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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FILE NO. 33- 89090
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FILE NO. 811- 8966
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. ______ [ ]
POST EFFECTIVE AMENDMENT NO. 2 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO 4 [X]
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FOCUS TRUST, INC.
(Exact name of Registrant as Specified in Charter)
Two Penn Center Plaza
Suite 1810
Philadelphia, PA 19102 19102
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (215) 665-9644
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Robert G. Hagstrom, Jr., CFA
Lloyd, Leith & Sawin, Inc.
Two Penn Center Plaza, Suite 1810
Philadelphia, PA 19102
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(Name and Address of Agent for Service)
COPIES TO:
Allan S. Mostoff, Esq. Joseph M. O'Donnell, Esq.
Dechert Price & Rhoads Fund/Plan Services, Inc.
1500 K Street, N.W. 2 West Elm Street
Washington, DC 20005-1208 Conshohocken, Pennsylvania 19428
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:
[X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485.
[ ] ON (DATE), PURSUANT TO PARAGRAPH (B).
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[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1).
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485.
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[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II).
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(II) OF RULE 485.
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IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
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Registrant has previously registered an indefinite number of shares of its
securities under the Securities Act of 1933 pursuant to Rule 24f-2 of the
Investment Company Act of 1940, as amended. Registrant filed a Notice pursuant
to Rule 24f-2 for the fiscal year ended December 31, 1995 on February 27, 1996.
As filed with the U.S. Securities and Exchange TOTAL PAGES: 146
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Commission on April 29, 1996 INDEX TO EXHIBITS, PAGE: 43
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FOCUS TRUST, INC.
Cross Reference Sheet Pursuant to Rule 481a
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FORM N-1A ITEM CAPTION IN PROSPECTUS
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PART A INFORMATION REQUIRED IN A PROSPECTUS
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1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objective and Policies; Risk Factors;
Investment Practices
5. Management of the Fund Management of the Fund
5A. Management's Discussion of Fund Performance Included in Registrant's Annual Report to Shareholder's
6. Capital Stock and Other Securities General Information; Dividends and Taxes; Net Asset Value
7. Purchase of Securities Being Offered How to Purchase Shares; Shareholder Services
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings *
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PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Covered in Part A
13. Investment Objectives and Policies Investment Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. Management of Registrant Covered in Part A
15. Control Persons and Principal Holders of Principal Shareholders
Securities
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation Portfolio Transactions and Brokerage;
18. Capital Stock and Other Securities Other Information
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PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
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19. Purchase, Redemption and Pricing of Purchases; Redemptions
Securities Being Offered
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
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PART C OTHER INFORMATION
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Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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* Item inapplicable at this time or answer negative.
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FOCUS TRUST, INC. PROSPECTUS
TWO PENN CENTER PLAZA, SUITE 1810 PHILADELPHIA, PA 19102 APRIL 29, 1996
FOCUS TRUST, INC.SM
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Focus Trust (the "Fund") is a no-load, non-diversified open-end management
investment company, commonly known as a mutual fund. The Fund seeks to attain
maximum long-term capital appreciation with minimum risk to principal by
investing primarily in common stocks and securities convertible into or
exchangeable for common stocks. The selection of common stocks will be made
through an investment strategy referred to as "Focus Investing". See page 5.
The Fund is the initial series of shares of Focus Trust, Inc., a Maryland
corporation. Lloyd, Leith & Sawin, Inc. serves as the investment adviser to
the Fund and manages the investments of the Fund according to the investment
objectives stated in this Prospectus.
You can invest, reinvest or redeem your shares directly from the Fund at any
time without paying any sales charge. If you redeem your shares within two
years after purchase, however, your redemption will be subject to a 1.00%
redemption fee. The effect of this fee is that you redeem your shares at 99%
of their net asset value. This redemption fee is not a deferred sales load and
the proceeds of the adjustment will be retained by the Fund.
The initial minimum investment in the Fund is $1,000. Subsequent investments
will be accepted in amounts not less than $100.
This Prospectus provides the information which you require to make an informed
investment decision about the Fund. Read it carefully before you invest or
send money and retain it for future reference. A Statement of Additional
Information, dated April 29, 1996, provides further information about this
Fund and has also been filed with the U.S. Securities and Exchange Commission.
It is incorporated in its entirety into this Prospectus by reference and is
available without charge by calling (800) 665-2550 or by writing to the Fund
at the address noted above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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TABLE OF CONTENTS PAGE
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Expense Summary............................ 3
Financial Highlights....................... 4
Investment Objective....................... 5
Theory of Focus Investing.................. 5
Investment Policies........................ 5
Investment Adviser--Shareholder Principles. 7
Risk Factors............................... 8
Investment Practices and Risks............. 8
Management of the Fund..................... 10
How to Purchase Shares..................... 13
How to Redeem Shares....................... 14
Shareholder Services....................... 16
Net Asset Value............................ 16
Dividends and Taxes........................ 17
Performance Information.................... 18
General Information........................ 19
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UNDERWRITER: ADVISER:
Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428 (800)
665-2550
Lloyd, Leith & Sawin, Inc. Two Penn Center Plaza, Suite 1810 Philadelphia, PA
19102 (215) 665-9644
This Prospectus is not an offering of the securities herein described in any
jurisdiction or to any person to whom it is unlawful for the Fund to make such
an offer or solicitation. No sales representative, dealer, or other person is
authorized to give any information or make any representation other than those
contained in this Prospectus.
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EXPENSE SUMMARY
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SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases.............................. None
Maximum Sales Load Imposed on Reinvested Dividends................... None
Contingent Deferred Sales Charge..................................... None
Maximum Redemption Fee (as a percentage of amount initially
invested)............................................................ 1.00%*
* The Fund charges a redemption fee of 1.00% on shares of the Fund that are
redeemed within two years of purchase. For more information, see "Redemption
Fee." If you want to redeem shares by wire transfer, the Fund's transfer
agent charges a fee (currently $9.00) for each wire redemption. Purchases
and redemptions may also be made through broker-dealers and others who may
charge a commission or other transaction fee for their services.
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees after expense reimbursement*......................... 0.00%
12b-1 Fees........................................................... None
Other Expenses after expense reimbursement*.......................... 2.00%
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Total Fund Operating Expenses after expense reimbursement*........... 2.00%
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* Pursuant to the terms of the investment advisory agreement between the
Adviser and the Fund, the Adviser is entitled to receive a monthly fee at
an annual rate of 0.70% of the Fund's average daily net assets. The above
table reflects the Adviser's voluntary undertaking, effective September 1,
1995, to waive its fees and reimburse expenses so that the Fund's total
annual operating expenses will not exceed 2.00%. Prior to September 1,
1995, the Adviser had voluntarily agreed to limit total operating expenses
to 1.75% of total net assets. Had the Adviser not voluntarily agreed to
this waiver, the total fund operating expenses for the period April 17,
1995 (commencement of operations) through December 31, 1995, would have
been 7.89%. Such fee reimbursement may be terminated at any time at the
discretion of the Adviser upon prior notice to shareholders.
EXAMPLE
The following example illustrates the expenses that you would pay on a
$1,000 investment assuming a 5% annual return, reinvestment of all
dividends and distributions and redemption at the end of each time
period.
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1 YEAR 3 YEARS
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$30 $63
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The purpose of this table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or
indirectly in connection with your investment in the Fund. The
assumption in this example of a 5% annual return is required by
regulations of the U.S. Securities and Exchange Commission applicable to
all mutual funds.
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATE OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
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FINANCIAL HIGHLIGHTS
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The following financial highlights for the fiscal year ended December 31, 1995
were derived from the Fund's financial statements dated December 31, 1995,
which were audited by Coopers & Lybrand, L.L.P., independent auditors, whose
unqualified report thereon is incorporated by reference into the Statement of
Additional Information. The Fund's Statement of Additional Information may be
obtained without charge and is incorporated by reference into this Prospectus.
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
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YEAR ENDED
DECEMBER 31, 1995*
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Net Asset Value, beginning of period........................ $10.00
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INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................... 0.06
Net realized and unrealized gain on investments.......... 1.17
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Total from investment operations....................... 1.23
Dividend from net investment income...................... (0.06)
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Net Asset Value, end of period.............................. $11.17
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TOTAL RETURN (2)............................................ 12.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)..................... $5,061
Ratio of expenses to average net assets before
reimbursement of expenses by Adviser (1)................ 7.89%
Ratio of expenses to average net assets after
reimbursement of expenses by
Adviser (1)............................................. 1.92%
Ratio of net investment income to average net assets
before reimbursement of expenses by Adviser (1)......... (4.78%)
Ratio of net investment income to average net assets
after reimbursement of expenses by Adviser (1).......... 1.19%
Portfolio turnover (2)................................... 0.00%
</TABLE>
(1) Annualized
(2) Not Annualized
* The Fund commenced investment operations on April 17, 1995.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is considered a fundamental policy and,
therefore, may not be changed without a vote of the holders of the majority of
the voting securities of the Fund. Unless otherwise stated in this Prospectus,
the Fund's investment policies are not fundamental and may be changed without
shareholder approval. While an investment policy or restriction may be changed
by the Directors of the Fund without shareholder approval, the Fund intends to
notify shareholders before making any material change to an investment policy
or restriction. Additional investment policies and restrictions are described
in the Statement of Additional Information.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek maximum long-term capital
appreciation with minimum long-term risk to principal by investing primarily
in common stocks, preferred stocks and securities convertible into or
exchangeable for common stocks. Any income realized will be incidental to the
Fund's objective. The selection of common stocks will be made through an
investment strategy referred to as "focus investing", as described below.
There can be no assurance that the Fund's investment objective will be
achieved.
THEORY OF FOCUS INVESTING
Lloyd, Leith & Sawin, Inc. (the "Adviser") identifies eligible portfolio
securities according to a methodology which it terms as "focus investing."
Focus investing, as explained by the Adviser, is an investment strategy
whereby companies (or businesses) are identified and selected as eligible for
investment by the examination of all fundamental quantitative and qualitative
aspects of the company, the company's management and financial position as
compared to its stock price. This is a bottom up, fundamental, method of
analysis as opposed to technical analysis. Technical analysis often depends on
the identification of market cycles and timing techniques.
If a particular stock is chosen for investment, focus investors then become
long-term owners of that business. Focus investing is based on the principle
that a shareholder's return from owning a stock is ultimately determined by
the fundamental economics of the underlying business. Of course, investment
results either can be enhanced or diminished by changes in valuation. The
Adviser theorizes that in shorter periods, changes in valuation tend to
dominate investment returns, but as the time horizon lengthens, the economic
returns of the business increasingly dominate the investment return.
A focus investor, according to the Adviser, should disregard short-term
nuances and instead focus on the long-term economic progress of the
investment. The economic progress of a business is determined by its earnings
power. The return on shareholder's capital is one measure that distinguishes
the operating earnings power of a business.
The Adviser believes that an outstanding business can be identified by focus-
ing on a company's economic competitive position, its financial strength, and
the capabilities of the company's management. There are certain business, fi-
nancial, and management tenets that encapsulate an outstanding business such
as those with favorable long-term prospects that are operated by honest and
competent people and importantly, are available at attractive prices. Focus
investors expend much energy determining the difference between a company's
intrinsic value and its current price in the marketplace.
The Adviser selects common stocks to be held by the Fund according to focus
investing. Such securities will be selected and held for the long-term in that
the Adviser is less concerned with short-term price fluctuations and instead
seeks to achieve minimal risk to principal together with long-term capital ap-
preciation. The Adviser ignores technical stock market studies and expends no
energy attempting to forecast the general direction of the stock market.
INVESTMENT POLICIES
The Adviser will seek capital appreciation primarily by purchasing common
stocks through "focus investing," as described above. The Adviser may also
purchase preferred stocks and securities convertible into common stocks, such
as convertible
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bonds and debentures. The securities in which the Fund invests generally will
be listed on a national stock exchange or traded on the over-the-counter
market. However, the Fund may invest up to 10% of its total assets in
securities for which there is no ready market, known as illiquid securities.
Security selection for the Fund is based on the Adviser's analysis of a
company's financial characteristics, economic competitive position and an as-
sessment of the quality and capability of the company's management. Companies
acceptable for investment by the Fund typically possess, in the opinion of the
Adviser, favorable long-term prospects, shareholder-oriented management, and
strong financial positions including high return on capital, healthy balance
sheets, predictability in the growth of earnings, and cash generating abili-
ties in excess of the company's operating needs. The Fund will only invest in
those companies which, in the Adviser's opinion, are undervalued at the time
of purchase. See "Theory of Focus Investing."
While it is the Fund's policy to remain substantially invested in common stock
or securities convertible into common stocks, it may invest in non-convertible
preferred stock and non-convertible debt securities. The Fund's investment in
debt securities will be made only in those considered to be investment grade.
Investment grade securities include those securities which are rated in one of
the four highest rating categories by a nationally recognized statistical
rating organization ("NRSRO") at the time of purchase, or, if unrated, are
determined to be of comparable quality by the Adviser. Securities rated in the
fourth highest category (e.g., BBB by Standard & Poor's Rating Group or Baa by
Moody's Investors Service, Inc.), although considered investment grade, may
have speculative characteristics and may be subject to greater fluctuations in
value than higher rated securities. In the event a security held by the Fund
is downgraded below investment grade, the Adviser shall promptly reassess the
risks involved and take such actions as it determines will be in the best
interests of the Fund and its shareholders.
Under normal circumstances, the Adviser expects to make concentrated
investments in a limited number of companies. When purchasing portfolio
securities for the Fund, the Adviser's philosophy is a buy and hold strategy
versus buying for short-term trading. Accordingly, the portfolio turnover rate
is not expected to exceed 25%. See "Portfolio Turnover Rate" under "Investment
Practices and Risks."
While the Fund has no present intention to invest in foreign securities, the
Fund may invest up to 15% of its total assets in foreign securities, either
directly or indirectly through the purchase of American Depository Receipts
("ADRs") or European Depository Receipts ("EDRs"). See "Risk Factors" and "In-
vestment Practices and Risks".
When, in the opinion of the Adviser, a temporary defensive position is
warranted, the Fund is permitted to temporarily invest up to 100% of its
assets in short-term U.S. Government securities, bank certificates of deposit,
prime commercial paper and other high-quality short-term fixed income
securities and repurchase agreements with respect to the foregoing securities.
High quality securities are securities that have received a rating from at
least one NRSRO in one of the two highest rating categories or, if not rated
by any NRSRO, such as U.S. Government securities, have been determined by the
Adviser to be of comparable quality. In addition, the Fund may hold cash
reserves, when necessary, for anticipated securities purchases and redemptions
or temporarily during periods when prevailing market conditions call for a
defensive posture. The Fund's investment objective may not be achieved at such
times when a temporary defensive position is taken.
The Fund is a non-diversified investment company and is able to invest more
than 5% of its total assets at the time of purchase in the securities of a
single issuer. See "Risk Factors".
The Fund may not use any of the following forms of derivatives or hedging in-
struments such as options, futures contracts, puts, calls or options on
futures contracts, and therefore will not be subject to the risks inherent in
these types of investments. The Fund may, however, invest in forward commit-
ments, when-issued securities and delayed delivery transactions which are con-
sidered derivative securities.
THE ADVISER DOES NOT INTEND TO PARTICIPATE IN SOFT DOLLAR ARRANGEMENTS.
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INVESTMENT ADVISER--SHAREHOLDER PRINCIPLES
You should read carefully the following Investment Adviser--Shareholder
Principles before making an investment in the Fund.
. Although the Fund is organized as a mutual fund, the principals of Lloyd,
Leith & Sawin, Inc. (the "Adviser") take the view that it is a managing
partner with you, the shareholders of this Fund. This commitment is
reinforced by having the principals of the Adviser also invest a portion of
their assets in the Fund and thus become co-owners of the Fund.
