.
(d) The rights of indemnification herein provided may
be insured against by policies maintained by the Fund, shall be severable,
shall not affect any other rights to which any Trustee, officer, employee or
agent may now or hereafter be entitled, shall continue as to a person who
has ceased to be such Trustee, officer, employee, or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person;
provided, however, that no person may satisfy any right of indemnity or
reimbursement granted herein except out of the property of the Fund, and no
other person shall be personally liable to provide indemnity or
reimbursement hereunder (except an insurer or surety or person otherwise
bound by contract).
(e) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 5.4 may be paid by the
Fund prior to final disposition thereof upon receipt of a written
undertaking by or on behalf of the Trustee, officer, employee or agent to
reimburse the Fund if it is ultimately determined under this Section 5.4
that he is not entitled to indemnification. Such undertaking shall be
secured by a surety bond or other suitable insurance or such security as the
Trustees shall require unless a majority of a quorum of the Trustees who are
neither Interested Persons nor parties to the proceeding, or independent
legal counsel in a written opinion, shall have determined, based on readily
available facts, that there is reason to believe that the indemnitee
ultimately will be found to be entitled to indemnification.
5.5. No Bond Required of Trustees. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the
performance of any of his duties hereunder.
5.6. No Duty of Investigation: Notice in Fund Instruments, etc.
No purchaser, lender, transfer agent or other person dealing with the
Trustees or any officer, employee or agent of the Fund shall be bound to
make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for
the application of money or property paid, loaned, or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every
obligation, contract, undertaking, instrument, certificate, Share, other
security of the Fund or any Series or Class, and every other act or thing
whatsoever executed in connection with the Fund or any Series or Class shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their
capacity as officers, employees or agents of the Fund. Every written
obligation, contract, undertaking, instrument, certificate, Share, other
security of the Fund or any Series or Class made or issued by the Trustees
or by any officers, employees or agents of the Fund, in their capacity as
such, shall contain an appropriate recital to the effect that the
Shareholders, Trustees, officers, employees and agents of the Fund shall not
personally be bound by or liable thereunder, nor shall resort be had to
their private property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to this
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, officers, employees
or agents of the Fund. The Trustees may maintain insurance for the
protection of the Fund Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to
cover possible tort liability, and such other insurance as the Trustees in
their sole judgment shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee and officer or
employee of the Fund shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Fund, upon an opinion of counsel, or upon reports made to the
Fund by any of its officers or employees or by any advisor, administrator,
manager, distributor, selected dealer, accountant, appraiser or other expert
or consultant selected with reasonable care by the Trustees, officers or
employees of the Fund, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE VI
Shares of Beneficial Interest
6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest
with par value of $.01 per share. The number of such shares of beneficial
interest authorized hereunder is unlimited. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend
in Shares or a split of Shares, shall be fully paid and nonassessable.
6.2. Series Designation. The Trustees, in their discretion from
time to time and without Shareholder approval, may authorize, by resolutions
duly adopted, the division of Shares into two or more Series, each Series
relating to a separate portfolio of investments; and may further authorize
the division of the Shares of any Series into two or more Classes. The
different Series and Classes shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series and Classes shall be fixed and determined, by the Trustees; provided,
that all Shares shall be identical except that there may be variations
between different Series and Classes as to purchase price, determination of
net asset values, the price terms and manner of redemption, special and
relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several Series and Classes shall have separate
voting rights. All references to Shares in this Declaration shall be deemed
to be shares of any or all Series or Classes as the context may require.
If the Trustees shall divide the Shares into two or more Series, or
divide the Shares of any Series into two or more Classes, the following
provisions shall be applicable:
(a) The number of Shares of each Series and Class that
may be issued shall be unlimited.
(b) The power of the Trustees to invest and reinvest
the Fund Property of each Series that may be established shall be
governed by Section 3.2 of this Declaration.
(c) All consideration received by the Fund for the
issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably
belong to that Series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of
the Fund. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Series,
the Trustees shall allocate them among any one or more of the
Series established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all
purposes.
(d) The assets belonging to each particular Series
shall be charged with the liabilities of the Fund in respect of
that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities, expenses,
costs, charges or reserves of the Fund which are not readily
identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more
of the Series established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion
deem fair and equitable. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the holders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(e) To the extent necessary or appropriate to give
effect to the relative rights and preferences of the Classes of
Shares into which any Series may be divided, the income, earnings,
profits, and proceeds thereof, or the liabilities, expenses, costs,
charges and reserves, belonging to any Series may be allocated to a
particular Class of Shares, or apportioned among two or more
Classes of Shares, of that Series. Each such allocation or
apportionment by the Trustees shall be conclusive and binding upon
the Shareholders of all Classes for all purposes.
(f) The power of the Trustees to pay dividends and make
distributions with respect to any one or more Series or Classes
shall be governed by Section 9.2 of this Declaration. Dividends
and distributions on Shares of a particular Series or Class may be
paid with such frequency as the Trustees may determine, which may
be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that Series or
Class, from such of the income and capital gains, accrued or
realized, from the assets belonging to that Series (or attributable
to that Class, as the case may be), as the Trustees may determine,
after providing for actual and accrued liabilities belonging to
that Series (or attributable to that Class). All dividends and
distributions on Shares of a particular Series shall be distributed
pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time
of record established for the payment of such dividends or
distributions, except to the extent otherwise required or permitted
by the relative rights and preferences of any Classes of that
Series, and any dividends and distributions on shares of a
particular Class shall be distributed pro rata to the holders of
that Class in proportion to the number of Shares of that Class held
by such holders at the date and time of record established for the
payment of such dividends or distributions.
The establishment and designation of any Series or Class of Shares
shall be effective upon the execution by a majority of the then Trustees of
an instrument setting forth the establishment and designation of such Series
or Class. Such instrument shall also set forth any rights and preferences
of such series or Class which are in addition to the rights and preferences
of Shares set forth in this Declaration. At any time that there are no
Shares outstanding of any particular Series or Class previously established
and designated, the Trustees may by an instrument executed by a majority of
their number abolish that Series or Class and the establishment and
designation thereof.
6.3. Rights of Shareholders. The ownership of the Fund Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the shareholders shall
have no interest therein other than the beneficial interest conferred by
their Shares with respect to a particular Series or Class, and they shall
have no right to call for any partition or division of any property,
profits, rights or interests of the Fund nor can they be called upon to
share or assume any losses of the Fund or suffer an assessment of any kind
by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights in this Declaration specifically set forth.
The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights.
6.4. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a business trust. Nothing in this Declaration shall be construed to
make the shareholders, either by themselves or with the Trustees, partners
or members of a joint stock association.
6.5. Issuance of Shares. The Trustees, in their discretion, may
from time to time without vote of the shareholders issue shares with respect
to any Series or Class that may have been established pursuant to Section
6.2, in addition to the then issued and outstanding Shares and Shares held
in the treasury, to such party or parties and for such amount not less than
par value and type of consideration, including cash or property, at such
time or times (including, without limitation, each business day in
accordance with the maintenance of a constant net asset value per share as
set forth in section 9.3 hereof), and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition
of assets subject to, and in connection with the assumption of, liabilities)
and businesses. In connection with any issuance of Shares, the Trustees may
issue fractional Shares. The Trustees may from time to time divide or
combine the Shares of any Series or Class into a greater or lesser number
without thereby changing the proportionate beneficial interests in such
Series or Class of the Fund. Reductions in the number of outstanding Shares
may be made pursuant to the constant net asset value per share formula set
forth in Section 9.3. Contributions to the Fund may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000ths of a Share or
multiples thereof.
6.6. Register of Shares. A register shall be kept at the Fund
or any transfer agent duly appointed by the Trustees under the direction of
the Trustees which shall contain the names and addresses of the Shareholders
and the number of Shares (with respect to each Series and Class that may
have been established) held by them respectively and a record of all
transfers thereof. Separate registers shall be established and maintained
for each Series and Class of the Fund. Each such register shall be
conclusive as to who are the holders of the shares of the applicable Series
or Class and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or distribution, nor to
have notice given to him as herein provided, until he has given his address
to a transfer agent or such other officer or agent of the Trustees as shall
keep the register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use.
6.7. Transfer Agent and Registrar. The Trustees shall have
power to employ a transfer agent or transfer agents, and a registrar or
registrars, with respect to the Shares of the various Series and Classes.
The transfer agent or transfer agents may keep the applicable register and
record therein the original issues and transfers, if any, of the said Shares
of the applicable Series or Class. Any such transfer agent and registrars
shall perform the duties usually performed by transfer agents and registrars
of certificates of stock in a corporation, except as modified by the
Trustees.
6.8. Transfer of Shares. Shares shall be transferable on the
records of the Fund only by the record holder thereof or by his agent
thereto duly authorized in writing, upon delivery to the Trustees or a
transfer agent of the Fund of a duly executed instrument of transfer,
together with such evidence of the genuineness of each such execution and
authorization and of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the applicable register of the
Fund. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereof and neither the
Trustees nor any transfer agent or registrar nor any officer, employee or
agent of the Fund shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the applicable register of Shares as
the holder of such Shares upon production of the proper evidence thereof to
the Trustees or a transfer agent of the Fund, but until such record is made,
the Shareholder of record shall be deemed to be the holder of such Shares
for all purposes hereof and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Fund shall be affected by any
notice of such death, bankruptcy or incompetence, or other operation of law.
6.9. Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be deemed
duly served or given if mailed, postage prepaid, addressed to any
Shareholder of record at his last known address as recorded on the
applicable register of the Fund.
ARTICLE VII
Custodians
7.1. Appointment and Duties. The Trustees shall at all times
employ a custodian or custodians, meeting the qualifications for custodians
for portfolio securities of investment companies contained in the 1940 Act,
as custodian or custodians with respect to each Series of the Fund.
Separate custodians may but need not be employed for the different Series of
the Fund. Each Series may, but need not, employ more than one custodian.
Any custodian, acting with respect to one or more Series, or portions
thereof, shall have authority as agent of the Fund or the Series with
respect to which it is acting, but subject to such restrictions, limitations
and other requirements, if any, as may be contained in the Bylaws and the
1940 Act:
(1) to hold the securities owned by the Fund or the
Series and deliver the same upon written order;
(2) to receive and receipt for any moneys due to the
Fund or the Series and deposit the same in its own banking
department (if a bank) or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books
and accounts of the Fund or the Series or any Class and furnish
clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute
the net income of the Fund or the Series or any Class;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote
of any Series with respect to which the custodian is acting, the custodian
shall deliver and pay over all property of the Fund held by it as specified
in such vote.
The Trustees may also authorize each custodian to employ one or
more sub-custodians from time to time to perform such of the acts and
services of the custodian and upon such terms and conditions, as may be
agreed upon between the custodian and such sub-custodian and approved by the
Trustees, provided that in every case such sub-custodian shall meet the
qualifications for custodians contained in the 1940 Act.
7.2. Action Upon Termination of Custodian Agreement. Upon
termination of any custodian agreement with respect to any Series or
inability of any custodian to continue to serve, the Trustees shall promptly
appoint a successor custodian, but in the event that no successor custodian
can be found who has the required qualifications and is willing to serve,
the Trustees shall call as promptly as possible a special Shareholders'
meeting to determine whether said Series shall function without a custodian
or shall be liquidated.
7.3. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Fund
or any Series in a system for the central handling of securities established
by a national securities exchange or a national securities association
registered with the Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Fund or
its duly authorized agents (which may include the Investment Adviser).
7.4. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the custodian to accept written receipts or other written
evidences indicating purchases of securities held in book-entry form in the
Federal Reserve System in accordance with regulations promulgated by the
Board of Governors of the Federal Reserve System and the local Federal
Reserve Banks in lieu of receipt of certificates representing such
securities.
ARTICLE VIII
Redemption
8.1. Redemptions. All outstanding Shares of any Series of the
Fund may be redeemed at the option of the holders thereof, upon and subject
to the terms and conditions provided in this Article VIII. The Fund shall,
upon application of any Shareholder or pursuant to authorization from any
Shareholder of a particular Series, redeem or repurchase from such
Shareholder outstanding Shares of such Series or Class for an amount per
share determined by the application of a formula adopted for such purpose by
the Trustees with respect to such Series or Class (which formula shall be
consistent with the 1940 Act); provided that (a) such amount per share shall
not exceed the cash equivalent of the proportionate interest of each share
in the assets of the Series (or of the assets of that Series attributable to
the Shares of the particular Class) of the Fund at the time of the purchase
or redemption and (b) if so authorized by the Trustees, the Fund may, at any
time and from time to time, charge fees for effecting such redemption, at
such rates as the Trustees may establish, as and to the extent permitted
under the 1940 Act, and may, at any time and from time to time, pursuant to
such Act, suspend such right of redemption. The procedures for effecting
redemption shall be as set forth in the Prospectus with respect to the
applicable Series or Class from time to time.
8.2. Redemption of Shares: Disclosure of Holding. If the
Trustees shall, at any time and in good faith, be of the opinion that direct
or indirect ownership of Shares or other securities of the Fund has or may
become concentrated in any person to an extent which would disqualify the
Fund as a regulated investment company under the Internal Revenue Code, then
the Trustees shall have the power by lot or other means deemed equitable by
them (i) to call for redemption a number, or principal amount, of Shares or
other securities of the Fund sufficient, in the opinion of the Trustees, to
maintain or bring the direct or indirect ownership of Shares or other
securities of the Fund into conformity with the requirements for such
qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Fund to any Person whose acquisition of the Shares or
other securities of the Fund in question would in the opinion of the
Trustees result in such disqualification. The redemption shall be effected
at a redemption price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Fund shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or; other securities of the Fund as
the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code, or to comply with the requirements of any other taxing
authority.
8.3. Redemptions of Accounts of Less than an Amount Specified by
the Trustees. Due to the relatively high cost of maintaining small
investment accounts, the Trustees shall have the power to redeem shares at a
redemption price determined in accordance with Section 8.1 if at any time
the total investment in such account does not have a value in excess of any
minimum account size that the Trustees may from time to time establish;
provided, however, that the Trustees may not exercise such power with
respect to Shares of any Series or Class if the Prospectus of such Series or
Class does not describe such power. In the event the Trustees determine to
exercise their power to redeem Shares provided in this Section 8.3,
Shareholders shall be notified that the value of their account is less than
the minimum account size then in effect and allowed 14 days to make an
additional investment before redemption is processed.
8.4. Redemptions Pursuant to Constant Net Asset Value. The Fund
may also reduce the number of outstanding Shares of any Series or Class
pursuant to the provisions of Section 9.3.
8.5 Redemption in Kind. Subject to any generally applicable
limitation imposed by the Trustees, any payment on redemption, purchase or
repurchase by the Fund of Shares may, if authorized by the Trustees, be made
wholly or partly in kind, instead of in cash. Such payment in kind shall be
made by distributing securities or other property, constituting, in the
opinion of the Trustees, a fair representation of the various types of
securities and other property then held by the Series of Shares being
redeemed, purchased or repurchased (but not necessarily involving a portion
of each of the Series holdings) and taken at their value used in determining
the net asset value of the Shares in respect of which payment is made.
ARTICLE II
Determination of Net Asset Value,
Net Income and Distributions
9.1. Net Asset Value. The net asset value of each outstanding
Share of each Series and Class of the Fund shall be determined at such time
or times on such days as the Trustees may determine, in accordance with the
1940 Act, with respect to each Series and Class. The method of
determination of net asset value shall be determined by the Trustees and
shall be as set forth in the Prospectus with respect to the applicable
Series or Class. The power and duty to make the daily calculations for any
Series or Class may be delegated by the Trustees to the advisor,
administrator, manager, custodian, transfer agent or such other person as
the Trustees may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
9.2. Distributions to Shareholders. The Trustees may from time
to time distribute among the Shareholders of any Series or Class such
proportion of the assets belonging to such Series (or attributable to the
particular Class) held by the Trustees as they may deem proper. Such
distribution may be made in cash or property (including without limitation
any type of obligations of the Fund or any assets thereof), and the Trustees
may distribute among the Shareholders of any Series or Class additional
Shares of such Series or Class in such manner, at such times, and on such
terms as the Trustees may deem proper. Such distributions may be among the
Shareholders of record at the time of declaring a distribution or among the
Shareholders of record at such later date as the Trustees shall determine.