. As managing partners, the Adviser will attempt to locate and invest in a few
outstanding businesses which it believes possess favorable long-term pros-
pects with superb underlying economics run by trustworthy and able manage-
ment and finally, are available at sensible prices.
. Once invested in a particular security, the Adviser looks forward to
becoming a long-term holder of these outstanding businesses. The Adviser is
not, nor will it ever be, interested in constantly buying and selling
mediocre businesses where economic gain depends more on profiting from
short-term price changes rather than the economic gain afforded by companies
that are able to grow their long-term intrinsic value.
. Because long-term maximum growth of intrinsic value, not profits from short-
term price changes, is the Adviser's prime objective, the Adviser expects
that the Fund may, from time to time, underperform various stock market
indices. This fact does not cause the Adviser any alarm. However, the
Adviser would be disappointed if the gain in the intrinsic value of the
companies selected for investment by the Fund, and hence the long-term rise
in their respective stock prices, did not advance at a rate greater than the
average large American company.
. It would be unfair to ask you, the shareholder, to ignore short-term price
movements as a way to measure investment results unless the Adviser offers
an alternative means by which to judge the Fund's progress. As a managing
partner, the Adviser is continually focused on, and will communicate to you,
the economic progress of the companies selected for investment by the Fund.
The Adviser believes that if a company is advancing economically at a
satisfactory rate, over time, the price of the company will correlate to
this change in value.
. The Adviser promises to be honest and forthcoming with you, the Fund's
shareholders. The Adviser promises to check periodic successes with an
equally hard look at any investment failures. The Adviser believes that this
public self-examination will be a benefit to shareholders and to the Adviser
over the long term. The Adviser's goal in reporting is to be as forthright
with you as it would like if the roles were reversed.
. STOP!!! If, after reading these principles, you have any reservation about
investing in the Fund, please don't. We would much prefer that you not
invest with us if the slightest short-term disruption in the markets or
individual stock prices will cause you to sell your shares. The Adviser
believes that long-term investment results should approximate the value of
the underlying businesses and not be affected by the excessive trading of
any of the Fund's shareholders.
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RISK FACTORS
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment objective will be attained. The
risks inherent in investing in the Fund are those risks which are common to
any mutual fund investment. These include the risks that the net asset value
will fluctuate in response to changes in economic conditions, interest rates
and the market's perception of the underlying portfolio securities of the
Fund.
The Fund is designed for long-term investors who are willing to accept the
risks entailed in seeking long-term growth of capital through investment
primarily in common stocks. The Fund is not meant to provide a vehicle for
playing short-term swings in the stock market nor is it intended to be a
complete investment program. The value of the Fund's portfolio securities will
fluctuate based on market and other conditions. Consistent with a long-term
investment approach, investors in the Fund should be prepared and able to
maintain or add to their investment during periods of adverse market
conditions and should not rely on an investment in the Fund for their short-
term financial needs.
The Fund is classified as a "non-diversified" investment company within the
meaning of the Investment Company Act of 1940 as amended (the "1940 Act"),
which means that the Fund may invest a larger portion of its assets in the
securities of a single issuer than a diversified fund. An investment in the
Fund therefore will entail greater price risk than an investment in a
diversified investment company because a higher percentage of investments
among fewer issuers may result in greater fluctuation in the total market
value of the Fund's portfolio, and economic, political or regulatory
developments may have a greater impact on the value of the Fund's portfolio
than would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with the diversification and other
requirements applicable to regulated investment companies under the Internal
Revenue Code of 1986, as amended. See "Dividends and Taxes."
The Fund may invest directly in the securities of foreign issuers. There are
certain risks and costs involved in investing in securities of companies and
governments of foreign nations, which are in addition to the usual risks in-
herent in U.S. investments. Investments in foreign securities involve higher
costs than investments in U.S. securities, including higher transaction costs
as well as the imposition of additional taxes by foreign governments. In addi-
tion, foreign investments may include additional risks associated with the
level of currency exchange rates, less complete financial information about
the issuers, less market liquidity, more market volatility and political in-
stability. Future political and economic developments, the possible imposition
of withholding taxes on dividend income, the possible seizure or nationaliza-
tion of foreign holdings, the possible establishment of exchange controls, or
the adoption of other governmental restrictions might adversely affect an in-
vestment in foreign securities. Additionally, foreign banks and foreign
branches of domestic banks may be subject to less stringent reserve require-
ments, and to different accounting, auditing and recordkeeping requirements.
Although the Adviser has not previously provided investment advisory services
to registered investment companies and has not previously engaged directly in
focus investing, the Adviser has been engaged in the investment advisory
business and providing investment advice to individuals, trusts, and pension
and profit sharing plans since 1971.
INVESTMENT PRACTICES AND RISKS
In attempting to achieve its investment objective, the Fund may, in addition
to the investment policies stated above, engage in the following practices:
ADR's and EDR's: For many foreign securities, there are U.S. dollar
denominated American Depository Receipts ("ADR's"), which are bought and sold
in the United States and are issued by domestic banks. ADR's represent the
right to receive securities of foreign issuers deposited in the domestic bank
or a correspondent bank. ADR's do not eliminate all the risk inherent in
investing in the securities of foreign issuers. By investing in ADR's rather
than directly in foreign issuer's stock, the Fund may avoid currency risks
during the settlement period for either purchases
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<PAGE>
or sales. In general, there is a large, liquid market in the United States for
most ADR's. The Fund may also invest in European Depository Receipts ("EDR's")
which are receipts evidencing an arrangement with a European bank similar to
that for ADR's and are designed for use in the European securities markets.
EDR's are not necessarily denominated in the currency of the underlying
security. The Fund has no current intention to invest in unsponsored ADR's and
EDR's.
Borrowing: The Fund has a fundamental policy that it may not borrow money, ex-
cept (1) from banks for temporary or emergency purposes and not for leveraging
or investment and (2) to enter into reverse repurchase agreements for any pur-
pose, so long as the aggregate amount of borrowings and reverse repurchase
agreements does not exceed one-third of the Fund's total assets less liabili-
ties (other than borrowings). In the event that such asset coverage shall at
any time fall below 300%, the Fund shall, within three business days thereaf-
ter or such longer period as the U.S. Securities and Exchange Commission (the
"SEC") may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall
be at least 300%. Investment securities will not be purchased while the Fund
has an outstanding borrowing that exceeds 5% of the Fund's net assets.
Forward Commitments, When-Issued Securities and Delayed Delivery
Transactions: The Fund may purchase securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" and "delayed
delivery" basis. These transactions involve a commitment by the Fund to
purchase or sell particular securities with payment and delivery taking place
at a future date. They involve the risk that the price or yield available in
the market may be less favorable than the price or yield available when the
delivery takes place. The Fund's when-issued purchases, forward commitments
and delayed delivery transactions in total will not exceed 5% of the value of
the Fund's net assets. This 5% limitation reflects the value of the underlying
obligation together with its initial payment.
Illiquid Securities: The Fund may invest up to 10% of its net assets in
securities that are illiquid. Illiquid securities are assets which may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued by the Fund. Due to the
absence of an active trading market, the Fund may experience difficulty in
valuing or disposing of illiquid securities. Repurchase agreements with deemed
maturities in excess of seven days and certain securities that are not
registered under the Securities Act of 1933 but that may be purchased by
institutional buyers under SEC Rule 144A (known as "restricted securities")
are subject to this 10% limit. The Adviser determines the liquidity of the
Fund's securities, under supervision of the Board of Directors.
Portfolio Turnover Rate: Generally, the Fund will purchase portfolio
securities for capital appreciation and not for short-term trading profits.
Due to the nature of "focus investing", however, the Adviser anticipates that
the portfolio turnover levels will be held at low levels. This is consistent
with the Fund's buy and hold strategy. The rate of portfolio turnover will not
be a limiting factor in making portfolio decisions. A high rate of portfolio
turnover may result in the realization of substantial capital gains and
involves correspondingly greater transaction costs. It is currently estimated
that under normal market conditions the annual portfolio turnover rate for the
Fund will not exceed 25%. Portfolio turnover rates may vary from year to year
as well as within a particular year.
Repurchase Agreements: The Fund may enter into repurchase agreements. The Fund
may only enter into repurchase agreements with financial institutions that are
deemed to be creditworthy by the Adviser, pursuant to guidelines established
by the Fund's Board of Directors. During the term of any repurchase agreement,
the Adviser will continue to monitor the creditworthiness of the seller. Re-
purchase agreements are considered under the 1940 Act to be collateralized
loans by the Fund to the seller secured by the securities transferred to the
Fund. Repurchase agreements under the 1940 Act will be fully collateralized by
securities in which the Fund may invest directly. Such collateral will be
marked-to-market daily. If the seller of the underlying security under the re-
purchase agreement should default on its obli-
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<PAGE>
gation to repurchase the underlying security, the Fund may experience delay or
difficulty in exercising its right to realize upon the security and, in addi-
tion, may incur a loss if the value of the security should decline, as well as
disposition costs in liquidating the security. The Fund will not invest more
than 10% of its net assets in repurchase agreements maturing in more than
seven days.
Restricted Securities and Rule 144A Securities: Restricted securities cannot
be sold to the public without registration under the Securities Act of 1933
(the "1933 Act"). Unless registered for sale, these securities can only be
sold in privately negotiated transactions or pursuant to an exemption from
registration. Rule 144A securities may be resold only to qualified institu-
tional buyers in accordance with Rule 144A under the 1933 Act. Some restricted
securities may be illiquid securities.
Securities Lending: The Fund may lend its portfolio securities on a short-term
basis to banks, broker/ dealers and other institutional investors pursuant to
agreements requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned. The Fund will not lend portfolio securities in excess of 33% of the
value of its total assets. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially.
However, loans are made only to borrowers deemed by the Adviser to be of good
standing and when, in its judgment, the income to be earned from the loan
justifies the attendant risks.
Securities of Other Investment Companies: The Fund may invest in securities
issued by other investment companies within the limits prescribed by the 1940
Act. The Fund may invest up to 10% of its assets in shares of investment com-
panies and up to 5% of its assets in any one investment company so long as the
investment does not represent more than 3% of the voting stock of the acquired
investment company. Investments in other investment companies will cause the
Fund (and, indirectly the Fund's shareholders) to bear proportionately the
costs incurred in connection with the investment companies' operations.
MANAGEMENT OF THE FUND
THE BOARD OF DIRECTORS AND OFFICERS
The Fund has a Board of Directors that establishes the Fund's policies and su-
pervises and reviews the management of the Fund. The day-to-day operations of
the Fund are administered by the officers of the Fund and by the Adviser pur-
suant to the terms of an investment advisory agreement with the Fund. The
Fund's Directors review the various services provided by the Adviser to ensure
that the Fund's general investment policies and programs are being properly
carried out and that administrative services are being provided to the Fund in
a satisfactory manner. Information pertaining to the Directors and executive
officers of the Fund is set forth below.
ROBERT G. HAGSTROM, JR., CFA*, President and Director; Two Penn Center Plaza,
Suite 1810, Philadelphia, Pennsylvania 19102; Principal with Lloyd, Leith &
Sawin since 1992 and Vice President from 1991 to 1992; prior thereto portfolio
manager with First Fidelity Bank, Philadelphia, PA from 1989 through 1991;
prior thereto, investment broker for Legg Mason Wood Walker from 1984 through
1989. Mr. Hagstrom received his B.A. and M.A. from Villanova University. He is
a member of the Association of Investment Management and Research and the
Financial Analysts of Philadelphia. Mr. Hagstrom is a Chartered Financial
Analyst and the author of the book titled The Warren Buffett Way: Investment
Strategies of the World's Greatest Investor (John Wiley & Sons, November,
1994).
ALLAN S. MOSTOFF, ESQ.*, Director; Partner from 1976 and Chairman of the
Government Practice Department of the law firm of Dechert Price & Rhoads, 1500
K Street, N.W., Washington, DC 20005; prior thereto, Director of the SEC's
Division of Investment Management Regulation from 1972 until 1976; Mr. Mostoff
received his B.S. from Cornell University, his M.B.A. from New York University
and his L.L.B. from New York Law School.
ROBERT J. COLEMAN, JR., Director; Principal of Combined Capital Management,
614 East High Street, Charlottesville, Virginia 22902 since 1993;
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<PAGE>
This is your
INVESTMENT APPLICATION
Detach and Mail to:
Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
<PAGE>
FOCUS TRUST, INC.
1. INITIAL INVESTED ($1,000 MINIMUM)
- --------------------------------------------------------------------------------
FORM OF PAYMENT - INITIAL INVESTMENT
[_] CHECK FOR $_______ ENCLOSED - PAYABLE TO FOCUS TRUST, INC.
[_] Proceeds from another mutual fund in the amount of $__________
[_] By Wire - Funds were wired on________ in the amount of $__________
- --------------------------------------------------------------------------------
2. REGISTRATION (Please Print).
- --------------------------------------------------------------------------------
INDIVIDUAL* (Joint ownership with rights of survivorship unless otherwise
noted)
------------------------------------------------------- ---- --- -----
First Name Middle Initial Last Name Social Security #
------------------------------------------------------- ---- --- -----
Jt. Owner First Name* Middle Initial Last Name Social Security #
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GIFT TO MINORS
Under the UGMA/UTMA
--------------------------------------------------- ---------
Name of Custodian (name one only) State
--------------------------------------------------- ---- --- -----
As Custodian For (name one only) Minor's Social Security #
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS (complete Corporate Resolution)
------------- --------------------------------------------------------
Tax I.D. # Name of Trustee(s) Date of Trust
----------------------------------------------------------------------------
Name of Corporation, Partnership, Trust or Other
Citizen of: [_] United States [_] Other (Please indicate) _________________
- --------------------------------------------------------------------------------
3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
Street Address and Apt. No. City State Zip Code
Daytime Phone Number ( ) ________________________
Evening Phone Number ( ) ________________________
- --------------------------------------------------------------------------------
<PAGE>
4. DISTRIBUTION OPTIONS (Please indicate one--Distributions will be reinvested
if no option is checked.)
- --------------------------------------------------------------------------------
[_] Automatic Compounding (dividends & capital gains in additional shares)
[_] Cash Dividends (dividends in cash, capital gains in additional shares)
[_] All Cash (dividends & capital gains in cash)
- --------------------------------------------------------------------------------
5. TELEPHONE OPTIONS
- --------------------------------------------------------------------------------
[_] TELEPHONE REDEMPTION
I (we) authorize Fund/Plan Services to honor telephone instructions for
my(our) account. Neither the Fund nor Fund/Plan Services will be liable
for properly acting upon telephone instructions believed to be genuine.
Please attach a voided check on the Transfer account or complete below.
------------------------------------------------------------------------
Name of Bank City State
------------------------------------------------------------------------
Bank Routing Number(nine digits) Account Number [_] Checking [_] Savings
[_] TELEPHONE PURCHASES
- --------------------------------------------------------------------------------
6. SIGNATURE AND CERTIFICATION
- --------------------------------------------------------------------------------
Required by Federal tax law to avoid 31% backup withholding; "By signing, I
certify under penalties of perjury that the social security or taxpayer
identification number entered above is correct and that I have not been
notified by the IRS that I am subject to backup withholding unless I have
checked the box to the right." [_] I am subject to backup withholding. Receipt
of current prospectus is hereby acknowledged.
----------------------------------------------------------------- -----------
Signature [_] Owner [_] Custodian [_] Trustee Date
----------------------------------------------------------------- -----------
Signature of Joint Owner (if applicable) Date
- --------------------------------------------------------------------------------
7. FOR INVESTMENT DEALER INFORMATION ONLY
- --------------------------------------------------------------------------------
--------------------------------------------------- ------------------------
Firm Name Branch/Branch #
-----------------------------------------------------------------------------
Branch Address
-----------------------------------------------------------------------------
City State Zip Code
-----------------------------------------------------------------------------
Rep # Rep's Last Name
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
RESOLUTIONS
(This Section to be Completed by Corporations, Trusts, and Other
Organizations).
RESOLVED: That this corporation or organization become a shareholder of Focus
Trust, Inc. (the "Fund") and that:
- -------------------------------------------------------------------------------
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and take any action for it as may be
necessary or appropriate with respect to its shareholders account(s) with the
Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Fund/Plan Services,
Inc. as redemption agent of the corporation or organization for shares of the
Fund, to establish or acknowledge terms and conditions governing the
redemption of said shares or to otherwise implement the privileges elected on
the application.
- -------------------------------------------------------------------------------
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the:
- -------------------------------------------------------------------------------
(Name of Corporation)
incorporated or formed under the laws of ______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on at which a quorum was
present and acting throughout, and that the same are now in full force and
effect.
I further certify that the following is (are) the duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
TITLE NAME
- -------------------------- ----------------------------------------------------
- -------------------------- ----------------------------------------------------
- -------------------------- ----------------------------------------------------
Witness my hand and the seal of the corporation or organization this day of
, 19 .
- -------------------------- ----------------------------------------------------
Other Authorized Officer *Secretary-Clerk
(if required)
* If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
prior thereto, institutional sales and research for the "Value Group" at
Dominick & Dominick, New York, New York from 1991 through 1993, and the "Value
Group" at Laidlaw Adam's and Peck (formerly, W.R. Lazard Laidlaw) from 1987 to
1991. Mr. Coleman attended Lake Forest College.
JOAN LAMM-TENNANT, PH.D., Director; Professor of Finance at Villanova
University, Villanova, Pennsylvania since 1988; Dr. Lamm-Tennant is the author
of the book titled Mutual Funds: Analysis, Allocation and Performance
Evaluation and co-editor of a book titled Financial Management of Life
Insurance Companies. Dr. Lamm-Tennant has published and lectured extensively
on investment policies and practices of the insurance industry. Her
publications include articles in journals such as the Journal of Business,
Journal of Risk and Insurance, Review of Research in Banking and Finance, and
Journal of Insurance Regulation. Dr. Lamm-Tennant serves on the Board of
Directors for Selective Insurance Group, Inc. and the Financial Analysts of
Philadelphia. She received a B.B.A. degree in Accounting and a M.B.A. degree
in finance from St. Mary's University, Texas, and a Ph.D. in finance,
investments and insurance from the University of Texas at Austin.
VIRGINIA BULLITT LEITH, Vice President and Treasurer; Principal of Lloyd,
Leith & Sawin, Two Penn Center Plaza, Suite 1810, Philadelphia, Pennsylvania
19102 since 1979; prior thereto, Mrs. Leith worked as a financial planner and
administrator. Mrs. Leith is an alumna of Wellesley College and is currently
Vice President of the Philadelphia Securities Association.
JOHN S. LLOYD, Vice President and Secretary; Principal of Lloyd, Leith &
Sawin, Two Penn Center Plaza, Suite 1810, Philadelphia, Pennsylvania 19102;
before founding the original firm, Lloyd Investments, Inc. in 1971, Mr. Lloyd
worked for the Provident National Bank, and Drexel University, Philadelphia,
Pennsylvania. Mr. Lloyd is a Chartered Financial Analyst and a member of the
board of the Overbrook School for the Blind, the Association of Investment
Management and Research and the Financial Analysts of Philadelphia and has
taught Portfolio Management to M.B.A. candidates at LaSalle University. Mr.
Lloyd is a graduate of Wesleyan University and has an M.B.A. from Drexel Uni-
versity
*These Directors are considered "interested persons" of the Fund as defined
under the 1940 Act.
The Directors of the Fund receive fees and expenses for each meeting of the
Board of Directors they attend. However, no officer or employee of Lloyd,
Leith & Sawin receives any compensation from the Fund for acting as a Director
of the Fund. The officers of the Fund receive no compensation directly from
the Fund for performing the duties of their offices.
THE INVESTMENT ADVISER
Lloyd, Leith & Sawin, Inc. (the "Adviser") which has its offices at Two Penn
Center Plaza, Suite 1810, Philadelphia, Pennsylvania 19102, serves as the
Fund's investment adviser and manager and is a registered investment adviser
under the Investment Advisers Act of 1940, as amended. Since 1971, the Adviser
has provided investment advice to individuals, trusts, and pension and profit
sharing plans. As of December 31, 1995, the Adviser had approximately $125
million of assets under management.
Subject to the overall authority of the Fund's Board of Directors, the Adviser
supervises the management of the Fund. These management responsibilities
include, among other things, reporting to the Directors regarding economic and
statistical information as requested by the Directors and Officers. The
Adviser invests the Fund's assets, manages the Fund's business affairs and
supervises the Fund's overall day-to-day operations. Pursuant to an investment
advisory agreement with the Fund, the Adviser provides the Fund with advice on
buying and selling securities in accordance with the Fund's investment
policies, limitations and restrictions. The Adviser also furnishes office
space and certain administrative and clerical services, and employs the
personnel needed with respect to the Adviser's responsibilities under the
investment advisory agreement.
-11-
<PAGE>
For providing investment advisory services, the Fund pays the Adviser a
monthly fee calculated daily by applying an annual rate of 0.70% to the Fund's
assets. From time to time, the Adviser may voluntarily waive all or a portion
of its management fee and/or absorb certain expenses of the Fund without
further notification of the commencement or termination of any such waiver or
absorption. Any such waiver or absorption will have the effect of lowering the
overall expense ratio of the Fund and increasing the Fund's overall return to
investors at the time any such amounts are waived and/or absorbed. The Adviser
has agreed to waive that portion of its advisory fee equal to the total
expenses of the Fund for any fiscal year which exceeds the permissible limits
applicable to a Fund in any state in which its shares are then qualified for
sale. Any reductions made by the Adviser in its fees are subject to
reimbursement by the Fund within the following three years provided the Fund
is able to effect such reimbursement and remain in compliance with applicable
expense limitations.
The terms of the Fund's investment advisory agreement permit the Adviser, at
its own expense, to obtain statistical and other factual information and
advice as it deems necessary or desirable to fulfill its investment
responsibilities under the contract.
PORTFOLIO MANAGEMENT
Robert G. Hagstrom, Jr., CFA, a principal with Lloyd, Leith & Sawin, is
responsible for overseeing all investments made by the Fund. See "The Board of
Directors and Officers" for biographical information.
BROKERAGE TRANSACTIONS
In determining the brokers through whom, and commission rates and other
transaction costs at which securities transactions for the Fund are to be
executed, the Adviser seeks to obtain the best available price, investment
services and execution. The Adviser does not have an agreement or commitment
to place orders with any particular broker-dealer, and it is expected that a
number of broker-dealers will be used in various transactions. The Adviser
does not intend to participate in soft dollar arrangements.
THE UNDERWRITER
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA
19428, was engaged pursuant to an underwriting agreement for the limited
purpose of acting as underwriter to facilitate the registration of shares of
the Fund under state securities laws and to assist in the sale of shares.
THE ADMINISTRATOR
Fund/Plan Services, Inc. ("Fund/Plan"), 2 W. Elm Street, Conshohocken, PA
19428 serves as administrator pursuant to an administrative services agree-
ment. The services Fund/Plan provides to the Fund include: the coordination
and monitoring of any third parties furnishing services to the Fund; providing
the necessary office space, equipment and personnel to perform administrative
and clerical functions for the Fund; preparing, filing and distributing proxy
materials and periodic reports to shareholders, registration statements and
other documents; and responding to shareholder inquiries. Pursuant to this
agreement, Fund/Plan receives a fee at the annual rate of 0.15% on the first
$50 million of total average net assets, 0.10% on the next $50 million of to-
tal average net assets and 0.05% on total net assets in excess of $100 mil-
lion. The minimum administrative services fee is $65,000 per year for the
Fund.
THE CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING/PRICING AGENT
The Bank of New York, 48 Wall Street, New York, New York 10286 is the custo-
dian for the cash and securities of the Fund. Fund/Plan serves as the Fund's
transfer agent and as such it maintains the records of each shareholder's ac-
count, answers shareholder inquiries concerning accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution dis-
bursing agent and performs other shareholder service functions. As fund ac-
counting agent, Fund/Plan performs certain accounting and
-12-
<PAGE>
pricing services for the Fund, including the daily calculation of the Fund's
net asset value.
FUND EXPENSES
The Fund shall be responsible for all of its own operating expenses. Such ex-
penses may include, but are not limited to: management fees; expenses for
printing and distribution costs of prospectuses and reports to existing share-
holders; brokerage fees and commissions; fees for the registration or qualifi-
cation of Fund shares under federal or state securities laws; expenses of the
organization of the Fund; transfer agent, custodian, administrator, legal and
auditing fees; the expenses of obtaining quotations of portfolio securities
and of pricing the Fund's shares; trade association dues; all costs associated
with shareholder meetings and the preparation and dissemination of proxy mate-
rials; and other expenses relating to the Fund's operations; costs of liabil-
ity insurance and fidelity bonds; fees for Directors who are not officers, di-
rectors or employees of the Adviser; and any extraordinary and nonrecurring
expenses which are not expressly assumed by the Adviser.
HOW TO PURCHASE SHARES
You can purchase shares of the Fund directly from the Fund at the net asset
value next determined after receipt of the order in proper form by the
transfer agent. There is no sales load or charge in connection with the
purchase of shares. The Fund's shares are also offered for sale through
Fund/Plan Broker Services, Inc. ("FPBS"), the Fund's underwriter.
The minimum initial investment is $1,000 for all accounts, including
investments for individual investors, IRAs, 403(b)(7) plans and other
retirement plans. Subsequent investments for the Fund will be accepted in
minimum amounts of $100.
The Fund reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund. The Fund reserves the right to waive the
initial and subsequent investment minimums at any time. In addition, FPBS may
waive the minimum initial investment requirement for any investor.
Purchase orders for shares of the Fund which are received by Fund/Plan in
proper form, including money orders, checks or bank drafts, by the close of
regular trading on the NYSE (currently 4:00 p.m. Eastern time), on any day
that the New York Stock Exchange is open for regular trading, will be
purchased at the Fund's net asset value determined that day. Orders for Fund
shares received after 4:00 p.m. Eastern time will be purchased at the net
asset value determined on the business day following receipt of the order.
You may purchase shares of the Fund in one of the following ways:
BY MAIL
Send your completed and signed application and check or money order, payable
to "Focus Trust, Inc.," to Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box
874, Conshohocken, PA 19428-0874. If this is your first purchase, please send
a minimum of $1,000. Subsequent investments must be a minimum of $100.
BY WIRE
Call (800) 665-2550 for instructions on how to wire money to purchase shares.
Your wire goes to United Missouri Bank and must include your name and your
account number. You must also furnish the Fund with your social security
number or other tax identification number. Following notification to the
transfer agent, federal funds and registration instructions should be wired
through the Federal Reserve System to:
UNITED MISSOURI BANK KC NA ABA # 10-10-00695 FOR: FUND/PLAN SERVICES, INC. A/C
98-7037-071-9 FBO "Focus Trust, Inc." "SHAREHOLDER NAME AND ACCOUNT NUMBER"
For initial wire purchases, complete, sign and mail your application to the
transfer agent subsequent to the initial wire. Be aware that some banks may
impose a wire service fee. The Fund will not be responsible for the
consequence of delays, including
-13-
<PAGE>
delays in the banking or Federal Reserve wire systems.
THROUGH BROKER-DEALERS
You may purchase and redeem your shares through broker-dealers, financial in-
stitutions or service organizations which have been previously approved by the
Fund. It is the responsibility of such brokers, financial institutions or
service organizations to promptly forward purchase orders and payments for the
same to the Fund. Shares of the Fund may be purchased through brokers, finan-
cial institutions, service organizations, banks, and bank trust departments,
each of which may charge you a transaction fee or other fee for its services
at the time of purchase. Such fees would not otherwise be charged if you pur-
chased your shares directly from the Fund.
SUBSEQUENT INVESTMENTS
Once your account has been opened, you may make subsequent purchases by mail,
bank wire or by telephone. The minimum for subsequent investments is $100 for
all accounts. Orders to purchase shares are effective on the day Fund/Plan
receives your check or money order.
When you are making subsequent investments by mail, return the remittance
portion of a previous confirmation with your investment in the envelope
provided. Your check should be made payable to "Focus Trust, Inc." and mailed
to Focus Trust, Inc. c/o Fund/Plan Services, Inc., P.O. Box 412797, Kansas
City, MO 64141-2797.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the United States. A charge ($20
minimum) will be imposed if any check used for the purchase of shares is
returned. The Fund and Fund/Plan each reserve the right to reject any purchase
order in whole or in part.
HOW TO REDEEM SHARES
You may request redemption of your shares at any time in one of the ways
outlined below. Such redemption proceeds may be reduced by the amount of any
applicable redemption fee. See "Redemption Fee".
BY MAIL
You may redeem your shares by submitting a written request for redemption to
Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA
19428-0874.
A written request must be in good order which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed; and (iii) be signed by each registered
owner exactly as the shares are registered. To prevent fraudulent redemptions,
a signature guarantee for the signature of each person in whose name the ac-
count is registered is required on all written redemptions requests over
$10,000 and redemption requests for which proceeds are to be mailed somewhere
other than the address of record. A guarantee may be obtained from any commer-
cial bank, credit union, a member firm of a national securities exchange, reg-
istered securities associations, clearing agencies and savings and loan asso-
ciations. Credit unions must be authorized to issue signature guarantees;
notary public endorsement will not be accepted. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a sig-
nature guarantee program. The transfer agent may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees or guardians and retirement plans.
BY TELEPHONE
If you have so indicated on the application, or have subsequently arranged in
writing to do so, you may redeem your shares by calling the transfer agent at
(800) 665-2550 during normal business hours. In order to arrange for
redemption by wire or telephone after an account has been opened, or to change
the bank or account designated to receive redemption proceeds, you must send a
written request to the transfer agent with a signature guarantee at the
address listed under "Redemption by Mail."
-14-
<PAGE>
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time.
During periods of unusual economic or market changes, telephone redemptions
may be difficult to implement. In such event, you should follow procedures
under redemption by mail.
GENERAL REDEMPTION INFORMATION
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. If you have any
questions with respect to the proper form for redemption requests you should
contact the transfer agent at (800) 665-2550.
Redemptions will be processed only on a business day that the New York Stock
Exchange ("NYSE") is open for business. Redemptions will be effective at the
net asset value per share next determined after the receipt by the transfer
agent of a redemption request meeting the requirements described above. The
Fund normally sends redemption proceeds on the next business day, but in any
event redemption proceeds are sent within seven calendar days of receipt of a
redemption request in proper form. Payment may also be made by wire directly
to any bank previously designated by you on a new account application. There
is a $9.00 charge for redemptions made by wire. Please note that your bank may
also impose a fee for wire service. There also may be fees for redemptions
made through brokers, financial institutions and service organizations.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day that the Fund calculates its net asset value are effective that
day. Redemption requests received after the close of the NYSE will be effected
at the net asset value per share determined on the next business day following
receipt. No redemption will be processed until the transfer agent has received
a completed application with respect to the account.
The Fund will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the Board of
Directors, result in the necessity of the Fund to sell assets under
disadvantageous conditions or to the detriment of the remaining shareholders
of the Fund.
Pursuant to the Fund's Articles of Incorporation, however, payment for shares
redeemed may also be made in kind, or partly in cash and partly in-kind. The
Fund has elected, pursuant to Rule 18f-1 under the 1940 Act to redeem its
shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund, during any 90 day period for any one shareholder. Any
portfolio securities paid or distributed in-kind would be in readily
marketable securities and valued as described under "Net Asset Value." In the
event that an in-kind distribution is made, you may incur additional expenses,
such as the payment of brokerage commissions, on the sale or other disposition
of the securities received from the Fund. In-kind payments need not constitute
a cross-section of the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of payment
for more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the SEC has by order permitted such suspension; (3) an
emergency, as defined by rules of the SEC, exists making disposal of portfolio
investments or determination of the value of the net assets of the Fund not
reasonably practicable.