Except as necessary or appropriate to give effect to the relative rights and
preferences of the Classes of Shares into which any Series may be divided,
all distributions shall be made ratably among the Shareholders of the
relative Series or Class based on the number of Shares of the relative
Series or Class held by such Shareholder. The Trustees may always retain
such amount as they may deem necessary to pay the debts or expenses of the
Fund or to meet obligations of the Fund, or as they may deem desirable to
use in the conduct its affairs or to retain for future requirements or
extensions of the business. The Trustees may adopt and offer to
Shareholders of any Series or Class such dividend reinvestment plans, cash
dividend payout plans or related plans as the Trustees shall deem
appropriate for such Series or Class.
Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in
their discretion to distribute for any fiscal year as ordinary dividends and
as capital gains distributions, respectively, additional amounts sufficient
to enable the Fund to avoid or reduce liability for taxes.
The Trustees shall be authorized to withhold from the payment of
any dividend an amount necessary to pay the expenses of the Fund which are
not deductible for Federal income tax purposes or otherwise to afford the
Fund the full tax benefits of a regulated investment company as defined in
the Internal Revenue Code of 1986.
9.3. Constant Net Asset Value: Reduction on Outstanding Shares.
The Trustees shall have the power, but shall not be required, to determine
the net income of any Series or Class of the Fund on each day the net asset
value of such Series or Class is determined as provided in Section 9.1 and
at each such determination declare such net income for such Series or Class
as dividends with the result that the net asset value per share of the
Series or Class of the Fund, taking into account withholdings authorized by
Section 9.2 hereof, shall remain at a constant dollar value. The
determination of net income and the resultant declaration of dividends shall
be as set forth in the Prospectus. In such event fluctuations in value may
be reflected in the number of outstanding Shares in each Shareholders
account. It is expected that each Series or Class of the Fund will have a
positive net income at the time of each determination. If for any reason
such net income is a negative amount, the Fund may offset such amount
against dividends accrued in the account of the Shareholder of the
applicable Series or Class. If and to the extent such negative amount
exceeds such accrued dividends, the Fund shall have authority to reduce the
number of outstanding Shares of the Series or Class. Such reduction will be
effected by having each Shareholder proportionately contribute to the Series
or Class capital the necessary Shares that represent the amount of the
excess upon such determination. Each Shareholder will be deemed to have
agreed to such contribution in these circumstances by his investment in the
Series or Class of the Fund. This procedure will permit the net asset value
per share of the Series or Class of the Fund to be maintained at a constant
dollar value per share.
The Trustees, by resolution, may discontinue or amend the practice
of maintaining the net asset value per share at a constant dollar amount
with respect to any Series or Class at any time and such modification shall
be evidenced by appropriate changes in the Prospectus.
9.4. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article IX, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the
per share net asset value of the Fund's Shares or net income, or the
declaration and payment of dividends and distributions as they may deem
necessary or desirable to enable the Fund to comply with any provision or
rule of the 1940 Act, or any securities association registered under the
Securities Exchange Act of 1934, or any order of exemption issued by the
Commission, all as in effect now or hereafter amended or modified.
ARTICLE X
Shareholders
10.1. Voting Powers. The Shareholders shall have the power to
vote (i) for the election of Trustees as provided in Article II, Section
2.2; (ii) for the removal of Trustees as provided in Article II, Section
2.3(d); (iii) with respect to any investment advisor as provided in Article
IV, Section 4.1; (iv) with respect to the amendment of this Declaration as
provided in Article XI, Section 11.4; (v) to the same extent as the
shareholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Fund or the Shareholders;
and (vi) with respect to such additional matters relating to the Fund as may
be required by law, by this Declaration, or the Bylaws of the Fund or any
regulation of the Fund by the Commission or any State, or as the Trustees
may consider desirable. Any matter affecting a particular Series,
including, without limitation, matters affecting the investment advisory
arrangements or investment policies or restrictions of a Series, shall not
be deemed to have been effectively acted upon unless approved by the
required vote of the Shareholders of such Series. To the extent required by
the 1940 Act or necessary or appropriate to give effect to the relative
rights and preferences of the Classes of Shares into which any Series may be
divided, any matter affecting a particular Class (unless the interests of
each Class of such Series in the matter are substantially identical),
including, without limitation, matters affecting the distribution plan of
that Class shall not be deemed to have been effectively acted upon unless
approved by the required vote of the Shareholders of such Class.
Notwithstanding the foregoing, to the extent permitted by the 1940 Act, each
Series and Class shall not be required to vote separately on the selection
of independent public accountants, the election of Trustees and any
submission with respect to a contract with a principal underwriter or
distributor. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action to be taken
by Shareholders which is required or permitted by law, this Declaration or
any Bylaws of the Fund.
10.2. Meetings. Shareholder meetings shall be held as specified
in the Bylaws and in Section 2.2 hereof at the principal office of the Fund
or at such other place as the Trustees may designate. Meetings of the
Shareholders may be called by the Trustees or by officers of the Fund given
such authority in the Bylaws and shall be called by the Trustees at a place
designated by them upon written request specifying the purpose of such
meeting and submitted by Shareholders of any Series or Class holding in the
aggregate not less than 10% of the outstanding Shares of such Series or
Class having voting rights.
10.3. Quorum and Required Vote. Except as otherwise provided by
law, the holders of a majority of the outstanding Shares of the Fund, or, as
to any matter to be voted on by a Series or Class, a majority of the
outstanding Shares of such Series or Class, present in person or by proxy
shall constitute a quorum for the transaction of any business at any meeting
of Shareholders. If a quorum, as above defined, shall not be present for
the purpose of any vote that may properly come before the meeting, the
Shareholders present in person or by proxy and entitled to vote at such
meeting on such matter holding a majority of the Shares present entitled to
vote on such matter may vote to adjourn the meeting from time to time to be
held at the same place without further notice than by announcement to be
given at the meeting until a quorum, as above defined, entitled to vote on
such matter shall be present, whereupon any such matter may be voted upon at
the meeting as though held when originally convened. Subject to any
applicable requirement of law, this Declaration or the Bylaws, a plurality
of the votes cast shall elect a Trustee and all other matters shall be
decided by a majority of the votes cast entitled to vote thereon.
10.4. Record Date for Meetings. For the purpose of determining
the Shareholders who are entitled to notice of and to vote at any meeting,
or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding 30 days, as the Trustees may determine; or without
closing the transfer books the Trustees may fix a date not more than 90 days
prior to the date of any meeting of Shareholders or declaration of daily
dividends or other action as a record date for the determination of the
persons to be treated as Shareholders of record for such purposes, except
for dividend payments which shall be governed by Section 9.2 hereof.
10.5. Proxies. Any vote by a Shareholder of the Fund may be made
in person or by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Trustees or their designee
prior to the time the vote is taken. Pursuant to a resolution of a majority
of the Trustees, proxies may be solicited in the name of one or more
Trustees or one or more officers of the Fund. Only Shareholders of record
shall be entitled to vote. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger.
10.6. Additional Provisions. The Bylaws may include further
provisions for Shareholders, votes, meetings and related matters.
10.7. Reports. The Trustees shall cause to be prepared with
respect to each Series and Class at least annually a report of operations
containing a balance sheet and statement of income and undistributed income
of the applicable Series or Class of the Fund prepared in conformity with
generally accepted accounting principles and an opinion of an independent
public accountant on such financial statements. It is contemplated that
separate reports may be prepared for the various Series and Classes. Copies
of such reports shall be mailed to all Shareholders of record of the
applicable Series or Class within the time required by the 1940 Act. The
Trustees shall, in addition, furnish to the Shareholders at least
semiannually, interim reports containing an unaudited balance sheet of the
Series or Class as of the end of such period and an unaudited statement of
income and surplus for the period from the beginning of the current fiscal
year to the end of such period.
10.8. Shareholder Action by Written Consent. Any action which
may be taken by Shareholders may be taken without a meeting if a majority of
Shareholders of each Series or Class entitled to vote on the matter (or such
larger proportion thereof as shall be required by any express provision of
this Declaration) consent to the action in writing and the written consents
are filed with the records of the meetings of Shareholders. Such consent
shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
10.9. Inspection of Records. The Trustees shall from time to
time determine whether and to what extent, and at what times and places, and
under what conditions and regulations, the accounts and books of the Fund or
any of them shall be open to the inspection of the Shareholders and no
Shareholder shall have any right to inspect any account or book or document
of the Fund except as conferred by law or otherwise by the Trustees.
ARTICLE XI
Duration; Termination of Fund;
Amendment; Mergers, Etc.
11.1 Duration. Subject to the provisions of Sections 11.2 and
11.3 hereof, the Fund created hereby shall continue without limitation of
time.
11.2. Termination.
(a) The Fund may be terminated by the affirmative vote
of the holders of not less than two-thirds of the Shares of each
Series of the Fund at any meeting of Shareholders or by an
instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the holders of not less than
two-thirds of such Shares. Any Series or Class may be so
terminated by vote or written consent of not less than two-thirds
of the Shares of such Series or Class. Upon the termination of the
Fund or any Series or Class:
(i) The Fund or such Series or Class shall
carry on no business except for the purpose of winding up
its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Fund or such Series or Class and all of the
powers of the Trustees under this Declaration shall
continue until the affairs of the Fund or such Series or
Class shall have been wound up, including the power to
fulfill or discharge the contracts of the Fund or such
Series or Class, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part
of the remaining Fund Property to one or more persons at
public or private sale for consideration which may consist
in whole or in part of cash, securities or other property
of any kind, discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business; provided
that any sale, conveyance, assignment, exchange, transfer
or other disposition of all or substantially all the Fund
Property shall require approval of the consideration by
vote or consent of the holders of a majority of the Shares
entitled to vote; and
(iii) After paying or adequately providing for
the payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements, as they
deem necessary for their protection, the Trustees may
distribute remaining Fund Property of any Series (or
attributable to the Shares of any Class), in cash or in
kind or partly each, among the Shareholders of such Series
or Class according to their respective rights.
(b) After termination of the Fund or any Series or
Class and distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and lodge among the records
of the Fund an instrument in writing setting forth the fact of such
termination. Upon termination of the Fund, the Trustees shall
thereupon be discharged from all further liabilities and duties
hereunder, and the rights and interests of all Shareholders shall
thereupon cease. Upon termination of any Series or Class, the
Trustees shall thereupon be discharged from all further liabilities
and duties with respect to such Series or Class, and the rights and
interests of all Shareholders of such Series or Class shall
thereupon cease.
11.3. Merger, Consolidation and Sale of Assets. The Fund may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Fund Property, including its good will, upon such terms and conditions and
for such consideration when and as authorized at any meeting of Shareholders
called for that purpose by the affirmative vote of the holders of not less
than two-thirds of the Shares of each Series, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than two-thirds of such Shares of each Series. Any Series may so
merge, consolidate or effect a sale or exchange of assets by the vote or
written consent of not less than two-thirds of the Shares of such Series.
11.4. Amendment Procedure.
(a) This Declaration may be amended by the affirmative
vote of the holders of not less than a majority of the Shares at
any meeting of Shareholders or by an instrument in writing, without
a meeting, signed by a majority of the Trustees and consented to by
the holders of not less than a majority of such Shares. The
Shareholders of each Series and Class shall have the right to vote
separately on amendments to this Declaration to the extent provided
by Section 10.1. The Trustees may also amend this Declaration
without the vote or consent of Shareholders if they deem it
necessary to conform this Declaration to the requirements of
applicable federal laws or regulations or the requirements of the
regulated investment company provisions of the Internal Revenue
Code, but the Trustees shall not be liable for failing so to do.
(b) No amendment may be made, under Section 11.4(a)
above, which would change any rights with respect to any Shares of
the Fund by reducing the amount payable thereon upon liquidation of
the Fund or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders
of two-thirds of the Shares of each Series. Nothing contained in
this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Fund or to permit
assessments upon Shareholders.
(c) A certification in recordable form signed by a
majority of the Trustees setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable
form, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records
of the Fund.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended,
covering the first public offering of Shares of the Fund shall have become
effective, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument
signed by a majority of the Trustees.
11.5. Incorporation. With the approval of the holders of a
majority of the Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other organization to take
over all of the Fund Property or to carry on any business in which the Fund
shall directly or indirectly have any interest, and to sell, convey and
transfer the Fund Property to any such corporation, trust, association or
organization in exchange for the shares or securities thereof or otherwise
and to lend money to, subscribe for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of,
and enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust,
association or organization in which the Fund holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Fund or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to
the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or
more corporations, trusts, partnerships, associations or other organizations
and selling, conveying or transferring a portion of the Fund Property to
such organizations or entities.
ARTICLE XII
Miscellaneous
12.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts
and in such other places as may be required under the laws of Massachusetts
and may also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee stating that such action was duly taken
in a manner provided herein, and unless such amendment or such certificate
sets forth some later time for the effectiveness of such amendment, such
amendment shall be effective upon its filing. A restated Declaration,
containing the original Declaration and all amendments theretofore made, may
be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may thereafter
be referred to in lieu of the original Declaration and the various
amendments thereto.
12.2. Resident Agent. The Fund shall maintain a resident agent
in the Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, Two Oliver Street, Boston, Massachusetts 02109. The
Trustees may designate a successor resident agent, provided, however, that
such appointment shall not become effective until written notice thereof is
delivered to the office of Secretary of the Commonwealth of Massachusetts.
12.3. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with
reference to the laws thereof, and the rights of all parties and the
validity and construction of every provision hereof shall be subject to and
construed according to the laws of said Commonwealth and reference shall be
specifically made to the business corporation law of the Commonwealth of
Massachusetts as to the construction of matters not specifically covered
herein or as to which an ambiguity exists.
12.4. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
12.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Fund, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the name of the Fund or any Series or Class thereof, (c)
the establishment of any Series or Class, (d) the due authorization of the
execution of any instrument or writing, (e) the form of any vote passed at a
meeting of Trustees or Shareholders, (f) the fact that the number of
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (g) the form of
any Bylaws adopted by or the identity of any officers elected by the
Trustees, or (h) the existence of any fact or facts which in any manner
relate to the affairs of the Fund or any Series or Class, shall be
conclusive evidence as to the matters so certified in favor of any person
dealing with the Trustees and their successors.
12.6. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable,
and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with 1940 Act, the
regulated investment company provisions of the Internal Revenue
Code or with other applicable laws and regulations, the conflicting
provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or
render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
This Declaration of Fund establishing "Cranbrook Funds" provides
that the name Cranbrook Funds refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of Cranbrook Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs Cranbrook Funds, but the assets of the Fund only
shall be liable.
IN WITNESS WHEREOF, the undersigned have caused these presents to
be executed as of the day and year first above written.
/S/ WAYNE WRIGHT
Wayne Wright
/S/ CHARLES W. MACKINNON, JR.
Charles W. MacKinnon, Jr.