Shares of the Fund may be redeemed through certain brokers, financial institu-
tions or service organizations, banks and bank trust departments who may
charge the investor a transaction or other fee for their services at the time
of redemption. Such additional transaction fees would not otherwise be charged
if the shares were redeemed directly from the Fund.
REDEMPTION FEE
With certain exceptions, shares of the Fund that are redeemed within the first
two years of purchase are subject to a redemption fee pursuant to which shares
-15-
<PAGE>
that are redeemed within two years after purchase are redeemable at 99% of
their net asset value. This redemption fee is not a deferred sales load. The
reductions from net asset value for shareholders redeeming during the first
two years after purchase are retained by the Fund for the benefit of all
shareholders to help offset the additional transactional costs of short-term
investments in the Fund.
The redemption fee will be waived under the following circumstances: 1) total
or partial redemptions made following the death or disability of a sharehold-
er; 2) minimum required distribution made in connection with an IRA, retire-
ment plan or custodial account under Section 403(b) or other retirement plan
following attainment of age 70 1/2; 3) total or partial redemption resulting
from a distribution following retirement in the case of a tax-qualified em-
ployer-sponsored retirement plan; 4) when a redemption results from a tax-free
return of an excess contribution or from the death or disability of the em-
ployer; or 5) redemptions pursuant to the Fund's right to liquidate a share-
holder's account involuntarily.
TELEPHONE TRANSACTIONS
If you wish to initiate redemption transactions by telephone, you must first
elect the option, as described above. The Fund and its transfer agent may
request personal identification information before accepting a telephone
redemption. To the extent that the Fund or its transfer agent fail to use
reasonable procedures to verify the genuineness of telephone instructions, the
Fund may be liable for losses due to fraudulent or unauthorized instructions.
The Fund reserves the right to refuse a telephone redemption if it is believed
advisable to do so. Procedures for redeeming Fund shares by telephone may be
modified or terminated at any time by the Fund. Written confirmation will be
provided for all redemption transactions initiated by telephone.
MINIMUM BALANCES
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntary redeem shares in any account at its then
current net asset value (which will be promptly paid to the shareholder) if at
any time the total investment does not have a value of at least $500 due to
redemptions but not market fluctuations. You will be notified that the value
of your account is less than the required minimum and you will be allowed at
least 60 days to bring the value of your account up to the minimum before the
redemption is processed.
SHAREHOLDER SERVICES
The following special services are available to you as a shareholder of the
Fund. There are no charges for the programs noted below and you may change or
stop these plans at any time by written notice to the Fund.
AUTOMATIC INVESTMENT PLAN: Once an account has been opened, you can make
additional monthly purchases of shares of the Fund through an automatic
investment plan. You may authorize the automatic withdrawal of funds from your
bank account by first opening your account with a minimum $1,000 purchase and
completing the appropriate section on the new account application enclosed
with this Prospectus. Subsequent monthly investments are subject to a minimum
amount of $50.
RETIREMENT PLANS: The Fund is available for investment by pension and profit
sharing plans including Individual Retirement Accounts, 401(k) plans, and
403(b)(7) Retirement Plans through which you may purchase Fund shares. For
details concerning any of the retirement plans, please call the Fund at (800)
665-2550.
NET ASSET VALUE
The net asset value per share of the Fund is computed once daily as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time.
Currently, the NYSE observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of all
securities and other assets in the
-16-
<PAGE>
portfolio, deducting any liabilities (expenses and fees are accrued daily),
and dividing that remainder by the total number of outstanding shares. The
Fund's securities are valued based on market quotations or, when no market
quotations are available, at fair value as determined in good faith by or
under direction of the Board of Directors. Securities listed on any national
securities exchange are valued at their last sale price on the exchange where
the securities are principally traded or, if there has been no sale on that
date, at the mean between the last reported bid and asked prices. Securities
traded over-the-counter are priced at the mean of the last bid and asked
prices.
Securities which are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers are done so in accordance with procedures
established by the Board of Directors.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Directors believes represents fair value.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by 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.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Board of Directors.
DIVIDENDS AND TAXES
DIVIDENDS
The Fund intends to distribute its net investment income annually in December.
Any net realized gain from the sale of portfolio securities are distributed at
least once each year unless they are used to offset losses carried forward
from prior years, in which case no such gain will be distributed. Such income
dividends and capital gain distributions are reinvested automatically in
additional shares at net asset value, unless a shareholder elects to receive
them in cash. Distribution options may be changed at any time by requesting it
in writing.
Any check in payment of dividends or other distributions which cannot be
delivered by the Post Office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then
current net asset value and the dividend option may be changed from cash to
reinvest. Dividends are reinvested on the ex-dividend date (the "ex-date") at
the net asset value determined at the close of business on that date.
Dividends and distributions are treated the same for tax purposes whether
received in cash or reinvested in additional shares. PLEASE NOTE THAT SHARES
PURCHASED SHORTLY BEFORE THE RECORD DATE FOR A DIVIDEND OR DISTRIBUTION MAY
HAVE THE EFFECT OF RETURNING CAPITAL ALTHOUGH SUCH DIVIDENDS AND DISTRIBUTIONS
ARE SUBJECT TO TAXES.
TAXES
The Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which generally will relieve the Fund of any liability
for federal income tax to the extent its earnings and net realized capital
gains are distributed to shareholders. To qualify as a regulated investment
company, the Fund generally must, among other things, diversify its
investments so that, at the close of each quarter of its taxable year, (1) not
more than 25% of the market value of the Fund's total assets will be invested
in the securities of a single issuer, and (2) at least 50% of the market value
of its total assets is represented by cash, U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer.
Because the Fund intends to distribute substantially all of its net investment
income and capital gains to shareholders and otherwise qualify as a regulated
investment company under Subchapter M of the
-17-
<PAGE>
Code, it is generally not expected that the Fund will be required to pay
federal income taxes.
An investment in the Fund has certain tax consequences, depending on the type
of account. Distributions are subject to federal income tax and may also be
subject to state and local income and other taxes. Distributions are generally
taxable when they are paid, whether in cash or by reinvestment in additional
shares, except that certain distributions declared in October, November or
December and paid during the following January are taxable as if they were
paid on December 31. If shares of the Fund are owned by a qualified retirement
account, taxes on income and gains earned by the retirement account are
generally deferred until distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss
designated by the Fund as capital gain dividends) are taxed as long-term
capital gains, regardless of how long a shareholder has held the Fund's
shares. The tax treatment of distributions of ordinary income or capital gains
will be the same whether the shareholder reinvests the distributions or elects
to receive them in cash.
Shareholders may be subject to a 31% backup withholding tax on reportable
dividend and redemption payments ("backup withholding") if, among other
things, a certified taxpayer identification number is not on file with the
Fund, or if to the Fund's knowledge, an incorrect number has been furnished.
An individual's taxpayer identification number is his/her social security
number which must be included with the account application.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Information accompanying a
shareholder's statement will show the portion of those distributions that are
not taxable in certain states. Further information regarding the tax
consequences of investing in the Fund is included in the Statement of
Additional Information.
The foregoing summary of certain federal income tax consequences is included
herein for general informational purposes only. Consult your own tax adviser
for more specific information regarding the tax consequences you may be
subject to if you make an investment in the Fund.
PERFORMANCE INFORMATION
The investment philosophy of the Fund is to make concentrated investments in a
limited number of companies whose long term economic progress, relative to the
acquisition price of their stocks, are deemed to be attractive. As a result of
this portfolio concentration, the performance of the Fund over time should
correlate more closely with the specific financial performance of its limited
number of portfolio companies than with price movements in the stock market in
general.
Performance information such as total return for the Fund may be quoted in
advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
since net investment return of the Fund changes in response to fluctuations in
market conditions, interest rates and Fund expenses, any given performance
quotation should not be considered representative of the Fund's performance
for any future period. The value of an investment in the Fund will fluctuate
and an investor's shares, when redeemed, may be worth more or less than their
original cost.
The Fund's total return is the change in value of an investment in the Fund
over a particular period, assuming that all distributions have been
reinvested. Thus, total return reflects not only income earned, but also
variations in share prices at the beginning and end of the period. Average
annual return reflects the average percentage change per year in the value of
an investment in the Fund. Aggregate total return reflects the total
percentage change over the stated period. Please refer to the Statement of
Additional Information for more information on performance.
-18-
<PAGE>
You may obtain current performance information about the Fund by calling the
Fund at (800) 665-2550.
GENERAL INFORMATION
ORGANIZATION: Focus Trust, Inc. was incorporated under the laws of Maryland on
January 27, 1995 as an open-end non-diversified management investment company.
The Fund's Articles of Incorporation permit the Directors to issue one hundred
million shares of common stock, with a $0.001 par value. The Board of
Directors has the power to designate one or more classes of shares of common
stock and to classify or reclassify any unissued shares with respect to such
class. Currently the Fund is offering one class of shares.
DESCRIPTION OF SHARES: Shares of the Fund represent equal proportionate
interests in the assets of the Fund and have identical voting, dividend,
redemption, liquidation, and other rights. All shares issued, in the opinion
of Dechert Price & Rhoads, are legally issued, fully paid and nonassessable,
and shareholders have no preemptive or other right to subscribe to any
additional shares. All accounts will be maintained in book-entry form, no
share certificate will be issued.
VOTING RIGHTS: A shareholder is entitled to one vote for each full share held
(and a fractional vote for each fractional share held). All shares of the Fund
participate equally in regard to dividends, distributions, and liquidations
with respect to the Fund. Shareholders do not have preemptive, conversion or
cumulative voting rights which means that the holders of more than 50% of the
shares voting for the election of directors can elect 100% of the directors if
they choose to do so and, in such event, the holders of the remaining shares
will not be able to elect any person to the Board of Directors.
SHAREHOLDER MEETINGS: The Directors of the Fund are not required and do not
intend to hold annual meetings of shareholders. The Fund has undertaken to the
SEC, however, that it will promptly call a meeting for the purpose of voting
upon the question of the removal of any Director when requested to do so by
holders of not less than 10% of the outstanding shares of the Fund. In
addition, subject to certain conditions, shareholders of the Fund may apply to
the Fund to communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Director or Directors.
SHAREHOLDER REPORTS AND INQUIRIES: Shareholders will receive semiannual
reports showing portfolio investments and other information as of June 30, and
annual reports audited by independent accountants as of December 31.
Shareholder inquiries should be addressed to the Fund c/o Lloyd, Leith &
Sawin, Inc., Two Penn Center Plaza, Suite 1810, Philadelphia, PA 19102, (800)
665-2550.
-19-
<PAGE>
INVESTMENT ADVISER
Lloyd, Leith & Sawin, Inc. Two Penn Center Plaza, Suite 1810 Philadelphia, PA
19102 (215) 665-9644
UNDERWRITER
Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428 (800)
665-2550
SHAREHOLDER SERVICES
Fund/Plan Services, Inc. 2 W. Elm Street Conshohocken, PA 19428 (800) 665-2550
CUSTODIAN
The Bank of New York 48 Wall Street New York, NY 10286
LEGAL COUNSEL
Dechert Price & Rhoads 1500 K Street, N.W. Washington, DC 20005
AUDITORS
Coopers & Lybrand, L.L.P. 2400 Eleven Penn Center Philadelphia, PA 19103
For Additional Information about Focus Trust, Inc. call:
(800) 665-2550
FOCUS TRUST, INC.SM
PROSPECTUS
APRIL 29, 1996
<PAGE>
FOCUS TRUST, INC.
-----------------
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
================================================================================
This Statement of Additional Information dated April 29, 1996, is not a
prospectus but should be read in conjunction with the Prospectus for the Focus
Trust, Inc. (the "Fund") dated April 29, 1996, as amended or supplemented from
time to time. No investment in shares should be made without first reading the
Prospectus. This Statement of Additional Information is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus. A copy of the Prospectus may
be obtained without charge from the Fund at the addresses and telephone numbers
below.
UNDERWRITER: ADVISER:
Fund/Plan Broker Services, Inc. Lloyd, Leith & Sawin, Inc.
2 W. Elm Street Two Penn Center Plaza, Suite 1810
Conshohocken, PA 19428 Philadelphia, PA 19102
(800) 665-2550 (215) 665-9644
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION OR IN
THE PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THE PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 24
<PAGE>
TABLE OF CONTENTS
================================================================================
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Policies and Techniques................................................ 26
Convertible Securities.......................................................... 26
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions... 26
Loans of Portfolio Securities................................................... 26
Repurchase Agreements........................................................... 27
Reverse Repurchase Agreements................................................... 27
Rule 144A Securities............................................................ 27
Other Investments............................................................... 27
Investment Restrictions........................................................... 27
Management of the Fund............................................................ 29
Principal Shareholders............................................................ 29
Investment Advisory and Other Services
Investment Advisory Agreement................................................... 29
Expenses of the Fund............................................................ 30
Administrator................................................................... 30
Underwriter..................................................................... 31
Portfolio Transactions and Brokerage.............................................. 31
Portfolio Turnover................................................................ 31
Determination of Net Asset Value.................................................. 31
Taxes............................................................................. 32
Performance Information
General......................................................................... 34
Total Return Calculation........................................................ 34
Performance and Advertisements.................................................. 35
Other Information................................................................. 35
Financial Statements.............................................................. 36
</TABLE>
Page 25
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Prospectus concerning
a description of securities and investment practices of the Fund.
The investment practices described below, except for the discussion of portfolio
loan transactions, are not fundamental and may be changed by the Board of
Directors without the approval of the shareholders of the Fund. Shareholders
will, however, be notified within thirty (30) days of any changes in the
investment policies.
CONVERTIBLE SECURITIES
- ----------------------
The Fund may invest in convertible securities. Common stock occupies the most
junior position in a company's capital structure. Convertible securities
entitle the holder to exchange the securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time and to receive interest or dividends until the holder
elects to convert. The provisions of any convertible security determine its
ranking in a company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings are
subordinated to the claims of other creditors, and are senior to the claims of
preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as with a fixed-income security. If the
conversion value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, may sell at some
premium over its conversion value. At such times the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS
- -----------------------------------------------------------------------------
Although the Fund may purchase securities on a when-issued basis, or purchase or
sell securities on a forward commitment basis or purchase securities on a
delayed delivery basis, the Fund does not have the current intention of doing so
in the foreseeable future. The Fund will normally realize a capital gain or
loss in connection with these transactions.
When the Fund purchases securities on a when-issued, delayed delivery or forward
commitment basis, the Fund's custodian will maintain in a segregated account:
cash, U.S. Government securities or other high grade liquid debt obligations
having a value (determined daily) at least equal to the amount of the Fund's
purchase commitments. In the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding. These procedures are
designed to ensure that the Fund will maintain sufficient assets at all times to
cover its obligations under when-issued purchases, forward commitments and
delayed delivery transactions.
LOANS OF PORTFOLIO SECURITIES
- -----------------------------
The Fund may lend portfolio securities to broker-dealers and financial
institutions, although at the present time it has no intention of lending
portfolio securities in the foreseeable future. The Fund may lend portfolio
securities provided: (1) the loan is secured continuously by collateral marked-
to-market daily and maintained in an amount at least equal to the current market
value of the securities loaned; (2) the Fund may call the loan at any time and
receive the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned will not at any time exceed 33% of the total assets of the
Fund.
Collateral will consist of U.S. Government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Fund will only enter into portfolio loans
after a review of all pertinent facts by the Adviser, under the supervision of
the Board of Directors, including the creditworthiness of the borrower. Such
reviews will be monitored on an ongoing basis.
Page 26
<PAGE>
REPURCHASE AGREEMENTS
- ---------------------
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement). Repurchase
agreements are considered loans by the Fund under the Investment Company Act of
1940, as amended (the "1940 Act").
The financial institutions with which the Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Adviser. The Adviser will continue to monitor the creditworthiness of the
seller under a repurchase agreement, and will require the seller to maintain
during the term of the agreement the value of the securities subject to the
agreement at not less than the repurchase price. The Fund will only enter into
a repurchase agreement where the market value of the underlying security,
including interest accrued, will be at all times equal to or exceed the value of
the repurchase agreement.
REVERSE REPURCHASE AGREEMENTS
- -----------------------------
The Fund may enter into reverse repurchase agreements but it does not currently
have the intention of doing so in the foreseeable future. Reverse repurchase
agreements involve the sale of securities held by the Fund pursuant to the
Fund's agreement to repurchase the securities at an agreed upon price, date and
rate of interest. Such agreements are considered to be borrowings under the
1940 Act, and may be entered into only for temporary or emergency purposes.
While reverse repurchase transactions are outstanding, the Fund will maintain in
a segregated account cash, U.S. Government securities or other liquid, high
grade debt securities in an amount at least equal to the market value of the
securities, plus accrued interest, subject to the agreement. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price of the securities the Fund is obligated to
repurchase.
RULE 144A SECURITIES
- --------------------
The Fund may invest in securities that are exempt under SEC Rule 144A from the
registration requirements of the Securities Act of 1933. Those securities,
purchased under Rule 144A, are traded among qualified institutional investors
and are subject to the Fund's limitation on illiquid investment.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The
Fund will limit its investment in securities of issuers which the Fund is
restricted from selling to the public without registration under the Securities
Act of 1933 to no more than 10% of the Fund's total assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Fund's Board of Directors.
OTHER INVESTMENTS
- -----------------
Subject to prior disclosure to shareholders, the Board of Directors may, in the
future, authorize the Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the Fund's investment objective and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies and may not
be changed without the approval of a majority of the outstanding voting shares
(as defined in the 1940 Act) of the Fund. Unless otherwise indicated, all
percentage limitations listed below apply to the Fund only at the time of the
transaction. Accordingly, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in the percentage which results from
a relative change in values or from a change in the Fund's total assets will not
be considered a violation.
Except as set forth under "Investment Objectives and Policies" and "Investment
Practices" in the Prospectus, the Fund may not:
(1) Act as an underwriter of securities, except that, in connection with
the disposition of a security, thee Fund may be deemed to be an
"underwriter" as that term is defined in the Securities Act of 1933;
Page 27
<PAGE>
(2) Purchase or sell real estate (but this restriction shall not prevent
the Fund from investing directly or indirectly in portfolio
instruments secured by real estate or interests therein or acquiring
securities of real estate investment trusts or other issuers that deal
in real estate), interests in oil, gas and/or mineral exploration or
development programs or leases. However, in order to comply with the
"blue sky" restrictions of certain states, the Fund will limit its
purchases of readily marketable real estate investment trusts to 10%
of its total assets, and the Fund will not invest in real estate
limited partnerships;
(3) Purchase or sell commodities or commodity contracts;
(4) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with the Fund's
investment objectives and policies, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or
broker-dealers;
(5) Borrow money or issue senior securities, except that the Fund may
borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets, except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts
borrowed or 5% of the value of the total assets of the Fund at the
time of its borrowing. All borrowings will be done from a bank and
asset coverage of at least 300% is required;
(6) Sell securities short or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of
transactions;
(7) Invest in puts, calls, straddles or combinations thereof;
(8) Participate on a joint or joint and several basis in any securities
trading account;
(9) Make investments in securities for the purpose of exercising control;
or
(10) Purchase the securities of any one issuer if, immediately after such
purchase, the Fund would own more than 25% of the outstanding voting
securities of such issuer.
(11) Invest more than 25% of the value of its total assets (taken at market
value at the time of each investment) in securities of issuers whose
principal business activities are in the same industry. For this
purpose, "industry" does not include the U.S. Government, its agencies
and instrumentalities;
(12) Purchase securities of issuers having less than three years'
continuous operation, if such purchase would cause the value of the
Fund's investments in all such issuers to exceed 5% of the value of
its total assets. Such three year periods shall include the operation
of any predecessor company or companies.
Although not considered fundamental, in order to comply with certain state "blue
sky" restrictions, the Fund will not invest: (1) more than 5% of its net assets
in warrants, including within that amount no more than 2% in warrants which are
not listed on the New York or American Stock Exchanges, except warrants acquired
as a result of its holdings of common stocks; and (2) purchase or retain the
securities of any issuer if, to the knowledge of the Fund, any officer or
director of the Fund or of its investment manager owns beneficially more than
1/2 of 1% of the outstanding securities of such issuer, and such officers and
directors of the Fund or of its investment manager who own more than 1/2 of 1%,
own in the aggregate, more than 5% of the outstanding securities of such issuer.
Page 28
<PAGE>
MANAGEMENT OF THE FUND
For the fiscal year ended December 31, 1995, the directors received the
following compensation:
COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGGREGATE COMPENSATION FROM TOTAL COMPENSATION FROM
REGISTRANT REGISTRANT AND FUND COMPLEX
<S> <C> <C>
Robert G. Hagstrom, Jr.* $ 0.00 $ 0.00
Allan S. Mostoff, Esq.* $2,600 $2,600
Robert J. Coleman, Jr. $2,600 $2,600
Joan Lamm-Tennant $2,600 $2,600
</TABLE>
* This director is considered an "Interested Person" of the Fund as defined
under the 1940 Act.
Directors who are not officers, directors or employees of the Adviser are
entitled to receive an annual retainer of $4,000 per annum and $200 per Board
meeting and committee meeting attended, as well as reimbursement for all
out-of-pocket expenses relating to attendence at such meetings.
PRINCIPAL SHAREHOLDERS
As of April 1, 1996, the officers and Directors of the Fund, together as a
group, owned beneficially 13,099.868 shares (2.70%) of the Fund. As of April 1,
1996, the following persons owned of record or beneficially more than 5% of the
outstanding voting shares of the Fund:
<TABLE>
<CAPTION>
NAME & ADDRESS NUMBER OF SHARES PERCENTAGE
-------------- ---------------- ----------
<S> <C> <C>
George H. Nofer 50,061.688 10.32%
Philadelphia, PA
Charles Schwab & Co., Inc. 24,289.503 5.01%
San Francisco, CA
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT
- -----------------------------
The advisory services provided by Lloyd, Leith & Sawin, Inc. (the "Adviser"),
and the fees received by it for such services, are described in the Prospectus.
As stated in the Prospectus, the Adviser may from time to time voluntarily waive
its advisory fees with respect to the Fund. In addition, if the total expenses
borne by the Fund in any fiscal year exceed the expense limitations imposed by
applicable state securities regulations, the Adviser will bear the amount of
such excess to the extent required by such regulations.
Page 29
<PAGE>
The Adviser has agreed to waive its advisory fee in an amount equal to the total
expenses of the Fund for any fiscal year which exceeds the permissible limits
applicable to the Fund in any state in which its shares are then qualified for
sale. At the present time, the most restrictive state expense limitation limits
a fund's annual expenses (excluding interest, taxes, distribution expense,
brokerage commissions and extraordinary expenses, and other expenses subject to
approval by state securities administrators) to 2.5% of the first $30 million of
its average daily net assets, 2.0% of the next $70 million of its average daily
net assets and 1.5% of its average daily net assets in excess of $100 million.
Under its investment advisory agreement (the "Investment Advisory Agreement"),
the Adviser is not liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the performance of the Investment
Advisory Agreement, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard of its duties and obligations thereunder.
Under its terms, the Investment Advisory Agreement will continue from year to
year thereafter, provided its continuance is approved at least annually by the
vote of the holders of at least a majority of the outstanding shares of the
Fund, or by the Directors of the Fund. The Investment Advisory Agreement is
terminable with respect to the Fund by vote of the Board of Directors or by the
holders of a majority of the outstanding voting securities of the Fund, at any
time without penalty, on 60 days' written notice to the Adviser. The Adviser may
also terminate its advisory relationship with respect to the Fund on 60 days'
written notice to the Fund. The Investment Advisory Agreement terminates
automatically in the event of its assignment.
For the period April 17, 1995 (commencement of operations) through December 31,
1995, the Adviser was entitled to receive advisory fees of $144,067 of which it
retained $15,371 and reimbursed the Fund $128,696.
EXPENSES OF THE FUND
- --------------------
Under the Investment Advisory Agreement, the Fund pays the following expenses:
(1) the fees and expenses of the Fund's disinterested directors; (2) the
salaries and expenses of the Fund's officers or employees who are not affiliated
with the Adviser; (3) interest expenses; (4) taxes and governmental fees; (5)
brokerage commissions and other expenses incurred in acquiring or disposing of
portfolio securities; (6) the expenses of registering and qualifying shares for
sale with the SEC and with various state securities commissions; (7) accounting
and legal costs; (8) insurance premiums; (9) fees and expenses of the Fund's
custodian, administrator and transfer agent and any related services; (10)
expenses of obtaining quotations of the Fund's portfolio securities and of
pricing the Fund's shares; (11) expenses of maintaining the Fund's legal
existence and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses; and
(13) fees and expenses of membership in industry organizations.
ADMINISTRATOR
- -------------
Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428 (the
"Administrator"), provides certain administrative services to the Fund pursuant
to an administrative services agreement (the "Administrative Services
Agreement").
Under the Administrative Services Agreement, the Administrator: (1) coordinates
with the Custodian and Transfer Agent and monitors the services they provide to
the Fund; (2) coordinates with and monitors any other third parties furnishing
services to the Fund; (3) provides the Fund with necessary office space,
telephones and other communications facilities and personnel competent to
perform administrative and clerical functions; (4) supervises the maintenance by
third parties of such books and records of the Fund as may be required by
applicable federal or state law; (5) prepares and, after approval by the Fund,
files and arranges for the distribution of proxy materials and periodic reports
to shareholders of the Fund as required by applicable law; (6) prepares and,
after approval by the Fund, arranges for the filing of such registration
statements and other documents with the SEC and other federal and state
regulatory authorities as may be required by applicable law; (7) reviews and
submits to the officers of the Fund for their approval invoices or other
requests for payment of the Fund's expenses and instructs the Custodian to issue
checks in payment thereof; and (8) takes such other action with respect to the
Fund as may be necessary in the opinion of the Administrator to perform its
duties under the agreement.
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<PAGE>
As compensation for services performed under the Administrative Services
Agreement, the Administrator receives a fee payable monthly at an annual rate
(as described in the Prospectus) multiplied by the average daily net assets of
the Fund. For the period April 17, 1995 (commencement of operations) through
December 31, 1995, the Administrator was entitled to receive administrative fees
of $48,482 of which it retained $46,982 and waived $1,500 of such fees.
UNDERWRITER
- -----------
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA
19428, acts as an underwriter of the Fund's shares for the purpose of
facilitating the registration of shares of the Fund under state securities laws
and to assist in sales of shares pursuant to an underwriting agreement (the
"Underwriting Agreement") approved by the Fund's Directors.
In this regard, FPBS has agreed at its own expense to qualify as a broker-dealer
under all applicable federal or state laws in those states which the Fund shall
from time to time identify to FPBS as states in which it wishes to offer its
shares for sale, in order that state registrations may be maintained for the
Fund.
FPBS is a broker-dealer registered with the U.S. Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc. and charges no fee for providing this service.
The Fund does not impose any sales loads nor does it bear any fees pursuant to a
Rule 12b-1 Plan. The Fund shall continue to bear the expenses of all filing or
registration fees incurred in connection with the registration of shares under
state securities laws.
The Underwriting Agreement may be terminated by either party upon 60 days' prior
written notice to the other party, and if so terminated, the prorata portion of
the unearned fee will be returned to the Adviser.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the Fund
and for effecting portfolio transactions and the negotiation of commissions, if
any, paid on such transactions. Fixed-income securities and many equity
securities in which the Fund invests are traded in over-the-counter markets.
These securities are generally traded on a net basis with dealers acting as
principal for their own accounts without a stated commission. In over-the-
counter transactions, orders are placed directly with a principal market-maker
unless a better price and execution can be obtained by using a broker. Brokerage
commissions are paid on transactions in listed securities, futures contracts and
options thereon. The Adviser is responsible for effecting portfolio transactions
and will do so in a manner deemed fair and reasonable to the Fund. The Fund does
not participate in soft dollar arrangements. For the period April 17, 1995
(commencement of operations) through December 31, 1995, the Fund incurred
aggregate brokerage commissions of $6,042.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Fund is calculated by dividing the lesser of
purchases or sales of portfolio investments for the reporting period by the
monthly average value of the portfolio investments owned during the reporting
period. The calculation excludes all securities whose maturities or expiration
dates at the time of acquisition are one year or less. Portfolio turnover may
vary greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of shares and by requirements which
enable the Fund to receive favorable tax treatment. In any event, the annual
portfolio turnover for the Fund is not expected to exceed 25%. This relatively
low portfolio turnover rate reflects the Adviser's buy and hold strategy for the
portfolio securities held by the Fund.
DETERMINATION OF NET ASSET VALUE
A more complete discussion of the Fund's determination of net asset value is
contained in the Prospectus. Generally, the net asset value of the Fund will be
determined as of the close of trading on each day the New York Stock Exchange
Page 31
<PAGE>
is open for trading. The Fund does not determine net asset value on days that
the New York Stock Exchange is closed and at other times described in the
Prospectus. The New York Stock Exchange is closed on New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. Additionally, if any of the aforementioned holidays falls on
a Saturday, the New York Stock Exchange will not be open for trading on the
preceding Friday and when such holiday falls on a Sunday, the New York Stock
Exchange will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or the yearly
accounting period.
TAXES
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
order to so qualify for any taxable year, the Fund generally must, among other
things, (i) derive at least 90% of its gross income from dividends, interest,
payments with respect to certain securities loans and gains from the sale or
other disposition of stock, securities of foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (ii) derive less than 30% of its gross income from gains from the
sale or other disposition of securities or certain futures, options or forward
contracts thereon held for less than three months; (iii) distribute at least 90%
of its dividend, interest and certain other taxable income each year; and (iv)
at the end of each fiscal quarter maintain at least 50% of the value of its
total assets in cash, U.S. Government securities, securities of other regulated
investment companies, and other securities, with such other securities limited,
in respect of any one to each issuer, to not more than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and have no more than 25% of its assets invested in the securities (other than
those of the U.S. Government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades or businesses.
To the extent the Fund qualifies for treatment as a regulated investment
company, it generally will not be subject to federal income tax on income paid
to shareholders in the form of dividends or capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of the
Fund's "required distributions" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of the Fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. The Fund intends to make distributions sufficient to avoid imposition of
the excise tax. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund during October, November or
December to shareholders of record during such month and paid during January of
the following year. Such distributions will be taxable in the year they are
declared, rather than the year in which they are received.
Shareholders generally will be subject to federal income taxes on distributions
made by the Fund whether received in cash or additional shares of the Fund.
Distributions of net investment income and net short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of net
investment income may be eligible for the corporate dividends-received
deduction to the extend attributable to the Fund's qualifying dividend income.
However, the alternative minimum tax applicable to corporations may reduce the
benefit of the dividends-received deduction. Distributions of net capital
gains, if any, designated by the Fund as capital gain dividends, will be taxable
to shareholders as long-term capital gains, without regard to how long a
shareholder has held shares of the Fund, and are not eligible for the dividends
received deduction. A loss on the sale of shares held for six months or less
will be treated as a long-term capital loss to the extent of any capital gain
dividend paid to the shareholder with respect to such shares.
Certain of the debt securities acquired by the Fund may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Generally, the amount
of the original issue discount is treated as interest income and is included in
income over the term of the debt security, even though payment of the amount is
not received until a later time, usually when the debt security matures.
Some debt securities may be purchased by the Fund at a discount which exceeds
the original issue discount on such debt securities, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any debt security having market discount will be
treated as ordinary income to the extent
Page 32
<PAGE>
it does not exceed the accrued market discount on such debt security. Generally,
market discount accrues on a daily basis for each day the debt security is held
by the Fund at a constant rate over the time remaining to the debt security's
maturity. In the case of certain short-term debt securities with market
discount, the amount of the market discount is included in income over the
remaining term of the debt security, even though payment of the amount is not
received until a later time, usually when the debt security matures.