The address of each of the above named Trustees is the principal
place of business of the Fund which is:
Cranbrook Funds
100 Renaissance Center, 25th Floor
Detroit, Michigan 48243
CRANBROOK FUNDS
BYLAWS
ARTICLE I
Transaction Confirmations, Account Statements,
Certificates and Dividend Distributions
1. Every shareholder of record will receive a confirmation of
each new transaction in their account with the Fund, and an account
statement at least quarterly, which will show the total number of shares of
the Fund owned by the shareholder and being held by the transfer agent for
the account of the shareholder. Shareholders may rely on these
confirmations and statements in lieu of certificates, which will not be
issued, except that certificates may be issued, upon request, to
Institutional Investors. "Institutional Investors" shall mean banks, trust
departments, savings banks, mutual savings banks, savings and loan
associations, credit unions, broker-dealers, and pension and profit sharing
plans. Dividends shall be declared and paid not less frequently than
monthly, as determined by the Board of Trustees for the particular series
involved. Capital gains shall be distributed annually.
2. Certificates evidencing shares of a particular series of
the Fund shall be in the form prescribed by the Board of Trustees and shall
be signed by the President or a Vice President and the Secretary or
Treasurer. The signature of any officer of the Fund and the seal of the
Fund thereon may be facsimiles.
3. In the event any officer authorized to sign certificates of
shares shall die, resign or be removed from office, otherwise valid
certificates bearing the signature, or facsimile thereof, of such officer
shall remain valid and may be issued.
ARTICLE II
Fiscal Year
Except as may otherwise be provided by the Board of Trustees, the
fiscal year of the Fund shall end on the 31st of October of each year.
ARTICLE III
Seal
The Fund seal shall, subject to alteration by the Board of
Trustees, consist of a flatfaced circular die upon which shall be engraved
or cut the word, "Massachusetts," together with the name of the particular
series of the Fund and the year of its Declaration (viz., 1994).
ARTICLE IV
Shareholder Meetings
1. Meetings of shareholders will only be held as necessary to
approve fundamental policy changes, elect trustees and other matters
requiring approval of the shareholders in accordance with the Investment
Company Act of 1940, as amended.
2. Meetings of shareholders of the Fund shall be held at such
time and on such day as shall be designated in the notice of said meeting.
At such meetings, shareholders may elect a Board of Trustees or transact
such other business as may properly be brought before the meeting and which
is stated in the notice of the meeting.
3. Special meetings of shareholders, of the Fund, or of any
particular series of the Fund, unless otherwise prescribed by statute, rule
or regulation, may be called for any purpose or purposes by the President at
any time and shall be called by the President at the request of a majority
of the Board of Trustees, or at the request in writing of one or more
shareholders who collectively hold at least ten percent (10%) of the shares
of a particular series of the Fund issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the meeting.
Business transacted at all special meetings shall be confined to the objects
stated in the notice of such meeting.
4. Written notice of every meeting of the shareholders,
stating the time, place and purpose or purposes for which the meeting is
called, shall be given by the secretary to each shareholder entitled to vote
thereat and to any shareholder entitled by law to such notice. Such notice
shall be given to each shareholder by mailing the same, postage prepaid, to
the address of the shareholder as it appears on the books of the Fund not
less than ten (10) days nor more than forty-five (45) days before the time
fixed for such meeting.
5. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be requisite and shall constitute a quorum at all meetings
of the shareholders for the transaction of business, except as otherwise
provided by statute. If such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time (provided no adjournment shall be for more than
three (3) months) without notice other than announcement at the meeting,
until a quorum shall be present or represented. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
6. When a quorum is present at any meeting, the vote of the
holders of a majority of the shares having the right to vote thereat,
present in person or represented by proxy, shall determine any question
brought before such meeting, unless the question is one upon which, by
express provision of the applicable statutes, rules and regulations,
Declaration of Trust or these Bylaws, a different vote is required in which
case such express provision shall control.
7. At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such shareholder and
bearing a date not more than eleven (11) months prior to said meeting, which
instrument shall be filed with the secretary of the meeting before being
voted. Each shareholder shall have one vote or fraction thereof for each
share or fraction thereof held.
8. The Board of Trustees may fix a record date, not more than
ninety (90) nor less than ten (10) days prior to the date for which a
meeting is called, as of which the shareholders entitled to vote at such
meeting or any adjournment thereof, shall be determined, notwithstanding any
transfer or the issue of any share occurring after such record date.
ARTICLE V
Trustees
1. The number of trustees which shall constitute the entire
Board of Trustees shall be not less than three (3) nor more than fifteen
(15). Any trustee may be removed by a two-thirds (2/3) majority of all
trustees, at a regular or special meeting called for that purpose, for cause
by them deemed sufficient. Subject to death, resignation or removal, each
trustee shall hold office indefinitely and until his successor is elected
and qualified. Trustees need not be shareholders of the Fund.
2. If the office of any trustee or trustees becomes vacant for
any reason, a majority of the remaining trustees, though less than a quorum,
may choose a successor or successors, who shall hold office for the
unexpired term in respect to which such vacancy occurred or until the next
election of trustees, provided that, immediately after filling any such
vacancy, at least two-thirds (2/3) of the trustees then holding office shall
have been elected to such office by the shareholders of the Fund entitled to
vote; otherwise such vacancy shall be filled by vote of the shareholders at
a special meeting called for such purpose.
3. The property and business of the Fund shall be managed by
its Board of Trustees which may exercise all powers of the trust and do all
lawful acts and things as are not by applicable statute, rule or regulation,
the Declaration of Trust or these Bylaws prohibited, or directed or required
to be exercised or done by the shareholders.
4. The Board of Trustees may hold their meetings and keep the
books of the Fund at the office of the Fund in the City of Detroit, State of
Michigan, or at such other places as they may from time to time determine,
and telephone meetings may be held except that the Board of Trustees may not
hold telephone meetings to approve or renew an investment advisory agreement
or any Rule 12b-1 Plan or any agreements related to such plan. The original
or duplicate stock ledger shall be kept at the office of the Fund in the
City of Detroit, State of Michigan or at the office of any transfer agent
which may be employed by the Fund.
5. The first meeting of the newly elected Board of Trustees
shall be held at the place of, and immediately following the meeting of the
shareholders at which such Board of Trustees was elected, either within or
without the State of Michigan; provided the trustees may hold their meeting
at such other place and time as they may determine. No notice of such
meeting shall be necessary to the newly elected trustees in order to legally
constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Trustees shall be held without notice at such time
and place, either within or without the State of Michigan as shall from time
to time be determined by the board.
6. Special meetings of the Board of Trustees may be held at
any time when called by the chairman, if any, the president, the secretary
or any two (2) trustees. Not less than forty-eight (48) hours' notice of
any special meeting shall be given by the secretary or other officer calling
such meeting to each trustee either in person, by telephone, by mail or by
telegram. Such notice may be waived by any trustee either in person or in
writing or by telegram. Such special meetings shall be held at such time
and place, within or without the State of Michigan, as the notice thereof or
waiver shall specify. Unless otherwise specified in the notice thereof, any
and all business may be transacted at any meeting of the Board of Trustees.
7. At all meetings of the Board of Trustees, a majority of the
trustees shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of the majority of trustees present at
any meeting at which there is a quorum shall be the act of the Board of
Trustees, except as may be otherwise specifically provided by an applicable
statute, rule, or regulation, by the Declaration of Trust or by these
Bylaws. If a quorum shall not be present at any meeting of the Board of
Trustees, the trustees present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
ARTICLE VI
Committees
The Board of Trustees may elect from their own number, by
resolution or resolutions passed by a majority of the board, an executive
committee to consist of two (2) or more trustees, which shall have the power
to conduct the current and ordinary business of the Fund while the Board of
Trustees is not in session. The Board of Trustees may also in the same
manner elect from their own number from time to time other committees, the
number composing such committees and the powers conferred thereon to be
determined from the resolution creating the same.
ARTICLE VII
Notices
1. Whenever, under the provisions of an applicable statute,
rule, or regulation, the Declaration of Trust or these Bylaws, notice is
required to be given to any shareholder or trustee, it shall not be
construed to mean personal notice unless the context otherwise provides.
Such notice may be given in writing, by mail, by depositing the same in a
post office or letter box, in a postage prepaid envelope, addressed to such
shareholder or trustee at such address as appears on the books of the Trust,
and such notice shall be deemed to be given at the time when the same shall
be thus mailed.
2. Whenever any notice is required to be given under the
provisions of an applicable statute, rule or regulation, the Declaration of
Trust or by these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be equivalent thereto.
ARTICLE VIII
Officers
1. The Board of Trustees shall annually elect officers of the
Fund. The Board of Trustees may elect one of its own members as Chairman of
the Board and shall elect a President, Secretary and Treasurer. The Board
of Trustees may also elect or appoint or authorize the Chairman, if any, or
President to appoint such other officers, including Vice Presidents and one
or more Assistant Secretaries and Assistant Treasurers, as the Board of
Trustees deems advisable. Two or more offices, when consistent, may be held
by the same person. The Chairman and President of the Fund shall be
trustees. All other officers may be, but need not be, trustees.
2. The Board of Trustees may appoint such other officers,
agents and representatives of the Fund as shall be deemed necessary, with
such powers for such term and to perform such acts and duties on behalf of
the Fund as the Board of Trustees may see fit to the extent authorized or
permitted by statute, rule, or regulation, the Declaration of Trust and
these Bylaws.
3. The Chairman of the Board, if one shall be elected, shall
preside at all meetings of the shareholders and Board of Trustees and shall
perform such other duties as the Board of Trustees may from time to time
prescribe.
4. The President shall be the chief executive officer of the
Fund and shall in the absence of the Chairman preside at all meetings of the
shareholders and Board of Trustees. The President shall perform such other
duties as the Board of Trustees shall from time to time prescribe.
5. The Vice Presidents, in the order of their seniority or as
designated by the Board of Trustees, shall in the absence or disability of
the President perform the duties and exercise the powers of the President
and shall perform such other duties as the Board of Trustees may from time
to time prescribe.
6. The Secretary shall record all votes and proceedings of
meetings of the shareholders and of the Board of Trustees in the Fund
records. The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and meetings of the Board of Trustees when
notice thereof is required. The Secretary shall have custody of the seal of
the Fund and may affix the same to any instrument requiring the seal and
attest to the same with his or her signature. The Secretary shall perform
such other duties as the Board of Trustees may from time to time prescribe.
7. The Assistant Secretaries, in order of their seniority or
as directed by the Board of Trustees, shall in the absence or disability of
the Secretary perform the duties and exercise the powers of the Secretary
and shall perform such other duties as the Board of Trustees may prescribe.
8. The Treasurer shall be the Chief Financial and Chief
Accounting Officer of the Fund. The Treasurer shall deliver all monies and
securities of the Fund which may come into the Treasurer's hands to such
bank or trust company as the Board of Trustees may designate as Custodian.
The Treasurer shall keep such records of the financial transactions of the
Fund as the Board of Trustees shall prescribe. The Treasurer shall perform
such other duties as the Board of Trustees may from time to time prescribe.
9. The Assistant Treasurers, in order of their seniority or as
directed by the Board of Trustees, shall in the absence or disability of the
Treasurer perform the duties and exercise the powers of the Treasurer and
shall perform such other duties as the Board of Trustees may prescribe.
10. The officers of the Fund shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by
the Board of Trustees may be removed at any time by the affirmative vote of
a majority of the entire Board of Trustees. If the office of any officer
shall become vacant for any reason, the vacancy shall be filled by the Board
of Trustees.
ARTICLE IX
Investment and Other Restrictions
The investment limitations for the Fund are set forth in each of
the Trust's current Prospectuses or Statements of Additional Information as
approved by the Trustees.
ARTICLE X
Custodian
1. The Fund shall employ a Custodian pursuant to a written
contract which shall contain in substance the following provisions:
(a) The Fund will cause all securities and monies owned
by the Fund to be delivered or paid to the Custodian.
(b) The Custodian will receive any monies due to the
Fund and deposit the same in an account in its own banking
department or in such other banking institution, if any, as the
Board of Trustees may direct.
(c) The Custodian shall release and deliver securities
owned by the Fund in the following cases only:
(1) Upon the sale of such securities for the
account of the Fund and the receipt of payment therefor;
(2) To the issuer thereof or its agent when
such securities are called, redeemed, retired or otherwise
become payable, provided that in any such case the cash
proceeds thereof shall be delivered to the Custodian;
(3) To the issuer thereof or its agent for
transfer into the name of the Fund or the Custodian, or a
nominee of either, or in exchange for a different number of
certificates representing the same number of shares or
aggregate face amount, provided that in any such case the
new securities replacing such securities are delivered to
the Custodian and approval of the Fund is received;
(4) To any broker selling the same for
examination in accord with the "street delivery" custom;
(5) For exchange or conversion pursuant to any
plan of merger, consolidation, reorganization,
recapitalization or readjustment of the securities of the
issuer of such securities, or pursuant to provisions for
conversion contained in such securities, provided that in
any such case the new securities and cash, if any, are
delivered to the Custodian;
(6) In the case of warrants, rights or similar
options, the surrender thereof shall be only for the
exercise of such warrants, rights or other options on
behalf of the Fund upon interim receipts or temporary
securities for definitive securities;
(7) For any other proper purpose approved by
the Fund.
(d) The Custodian shall pay out monies of the Fund only
upon the purchase of securities for the account of the Fund and the
delivery in due course of such securities to the Custodian, or in
connection with the conversion, exchange or surrender of securities
owned by the Fund as set forth herein, or for the repurchase of
shares issued by the Fund, or for the making of any disbursements
authorized by the Board of Trustees for expenses or liabilities
incurred by the Fund pursuant to all applicable statutes, rules and
regulations.
(e) The Custodian shall make deliveries of securities
and payments of cash only upon proper written instructions signed
by such officer or officers or other agent or agents of the Fund,
including the investment adviser, as may be authorized to sign such
instructions by resolution of the Board of Trustees. The Trustees
may, from time to time, authorize different persons to sign proper
instructions for different purposes.
2. The contract between the Fund and the Custodian may contain
any other provisions not inconsistent with all applicable statutes, rules,
and regulations, the Declaration of Trust or with these Bylaws which the
Board of Trustees may approve.
3. Such contract shall be terminable by either party upon
written notice to the other; provided, however, that upon termination of the
contract or inability of the Custodian to continue to serve, the Custodian
shall deliver and pay over to such successor Custodian all securities and
monies held by it for the account of the Fund. In the event that the
Custodian terminates its contract with the Fund: (a) the Board of Trustees
shall promptly appoint a successor Custodian; (b) in the event that the Fund
cannot find a successor Custodian having the required qualifications and
willing to serve, the Board of Trustees shall promptly call a special
meeting of the shareholders to determine whether the Fund shall function
without a Custodian or shall be liquidated; (c) in the event that such vote
of shareholders shall be held the Custodian shall deliver and pay over all
property of the Fund held by it as directed by, and in accordance with, the
vote of a majority of the outstanding shares of the Fund.
ARTICLE XI
Investment Adviser
The Board of Trustees, with the approval of the shareholders, as
provided by applicable statutes, rules and regulations, and consistent with
the Declaration of Trust, may enter into a contract or contracts with any
one or more persons, firms or corporations to act as Investment Adviser or
Advisors for the Fund, or for any particular series of the Fund, and to
perform such duties and render such services as shall be deemed necessary.
Each contract shall provide that it may be terminated at any time by the
Fund without penalty and upon not more than sixty (60) days' written notice,
and shall be automatically terminated in the event of its assignment. Any
such contract shall continue in effect only if approved in accordance with
the provisions of all applicable statutes, rules, and regulations, the
Declaration of Trust and these Bylaws.
ARTICLE XII
Distributor
The Board of Trustees, as consistent with all applicable statutes,
rules, and regulations, and the Declaration of Trust, may enter into a
contract with any one or more persons, firms or corporations to act as
Distributor or Distributors for the Fund, or any particular series of the
Fund, and to perform such other duties and render such other services as
shall be deemed necessary. Any such contract shall provide that it shall be
automatically terminated in the event of its assignment by such person, firm
or corporation, and that, in the event it shall continue in effect for a
period of more than two (2) years from the date of its execution, it shall
be specifically approved at least annually by vote of the outstanding voting
securities of the Fund or by the Board of Trustees in accordance with all
applicable statutes, rules and regulations. Such contract may be exclusive,
and may be, with the same person, firm or corporation which is a party to an
investment adviser's contract with the Fund. Such contract may also contain
any other provisions not inconsistent with all applicable statutes, rules
and regulations, the Declaration of Trust and these Bylaws.
ARTICLE XIII
Transactions of Trustees, Officers and Others
1. No trustee or officer of the Fund, nor any investment
adviser, nor any member, officer, director, or shareholder of such
investment adviser shall take a long or short position in the securities
issued by the Fund, except that any trustee or officer of this Fund, or
member, officer, director or shareholder of the Investment Adviser may
purchase from the Fund at any time, shares issued by any series of the Fund:
(a) at the price available to the public at the moment of such purchase; or
(b) to the extent that such person is a shareholder, at the price available
to shareholders generally at the moment of such purchase; or (c) at a price
determined as set forth in current Prospectus of the Fund. In any event,
such purchase shall not be in contravention of any applicable federal or
state statute, rule or regulation.
2. The Fund shall not lend any of its assets to the
Distributor or any investment adviser or to any officer, director or trustee
of a Distributor or an investment adviser of the Fund and shall not permit
any officer or trustee, or any officer or director of any Distributor or the
investment adviser to deal for or on behalf of the Fund with himself as
principal or agent, or with any partnership, association or corporation in
which he has a financial interest. The foregoing provisions shall not
prevent: (a) officers and trustees of the Fund from buying, holding or
selling shares in any series of the Fund, or from being partners, officers
or directors of or otherwise financially interested in a Distributor or an
investment adviser; (b) employment of legal counsel, registrar, transfer
agent, dividend disbursing agent or custodian who is, or has a partner,
shareholder, officer or director who is, an officer or trustee of the Fund,
if only customary fees are charged for services to the Fund; or (c)
purchases or sales of securities or other property if such transaction is
permitted by or is exempted under any applicable statute, rule or
regulation.
3. Any officer, trustee or agent of the Fund may acquire, own
and dispose of shares of the Fund to the same extent as if he or she were
not such officer, trustee or agent. The Board of Trustees may issue,
purchase and sell or cause to be issued, purchased and sold shares in the
Fund and from any person, or to and from any firm or company of which such
person is an officer, director, trustee or shareholder subject only to all
applicable statutes, rules, and regulations, any limitations contained in
the Declaration of Trust and the limitations and restrictions in these
Bylaws.
ARTICLE XIV
Indemnification
1. The Fund shall indemnify each trustee and officer to the
full extent permitted by applicable federal, state and local statutes, rules
and regulations and the Declaration of Trust, as amended from time to time.
2. With respect to a proceeding against a trustee or officer
brought by or on behalf of the Fund to obtain a judgment or decree in its
favor, the Fund shall provide the officer or trustee with the same
indemnification, after the same determination, as it is required to provide
with respect to a proceeding not brought by or on behalf of the Fund.
3. The Board of Trustees, in its discretion, may authorized or
provide the above-described indemnification to an employee or agent.
4. Any indemnification provided by this Article:
(a) Continues as to a trustee, officer, employee or
agent who has ceased to be such, and inures to the benefit of his
heirs and personal representative; and
(b) Does not exclude any other rights to which a person
is or may be entitled by any applicable statute, rule, regulation,
agreement, vote of shareholders or disinterested trustees, or
otherwise, as to:
(1) Actions in his official capacity; and
(2) Actions in any other capacity while
holding such office.
5. The indemnification provided by this Article shall be
provided with respect to an action, suit or proceeding arising from an act
or omission or alleged act or omission, whether occurring before or after
the adoption of this Article.
6. Nothing in this Article protects, or purports to protect,
or may be interpreted or construed to protect, any trustee or officer
against any liability to the Fund or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office.
ARTICLE XV
Auditor
The independent auditor of the Fund shall be selected annually in
accordance with all applicable statutes, rules and regulations.
ARTICLE XVI
Amendments
The Board of Trustees may make, amend, alter or repeal these
Bylaws, at any meeting duly held; provided, that the provisions concerning
investment and other restrictions contained in Article IX of these Bylaws
shall only be amended, altered or repealed by the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Investment
Company Act of 1940, or as otherwise provided by any applicable statute,
rule or regulations.
ARTICLE XVII
Miscellaneous
1. When used in these Bylaws, the term "applicable statutes,
rules and regulations" shall mean any and all federal and state statutes,
rules and regulations which are applicable to, govern or otherwise regulate
the conduct of the Fund's business as a regulated, diversified, open-end
investment company of the management type. Such statutes, rules and
regulations shall include, but are not limited to: The Investment Company
Act of 1940, the Investment Advisers Act of 1940, the Securities Act of
1933, the Securities Exchange Act of 1934 and all rules and regulations
promulgated by the Securities and Exchange Commission thereunder; Subchapter
M of the Internal Revenue Code, and all rules and regulations promulgated by
the Internal Revenue Service thereunder; the Annotated Code of
Massachusetts, and all rules and regulations promulgated by any commission,
organization, or division of such, which has been authorized by the State of
Massachusetts to formulate or to enforce same; and any and all other
statutes, rules or regulations enacted or promulgated by any state,
commission or division which shall or may be deemed to govern or regulate
the conduct of the Fund.
2. Each article, section or portion of these Bylaws shall be
deemed severable, and the invalidity of any such article, section or portion
shall not affect the validity of the remainder of these Bylaws.
ADVISORY AGREEMENT
THIS AGREEMENT is made as of December 15, 1994, by and between
CRANBROOK FUNDS, a Massachusetts business trust (the "Fund"), and CRANBROOK
CAPITAL MANAGEMENT, INC., a Michigan corporation (the "Adviser").
WHEREAS, the Fund is an open-end, diversified management investment
company, registered under the Investment Company Act of 1940 (the "1940
Act"), with two present series of shares each having its own investment
objective, policies and limitations, known as the "Cranbrook Money Market
Fund" and the "Cranbrook Treasury Fund" (collectively referred to hererin as
the "Funds");
WHEREAS, the Fund desires to retain the Adviser to render
investment advisory and management services under the terms hereof; and
WHEREAS, the Adviser has been organized to operate as an investment
adviser and desires to provide investment advisory services to the Fund, and
is registered as an Investment Adviser under the Investment Advisers Act of
1940, as amended;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
l. Employment of the Adviser. The Fund hereby employs the Adviser
to act as the investment adviser for and to manage the investment and
reinvestment of the assets of the Funds in accordance with the investment
objective and policies and limitations for each Fund, and to administer its
affairs to the extent requested by and subject to the supervision of the
Trustees of the Fund for the period and upon the terms herein set forth.
The investment of monies shall be subject to all applicable restrictions of
the Declaration of Trust and Bylaws of the Fund as may from time to time be
in force. The Fund and the Adviser agree that, with respect to any
additional series of shares of the Fund created in the future, they may
negotiate and execute a separate advisory contract or one which is
supplementary and/or amendatory hereto.
The Adviser accepts such employment and agrees during such period
to render such services, to furnish office facilities and equipment and
clerical, bookkeeping and administrative services for the Fund, and to
assume the obligations herein set forth for the compensation herein
provided. Subject to the supervision and direction of the Trustees, to the
restrictions of the Declaration of Trust and Bylaws of the Fund, as amended
from time to time, to the provisions of the 1940 Act and to the statements
relating to the Fund's investment objectives, investment policies and
investment restrictions as the same are set forth in the currently effective
prospectus relating to the shares of the beneficial interest of each Fund
under the Securities Act of 1933, as amended (the "Prospectus"), the
services provided by the Adviser include, but are not be limited to:
furnishing continuously an investment program and determining from time to
time which securities shall be purchased, sold or exchanged and what portion
of the assets of each Fund shall be held in authorized securities or cash;
making decisions for the Fund as to the manner in which voting rights,
rights to consent to action and any other rights pertaining to the Fund's
portfolio securities shall be exercised; implementing investment policies
and strategies; taking, on behalf of each Fund, all actions which the
Adviser deems necessary to implement the investment policies determined as
provided above, and in particular placing all orders for the purchase or
sale of portfolio securities for each Fund's account with brokers or dealers
selected by it, and to that end, giving instructions to the Custodian of
each Fund as to deliveries of securities and payments of cash for the
account of each Fund; and calculating the net asset value of each Fund from
time to time as directed by the Board of Trustees of the Fund. The Adviser
shall for all purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized, shall
have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund. It is understood and agreed that the
Adviser, by separate agreements with the Fund, may also serve the Fund in
other capacities.
2. Compensation of the Adviser. For the services and facilities
described in Section 1, the Fund will pay to the Adviser at the end of each
calendar month, an investment advisory and management fee, computed daily
and payable monthly, at an annual rate of 0.225% of the first $500,000,000
of average net assets of each Fund, and 0.20% of average net assets of each
Fund in excess of $500,000,000. The fee as computed above shall based upon
the relative net assets of each Fund and shall be based only upon the net
assets of the Fund allocated to Funds for which this Agreement is then in
effect. For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month and year,
respectively. The services of the Adviser to the Fund under this Agreement
are not to be deemed exclusive, and the Adviser shall be free to render
similar services or other services to others.
3. Expenses Borne by Fund. In addition to the fee of the
Adviser, the Fund shall assume and pay any expenses for services rendered by
a Custodian or by the Transfer and Dividend Disbursing Agent for the
safekeeping of the Fund's securities or other property, for keeping its
books of account, and for any other charges of the Custodian or of the
Transfer and Dividend Disbursing Agent. The Adviser shall not be required
to pay and the Fund shall assume and pay the charges and expenses of the
Fund's operations, including compensation of the Trustees, of the
Administrator and Distributor, charges and expenses of independent auditors,
of legal counsel, any registrar of the Fund, costs of acquiring and
disposing of portfolio securities, interest, if any, on obligations incurred
by the Fund, cost of share certificates, if any, and of reports, membership
dues in the Investment Company Institute or any similar organization,
reports and notices to shareholders, other like miscellaneous expenses and
all taxes, costs and fees payable to federal, state or other governmental
agencies or others on account of the registration of securities issued by
the Fund, filing of corporate documents or otherwise. The Fund shall not
pay or incur any obligation for any expenses for which the Fund intends to
seek reimbursement from the Adviser or adjustment of the Adviser's fee as
herein provided without first obtaining the written approval of the Adviser.
4. Expense Reimbursement. If expenses borne by the Fund for
those Funds which the Adviser manages in any fiscal year (including the
Adviser's fee) exceed any expense limitation imposed by applicable law, the
Adviser will reduce its fee or reimburse the Fund for one-half of any such
excess, the other half of such excess to be reimbursed by the Administrator
and Distributor of the Fund. The expense limitation guarantee shall be
allocated to each such Fund upon a fee reduction or reimbursement based upon
the relative average daily net assets of each such Fund. If for any month
the expenses of the Fund properly chargeable to the income account shall
exceed the expense limitation on monthly basis, payment to the Adviser for
that month shall be reduced and, if necessary, the Adviser shall make a
refund payment to the Fund so the total net expense will not exceed such
limitation, taking into account the related refund to be made to the Fund by
the Administrator and Distributor. As of the end of the Fund's fiscal year,
however, the foregoing computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser and to the Administrator
and Distributor for the year is equal to the percentages set forth in
Section 2 hereof and in the Administration and Distribution Agreement with
respect to the average net asset values as determined as described herein
and therein throughout the fiscal year, diminished to the extent necessary
so that the total of the aforementioned expense items shall not exceed the
expense limitation. The aggregate of repayments, if any, by the Adviser and
by the Administrator and Distributor to the Fund for the year shall be the
amount necessary to limit the said net expense as required.
5. Allocation of Brokerage; Calculation of Net Asset Value.
(a) The Adviser shall place all orders for the purchase or sale of portfolio
securities for the accounts of the Funds with brokers or dealers selected by
the Adviser, and to that end the Adviser is authorized as the agent of the
Fund to give instructions to the Custodians of each Fund as to deliveries of
securities and payment of cash for the account of the Funds. In connection
with the selection of such brokers or dealers and the placing of such
orders, the Adviser shall use its best efforts to seek to execute security
transactions at prices that are advantageous to the Funds and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Adviser and the Adviser is expressly
authorized to pay any broker or dealer who provides such brokerage and
research services a commission for executing a security transaction which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is 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 that the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. Subject to the
requirement set forth in the second sentence of this paragraph, the Adviser
is authorized to consider, as a factor in the selection of any broker or
dealer with whom purchase or sale orders may be placed, the fact that such
broker or dealer has sold or is selling shares of the Funds, or any other
series of the Fund, or of other investment companies sponsored by the
Adviser or its affiliates.
(b) The net asset value for each class of the Fund's shares
shall be calculated as of 5:00 p.m., Detroit time, on each day that the New
York Stock Exchange is open for business, and as of such other time or times
as the Trustees may determine in accordance with the provisions of the 1940
Act and the policies and procedures established from time to time by the
Board of Trustees of the Fund. On each day when net asset value is not
calculated, the net asset value of a share of any class of the Fund's shares
shall be deemed to be the net asset value of such a share as of the last day
on which such calculation was made for the purpose of the foregoing
computations.
6. Permissible Investments. Subject to applicable statutes
and regulations, it is understood that Trustees, officers or agents of the
Fund are or may be interested in the Adviser as officers, directors, agents,
shareholders or otherwise, and that the officers, directors, shareholders
and agents of the Adviser may be interested in the Fund otherwise than as a
director, officer or agent.
7. Limitation on Adviser Liability. The Adviser shall not be
liable for any error of judgment or of law or for any loss suffered by the
Fund in connection with the matters to which this Agreement relates, except
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
8. Term; Termination. This Agreement shall become effective
with respect to each Fund on the date hereof and shall remain in full force
until December 15, 1996, unless sooner terminated as hereinafter provided.
This Agreement shall continue in force from year to year thereafter with
respect to each Fund, but only as long as such continuance is specifically
approved for each Fund at least annually in the manner required by the 1940
Act and the rules and regulations thereunder; provided, however, that if
the continuation of this Agreement is not approved for a Fund, the Adviser
may continue to serve in such capacity for such Fund in the manner and to
the extent permitted by the 1940 Act and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without cause and without the
payment of any penalty by the Fund or by the Adviser on sixty (60) days
written notice to the other party. The Fund may effect termination with
respect to any Fund by action of the Trustees or by vote of a majority of
the outstanding voting securities of such Fund.
The terms "assignment" and "vote of a majority of the outstanding
voting securities" have the meanings set forth in the 1940 Act and the
rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the
Adviser to receive payments on any unpaid balance of the compensation
described in Section 2 earned prior to the effective date of such
termination.
9. Severability. If any provision of this Agreement shall be
held or made invalid or unenforceable by a court decision, statute, rule or
otherwise, the remainder shall not be thereby affected.
10. Notices. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the receipt of
such notice.
11. Limitation of Fund Liability. The Declaration of Trust
establishing Cranbrook Funds, dated November 30, 1994, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name "Cranbrook Funds" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of Cranbrook Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said Cranbrook Funds, but the Fund Estate
only shall be liable.
12. Defined Terms. Terms not defined herein shall have the
same meanings as such terms are used in the currently effective prospectus
with respect to shares of the Fund.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed on the day and year first above written.
CRANBROOK FUNDS
By: /S/ CONRAD KOSKI
Its: PRESIDENT
CRANBROOK CAPITAL MANAGEMENT, INC.
By: /S/ JAMES T. FORAN
Its: PRESIDENT
ADMINISTRATION AND DISTRIBUTION AGREEMENT
This AGREEMENT is made as of this 15th day of December, 1994,
between CRANBROOK FUNDS, a trust organized under the laws of Massachusetts
(the "Fund"), and FIRST OF MICHIGAN CORPORATION, a Delaware corporation
("FoM").