The Fund may invest in stocks of foreign companies that are classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
company is classified as a PFIC if at least one-half of its assets constitute
investment-type assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an "excess distribution" received with respect to
PFIC stock is treated as having been realized ratably over the period during
which the Fund held the PFIC stock. The Fund itself will be subject to tax on
the portion, if any, of the excess distribution that is allocated to the Fund's
holding period in prior taxable years (and an interest factor will be added to
the tax as if the tax had actually been payable in such prior taxable years)
even though the Fund distributed the corresponding income to shareholders.
Excess distributions include any gain from the sale of PFIC stock as well as
certain distributions from a PFIC. All excess distributions are taxable as
ordinary income.
The Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, the Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. If this election is made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply.
Alternatively, the Fund may be able to elect to mark to market its PFIC stock,
resulting in the stock being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income, and any resulting loss would not be recognized. If this
election were made, the special rules described above with respect to excess
distributions would still apply. The Fund's intention to qualify annually as
regulated investment company may limit its elections with respect to PFIC stock.
Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject the Fund itself to tax
on certain income from PFIC stock, the amount that must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a Fund that did not invest in PFIC stock.
Under the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency,
gains or losses attributable to fluctuations in the value of foreign currency
between the date of acquisition of the security and the date of disposition also
are treated as ordinary gain or loss. These gains and losses, referred to under
the Code as "Section 988" gains and losses, may increase or decrease the amount
of the Fund's net investment income to be distributed to its shareholders as
ordinary income. For example, fluctuations in exchange rates may increase the
amount of income that the Fund must distribute in order to qualify for treatment
as a regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may
decrease or eliminate income available for distribution. If Section 988 losses
exceed other net investment income during a taxable year, the Fund would not be
able to make ordinary dividend distributions, or distributions made before the
losses were realized would be recharacterized as return of capital to
shareholders for federal income tax purposes, rather than as an ordinary
dividend, reducing each shareholder's basis in his Fund shares.
Upon the sale or exchange of shares in the Fund, a shareholder will realize a
taxable gain or loss depending upon his basis in the shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands, and generally will be long-term if the shareholder's
holding period for the shares is more than one year and generally otherwise will
be short-term. Any loss realized on a sale or exchange will be disallowed to
the extent that the shares disposed of are replaced (including replacement
through the reinvesting of dividends and capital gain distributions in the Fund)
within a period of 61 days beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired
will be adjusted to reflect the disallowed loss.
Page 33
<PAGE>
The Fund will notify shareholders each year of the amount of dividends and
distributions, including the amount of any distribution of capital gain
dividends, and the portion of its dividends which may be eligible for the 70%
dividend-received deduction.
The above discussion and the related tax discussion in the Prospectus are
general in nature and are not intended to be complete discussions of all
applicable federal tax consequences relating to an investment in the Fund. The
law firm of Dechert Price & Rhoads has expressed no opinion in respect thereof.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local taxes.
The foregoing discussion relates solely to U.S. federal income tax law. Non-
U.S. investors should consult their tax advisors concerning the tax consequences
of ownership of shares of the Fund, including the possibility that distributions
may be subject to a 30% U.S. withholding tax (or a reduced rate of withholding
provided by treaty).
PERFORMANCE INFORMATION
GENERAL
- -------
From time to time, the Fund may include general comparative information, such as
statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Fund may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of the Fund.
From time to time, the total return of the Fund may be quoted in advertisements,
shareholder reports or other communications to shareholders.
TOTAL RETURN CALCULATION
- ------------------------
Current yield and total return quotations used by the Fund are based on
standardized methods of computing performance mandated by SEC Rules. As the
following formula indicates, the average annual total return is determined by
multiplying a hypothetical initial purchase order of $1,000 by the average
compound rate of return (including capital appreciation/depreciation and
dividends and distributions paid and reinvested) for the stated period less any
fees charged to all shareholder accounts and annualizing the result. The
calculation assumes that all dividends and distributions are reinvested at the
net asset value on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and
deduction of applicable charges and fees. This calculation can be expressed as
follows:
Average Annual Total Return = P(1+T)/n/ = ERV
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed
in terms of years.
The Fund computes its aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
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<PAGE>
Aggregate Total Return = [ (ERV) - 1 ]
---
P
Where: ERV =ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P =hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. Based upon the foregoing
calculations, the aggregate total return for the Fund for the period April 17,
1995 (commencement of operations) through December 31, 1995 was 12.29%.
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
PERFORMANCE AND ADVERTISEMENTS
- ------------------------------
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Fund's
performance may also be compared to the average performance of its Lipper
category.
The Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. which ranks funds on the basis of historical risk and
total return. Morningstar's rankings range from five stars (highest) to one
star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a fund as a weighted average for three, five and ten
year periods. Ranks are not absolute or necessarily predictive of future
performance.
In assessing such comparisons of total return, or volatility, an investor should
keep in mind that the composition of the investments in the reported indices and
averages is not identical to those of the Fund, that the averages are generally
unmanaged, and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its figures.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not contain all
the information included in the Registration Statement filed with the SEC under
the Securities Act of 1933 with respect to the securities offered by the
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Statement of Additional Information pursuant to the
rules and regulations of the SEC. The Registration Statement including the
exhibits filed therewith may be examined at the office of the SEC in Washington,
D.C.
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract 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
forms a part. Each such statement is qualified in all respects by such
reference.
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<PAGE>
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, NY 10286 is
custodian of the Fund's assets pursuant to a custodian agreement. Under the
custodian agreement, The Bank of New York (i) maintains a separate account or
accounts in the name of the Fund (ii) holds and transfers portfolio securities
on account of the Fund, (iii) accepts receipts and makes disbursements of money
on behalf of the Fund, (iv) collects and receives all income and other payments
and distributions on account of the Fund's securities and (v) makes periodic
reports to the Board of Directors concerning the Fund's operations.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, PA 19103 have been selected as the independent accountants for
the Fund. Coopers & Lybrand L.L.P. provide audit and tax services. The books
of the Fund will be audited at least once each year by Coopers & Lybrand L.L.P.
REPORTS TO SHAREHOLDERS. Shareholders will receive unaudited semi-annual
reports describing the Fund's investment operations and annual financial
statements audited by independent certified public accountants. Inquiries
regarding the Fund may be directed to the Adviser at (215) 665-9644.
FINANCIAL STATEMENTS
The Fund's Financial Statements, including the notes thereto, dated as of
December 31, 1995, which have been audited by Coopers & Lybrand L.L.P., are
incorporated by reference from the Fund's 1995 Annual Report to
shareholders.
Page 36
<PAGE>
FOCUS TRUST, INC.
FORM N-1A
PART C OTHER INFORMATION
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
- --------------------------------------------
(a) Financial Statements:
Included in Part A:
(1) The Financial Highlights for the period from April 17, 1995
(commencement of operation) through December 31, 1995 (audited).
Incorporated by reference in Part B.
(1) Schedule of Investments at December 31, 1995 (audited).
(2) Statement of Assets and Liabilities at December 31, 1995
(audited).
(3) Statement of Operations for the period ended December 31, 1995
(audited).
(4) Statement of Changes in Net Assets for the period of April 17, 1995
(commencement of operations) to December 31, 1995 (audited).
(5) Notes to Financial Statements.
(6) Financial Highlights (audited).
(7) Report of Independent Accountants
(b) Exhibits filed pursuant to Form N-1A:
(1) Copies of Charter -- Articles of Incorporation are filed herewith
electronically, previously filed as Exhibit No. (1) of Registration
Statement No. 33-89090 filed February 3, 1995.
(2) Copies of existing By-Laws -- By-Laws are filed herewith
electronically, previously filed as Exhibit No. (2) of Registration
Statement No. 33-89090 filed February 3, 1995.
(3) Copies of any voting trust agreement -- Not Applicable.
(4) Copies of all instruments defining the rights of holders of the
securities-- Not Applicable - Registrant proposes to maintain
investments as non-certificated book entry shares.
(5) Copies of all investment advisory contracts -- Investment Advisory
Agreement dated April 4, 1995 between Registrant and Lloyd, Leith &
Sawin is filed herewith electronically, previously filed as
Exhibit (5) of Pre-Effective Amendment No. 2 to Registration Statement
No. 33-89090 filed April 10, 1995.
(6) Copies of each underwriting or distribution contract -- Underwriting
Agreement dated April 4, 1995 between Registrant and Fund/Plan Broker
Services, Inc. is filed herewith electronically, previously filed as
Exhibit (6) of Pre-Effective Amendment No. 2 to Registration Statement
No. 33-89090 filed April 10, 1995.
(7) Copies of all bonus, profit sharing, pension or other similar
contracts --Not Applicable.
(8) Copies of all custodian agreements
(a) Custody Administration and Agency Agreement dated April 22, 1996
between Registrant and Fund/Plan Services, Inc. is filed herewith
electronically.
(b) Custody Agreement dated April 22, 1996 between the Registrant and
The Bank of New York is filed herewith electronically.
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<PAGE>
(9) Copies of all other material contracts not made in the ordinary course
of business which are to be performed.
(a) Shareholder Services Agreement between the Registrant and
Fund/Plan Services, Inc. dated April 4, 1995 is filed herewith
electronically, previously filed as Exhibit (9)(a) of Pre-
Effective Amendment No. 2 to Registration Statement No. 33-89090
filed April 10, 1995.
(b) Administrative Services Agreement between the Registrant and
Fund/Plan Services, Inc. dated April 4, 1995 is filed herewith
electronically, previously filed as Exhibit (9)(b) of
Pre-Effective Amendment No. 2 to Registration Statement No.
33-89090 filed April 10, 1995.
(c) Accounting Services Agreement between the Registrant and
Fund/Plan Services, Inc. dated April 4, 1995 is filed herewith
electronically, previously filed as Exhibit (9)(b) of Pre-
Effective Amendment No. 2 to Registration Statement No. 33-89090
filed April 10, 1995.
(10) Opinion and Consent of Counsel as to the legality of the
securities to be issued -- Opinion and Consent of Counsel is
incorporated by reference to Registrant's Rule 24f-2 Notice filed
electronically on February 27, 1996.
(11) Copies of any other opinions, appraisals or rulings --
Consent of Independent Auditors - Filed herewith.
(12) All financial statements omitted from Item 23. -- Not Applicable.
(13) Copies of any agreements or understandings made in consideration for
providing the initial capital between or among the Registrant is filed
herewith electronically, previously filed as Exhibit (13) of
Pre-Effective Amendment No. 2 to Registration Statement No. 33-89090
filed April 10, 1995.
(14) Copies of the model plan -- Form of Individual Retirement Account
(I.R.A.) is filed herewith electronically.
(15) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 -- Not Applicable.
(16) Schedule for Computation of Performance Quotations -- Filed herewith
electronically.
(18) Directors' and Officers Powers of Attorney: (a) Robert G. Hagstrom,
Jr.; (b) Allan S. Mostoff, Esq.; (c) Joan Lamm-Tennant; (d) Robert
J. Coleman, Jr.; and (e) John S. Lloyd are filed herewith
electronically, previously filed as. Exhibit (18) of Pre-Effective
Amendment No. 2 to Registration Statement No. 33-89090 filed April 10,
1995.
(27) Electronic Filers -- Financial Data Schedule is filed herewith
electronically.
Item 25. Persons Controlled by or under Common Control with Registrant.
- ------------------------------------------------------------------------
None.
-----
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<PAGE>
Item 26. Number of Holders of Securities as of April 1, 1996.
- ----------------------------------------------------------------
652
Item 27. Indemnification.
- --------------------------
Reference is made to Article VII of the Registrant's Articles of
Incorporation and Article VI of the Registrant's By-Laws which are filed as
exhibits 1 and 2 respectively, and are incorporated by reference herein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant by the Registrant pursuant to the Fund's Articles of
Incorporation, its By-Laws or otherwise, the Registrant is aware that in
the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by directors, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or proceeding) is
asserted by such directors, officers or controlling persons in connection
with shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Adviser.
- ----------------------------------------------------
Lloyd, Leith & Sawin, Inc., Two Penn Center Plaza, Suite 1810,
Philadelphia, PA 19102 provides investment advisory services to individual
and institutional investors, and as of December 31, 1995 had approximately
$125 million in assets under management.
For information as to any other business, vocation or employment of a
substantial nature in which each Director or officer of the Registrant's
investment adviser has been engaged for his own account or in the capacity
of Director, officer, employee, partner or trustee, reference is made to
the Form ADV (File #801-7341) filed by it under the Investment Advisers Act
of 1940.
Item 29. Principal Underwriter.
- --------------------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter
for the Registrant's securities, currently acts as principal
underwriter for the following entities:
The Brinson Funds
CT&T Funds
Fairport Funds
Farrell Alpha Strategies
First Mutual Funds.
Focus Trust, Inc.
The Homestate PA Growth Fund
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
(b) The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:
Page 39
<PAGE>
<TABLE>
<CAPTION>
POSITION POSITION AND
NAME AND PRINCIPAL AND OFFICES OFFICES WITH
BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT
------------------ ---------------- ------------
<S> <C> <C>
Kenneth J. Kempf Director and None
2 W. Elm Street President
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and None
2 W. Elm Street Principal
Conshohocken, PA ###-##-####
Rocco C. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Joseph M. O'Donnell Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
</TABLE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
- -------------------------------------------
All records described in Section 31(a) of the 1940 Act and the Rules 17 CFR
270.31a-1 to 31a-31 promulgated thereunder, are maintained by the Fund's
Investment Adviser, Lloyd, Leith & Sawin, Inc., Two Penn Center Plaza,
Suite 1810, Philadelphia, PA 19102, except for those maintained by the
Fund's Custodian, The Bank of New York and the Fund's Administrator,
Transfer Agent and Fund Account Services Agent, Fund/Plan Services, Inc. 2
W. Elm Street, Conshohocken, PA 19428.
Item 31. Management Services.
- ------------------------------
There are no management-related service contracts not discussed in Part A
or Part B.
Item 32. Undertakings.
- -----------------------
(a) Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of
any director or directors when requested in writing to do so by the
record
Page 40
<PAGE>
holders of not less than 10 percent of the Registrant's outstanding
shares and to assist its shareholders in accordance with the
requirements of Section 16(c) of the Investment Company Act of 1940
relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report for the fiscal year ended December 31, 1995 upon request and
without charge.
Page 41
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485 (b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Philadelphia, and Commonwealth of Pennsylvania
on the 25th day of April, 1996.
FOCUS TRUST, INC.
-----------------------------
Name of Registrant
By: /s/ Robert G. Hagstrom, Jr., CFA
-----------------------------------
Robert G. Hagstrom, Jr., CFA
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Focus Trust, Inc. has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Robert G. Hagstrom, Jr., CFA Director, President and 4/25/96
- ----------------------------------
Robert G. Hagstrom, Jr., CFA Principal Executive Officer
/s/ Allan S. Mostoff, Esq. Director 4/25/96
- ----------------------------------
Allan S. Mostoff, Esq.
/s/ Robert J. Coleman, Jr. Director 4/25/96
- ----------------------------------
Robert J. Coleman, Jr.
/s/ Joan Lamm-Tennant Director 4/25/96
- ----------------------------------
Joan Lamm-Tennant
/s/ John S. Lloyd Vice President, Secretary, 4/25/96
- ----------------------------------
John S. Lloyd Principal Accounting and
Financial Officer
</TABLE>
Page 42
<PAGE>
FOCUS TRUST, INC.