The Fund is registered with the Securities and Exchange Commission
(the "Commission") under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), as a diversified open-end management investment
company and its Board of Trustees has determined that it will be in the best
interests of the Fund and its shareholders to offer shares of its existing
series for resale in a continuous offering. The Fund is authorized to
establish separate series, each of which may offer one or more classes of
shares of beneficial interest (collectively referred to as "shares"), to
selected groups of purchasers. The Fund has currently established two
series, the Cranbrook Money Market Fund and the Cranbrook Treasury Fund (the
"Series"). FoM is a securities firm engaged, among other things, in the
business of selling shares of investment companies either directly to
investors or through other securities dealers
The Fund and FoM wish to enter into an agreement with each other
with respect to the administration of the Fund and to the continuous
offering of the shares of each Series, such offering to commence after the
effectiveness of the registration statement covering the shares of the
Series filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). In consideration of the premises, the parties agree as
follows:
Section 1. Appointment as Administrator. The Fund hereby appoints
FoM to act as administrator for the benefit of the Fund and its shareholders
to provide information and services for existing and potential shareholders
of the Fund. FoM shall provide such office space and equipment, telephone
facilities, personnel, literature distribution, advertising and promotion as
is necessary or beneficial for providing information and services to
potential and existing shareholders and to assist in servicing accounts of
the FoM clients who own Fund shares ("clients"). Such services and
assistance may include, but not be limited to, establishment and maintenance
of shareholder accounts and records, processing purchase and redemption
transactions, automatic investment in Fund shares of client account cash
balances, answering routine client inquiries regarding the Fund, assistance
to clients in changing dividend options, account designations and addresses,
investigating, selecting and conducting relations with custodians,
depositories, transfer agents, dividend disbursing agents, other shareholder
service agents, accountants, attorneys, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and such other persons in any such
other capacity deemed to be necessary or desirable, other than those
operations which are to be managed by the Fund's Adviser pursuant to that
certain Advisory Agreement dated as of December 15, 1994, furnishing advice
and recommendations with respect to such other aspects of the business and
affairs of the Fund as it shall determine to be desirable and such other
services as the Fund may reasonably request. FoM further agrees to make its
employees available to serve the Fund as Trustees or officers without
compensation by the Fund.
Section 2. Appointment as Distributor. The Fund hereby appoints
FoM as the exclusive distributor and representative of the Fund to sell
shares to investors in the manner and on the terms set forth in the
prospectus (the "Prospectus") relating to the shares of each Series, as such
Prospectus is finally declared effective by the Commission under the
Securities Act. The Fund during the term of this Agreement shall sell its
shares to FoM upon the terms and conditions set forth below.
Section 3. Exclusive Nature of Duties. FoM shall be the exclusive
representative of the Fund to act as distributor, except that:
(a) The Fund may, upon written notice to FoM, from time to time
designate other underwriters and distributors of shares of one or more
Series with respect to areas other than the United States as to which FoM
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of FoM under this Agreement to
sell shares in the areas so designated shall terminate, but this Agreement
shall remain otherwise in full effect until terminated in accordance with
the other provisions hereof.
(b) The exclusive rights granted to FoM to purchase shares from
the Fund shall not apply to shares of any Series issued in connection with
the merger or consolidation of any other investment company or personal
holding company with the Fund or the acquisition by purchase or otherwise of
all (or substantially all) of the assets or the outstanding shared of any
such company by the Fund.
(c) Such exclusive rights shall also not apply to shares issued
by the Fund pursuant to reinvestment of dividends and capital gains
distributions.
Section 4. Purchase of Shares from the Fund.
(a) FoM shall have the right to buy from the Fund the shares
needed, but not more than the shares needed (except for clerical errors in
transmission) to fill unconditional orders for shares of the Fund placed
with FoM by investors or securities dealers. The price which FoM shall pay
for the shares so purchased from the Fund shall be the net asset value,
determined as set forth in Section 4(c) hereof, used in determining the
public offering price described below on which such orders were based.
(b) The shares are to be resold by FoM to investors at the
public offering price, as set forth in Section 4(c) hereof, or to securities
dealers having agreements with FoM upon the terms and conditions set forth
in Section 8 hereof.
(c) The public offering price of the shares of any Series,
i.e., the price per share at which FoM may sell shares to the public, shall
be the public offering price as set forth in the Prospectus relating to such
shares, which shall be the net asset value thereof, as determined in
accordance with the description thereof contained in the Prospectus relating
to that Series, plus any sales charge which may be approved by the Trustees
of the Fund.
(d) The Fund, or any agent of the Fund designated in writing by
it, shall be promptly advised of all purchase orders for shares received by
FoM. Procedures may be established by the Fund and FoM whereby purchase
orders for shares of any Series are presented directly to the Fund or an
agent designated by the Fund upon the condition that in such cases it shall
be deemed that the sale of the shares to be purchased is made pursuant to
Section 4 hereof. Any order may be rejected by the Fund or FoM, provided,
however, that neither will arbitrarily or without reasonable cause refuse to
accept or confirm orders for the purchase of shares. The Fund (or its
agent) will confirm orders upon their receipt, or in accordance with any
exemptive order of the Commission, and will make appropriate book entries
pursuant to the instructions of FoM. Purchase orders are effective when
good investable funds become available to the Fund. FoM agrees to cause
such payment and such instructions to be delivered promptly to the Fund (or
its agent).
Section 5. Redemption or Repurchase of Shares by the
Fund.
(a) Any of the outstanding shares of either Series may be
tendered for redemption or repurchase at any time, and the Fund shall redeem
or repurchase the shares so tendered in accordance with its obligations and
rights as set forth in its Declaration of Trust, as amended from time to
time, and in accordance with the applicable provisions contained in the
prospectus relating to such shares. The Fund shall pay the total amount of
the redemption price as defined in the above paragraph pursuant to the
instructions of FoM and in accordance with the terms set forth in the
prospectus relating to the shares being redeemed.
(b) The Fund reserves the right to reject any order for
repurchase through a securities dealer, but the right to redeem shares, or
to receive payment with respect to any such redemption, upon the
presentation of properly submitted redemption requests in accordance with
the procedures set forth in the prospectus relating to such shares, may only
be suspended in accordance with the provisions of the Investment Company
Act.
Section 6. Duties of the Fund.
(a) The Fund shall furnish to FoM copies of all information,
financial statements and other documents which FoM may reasonably request
for use in connection with the distribution of shares of the Fund, and this
shall include one certified copy, upon request by FoM, of all financial
statements of each Series audited by independent auditors. The Fund shall
make available to FoM such number of copies of the Prospectus for each
Series as FoM shall reasonably request.
(b) The Fund shall take, from time to time, all necessary
action to register shares of each Series under the Securities Act to the end
that there will be available for sale such number of shares as FoM may
reasonably be expected to sell.
(c) The Fund shall use its best effort to qualify and maintain
the qualification of an appropriate number of shares of each Series for sale
under the securities laws of such states as FoM and the Fund may approve.
Any such qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion, as provided in Section 10(c) hereof, the
expense of qualification and maintenance of qualification shall be borne by
the Fund. FoM shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
(d) The Fund will furnish to FoM, in reasonable quantities upon
request by FoM, copies of annual and interim reports of each Series.
Section 7. Duties of FoM as the Distributor.
(a) FoM shall devote reasonable time and effort to effect sales
of shares of the Fund, but shall not be obligated to sell any specific
number of shares. The services of FoM hereunder are not to be deemed
exclusive and nothing herein contained shall prevent FoM from entering into
distribution arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
(b) In selling the shares of the Fund, FoM shall use its best
efforts in all respects duly to conform with the requirements of all federal
and state laws and regulations and the regulations of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
such securities. Neither FoM nor any other person is authorized by the Fund
to give any information or to make any representations other than those
contained in the prospectus for each Series or any sales literature
specifically approved by the Fund for use with respect to a particular
Series.
(c) FoM shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors on such sales, and the
cancellation of unsettled transactions, as may be necessary to comply with
the requirements of the NASD, as such requirements may from time to time
exist.
Section 8. Selected Dealer Agreements.
(a) FoM shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for
the sale of shares; provided, however, that the form of selected dealer
agreement shall be approved by the Fund. Shares sold to selected dealers
shall be for resale by such dealers only in accordance with the provisions
of the Prospectus relating to such shares.
(b) Within the United States, FoM shall offer and sell shares
only to such selected dealers as are members in good standing of the NASD.
Section 9. Acceptance of Appointments. FoM accepts such
appointments and agrees during such period to render such services and to
assume the obligations herein sct forth for the compensation herein
provided. FoM shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any
way or otherwise be deemed an agent of the Fund. It is understood and
agreed that FoM, by separate agreement with the Fund, may also serve the
Fund in other capacities.
Section 10. Payment of Expenses.
(a) The Fund shall bear all of its costs and expenses,
including fees and disbursements of its counsel and auditors, in connection
with the preparation and filing of any required registration statements and
prospectuses under the Investment Company Act, the Securities Act, and all
amendments and supplements thereto, and the expense of preparing, printing,
mailing and otherwise distributing prospectuses, annual or interim reports
and proxy materials to its shareholders.
(b) After the prospectuses and annual and interim reports have
been prepared, set in type and mailed to shareholders, FoM shall bear the
costs and expenses of printing and distributing any copies thereof which are
used in connection with the offering of the shares. FoM shall bear the
costs and expenses of preparing, printing and distributing any supplementary
sales literature used by FoM in connection with the offering of the shares
for sale. Any expenses of advertising incurred in connection with such
offering will also be the obligation of FoM.
(c) The Fund shall bear the cost and expenses of qualification
of the shares for sale, and, if necessary or advisable in connection
therewith, of qualifying the Fund as a broker or dealer, in such states of
the United States or other jurisdictions as shall be selected by the Fund
and FoM, and the cost and expenses payable to each such state for continuing
qualification therein until the Fund decides to discontinue such
qualification.
Section 11. Compensation. For the services and facilities
described herein, the Fund will pay to FoM at the end of each calendar month
an administration and distribution fee computed at an annual rate of 0.25%
of the first $500,000,000 of the Fund's average net assets for such month;
0.225% of the next $500,000,000 of average net assets; and 0.20% of average
net assets in excess of $1,000,000.000. FoM shall not be required to
allocate its compensation hereunder between its duties as administrator and
its duties as distributor. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate proration on
the basis of the number of days that the Agreement is in effect during the
month and year, respectively. The services of FoM to the Fund under this
Agreement are not to be deemed exclusive, and FoM shall be free to render
similar services or other services to others so long as its services
hereunder are not impaired thereby.
If expenses borne by the Fund for those Series which FoM acts as
distributor in any fiscal year (including FoM's fee) exceed any expense
limitation imposed by applicable law, FoM will reduce its fee or reimburse
the Fund for one-half of any such excess, the other half of such excess to
be reimbursed by the Adviser of the Fund. The expense limitation guarantee
shall be allocated to each Series upon a fee reduction or reimbursement
based upon the relative average daily net assets of each such Series. If
for any month the expenses of the Fund properly chargeable to the income
account shall exceed the expense limitation on monthly basis, payment to FoM
for that month shall be reduced and, if necessary, FoM shall make a refund
payment to the Fund so the total net expense will not exceed such
limitation, taking into account the related refund to be made to the Fund by
the Adviser. As of the end of the Fund's fiscal year, however, the
foregoing computations and payments shall be readjusted so that the
aggregate compensation payable to the Adviser and to FoM, as administrator
and distributor, for the year is equal to the percentages set forth in this
Section 11 and in the Advisory Agreement with respect to the average net
asset values as determined as described herein and therein throughout the
fiscal year, diminished to the extent necessary so that the total of the
aforementioned expense items shall not exceed the expense limitation. The
aggregate of repayments, if any, by the Adviser and by FoM to the Fund for
the year shall be the amount necessary to limit such net expense as
required.
The net asset value for each Series, and each class of shares
within a Series, if more than one, shall be calculated as of 5:00 p.m.
Detroit time on each day that the New York Stock Exchange is open for
business, and as of such other time or times as the Trustees may determine
in accordance with the provisions of the Investment Company Act. On each
day when net asset value is not calculated, the net asset value of a share
of any Series or class of stock of the Fund shall be deemed to be the net
asset value of such a share as of the last day on which such calculation was
made for the purpose of the foregoing computations.
The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by FoM under
this Agreement.
Section 12. Indemnification.
(a) The Fund shall indemnify and hold harmless FoM and each person,
if any, who controls FoM against any loss, liability, claim, damage or
expense (including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), arising by reason of any person
acquiring any shares, which may be based upon the Securities Act, or on any
other statute or at common law, on the ground that the registration
statement or related Prospectus of any Series, as from time to time amended
and supplemented, or the annual or interim reports to shareholders of any
Series, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, unless such statement or omission was
made in reliance upon, and in conformity with, information furnished to the
Fund in connection therewith by or on behalf of FoM; provided, however, that
in no case (i) is the indemnity of the Fund in favor of FoM and any such
controlling persons to be deemed to protect FoM or any such controlling
persons thereof against any liability to the Fund or its security holders to
which FoM or any such controlling persons would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Fund to be
liable under its indemnity agreement contained in this paragraph with
respect to any claim made against FoM or any such controlling persons,
unless FoM or such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon FoM or such controlling persons (or after FoM or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall
not relieve it from any liability which it may have to the person against
whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects to assume
the defense of any suit brought to enforce any such liability, but if the
Fund elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to FoM or such controlling persons or
persons, defendant or defendants in the suit. In the event the Fund elects
to assume the defense of any such suit and retain such counsel, FoM or such
controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but,
in case the Fund does not elect to assume the defense of any such suit, it
will reimburse FoM or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify FoM of the commencement of
any litigation or proceedings against it or any of its officers or Trustees
in connection with the issuance or sale of any of the shares.
(b) FoM shall indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in
conformity with, information furnished to the Fund in writing by or on
behalf of FoM for use in connection with the registration statement or
related prospectus of any Series, as from time to time amended, or the
annual or interim reports to shareholders of any Series. In case any action
shall be brought against the Fund or any persons so indemnified in respect
of which indemnity may be sought against FoM, FoM shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to FoM by the provisions of subsection (a)
of this Section 12.
Section 13. Duration and Termination of this Agreement. This
Agreement shall become effective as of the date first above written and
shall remain in force until December 14, 1996, and thereafter, but only so
long as such continuance is specifically approved at least annually by (i)
the Trustees of the Fund, or by the vote of a majority of the outstanding
voting securities of the Fund, and (ii) a majority of those Trustees who are
not parties to this Agreement and have no direct or indirect interest in the
operation of this Agreement, or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment
of any penalty, by the Trustees of the Fund who are not interested persons
of the Fund and have no direct or indirect interest in the operation of the
Plan of Distribution adopted by the Fund or any related agreement thereto,
or by vote of a majority of the outstanding voting securities of the Fund,
or by FoM, on sixty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
Section 14. Amendments. This Agreement may be amended by the
parties hereto only if such amendment is specifically approved (i) by the
Trustees of the Fund, or if such amendment provides for an increase in the
amount to be spent for distribution, by the vote of a majority of
outstanding voting securities of the Fund, and (ii) by a majority of those
Trustees who are not parties to this Agreement and have no direct or
indirect interest in the operation of this Agreement, or interested persons
of any such party, which vote must be cast in person at a meeting called for
the purpose of voting on such approval.
Section 15. Definitions of Certain Terms. The terms "vote of a
majority of the outstanding voting securities", "assignment", "interested
person" and "affiliated person", when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 16. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Michigan and the applicable
provisions of the Investment Company Act. To the extent the applicable law
of the State of Michigan or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall
control.