INDEX TO EXHIBITS TO FORM N-1A
<TABLE>
<CAPTION>
Exhibit Description of Sequentially
Number Exhibit Numbered Page
<S> <C> <C>
1.1 Underwriting Agreement........................................................................ 61
3.1 Article of Incorporation...................................................................... 44
3.2 By-Laws....................................................................................... 51
10.1 Investment Advisory Agreement................................................................. 59
10.2 Custodian Administration and Agency Agreement................................................. 67
10.3 Custodian Agreement........................................................................... 72
10.4 Transfer Agent Services Agreement............................................................. 93
10.5 Administration Services Agreement............................................................ 102
10.6 Accounting Services Agreement................................................................ 112
11 Schedule for Computations and Total Return Formula........................................... 141
23 Consent of Independent Auditors.............................................................. 126
24 Powers of Attorney........................................................................... 142
99.1 Letters of Understanding Relating to Initial Capital......................................... 127
99.2 Form of Individual Retirement Plan........................................................... 130
</TABLE>
Page 43
<PAGE>
UNDERWRITING AGREEMENT Exhibit (1)
This Agreement, dated as of the 4th day of April , 1995,
------------ ------------
made by and between Focus Trust, Inc. ("Focus Trust"), a corporation duly
-----------------
organized under the laws of the state of Maryland and operating as a registered
investment company under the Investment Company Act of 1940, as amended (the
"Act"); Lloyd, Leith & Sawin, Inc. ("Lloyd Leith"), a registered investment
--------------------------
adviser existing as a corporation duly organized and existing under the laws of
the Commonwealth of Pennsylvania; and Fund/Plan Broker Services, Inc.
-------------------------------
("Fund/Plan"), a corporation duly organized and existing under the laws of the
State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, Focus Trust is authorized by its Articles of Incorporation to
issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "A" attached
hereto, and which Schedule "A" may be amended from time to time by mutual
agreement among the Parties; and
WHEREAS, Lloyd Leith has been appointed investment adviser to Focus Trust;
and
WHEREAS, Fund/Plan is a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement providing
for the distribution by Fund/Plan of the shares of Focus Trust (the "Shares");
NOW, THEREFORE, in consideration of the promises and agreements of the
Parties contained herein and in exchange of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. Appointment.
-----------
Focus Trust hereby appoints Fund/Plan as its exclusive agent for the
distribution of the Shares in the fifty United States of America, the
District of Columbia and Puerto Rico, and Fund/Plan hereby accepts such
appointment under the terms of this Agreement. Focus Trust agrees that it
will not sell any shares to any person except to fill orders for the shares
received through Fund/Plan; provided, however, that the foregoing exclusive
right shall not apply: (a) to shares issued or sold in connection with the
merger or consolidation of any other investment company with Focus Trust or
the acquisition by purchase or otherwise of all or substantially all of the
assets of any investment company or substantially all of the outstanding
shares of any such company by Focus Trust; (b) to shares which may be
offered by Focus Trust to its stockholders for reinvestment of cash
distributed from capital gains or net investment income of Focus Trust; or
(c) to shares which may be issued to shareholders of other funds who
exercise any exchange privilege set forth in Focus Trust's Prospectus.
Notwithstanding any other provision hereof, Focus Trust may terminate,
suspend, or withdraw the offering of the Shares whenever in its sole
discretion, it deems such action to be desirable.
2. Sale and Repurchase of Shares.
-----------------------------
Fund/Plan agrees to provide the services set forth in Schedule "A"
attached, and
(a) Fund/Plan is hereby granted the right as agent for Focus Trust, to
sell Shares to the public against orders therefor at the public
offering price (as defined in sub-paragraph 2.(c) below).
(b) Fund/Plan will also have the right to take, as agent for Focus Trust,
all actions which, in Fund/Plan's judgment, are necessary to carry
into effect the distribution of the Shares.
(c) The public offering price shall be the net asset value of the Shares
then in effect.
(d) The net asset value of the Shares shall be determined in the manner
provided in the then current prospectus and statement of additional
information relating to the Shares and when determined shall be
applicable to all transactions as provided in the prospectus. The net
asset value of the Shares shall be calculated by Focus Trust or by
another entity on behalf of Focus Trust. Fund/Plan shall have no duty
to inquire into or liability for the accuracy of the net asset value
per Share as calculated.
(e) On every sale, Focus Trust shall receive the applicable net asset
value of the Shares promptly.
(f) Upon receipt of purchase instructions, Fund/Plan will transmit such
instructions to Focus Trust or its transfer agent for registration of
the Shares purchased.
(g) Nothing in this Agreement shall prevent Fund/Plan or any affiliated
person (as defined in the Act) of Fund/Plan from acting as underwriter
or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Fund/Plan
or such affiliated person from buying, selling or trading any
securities for its or their own account or for the accounts of others
for whom it or they may be acting; provided, however, that Fund/Plan
expressly agrees that it will not for its own account
Page 61
<PAGE>
purchase any shares of Focus Trust except for investment purposes and
that it will not for its own account sell any such shares except by
redemption of such shares by Focus Trust, and that it will not
undertake in any activities which, in its judgment, will adversely
affect the performance of its obligations to Focus Trust under this
Agreement.
(h) Fund/Plan may repurchase Shares at such prices and upon such terms and
conditions as shall be specified in the Prospectus.
3. Rules of Sale of Shares.
-----------------------
Fund/Plan does not agree to sell any specific number of Shares. Fund/Plan,
as Underwriter for Focus Trust, undertakes to sell Shares on a best efforts
basis and only against orders received therefor.
Focus Trust reserves the right to terminate, suspend or withdraw the sale
of its Shares for any reason deemed adequate by it and Focus Trust reserves
the right to refuse at any time or times to sell any of its Shares to any
person for any reason deemed adequate by it.
4. Rules of NASD.
-------------
(a) Fund/Plan will conform to the Rules of Fair Practice of the NASD and
the securities laws of any jurisdiction in which it directly or
indirectly sells any Shares.
(b) Fund/Plan will require each dealer with whom Fund/Plan has a selling
agreement to conform to the applicable provisions of the Prospectus,
with respect to the public offering price of the Shares, and Fund/Plan
shall not cause Focus Trust to withhold the placing of purchase orders
so as to make a profit thereby.
(c) Focus Trust and Lloyd Leith agree to furnish to Fund/Plan sufficient
copies of any and all: agreements, plans, communications with the
public or other materials which Focus Trust or Lloyd Leith intends to
use in connection with any sales of Shares in adequate time for
Fund/Plan to file and clear such materials with the proper authorities
before they are put in use. Fund/Plan and Focus Trust or Lloyd Leith
may agree that any such material does not need to be filed subsequent
to distribution. In addition, Focus Trust and Lloyd Leith agree not to
use any such materials until so filed and cleared for use by
appropriate authorities as well as by Fund/Plan.
(d) Fund/Plan, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in
order that the Shares may be sold in such states as may be mutually
agreed upon by the Parties.
(e) Fund/Plan shall remain registered with the U.S. Securities and
Exchange Commission and a member of the National Association of
Securities Dealers for the term of this Agreement.
(f) Fund/Plan shall not, in connection with any sale or solicitation of a
sale of the Shares, make or authorize any representative, Service
Organization, broker or dealer to make, any representations concerning
the Shares except those contained in the Prospectus covering the
Shares and in communications with the public or sales materials
approved by Fund/Plan as information supplemental to such Prospectus.
Copies of the Prospectus will be supplied by Focus Trust or Lloyd
Leith to Fund/Plan in reasonable quantities upon request.
5. Records to be Supplied by Focus Trust.
-------------------------------------
Focus Trust shall furnish to Fund/Plan copies of all information, financial
statements and other papers which Fund/Plan may reasonably request for use
in connection with the distribution of the Shares including, but not
limited to, one certified copy of all financial statements prepared for
Focus Trust by its independent public accountants.
6. Expenses.
--------
(a) Focus Trust will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient copies
of the prospectuses and statements of additional information
for distribution to shareholders, and the distribution of same
to the shareholders;
(ii) preparation, printing and distribution of reports and other
communications to shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualification of the Shares for sale in the jurisdictions as
directed by Focus Trust;
(v) maintaining facilities for the issue and transfer of the
Shares;
(vi) supplying information, prices and other data to be furnished by
Focus Trust under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to the
sale or delivery of the Shares
Page 63
<PAGE>
or certificates therefor.
(b) Lloyd Leith will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
7. Term.
----
(a) The term of this Agreement shall commence on the date on which Focus
Trust's registration statement is declared effective by the U.S.
Securities and Exchange Commission ("Effective Date").
(b) This Agreement shall remain in effect for two (2) years from the
Effective Date. This Agreement shall continue thereafter for periods
not exceeding one (1) year if approved at least annually (i) by a vote
of a majority of the outstanding voting securities of each Series or
by a vote of the Board of Directors of Focus Trust, and (ii) by a vote
of a majority of the Directors of Focus Trust who are not interested
persons or parties to this Agreement (other than as Directors of Focus
Trust), cast in person at a meeting called for the purpose of voting
on such approval.
(c) This Agreement (i) may at any time be terminated without the payment
of any penalty, either by a vote of the Directors of Focus Trust or by
a vote of a majority of the outstanding voting securities of each
Series with respect to such Series, on sixty (60) days' written notice
to Fund/Plan; and (ii) may be terminated by Fund/Plan on sixty (60)
days' written notice to Focus Trust with respect to any Series.
(d) This Agreement shall automatically terminate in the event of its
assignment.
8. Indemnification of Fund/Plan by Lloyd Leith.
-------------------------------------------
Lloyd Leith and Focus Trust will indemnify and hold Fund/Plan harmless for
the actions of Lloyd Leith's employees registered with the NASD as
Fund/Plan representatives and will undertake to maintain compliance with
all rules and regulations concerning any and all sales presentations made
by such employees.
9. Liability of Fund/Plan.
----------------------
(a) Fund/Plan, its directors, officers, employees, shareholders and agents
shall not be liable for any error of judgment or mistake of law or for
any loss suffered by Focus Trust in connection with the performance of
this Agreement, except a loss resulting from a breach of Fund/Plan's
obligation pursuant to Section 4 of this Agreement, a breach of
fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of Fund/Plan in the performance of its
obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
(b) Focus Trust agrees to indemnify and hold harmless Fund/Plan against
any and all liability, loss, damages, costs or expenses (including
reasonable counsel fees) which Fund/Plan may incur or be required to
pay hereafter, in connection with any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which Fund/Plan may be involved
as a party or otherwise or with which Fund/Plan may be threatened, by
reason of the offer or sale of Focus Trust shares by persons other
than Fund/Plan or its representatives, prior to the execution of this
Agreement.
(c) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer,
director, trustee, employee or agent of Focus Trust, shall be deemed,
when rendering services to Focus Trust or acting on any business of
Focus Trust (other than services or business in connection with
Fund/Plan's duties hereunder), to be rendering such services to or
acting solely for Focus Trust and not as a director, officer,
employee, shareholder or agent, or one under the control or direction
of Fund/Plan even though receiving a salary from Fund/Plan.
(d) Focus Trust agrees to indemnify and hold harmless Fund/Plan, and each
person, who controls Fund/Plan within the meaning of Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section
20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigative, legal and
other expenses incurred in connection therewith) to which they, or any
of them, may become subject under the Act, the Securities Act, the
Exchange Act or other federal or state law or regulation, at common
law or otherwise insofar as such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in a prospectus, statement of
additional information, supplement thereto, sales literature or other
written information prepared by Focus Trust and furnished by Focus
Trust to Fund/Plan for Fund/Plan's use hereunder, disseminated by
Focus Trust or arise out of or are based upon any
Page 64
<PAGE>
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Such indemnity shall not, however, inure to the benefit of
Fund/Plan (or any person controlling Fund/Plan) on account of any
losses, claims, damages or liabilities (or actions, suits or
proceedings in respect thereof) arising from the sale of the shares of
Focus Trust to any person by Fund/Plan (i) if such untrue statement or
omission or alleged untrue statement or omission was made in the
prospectus, statement of additional information, or supplement, sales
or other literature, in reliance upon and in conformity with
information furnished in writing to Focus Trust by Fund/Plan
specifically for use therein or (ii) if such losses, claims, damages
or liabilities arise out of or are based upon an untrue statement or
omission or alleged untrue statement or omission found in any
prospectus, statement of additional information, supplement, sales or
other literature, subsequently corrected, but, negligently distributed
by Fund/Plan and a copy of the corrected prospectus was not delivered
to such person at or before the confirmation of the sale to such
person.
(e) Fund/Plan shall not be responsible for any damages, consequential or
otherwise, which Lloyd Leith or Focus Trust may experience, due to the
disruption of the distribution of Shares caused by any action arising
out of the actions or inactions of any registered representative or
affiliate of Fund/Plan whose registration is not yet effective.
10. Amendments.
----------
No provision of this Agreement may be amended or modified, in any manner
whatsoever except by a written agreement properly authorized and executed
by the Parties.
11. Section Headings.
----------------
Section and Paragraph headings are for convenience only and shall not be
construed as part of this Agreement.
12. Reports.
-------
Fund/Plan shall prepare reports for the Board of Directors of Focus Trust
on a quarterly basis showing such information as from time to time shall be
reasonably requested by such Board.
13. Severability.
------------
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not affected, and the
rights and obligations of the parties shall be construed and enforced as if
the Agreement did not contain the particular part, term or provision held
to be illegal or invalid provided that the basic agreement is not thereby
substantially impaired.
14. Governing Law.
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania and the venue of any action arising under this Agreement shall
be Montgomery County, Commonwealth of Pennsylvania.
15. Authority to Execute
--------------------
The Parties represent and warrant that the execution and delivery of this
Agreement by the undersigned officers of the Parties has been duly and validly
authorized by resolution of the respective Boards of Directors or each of the
Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of nine type written pages, together with Schedule "A" to be signed
by their duly authorized officers, as of the day and year first above written.
Lloyd Leith & Sawin Focus Trust Inc.
- ------------------- ----------------
____________________________________ _________________________________
By: Robert G. Hagstrom, Jr., By: Robert G. Hagstrom, Jr.,
Principal President
Fund/Plan Broker Services, Inc.
-------------------------------
_________________________________
By: Kenneth J. Kempf,
President
Page 64
<PAGE>
SCHEDULE "A"
============
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"FOCUS TRUST, INC."
This Schedule "A" may be amended from time to time by agreement of the Parties.
Page 65
<PAGE>
April 11, 1995
Mr. Robert G. Hagstrom, Jr., CFA
Lloyd, Leith & Sawin
Two Penn Center Plaza, Suite 1810
Philadelphia, PA 19102
RE: Licensing of Lloyd, Leith & Sawin, Inc. Personnel as Registered
---------------------------------------------------------------
Representatives of Fund/Plan Broker Services, Inc.
--------------------------------------------------
Dear Mr. Hagstrom:
This letter will confirm our agreement concerning the above referenced matter as
follows:
In exchange for payment of the below listed fees by Lloyd, Leith & Sawin, Inc.
Fund/Plan Broker Services, Inc. will sponsor Registered Representatives and
provide literature fulfillment services as follows:
I. Representative Registration
---------------------------
In exchange for the below listed fees, Fund/Plan Broker Services, Inc. makes
initial application for and renews all NASD and state agent registration within
the fifty (50) United States, the District of Columbia and Puerto Rico:
$1,500 per registered representative (1 - 2 states)
$3,000 per registered representative (3 - 30 states)
$4,000 per registered representative (31 - 50 states)
$ 300 additional per registered representative (Puerto Rico)
Note that a portion of this fee is governed by the NASD and not Fund/Plan.
These fees are charged on a calendar year basis and cannot be pro-rated.
Initial fees are due when the first registration expense occurs. Renewal fees
are due by December 10th of the preceding year.
II. Literature Fulfullment Services
-------------------------------
$2.00 per inquiry with Literature Fulfillment Response subject to a
$2,000 per month minimum fee
III. Out of Pocket Expenses
----------------------
Lloyd, Leith & Sawin will reimburse Fund/Plan monthly for all out-of-pocket
expenses, including postage, telecommunications (telephone and facsimile),
special reports, record retention, special transportation and continuing
education costs as incurred.