Section 17. Personal Liability. The Declaration of Trust
establishing Cranbrook Funds, dated November 30, 1994, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name "Cranbrook Funds" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of Cranbrook Funds shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said Cranbrook Funds, but the Fund Estate
only shall be liable.
Section 18. Reports. FoM shall prepare and submit to the Trustees
of the Fund for their review at least quarterly, a written report of all
expenses and compensation paid by the Fund hereunder and the purposes for
which such expenditures were made.
Section 19. Compliance with Rule 12b-1. This Agreement is entered
into by the Fund in connection with a Plan of Distribution approved by the
Fund pursuant to Rule 12b-1 under the Investment Company Act; it is the
intention of the Fund and FoM that this Agreement shall be construed so as
to comply with all applicable provisions of the Investment Company Act, Rule
12b-1 thereunder, and such Plan of Distribution.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
FIRST OF MICHIGAN CORPORATION
By: /S/ WAYNE WRIGHT
Its: VICE PRESIDENT
CRANBROOK FUNDS
By: /S/ CONRAD W. KOSKI
Its: PRESIDENT
CUSTODIAN AGREEMENT
AGREEMENT, entered into as of this 1st day of February, 1995,
between NBD BANK, a Michigan banking corporation, having its principal
office and place of business at 611 Woodward Avenue, Detroit, Michigan 48226
(hereinafter called the "Custodian"), and CRANBROOK FUNDS, a Massachusetts
business trust registered as an investment company under the Investment
Company Act of 1940, having its office at 100 Renaissance Center, 25th
Floor, Detroit, Michigan 48243 (hereinafter called the "Fund").
W I T N E S S E T H:
WHEREAS; the shares of capital stock (Shares) of the Fund are
currently divided into two Series known as the Cranbrook Money Market Fund
and the Cranbrook Treasury Fund (each a "Series"), each of which represents
a diversified portfolio of investments,
WHEREAS, the Fund desires to appoint NBD Bank to act as the
custodian of the securities and cash of each Series,
WHEREAS, NBD Bank is willing to act as Custodian as herein set
forth,
NOW, THEREFORE, the Custodian and the Fund, on behalf of themselves
and their respective successors and assigns, 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. "Authorized Person" shall be deemed to include the
President and the Treasurer of the Fund or any other person, whether or not
any such person is an Officer or employee of the Fund, duly authorized by
the Trustees of the Fund to give Oral Instructions and Written Instructions
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.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
Book-Entry system for United States government and federal agency
securities, its successor or successors and its nominee or nominees.
3. "Certificate" shall mean notice, instructions 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 Trustees or two Officers of the Fund or by an
Authorized Person.
4. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission, its successor and 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.
5. "Officers" shall be deemed to include the President, any
Vice President, the Secretary, the Treasurer, any Assistant Treasurer, or
any other person or persons duly authorized by the Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf
of the Fund and listed in a Certificate that may be received by the
Custodian from time to time.
6. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized Person.
7. "Securities" shall be deemed to include, without
limitation, such securities in which the Fund is authorized to invest in
respect of any Series pursuant to its current prospectus.
8. "Series" means either or both, as the case may be, of the
Series into which the Shares of the Fund are currently divided.
9. "Written Instructions" shall mean written communications
actually received by the Custodian by telex or any other such system whereby
the receiver of such communications is able to verify by codes or otherwise
with a reasonable degree of certainty the authenticity of the sender of such
communication.
ARTICLE II
Appointment of Custodian
l. The Fund hereby constitutes and appoints the Custodian as
custodian of Securities and moneys owned by the Fund for the account of each
Series during the period of this Agreement.
2. The Custodian hereby accepts appointment as said custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
Custody of Cash and Securities
1. The Fund will deliver or cause to be delivered to the
Custodian Securities and monies owned by it on behalf of each Series,
including cash received for the issuance of shares of each Series of the
Fund, during the period of this Agreement. The Custodian will not be
responsible for such Securities and such monies until 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 monies are
not finally collected. The Fund shall instruct the Custodian from time to
time in its sole discretion, by means of a Certificate or, in connection
with the purchase or sale of Securities, by means of Oral Instructions or a
Certificate, as to the manner in which and in what amounts such Securities
and monies are to be deposited on behalf of each Series of the Fund in the
Book-Entry System or the Depository, provided, however, that prior to the
deposit of Securities of the Fund in either the Book-Entry System or the
Depository, including a deposit in connection with the settlement of a
purchase or sale or a delivery of loan collateral, the Custodian shall have
received a certified resolution of the Trustees specifically approving such
deposits by the Custodian on behalf of the Fund in the Book-Entry System or
the Depository, or physically deposited in the vault of the Custodian, as
the case may be. Securities and funds of the Fund 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.
2. The Custodian shall establish and maintain a separate
account in the name of each Series of the Fund and credit thereto all monies
received by it for the account of such Series of the Fund, and monies
credited to the separate accounts shall be disbursed by the Custodian only:
(a) In payment for Securities purchased, as provided in
Article IV hereof;
(b) In payment of dividends or distributions with
respect to the Shares, as provided in Article V hereof;
(c) In payment of original issue or other taxes with
respect to the Shares, as provided in Article VI hereof;
(d) In payment for Shares redeemed by it, as provided
in Article VI hereof;
(e) Pursuant to Certificates, or with respect to the
purchase or sale of Securities, pursuant to Oral Instructions or
Certificates, setting forth the name and address of the person to
whom the payment is to be made, the amounts to be paid, the account
from which the payment is to be made, and the purpose for which
payment is to be made; or
(f) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian, as provided in Article
VIII hereof.
The Custodian shall maintain all cash, other than cash maintained
by the Fund in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940, of the Fund in such separate
accounts, subject only to draft or other order by the Custodian acting
pursuant to the terms of this Agreement. If and when authorized and
instructed by the Fund, the Custodian may open and maintain an additional
account or accounts in such other bank or Fund companies as may be
designated by such instructions, such account or accounts, however, to be in
the name of the Custodian in its capacity as Custodian and subject only to
its draft or order in accordance with the terms of this Agreement.
3. On each business day the Custodian shall furnish the Fund
with a written statement (i) summarizing all transactions and entries for
the account of each Series of the Fund effected the immediately preceding
business day, and (ii) confirming any purchase or sale of Securities on such
preceding business day. Where Securities are transferred to the account of
a Series of the Fund, the Custodian shall also by book entry or otherwise so
identify as belonging to the Fund and to the appropriate 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, the Custodian
shall furnish the Fund with a detailed statement of the Securities and
monies held for each Series of the Fund under this Agreement.
4. All securities held for the Fund 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 for the Fund may be registered in the name of the Fund with
designation of the appropriate Series, 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, and may be held
by a sub-custodian designated by the Custodian. The Fund agrees to furnish
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 for the account of the Fund and which may
from time to time be registered in the name of the Fund. The Custodian
shall hold all such Securities which are not held in the Book-Entry System
or in the Depository in a separate account in the name of the Fund with
designation of the appropriate Series physically segregated at all times
from those of any other person or persons.
5. 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 therein deposited, shall
with respect to all Securities held for the Fund in accordance with this
Agreement:
(a) Collect all income due and payable;
(b) Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed or
retired, or otherwise become payable;
(c) Surrender Securities in temporary form for
definitive Securities;
(d) 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
(e) Receive and hold directly, or through the
Book-Entry System or the Depository for the account of the Fund all
stock dividends, rights and similar securities issued with respect
to any Securities held by the Custodian 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 may be exercised;
(b) Deliver any Securities held for the Fund 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
any cash or other securities received in exchange;
(c) Deliver any Securities held for the Fund 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 under the terms of this Agreement
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 Fund and take such other steps as shill be stated in said
Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund.
7. The Custodian shall cooperate in the preparation of reports
to holders of shares of the Fund, to the Securities and Exchange Commission,
to State authorities and to others, in the auditing of accounts, and in
other matters of like nature.
8. Notwithstanding any other provision of this Agreement, it
is expressly understood and agreed that the Custodian is authorized to
deposit all or any part of the securities owned by the Fund in the
Book-Entry System of the Federal Reserve Banks, as provided under the
provisions of Rule l7f-4 of the Investment Company Act of 1940 as from time
to time amended.
9. Notwithstanding any other provisions of this Agreement, it
is expressly understood and agreed that the Custodian is authorized in the
performance of its duties hereunder to use the facilities of any Depository.
10. The Custodian shall calculate daily the "net income" of
each Series in a manner consistent with the Fund's governing document and in
accordance with the then current prospectus of the Fund with respect to each
Series, and shall advise the Fund and the Transfer and Dividend Disbursement
Agent of the Fund daily of the total amount of such net income.
ARTICLE IV
Purchase and Sale of Investments of the Fund
1. Promptly after each purchase of Securities by the Fund, the
Fund shall deliver or cause to be delivered to the Custodian prior to 12:00
Noon, Detroit time, a Certificate or Oral Instructions, specifying with
respect to each such purchase: (a) the name of the issuer and the title of
the Securities, (b) the number of shares or the principal amount purchased
and accrued interest, if any, (c) the date of purchase and settlement, (d)
the purchase price per unit, including accrued interest, if any (e) the
total amount payable upon such purchase, including accrued interest, if any,
and the Series the moneys of which are to be used for payment (f) the name
of the person from whom or the broker through whom the purchase was made,
(g) whether such purchase is to be settled through the Book-Entry System or
the Depository, (h) whether the Securities purchased are to be deposited in
the Book-Entry System or the Depository and (i) for which Series the
Securities were purchased. The Custodian shall upon receipt of Securities
purchased by or for the Fund pay out of the moneys held for the account of
the applicable Series of the Fund the total amount payable to the person
from whom or the broker through whom the purchase was made, 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, the
Fund shall deliver or cause to be delivered to the Custodian prior to 12:00
Noon, Detroit time, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the name of the issuer and the title of the
Security, (b) the number of shares or the principal amount sold and accrued
interest, if any, and the Series for which the sale was made, (c) the date
of sale, (d) the sale price per unit, including accrued interest, if any,
(e) the total amount payable to the Fund and the Series thereof to which
payable upon such sale, including accrued interest if any, (f) the name of
the broker through whom or the person to whom the sale was made, and (g)
whether such sale is to be settled through the Book-Entry System or the
Depository. The Custodian shall deliver the Securities 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. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
ARTICLE V
Payment of Dividends or Distributions
1. The Fund shall furnish to the Custodian a copy of a
resolution of the Trustees of the Fund, certified by the Secretary or any
Assistant Secretary; authorizing the declaration of dividends on the Shares
of each Series on a daily basis and (i) specifying the date of the
declaration of such dividend or distribution, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of that date and the total amount
payable to the Transfer Agent of the Fund on the payment date, or (ii)
authorizing the Custodian to rely on Oral Instructions or a Certificate
specifying 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 to the
shareholders of record as of that date and the total amount payable to the
Dividend Disbursing Agent on the payment date.
2. Upon any payment date specified in such resolution, Oral
Instructions or Certificate, the Custodian shall pay out of the moneys held
for the account of each Series of the Fund the total amount payable to the
Dividend Disbursing Agent of the Fund in respect of each Series.
ARTICLE VI
Sale and Redemption of Shares of
Beneficial Interest of the Fund
1. Whenever the Fund shall sell any Shares, it shall deliver
to the Custodian a Certificate duly specifying:
(a) The number of Shares of each Series 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 of the
Fund, 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 the Fund in accordance with
the foregoing provisions of this Article, the Custodian shall pay out of the
money held in the separate account in the name of the Series of the Shares
sold, all original issue or other taxes required to be paid by the Fund in
connection with such issuance upon the receipt of a Certificate specifying
the amount to be paid.
4. Except as provided hereinafter, whenever the Fund shall
hereafter redeem any Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) The number of Shares of each Series redeemed; and
(b) The amount to be paid for the Shares of each Series
redeemed.
5. Upon receipt from the Transfer Agent of the Fund of an
advice setting forth the number of Shares of each Series received by the
Transfer Agent of the Fund for redemption and stating that such Shares are
valid and in good form for redemption, the Custodian shall' make payment to
the Transfer Agent out of the moneys in the separate account in the name of
the appropriate Series of the Fund for the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE VII
Overdrafts of Indebtedness
1. If the Custodian should, by reason of clerical error or the
failure of a purchaser of Fund shares to provide available monies, advance
monies on behalf of the Fund which results in an inadvertent overdraft
because the moneys held by the Custodian in the separate account in the name
of a Series shall be insufficient to pay the total amount payable upon
purchase of Securities as set forth in a Certificate or Oral Instructions
issued pursuant to Article IV or which results in an overdraft in the
account for some other reason, or if the Fund is for any other reason
indebted to the Custodian, such overdraft or indebtedness shall be repayable
to the Custodian by the Fund 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 effective
date of any change in such prime commercial lending rate but in no event to
be less than 6% per annum. In addition thereto the Fund agrees that the
Custodian shall have a continuing lien and security interest in and to any
property which is at any time held by it for the benefit of the relevant
Series or 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 the credit of the relevant Series
on the Custodian's books.
2. The Fund will cause to be delivered to the Custodian by any
bank (excluding the Custodian) from which it borrows money for temporary or
emergency purposes using Securities 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 shall promptly deliver
to the Custodian a Certificate specifying with respect to each such
borrowing: (a) the name of the bank, (b) 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, (c) the
time and date, if known, on which the loan is to be entered into (the
"borrowing date"), (d) the date on which the loan becomes due and payable,
(e) the total amount payable to the Fund on the borrowing date, (f) 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, (g) whether the Custodian is
to deliver such collateral through the Book-Entry System, the Depository or
a Sub-custodian, (h) the Series designation of the portfolio from which such
securities are to be delivered, and (i) a statement that such loan for
temporary or emergency purposes is in conformance with the Investment
Company Act of 1940 and the Fund's current prospectus. The Custodian shall
deliver on the borrowing date such 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 in the manner directed by the Fund from time to time 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 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 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. Collateral returned to the
Custodian shall be held hereunder as it was prior to being used as
collateral.
ARTICLE VIII
Concerning the Custodian
1. Except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, except for any
such loss or damage arising out of its own negligence or willful misconduct.
The Custodian may, with respect to questions of law, 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 subject to the same liability with respect
to all securities of the Fund, and all cash, stock dividends, rights and
items of like nature to which the Fund is entitled, held or received by a
Depository as agent for the Custodian, as if the same were held or received
by the Custodian at its own offices. Anything to the contrary in this
Agreement notwithstanding, the Custodian shall not be liable to the Fund for
any loss or damage to the Fund resulting from use of the Book-Entry System
except by reason of any negligence, misfeasance or misconduct of the
Custodian (or any of its agents) or by any of its (or their) employees or
from any failure of the Custodian (or any such agent) to enforce effectively
such rights as it may have against the Book-Entry System; at the election of
the Fund, it shall be entitled to be subrogated for the Custodian in any
claim against the Book-Entry System or any other person which the Custodian
may have as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or damage.
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 by or for the Fund, the legality of the purchase thereof,
or the propriety of the amount paid therefor;
(b) The legality of the sale of any Securities by or
for the Fund, or the propriety of the amount for which the same are
sold;
(c) The legality of the issue or sale of any Shares, or
the sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any Shares, or
the propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any
dividend by the Fund; or
(f) The legality of any borrowing by the Fund using
Securities as collateral.
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 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.
5. The Custodian may appoint one or more banking institutions
as Depository or depositories or as Sub-custodian or Sub-custodians,
including, but not limited to, banking institutions located in foreign
countries, of Securities and moneys at any time owned by the Fund, upon
terms and conditions approved by the Fund.
6. The Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by it for
the account of the Fund are such as properly may be held by the Fund and
under the provisions of its Declaration of Trust.
7. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian such compensation and expenses as may be
agreed upon from time to time between the Custodian and the Fund, which
compensation initially shall be as set out in Appendix B hereto. The
Custodian may charge against any moneys such compensation with respect to
the Fund and any expenses with respect to the Fund incurred by the Custodian
in the performance of its duties pursuant to such agreement. The Custodian
shall also be entitled to charge against any money held by it, the amount of
any loss, damage, liability or expense incurred with respect to the Fund,
including counsel fees, for which it shall be entitled to reimbursement
under the provisions of this Agreement. The expenses which the Custodian
may charge against the account of the Fund include, but are not limited to,
the expenses and liabilities of any Sub-custodian which the Custodian may be
required to pay or reimburse, and expenses of foreign branches of the
Custodian incurred in settling outside of Detroit transactions involving the
purchase and sale of Securities.
8. 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 genuine and to be signed by
two Officers of the Fund or by an Authorized Person. The Custodian shall be
entitled to rely upon any Oral Instructions actually received by the
Custodian pursuant to Articles III, IV and V hereof and reasonably believed
by the Custodian to be genuine and to be given by an Authorized Person. The
Fund agrees to forward to the Custodian Written Instructions from an
Authorized Person confirming such Oral Instructions in such manner so that
such Written Instructions are received by the Custodian, whether by hand
delivery, telex 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
Authorized Person.
9. The Custodian shall maintain all records relating to its
activities and obligations under this Agreement consistent with the
provisions of the Investment Company Act of 1940, particularly Section 31
thereof and Rules 31a-1 and 31a-2 thereunder, and such records shall be
available to enable the Fund to report information required on Form N-1A,
N-SAR, applicable tax returns and any other law or administrative reporting
rules or procedures which may be applicable to the Fund. All records
maintained by the Custodian in connection with the performance of its duties
under this Agreement will remain the property of the Fund and in the event
of termination of this Agreement will be delivered to the Fund or to the
successor custodian.
10. 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 or the Depository and with such reports on its own
systems of internal accounting control as the Fund may reasonably request
from time to time.
11. The Fund, its successors and assigns, shall at all times
fully indemnify and save harmless the Custodian, and its successors and
assigns, from any liability or expense whatsoever, including attorney's
fees, which may arise in connection with this Agreement, except for the
failure of the Custodian to perform the things to be done by it under this
Agreement. The Custodian may, with respect to questions of law, 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.
ARTICLE IX
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. In the event such notice is given by the Fund, it
shall be accompanied by a copy of a resolution of the Trustees, certified by
the Secretary or any Assistant Secretary, electing to terminate this
Agreement and designating a successor custodian or custodians, each of which
shall be a bank or Fund company having not less than $100,000,000 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 Trustees, certified by the
Secretary or any Assistant Secretary, 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 Fund company having
not less than $100,000,000 aggregate capital, surplus, and undivided
profits. If the Fund fails to designate a successor custodian, or if the
Custodian shall fail to designate a successor custodian, 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 and moneys then owned by the
Fund be deemed to be its own custodian and the Custodian shalt thereby be
relieved of all duties and responsibilities pursuant to this Agreement.
2. 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 funds 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.
ARTICLE X
Miscellaneous
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Officers or Trustees of the Fund, setting forth the names and
the signatures of each Officer of the Fund and each Authorized Person. The
Fund agrees to furnish to the Custodian a new Certificate in similar form in
the event that any such present Authorized Person ceases to be an Authorized
Person or in the event that other or additional Authorized Persons 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 Authorized
Persons 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 611 Woodward Avenue, Detroit, Michigan 48226, 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 100 Renaissance Center, 25th Floor, Detroit, Michigan 48243, or at such
other place as the Fund 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 authorized and approved by a resolution of
the Trustees.
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 Trustees.
6. This Agreement shall be construed in accordance with the
laws of the State of Michigan.
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. The Declaration of Trust establishing Cranbrook Funds,
dated November 30, 1994, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of
the Commonwealth of Massachusetts, provides that the name "Cranbrook Funds"
refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, shareholder, officer,
employee or agent of Cranbrook Funds shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of said Cranbrook Funds, but the Trust Estate only shall be liable.
9. If any party responsible for supplying information to the
Bank fails to furnish records and/or data or such records or data are
illegible, incorrect or incomplete, the Bank will not be responsible for
inaccurate reports resulting therefrom.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective Officers, thereunto duly authorized, as
of the day and year first above written.
Attest: CRANBROOK FUNDS
By: /S/ CONRAD W. KOSKI
Attest: NBD BANK
/S/ TAMMIE D. POPLAR By: /S/ MICHAEL M. BARRY
<PAGE>
APPENDIX A
CERTIFICATE
The undersigned Trustee of Cranbrook Funds hereby certify that the
following persons are the Officers of the Fund and are Authorized Persons,
as defined in the foregoing Custodian Agreement:
Name (and title, if any) Signature
OFFICERS:
Conrad W. Koski /S/ CONRAD W. KOSKI
President
Charles M. Grimley /S/ CHARLES M. GRIMLEY
Treasurer/Secretary
AUTHORIZED PERSONS:
Wayne Wright /S/ WAYNE WRIGHT
James T. Foran /S/ JAMES T. FORAN
Kathryn Nurre /S/ K. NURRE
Christopher Caputo /S/ CHRISTOPHER CAPUTO
IN WITNESS WHEREOF we have set our hands.
Trustee
Trustee
<PAGE>
APPENDIX B
Fee schedule for the services provided by NBD Bank as Custodian to Cranbrook
Funds. Fees will be billed to the Fund on a monthly basis.
Basic Account Fee: $2,400 per annum ($200 per month).
Market Value Fee: $0.0001 per million dollars of assets
under custody, calculated at the end of
each month.
Transaction Fee: $20.00 per buy or sell processed through the
custodial system of the Custodian during each
month.
Such reasonable out-of-pocket expenses that are mutually agreeable among the
parties.
AGENCY AGREEMENT
This AGREEMENT is made as of the 15th day of December, 1994,
between FIRST OF MICHIGAN CORPORATION, a Delaware corporation ("FoM"),
having its principal office and place of business at 100 Renaissance Center,
26th Floor, Detroit, Michigan, and CRANBROOK FUNDS, a Massachusetts business
trust (the "Fund"), having its office at 100 Renaissance Center, 25th Floor,
Detroit, Michigan.
The Fund is registered with the Securities and Exchange Commission
(the "Commission") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and intends to
initially offer two series of its shares to be known as "Cranbrook Money
Market Fund" and "Cranbrook Treasury Fund" (the "Series"). FoM is
registered with the Commission as a transfer agent pursuant to Section 17A
of the Securities Exchange Act of 1934, as amended.
The parties hereto pursuant to the terms hereof enter into the
following Agreement:
ARTICLE I
Appointment As Agent
The Fund hereby appoints FoM to serve as transfer agent and
dividend disbursing agent for the Series and FoM agrees to provide such
services as provided herein. As transfer agent, FoM agrees to furnish to
each shareholder a statement which shows all activity in the shareholder's
account, including purchases, redemptions, and reinvestment of dividends,
since the last such statement, such statements to be mailed at such
intervals as may be reguested by the Fund: and on behalf of the Fund, to
forward any inguiries or correspondence from or with shareholders to such
persons as the Fund may designate from time to time. Further, FoM regularly
will furnish the Fund with current shareholder lists and information
necessary to keep the shares in balance with the Fund's records. FoM shall
provide such computer services as may be required to maintain a record of
the status of each shareholder account, including dividends accrued to such
account on a daily basis, and shall provide terminal facilities for
processing of shareholder purchase and redemption requests as well as
maintenance of customer data. The mailing of all financial statements,
statements, notices and prospectuses to shareholders is to be performed by
FoM, subject to reimbursement for out of pocket expenses, as provided in
Article II.
ARTICLE II
Fees for Services of the Agent
As compensation for all services rendered and to be rendered by FoM
pursuant to this Agreement, the Fund shall pay to FoM a monthly fee equal to
$0.7178 multiplied by the number of shareholder accounts on the date as of
which each monthly mailing of shareholder statements is to be made (plus
$0.7178 for each duplicate statement mailed); or if no such monthly mailing
is to be made, as of the last day of each calendar month. The Fund will
reimburse FoM for any direct out-of-pocket expenses for forms and mailing
costs used in performing its functions, except that customary out-of-pocket
expenses (including postage) incurred in connection with the periodic
mailing of shareholder account statements on a basis no more frequently than
once per month shall be borne by FoM and not reimbursed by the Fund.
ARTICLE III
Measure of Conduct of Agent
FoM shall use its best judgment and knowledge in rendering the
services to be rendered by it hereunder, but shall incur no liability for
services rendered, nor for instructions or recommendations given or acts or
failure to act hereunder, except for willful misfeasance, bad faith and
gross negligence in the performance of such services, or reckless disregard
of its obligations.
ARTICLE IV
Amendment and Termination of Agreement
This Agreement shall commence on the date first above written and
shall continue until terminated as hereafter provided, and may be modified
or amended from time to time by mutual agreement between the parties hereto.
This Agreement may be terminated at any time by ninety (90) days' written
notice given by one party to the other.
ARTICLE V
Specific Provisions Concerning
FoM Acting as Transfer Agent
Section 1. Recording of Shares. FoM, as Transfer Agent, is
authorized, empowered and directed to record units of beneficial interest of
the Fund ("shares") in relation to which FoM has been appointed, namely:
shares of original issue of each Series when authorized by resolution of the
shareholders and/or Trustees of the Fund, in such names and for such number
of shares as shall have been directed by the Fund.
The recording of ownership of shares of the Fund may be integrated
with FoM's accounting and record keeping systems in any manner deemed
appropriate by FoM, provided that any such system shall be capable of
accurate and timely recording of ownership of Fund shares; and provided
further that notwithstanding such integration, each listing of ownership of
Fund shares so recorded pursuant to any integrated system shall constitute a
register of ownership of Fund shares.
Upon receipt of a purchase order for the purchase of shares and
sufficient information to enable FoM to establish a shareholder account, and
after confirmation of receipt or crediting of Federal funds for the order
from NBD Bank, N.A., as the Fund's Custodian (the "Custodian"), FoM shall
issue and credit the account of the shareholder with shares in the manner
described in the Fund's then current Prospectus describing such shares.
Upon receipt of a redemption order, FoM shall redeem the number of shares
indicated thereon from the redeeming shareholders account and receive from
the Custodian and disburse to the redeeming shareholder the redemption
proceeds therefor, or arrange for direct payment of redemption proceeds to
such shareholder by the Custodian, in accordance with such procedures and
controls as are mutually agreed upon from time to time by and among the
Fund, FoM, and the Custodian.
Section 2. Refusal or Delay of Transfers; Guaranties; Proof Of
Ownership: Particular Action or Instructions. FoM as Transfer Agent may
refuse or delay to record an issuance or redemption of shares unless and
until it shall have been satisfied in its sole discretion that the requested
issuance or redemption is authorized, in which case it may require such
evidence and/or guaranty as shall be satisfactory to it until it shall have
been satisfied in its discretion as to the power, authority and capacity of
any person whose act may be relied upon to effect the issuance or redemption
requested.
FoM shall incur no liability for the refusal in good faith to
record an issuance or redemption which it, in its judgment, deems improper
or unauthorized.
FoM as Transfer Agent is authorized to take or suffer any action in
accordance with instructions in writing signed by an officer of the Fund in
recording shares, notwithstanding any irregularity or lack of power,
authority or capacity of some party to the transaction, and without any
further inquiry concerning or examination into any facts, acts or
instruments. FoM as Transfer Agent, upon receipt of instructions in writing
from an officer of the Fund, will address and mail to the shareholders such
notices, proxy material, financial statements, and other printed matter as
the Fund may desire to send.
FoM as Transfer Agent shall make available to the Fund, and to such
persons responsible for administration of Fund affairs as the Fund may
designate, computerized access to the current list of the registered holders
of shares as shown by the Transfer Agent's records.
In case of any demand upon FoM for inspection of the records of
ownership of shares of the Fund, FoM shall endeavor to notify the Fund and
to secure instructions from an officer of the Fund to permit or to refuse to
permit such inspection. In the absence of instructions to the contrary, FoM
will be authorized to exhibit such records to any duly accredited
representative of any Federal or State governmental authority upon request
of such representative, or pursuant to order of a court. FoM reserves the
right, however, to exhibit such records to any person in case it is advised
by its legal counsel that it may be held liable for the failure to exhibit
such records to such person.
ARTICLE VI
Specific Provisions Concerning FoM
Acting as Dividend Disbursing Agent
FoM will act as Dividend Disbursing Agent for the Fund. As
Dividend Disbursing Agent it will, as agent for each shareholder, reinvest
all dividends and distributions for the shareholder in additional full and
fractional shares of the applicable series, or, if a proper election has
been filed by the shareholder, shall distribute such distributions and
dividends, on the date upon which the dividend or distribution is to be
paid, and of the record date as of which the list is to be taken of persons
entitled to receive such dividend or distribution. The Fund shall cause to
be deposited with FoM prior to 12:00 Noon of the day on which the dividend
or distribution is to be paid the amount of money necessary for the payment
of such dividend or distribution, without which deposit FoM will not be
under any obligation to distribute such dividend or distribution.
Dividend checks shall be of a form and size compatible for use on
the mechanical equipment of FoM. A sufficient supply of such checks must be
in the possession of FoM on the record date. Any portion of monies
deposited with FoM for the payment of a dividend or distribution, which
shall remain unclaimed by the person or persons entitled thereto at the end
of three years from the payment date of such dividend or distribution, shall
be returned to the Fund, to be held by the Fund for the same purpose as if
held by FoM, and thereafter any person entitled to payment out of said fund
shall look only to the Fund for payment thereof, although such person say
have in his possession the dividend check drawn by FoM as Transfer Agent and
Dividend Disbursing Agent for the amount payable. If a shareholder shall
report to FoM that any such check so mailed has been lost, stolen or
destroyed and that he has not received the proceeds thereof and if the check
has not been paid, then, upon execution of an indemnity agreement in form
satisfactory to FoM and the Fund, FoM may stop payment upon such check and
may issue and deliver to such shareholder a new check for like amount. Such
indemnity agreement may be in the form of an endorsement upon the new check.
FoM may defer the issue of the new check for a period of 30 days or more.
FoM shall prepare and file with the Internal Revenue Service and other
appropriate taxing authorities, and address and mail to shareholders or
their authorized representatives such returns and information relating to
dividends and distributions paid by the Fund as are required to be so
prepared, filed and mailed by applicable laws, rules and regulations, or
such substitute form of notice as may from time to time be permitted or
required by the Internal Revenue Service or other appropriate taxing
authorities. On behalf of the Fund, FoM shall pay on a timely basis to the
appropriate Federal authorities any taxes required by applicable Federal tax
laws to be withheld by the Fund on dividends and distributions paid by the
Fund.
ARTICLE VII
General
FoM shall be protected in acting upon any paper or document
believed by it to be genuine and to have been signed by the proper person or
persons and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund.
FoM represents that it has and is currently registered as a
transfer agent with the Commission and has complied with the regulations of
the appropriate federal agency for registered transfer agents. FoM agrees
that it will continue to be registered as a transfer agent with the
appropriate federal agency for the duration of this Agreement. Should FoM
fail to be registered with the appropriate federal agency as a transfer
agent at any time during this Agreement, the Fund may, on written notice to
FoM, immediately terminate this Agreement.
The Fund assumes full responsibility and will indemnify FoM and
save it harmless from and against any and all actions or suits, whether
groundless or otherwise, and from and against any and all losses, damages,
costs, chargos, counsel fees, payments, expenses and liabilities arising out
of the agency relationship, where FoM has acted in good faith and with due
diLigence and without negligence. FoM shall not be under any obligation to
prosecute any action or suit in respect of the agency relationship which, in
its sole judgment, may involve it in expense or liability. In any action or
suit the Fund shall, as often as requested, furnish FoM with satisfactory
indemnity against any expense or liability growing out of such action or
suit by or against FoM in its agency capacity.
Unless othervise expressly limited by the resolution of appointment
or by subsequent Fund action, the appointment of FoM as Transfer Agent and
Dividend Disbursing Agent will be construed to cover the full amount of each
Series of authorized shares of the Fund as the same shall from time to time
be constituted.
FoM shall not register or record any shares of the Fund in excess
of the number of shares of the same class or series which the Fund has
theretofore authorized FoM so to register and record.
FoM shall maintain records for each Series showing for each
shareholder's account such historical information and shareholder data as
may be requested by the Fund.
FoM shall furnish the Fund state by state registration reports,
such periodic and special reports as the Fund may reasonably request, and
such other information, including shareholder lists and statistical
information concerning accounts, as may be agreed upon from time to time
between the Fund and FoM.
Any such records required to be maintained by Rule 31a-1 under the
1940 Act shall be preserved for the periods prescribed in Rule 31a-2.
Records may be inspected by the Fund at reasonable times. Records and
documents shall be retained six years from the year of creation, during the
first two of which such documents will be in readily accessible form. At
the end of the six year period, such records and documents will either be
turned over to the Fund or destroyed i,n accordance with the Funds
authorization.
In the event of equipment failures beyond FoM's control, FoM shall,
at no additional expense to the Fund, take reasonable steps to minimize
service interruptions but shall have no liability with respect thereto. FoM
shall enter into and shall maintain in effect with appropriate parties one
or more agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
At any time FoM may apply to any officer of the Fund for
instructions, and may consult with legal counsel for the Fund or its own
legal counsel, at the expense of the Fund, in respect of any matter arising
in connection with the agency, and it shall not be liable for any action
taken or not taken or suffered by it in good faith in accordance with such
instructions or with the opinion of counsel. However, nothing in this
paragraph shall be construed as imposing upon FoM any obligation (i) to seek
such directions or advice, or (ii) to act in accordance with such directions
or advice when received, unless, under the terms of another provision of
this Agreement, the same is a condition to FoM's properly taking or omitting
to take such action. The Fund will hold FoM harmless against the claim or
demand of any person as a result of action taken or not taken upon
instructions from the Fund.
The Declaration of Trust establishing the Fund, dated November 30,
1994, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "Cranbrook Funds"
refers to the Trustees under the Declaration, collectively as Trustees, but
not as individuals or personally; and no Trustee, shareholder, officer,
employee or agent of Cranbrook Funds shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of said Cranbrook Funds, but the Fund Estate only shall be liable.
This Agreement shall be governed by the laws of the State of
Michigan, without reference to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on behalf of each of them by their duly authorized officers
the date and year first above written.
FIRST OF MICHIGAN CORPORATION
By: /S/ CHARLES M. GRIMLEY
Its: VICE PRESIDENT
CRANBROOK FUNDS
By: /S/ CONRAD W. KOSKI
Its: PRESIDENT
26 December 1995
Cranbrook Funds
100 Renaissance Center, 25th Floor
Detroit, Michigan 48243
Re: Post-Effective Amendment No. 2 to Form N-1A;
Amendment No. 4 to 1940 Act Registration
Gentlemen:
Cranbrook Funds, a Massachusetts business trust (the "Trust"), has
registered under the Securities Act of 1933, as amended (the "1933 Act"), an
indefinite number of shares of beneficial interest in two series (the
"Funds"), as permitted by Rule 24f-2 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is proposing to file a
Post-Effective Amendment (the "Post-Effective Amendment") to the Trust's
Registration Statement previously filed under the 1933 Act.
We have served as counsel to the Trust in connection with such
registration of shares, and in such capacity we have reviewed the Trust's
Declaration of Trust, its Bylaws, the records of action by its Board of
Trustees, the proposed Post-Effective Amendment and such other information
as we have deemed necessary for purposes of the opinions expressed herein.
Based upon the foregoing, it is our opinion that the indefinite
number of shares of the Funds to be registered and sold have been duly
authorized and, when sold and paid for as contemplated by the Post-Effective
Amendment, will be validly issued, fully paid and non-assessable shares of
each relevant Fund, as a series of the Trust.
We consent to the inclusion of this opinion as an exhibit to the
Post-Effective Amendment and to the reference therein to our firm under the
caption "Counsel".
Very truly yours,
DYKEMA GOSSETT PLLC
By: /S/ PAUL R. RENTENBACH
Paul R. Rentenbach
A member of the Firm
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Financial
Highlighs" in the Prospectus and "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information and to the
incorporation by reference in this Post-Effective Amendment No. 2 to
Registration Statement No. 33-87488, dated December 22, 1995, of Cranbrook
Funds of our report dated December 1, 1995, included in the Annual report to
Shareholders of Cranbrook Funds.
/S/ ERNST & YOUNG LLP
Detroit, Michigan
December 20, 1995
PURCHASE AGREEMENT
Cranbrook Funds, a diversified, open-end management investment
company (the "Fund"), and First of Michigan Corporation ("FOM"), a Michigan
corporation, intending to be legally bound, hereby agree as follows:
1. FOM has previously purchased 10,000 shares of common stock
of the Fund and paid to the Fund the sum of $10,000 for such
shares. In order to provide the Fund with the initial capital
required under Section 14 of the Invesment Company Act, the Fund
hereby sells to FOM and FOM hereby purchases, 90,000 shares of
common stock of the Fund (the "Shares") at $1.00 per share. The
Fund hereby acknowledges receipt from FOM of $90,000 in full
payment for the Shares.
2. FOM represents and warrants to the Fund that the Shares are
being acquired for investment and not with a view to distribution
thereof and that FOM has no present intention to redeem or dispose
of any of the Shares.
3. FOM hereby agrees that it will not redeem any of the Shares
or the shares of the Fund previously purchased prior to the time
that the Trust has completed the amortization of its organizational
expenses. In the event that the Fund liquidates before the
deferred organizational expenses are fully amortized, then the
Shares shall bear their proportionate share of such unamortized
organization expenses.
IN WITNESS WHEREOF, the parties have executed this agreement on
December 15, 1994.
CRANBROOK FUNDS
By: /S/ CONRAD W. KOSKI
Its: PRESIDENT
FIRST OF MICHIGAN CORPORATION
By: /S/ WAYNE WRIGHT
Its: VICE PRESIDENT
CRANBROOK FUNDS
PLAN OF DISTRIBUTION
Pursuant to Rule 12b-1 Under the 1940 Act
This is the written Plan of Distribution (the "Plan") of Cranbrook
Funds (the "Fund"), adopted by the Trustees and shareholders of the Fund
pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of 1940
(the "1940 Act").
Background
The Fund is a no load, open-end, diversified management investment
company, organized under the laws of Massachusetts pursuant to a Declaration
of Trust dated November 30, 1994. The Fund is authorized by the Declaration
of Trust to issue its shares of beneficial interest ("shares") in separate
series, each series representing a distinct portfolio of investments for the
benefit of the holders of shares in that series. The Fund has authorized
two series of shares, the Cranbrook Money Market Fund and the Cranbrook
Treasury Fund (the "Portfolios"). Each Portfolio has as its objective the
providing of a high level of current income consistent with the preservation
of capital and liquidity. Permitted investments for each Portfolio include
securities issued by the U.S. Treasury, and, as to the Cranbrook Money
Market Fund only, other securities of the U.S. Government and its agencies
and instrumentalities, and bank and corporate debt obligations meeting
specified investment quality criteria.
On or about December 16, 1994 the Fund intends to file a
registration statement on Form N-1A with the Securities and Exchange
Commission, and intends to take further action to qualify the shares of each
series for sale to the public in various states. Each Portfolio is a "money
market fund" as that term is commonly used in the financial marketplace, and
as such will be in competition with more than 400 funds having comparable
investment objectives. The performance of each Portfolio and the benefits
derived by the holders of shares of each Portfolio will be directly related
to the yield per share produced by each Portfolio. Certain costs of the
Fund are expected not to vary substantially with the size of the Portfolios.
Such costs include the maintenance of computerized systems for the Fund's
record keeping of investment securities and shareholder status, legal and
accounting fees, and expenses in connection with filing various reports with
Federal and state authorities. Other costs, such as the fees contemplated
by the Advisory Agreement, are based on predetermined percentages of the
Fund's average daily net assets, which percentages decrease as the Fund's
net assets increase. This method of compensation is commonly used in money
market funds with which the Fund will be in competition. The performance of
the Fund and the return on the investment to shareholders will depend to
some extent on the number of Portfolio shares outstanding, since the more
shares outstanding the less will be each shareholder's portion of the fixed
costs being incurred by the Fund.
Method of Distributing Shares
The distribution of shares of each Portfolio shall be the exclusive
responsibility of First of Michigan Corporation as provided in the
Administration and Distribution Agreement (the "Agreement"), a copy of which
is attached hereto. In addition to payments made under the Agreement, some
part of which may be deemed to be allocable to services related to
distribution of Fund shares, the Fund is expected to incur other expenses
which may be deemed to relate to the distribution of its shares. While
these costs are not primarily intended to result in the sale of shares of
the Fund, it is recognized that the Rule is subject to a broad
interpretation which could include such coats within its coverage. To the
extent that such costs are deemed to be within scope of the Rule, it is the
intention of the Fund that they be included as being authorized by this
Plan.
The Administration and Distribution Agreement
The Trustees have approved the Agreement with First of Michigan
Corporation. Under the Agreement, First of Michigan Corporation is
appointed administrator of the Fund, and as such is responsible for the
day-to-day operation of the Fund, including receiving and processing
purchase and redemption transactions for the Fund's shares. First of
Michigan Corporation is also appointed distributor of shares of each
Portfolio, and as such is the exclusive distributor and representative of
the Fund in the distribution of such shares to investors. First of Michigan
Corporation is authorized to enter into selected dealer agreements with
securities dealers of its choice for the sale of shares, provided that the
form of dealer agreement shall have been previously approved by the Fund.
The Agreement provides that:
(a) It will continue in effect for a period of more
than one year from the date of its execution only so long as such
continuance is specifically approved at least annually by a vote of
the Trustees, and of the Trustees who are not interested persons of
the Fund and have no direct or indirect Financial interest in the
operation of the Plan or in any agreements related to this Plan
("Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such continuance.
(b) First of Michigan Corporation shall provide the
Trustees for their review at least quarterly a written report of
the amounts expended under the Agreement (whether or not related to
the distribution of Fund shares) and of other amounts expended by
the Fund as authorized by this Plan, and the purpose for which such
expenditures were made.
(c) It may be terminated at any time, without the
payment of any penalty, by a vote of a majority of the Independent
Trustees, or by a vote of a majority of the outstanding voting
securities of the Fund, on sixty days' written notice to First of
Michigan Corporation.
(d) It shall automatically terminate in the event of
its assignment.
Neither this Plan nor the Agreement contemplate any restriction on
the activities of First of Michigan Corporation in connection with its
distributional activities, and First of Michigan Corporation is authorized
to conduct any lawful activity in connection with the selling of shares of
the Fund. First of Michigan Corporation has advised the Fund that a portion
of its activities under the Agreement will consist of accepting orders for
Fund shares, servicing existing shareholders' accounts, and other activities
which are not commonly regarded as distributional activities. It is also
expected, however, that First of Michigan Corporation will engage in the
type of distributional activities contemplated by the Rule. First of
Michigan Corporation's fee is based on a percentage of the average daily net
assets of the Fund, and no allocation of such fee is made between
distributional and non-distributional activities. The Trustees have
concluded that it is impractical to determine what portion of the fees to be
paid to First of Michigan Corporation will be for activity which comes
within the ambit of the Rule and what portion of the fee will not be for
such activities.
Distributional Expenditures Authorized
The Fund is permitted by the Rule to engage "directly or indirectly
in financing any activity which is primarily intended to result in the sale
of shares issued by [the Fund], including, but not necessarily 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" (herein referred to as
"distributional expenses"), provided, inter alia, that payments are made
pursuant to a written plan describing all material aspects of the proposed
financing of the distribution, and provided all agreements relating to the
implementation of this Plan are in writing.
The Trustees have concluded, in the exercise of their reasonable
business judgment and in light of their fiduciary duties under state law and
Sections 36(a) and (b) of the Act, that the implementation of this Plan is
reasonably likely to benefit the Fund and its shareholders.
To the extent that any of the items listed below may be deemed to
be a payment for the distribution of Fund shares as contemplated by the
Rule, such payments are authorized under the Plan:
1. All fees of First of Michigan Corporation pursuant
to the Agreement.
2. The cost of preparation, printing and mailing of
all prospectuses.
3. The cost of preparation, printing and mailing of
any proxy statements and proxies.
4. Any legal and accounting fees related to the
preparation of any report, prospectus, proxy or proxy statement.
5. Fees and expenses incurred in connection with
qualification of Fund shares in any jurisdiction.
6. Any fees and expenses in connection with
registration of Fund shares under the Securities Act of 1933 and
the 1940 Act, including any fees in connection with applications
for orders or exemptions.
7. Fees for membership in any trade or other
association, and expenses incurred in connection with attendance at
meetings or other activities.
8. Any costs associated with the preparation or
mailing of confirmations of shares issued or redeemed, and reports
to shareholders of the status of their shareholdings.
Effectiveness and Continuation of the Plan
This Plan shall become effective upon approval by a vote of the
Trustees of the Fund and of the Independent Trustees cast in person at a
meeting called for the purpose of voting on the Plan, and by at least a
majority of the then outstanding shares of the Fund. Thereafter, this Plan
shall, unless terminated as hereafter provided, continue in effect for one
year from the date of its effectiveness and from year to year thereafter
only so long as such continuance is specifically approved at least annually
by the Trustees, and by the Independent Trustees, in person at a meeting
called for the purpose of voting on such continuance.
Termination
This Plan may be terminated at any time by a vote of the majority
of the Independent Trustees or by a vote of the holders of a majority of the
outstanding voting shares of the Fund.
Amendment
Any amendment to this Plan shall be effective only if it is
approved in accordance with the same requirements applicable to the initial
effectiveness of this Plan.
Independent Trustees
While this Plan is in effect, the selection and nomination of
Independent Trustees shall be committed to the discretion of such
Independent Trustees.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Cranbrook Money Market Fund
<MULTIPLIER> 1
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> OCT-31-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 410,765,285
<INVESTMENTS-AT-VALUE> 411,416,672
<RECEIVABLES> 1,884,118
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<DISTRIBUTIONS-OF-INCOME> 13,509,443
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<NUMBER-OF-SHARES-SOLD> 1,133,540,267
<NUMBER-OF-SHARES-REDEEMED> 734,034,037
<SHARES-REINVESTED> 13,312,245
<NET-CHANGE-IN-ASSETS> 412,818,475
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 570,788
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,739,436
<AVERAGE-NET-ASSETS> 377,896,627
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .0357
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .0357
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Cranbrook Treasury Fund
<MULTIPLIER> 1
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> OCT-31-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 57,642,196
<INVESTMENTS-AT-VALUE> 57,918,218
<RECEIVABLES> 103,674
<ASSETS-OTHER> 16,690
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,038,582
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 75,250
<TOTAL-LIABILITIES> 75,250
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,166,999
<SHARES-COMMON-STOCK> 57,963,332
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 57,963,332
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,321,070
<OTHER-INCOME> 0
<EXPENSES-NET> 274,203
<NET-INVESTMENT-INCOME> 2,046,867
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,046,867
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 178,869,473
<NUMBER-OF-SHARES-REDEEMED> 122,947,831
<SHARES-REINVESTED> 2,041,690
<NET-CHANGE-IN-ASSETS> 57,963,332
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 274,203
<AVERAGE-NET-ASSETS> 58,997,349
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .0347
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</TABLE>