If this presentation conforms with your understanding of the terms of the
agreement, please indicate so by signing the accompanying copy of this letter
and returning it to me in the accompanying envelope.
If you have any questions or concerns regarding this or any matter concerning
Fund Plan, please do not hesitate to contact Joe O'Donnell of this office at
(610) 834-3465.
Very truly yours,
Kenneth J. Kempf
President
Accepted:
- --------
________________________
Robert G. Hagstrom, Jr., CFA, Principal
Lloyd, Leith & Sawin, Inc.
Page 66
<PAGE>
Exhibit (3.1)
ARTICLES OF INCORPORATION
OF FOCUS TRUST, INC.
ARTICLE I
INCORPORATOR
------------
THE UNDERSIGNED, Joseph M. O'Donnell, Esq., whose post office address is 2 West
Elm Street, Conshohocken, Pennsylvania 19428, being at least eighteen (18) years
of age, does hereby act as incorporator to form a corporation under and by
virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
----
2.1 Name. The name of the corporation is Focus Trust, Inc. (the
----
"Corporation").
2.2 Name Reservation. The Corporation acknowledges that it uses the term
----------------
"Focus Trust" in its corporate name only with the permission of Lloyd, Leith &
Sawin, Inc., a Pennsylvania corporation ("LLS"), the investment adviser to the
Corporation, and agrees that LLS shall control the use of the term "Focus Trust"
by the Corporation. The Corporation further agrees that if LLS, its successors
or assigns should at any time cease to be investment adviser to the Corporation,
the Corporation shall, at the written request of LLS or its successors or
assigns eliminate the term "Focus Trust" from its corporate name and any
materials or documents referring to the Corporation, and will not henceforth use
the term "Focus Trust" in the conduct of the Corporation's business, except to
any extent specifically agreed to by LLS. The Corporation further acknowledges
that LLS reserves the right to grant the non-exclusive right to use the term
"Focus Trust" to any other persons or entities, including other investment
companies, whether now in existence or hereafter created. The provisions of
this paragraph are binding on the Corporation, its successors and assigns and on
its directors, officers, stockholders, creditors and all other persons claiming
under or through it.
ARTICLE III
CORPORATE PURPOSES AND POWERS
-----------------------------
The purpose or purposes for which the Corporation is formed is to act as an
investment company under the federal Investment Company Act of 1940, and to
exercise and enjoy all the powers, rights and privileges granted to, or
conferred upon, corporations by the General Laws of the State of Maryland.
----------------------------------------------------------------------------
STATE OF MARYLAND
-----------------
I hereby certify that this is a true and complete copy of the 14
--
page document on file in this office. DATED: 1-27-95
-------
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
BY: \s\ Shana J. Watson
--------------------
This stamp replaces our previous certification system. Effective 10/84
----------------------------------------------------------------------------
The Corporation shall exercise and enjoy all such powers, rights and privileges
to the extent not inconsistent with these Articles of Incorporation.
Page 44
<PAGE>
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post office address of the principal office of the Corporation in the State
of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the Corporation's resident agent in the
State of Maryland is The Corporation Trust Incorporated, a corporation of the
State of Maryland, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
-------------
5.1 Authorized Shares. The total number of shares of capital stock which the
-----------------
Corporation shall have authority to issue is one hundred million (100,000,000)
shares of the par value of one tenth of one cent ($0.001) per share and of the
aggregate par value of one hundred thousand dollars ($100,000), all of which
shares are designated Common Stock.
5.2 Authorization of Stock Issuance. The Board of Directors may authorize the
-------------------------------
issuance and sale of capital stock of the Corporation, including stock of any
class or series, from time to time in such amounts and on such terms and
conditions, for such purposes and for such amount or kind of consideration as
the Board of Directors shall determine, subject to any limits required by then
applicable law. All shares shall be issued on a fully paid and non-assessable
basis.
5.3 Fractional Shares. The Corporation may issue fractional shares. Any
-----------------
fractional share shall carry proportionately the rights of a whole share,
excepting the right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the right to receive
dividends.
5.4 Power to Classify. The Board of Directors of the Corporation may classify
-----------------
and reclassify any unissued shares of capital stock into one or more additional
or other classes or series as may be established from time to time by setting or
changing in any one or more respects the designations, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of stock, or shares of any existing class or series of stock.
Except as otherwise provided herein, all references herein to capital stock
shall apply without discrimination to the shares of each class or series of
stock. Pursuant to such power, the Board of Directors has initially designated
100,000,000 shares of its capital stock into a single series of shares of
capital stock of the Corporation. The name of this initial series and the
number of shares allocated to it, is as follows:
<TABLE>
<CAPTION>
Number of Shares Initially
--------------------------
Name of Series Allocated
- -------------- ---------
<S> <C>
Focus Trust 100,000,000
</TABLE>
5.5 Classes and Series - General. The relative preferences, conversion and
----------------------------
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of each class or series
of stock of the Corporation shall be as follows, unless otherwise provided in
Articles Supplementary hereto:
(a) Assets Belonging to Series. All consideration received by the
--------------------------
Corporation for the issue or sale of stock of a particular series
(including all classes of such 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 to the terms and conditions of each class (if
any) of that series, and shall be so recorded on the books of account of
the Corporation. Any assets, income, earnings, profits or proceeds thereof,
funds or payments which are not readily attributable to a particular series
shall be allocated to and among any one or more series in such manner and
on such basis as the Board of Directors, in its sole discretion, shall deem
fair and equitable, and items so allocated to a particular series shall
belong to that series. Each such allocation shall be conclusive and binding
upon the stockholders of all series for all purposes.
(b) Liabilities Belonging to Class or Series. The assets belonging to
----------------------------------------
each series shall be charged with the liabilities of the Corporation in
respect of that series and with all expenses, costs, charges and reserves
attributable to that series and shall be so recorded on the books of
account of the Corporation; provided, however, that identified costs,
expenses, charges, reserves and liabilities properly allocable to a
particular class of a series shall be charged to and
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<PAGE>
borne solely by such class. Any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable
as belonging to any particular class or series shall be allocated and
charged to and among any one or more of the classes or series in such
manner and on such basis as the Board of Directors in its sole discretion
deems fair and equitable, and any items so allocated to a particular class
or series shall be charged to, and shall be a liability belonging to, that
class or series. Each such allocation shall be conclusive and binding upon
the stockholders of all classes and series for all purposes.
(c) Income.The Board of Directors shall have full discretion, to the
------
extent not inconsistent with the General Laws of the State of Maryland and
the Investment Company Act of 1940, to determine which items shall be
treated as income and which items shall be treated as capital. Each such
determination shall be conclusive and binding.
(d) Dividends and Distributions. The holders of each class or series of
---------------------------
capital stock of record as of a date determined by the Board of Directors
from time to time shall be entitled, from funds or other assets legally
available therefor, to dividends and distributions, including distributions
of capital gains, in such amounts and at such times as may be determined by
the Board of Directors. The Board of Directors may determine that no
dividend or distribution shall be payable on shares as to which the
purchase order, payment, or both have not been received by a specified
date. Any such dividends or distributions may be declared payable in cash,
property or shares of the class or series, as determined by the Board of
Directors or pursuant to a standing resolution or program adopted or
approved by the Board of Directors. Dividends and distributions may be
declared with such frequency, including daily, as the Board of Directors
may determine and in any reasonable manner, including by standing
resolution, by resolutions adopted only once or with such frequency as the
Board of Directors may determine, or by formula or other similar method of
determination, whether or not the amount of the dividend or distribution so
declared can be calculated at the time of such declaration. The Board of
Directors may establish payment dates for such dividends and distributions
on any basis, including payment that is less frequent than the
effectiveness of such declarations. The Board of Directors shall have the
discretion to designate for such dividends and distributions amounts
sufficient to enable the Corporation or any class or series thereof to
qualify as a "regulated investment company" under the Internal Revenue Code
of 1986 or any successor or comparable statute, and regulations promulgated
thereunder (collectively, the "IRC"), and to avoid liability of the
Corporation or any class or series for Federal income tax in respect of a
given year and to make other appropriate adjustments in connection
therewith. Nothing in the foregoing sentence shall limit the authority of
the Board of Directors to designate greater or lesser amounts for such
dividends or distributions. The amounts of dividends and distributions
declared and paid with respect to the various classes or series of capital
stock and the timing of declaration and payment of such dividends and
distributions may vary among such classes and series.
(e) Tax Elections. The Board of Directors shall have the power, in its
-------------
discretion, to make such elections as to the tax status of the Corporation
or any series or class of the Corporation as may be permitted or required
by the IRC without the vote of stockholders of the Corporation or any
series or class.
(f) Liquidation. At any time there are no shares outstanding for a
-----------
particular class or series, the Board of Directors may liquidate such class
or series in accordance with applicable law. In the event of the
liquidation or dissolution of the Corporation, or of a class or series
thereof when there are shares outstanding of the Corporation or of such
class or series, as applicable, the stockholders of such, or of each, class
or series, as applicable, shall be entitled to receive, when and as
declared by the Board of Directors, the excess of the assets attributable
to that class or series over the liabilities of that class or series,
determined as provided herein and including assets and liabilities
allocated pursuant to sections (a) and (b) of this Article 5.5. Any such
excess amounts will be distributed to each stockholder of the applicable
class or series in proportion to the number of outstanding shares of that
class or series held by that stockholder and recorded on the books of the
Corporation. Subject to the requirements of applicable law, dissolution of
a class or series may be accomplished by distribution of assets to
stockholders of that class or series as provided herein, by the transfer of
assets attributable to that class or series to another class or series of
the Corporation, by the exchange of shares of that class or series for
shares of another class or series of the Corporation, or in any other legal
manner.
(g) Voting Rights. On each matter submitted to a vote of stockholders,
-------------
each holder of a share of capital stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock standing in such holder's name on the books of
the Corporation, irrespective of the class or series thereof, and all
shares of all classes and series shall vote together as a single class,
provided that (a) when the Maryland General Corporation Law or the
Investment Company Act of 1940 requires that a class or series vote
separately with respect to a given matter, the separate voting requirements
of the applicable law shall govern with respect to the affected
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<PAGE>
class(es) and/or series and other classes and series shall vote as a single
class and (b) unless otherwise required by those laws, no class or series
shall vote on any matter which does not affect the interest of that class
or series.
(h) Quorum. The presence in person or by proxy of the holders of one-
------
third of the shares of stock of the Corporation entitled to vote thereat,
without regard to class or series, shall constitute a quorum at any meeting
of the stockholders, except with respect to any matter which, under
applicable statutes or regulatory requirements, requires approval by a
separate vote of one or more classes or series of stock, in which case the
presence in person or by proxy of the holders of one-third of the shares of
stock of each class or series required to vote as a class on the matter
shall constitute a quorum. If at any meeting of the stockholders there
shall be less than a quorum present, the stockholders present at such
meeting may, without further notice, adjourn the same from time to time
until a quorum shall be present.
5.6 Authorizing Vote. Notwithstanding any provision of the General Laws of the
----------------
State of Maryland requiring for any purpose a proportion greater than a majority
of all votes entitled to be cast, the affirmative vote of the holders of a
majority of the total number of shares of the Corporation, or of a class or
series of the Corporation, as applicable, outstanding and entitled to vote under
such circumstances pursuant to these Articles of Incorporation and the By-Laws
of the Corporation shall be effective for such purpose, except to the extent
otherwise required by the Investment Company Act of 1940 and rules thereunder;
provided that, to the extent consistent with the General Laws of the State of
Maryland and other applicable law, the By-Laws may provide for authorization to
be by the vote of a proportion less than a majority of the votes of the
Corporation, or of a class or series.
5.7 Preemptive Rights. No stockholder of the Corporation shall be entitled as
-----------------
of right to subscribe for, purchase, or otherwise acquire any shares of any
classes or series, or any other securities of the Corporation which the
Corporation proposes to issue or sell; and any or all of such shares or
securities of the Corporation, whether now or hereafter authorized or created,
may be issued, or may be reissued or transferred if the same have been
reacquired, and sold to such persons, firms, corporations and associations, and
for such lawful consideration, and on such terms as the Board of Directors in
its discretion may determine, without first offering the same, or any thereof,
to any said stockholder.
5.8 Redemption.
----------
(a) The Board of Directors shall authorize the Corporation, to the extent
it has funds or other property legally available therefor and subject to
such reasonable conditions as the directors may determine, to permit each
holder of shares of capital stock of the Corporation, or of any class or
series, to require the Corporation to redeem all or any part of the shares
standing in the name of such holder on the books of the Corporation, at the
applicable redemption price of such shares (which may reflect the deduction
of such fees and charges as the Board of Directors may establish from time
to time) determined in accordance with procedures established by the Board
of Directors of the Corporation from time to time in accordance with
applicable law.
(b) Without limiting the generality of the foregoing, the Board of
Directors may authorize the Corporation, at its option and to the extent
permitted by and in accordance with the conditions of applicable law, to
redeem stock of the Corporation, or of any class or series, owned by any
stockholder under circumstances deemed appropriate by the Board of
Directors in its sole discretion from time to time, such circumstances
including but not limited to (1) failure to provide the Corporation with a
tax identification number and (2) failure to maintain ownership of a
specified minimum number or value of shares of any class or series of stock
of the Corporation, such redemption to be effected at such price, at such
time and subject to such conditions as may be required or permitted by
applicable law.
(c) Payment for redeemed stock shall be made in cash unless, in the opinion
of the Board of Directors, which shall be conclusive, conditions exist
which make it advisable for the Corporation to make payment wholly or
partially in securities or other property or assets of the class or series
of the shares being redeemed. Payment made wholly or partially in
securities or other property or assets may be delayed to such reasonable
extent, not inconsistent with applicable law, as is reasonably necessary
under the circumstances. No stockholder shall have the right, except as
determined by the Board of Directors, to have his shares redeemed in such
securities, property or other assets.
(d) All rights of a stockholder with respect to a share redeemed, including
the right to receive dividends and distributions with respect to such
share, shall cease and determine as of the time as of which the redemption
price to be paid for such shares shall be fixed, in accordance with
applicable law, except the right of such stockholder to receive payment for
such shares as provided herein.
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(e) Notwithstanding any other provision of this Article 5.8, the Board of
Directors may suspend the right of stockholders of any or all classes or
series of shares to require the Corporation to redeem shares held by them
for such periods and to the extent permitted by, or in accordance with, the
Investment Company Act of 1940. The Board of Directors may, in the absence
of a ruling by a responsible regulatory official, terminate such suspension
at such time as the Board of Directors, in its discretion, shall deem
reasonable, such determination to be conclusive.
(f) Shares of any class or series which have been redeemed shall constitute
authorized but unissued shares subject to classification and
reclassification as provided in these Articles of Incorporation.
5.9 Repurchase of Shares. The Board of Directors may by resolution from time
--------------------
to time authorize the Corporation to purchase or otherwise acquire, directly or
through an agent, shares of any class or series of its outstanding stock upon
such terms and conditions and for such consideration as permitted by applicable
law and determined to be reasonable by the Board of Directors and to take all
other steps deemed necessary in connection therewith. Shares so purchased or
acquired shall have the status of authorized but unissued shares.
5.10 Valuation. Subject to the requirements of applicable law, the Board of
---------
Directors may, in its absolute discretion, establish the basis or method, timing
and frequency for determining the value of assets belonging to each class or
series and for determining the net asset value of each share of each class or
series for purposes of sales, redemptions, repurchases or otherwise. Without
limiting the foregoing, the Board of Directors may determine that the net asset
value per share of any class or series should be maintained at a designated
constant value and may establish procedures, not inconsistent with applicable
law, to accomplish that result. Such procedures may include a requirement, in
the event of a net loss with respect to the particular class or series from time
to time, for automatic pro rata capital contributions from each stockholder of
that class or series in amounts sufficient to maintain the designated constant
share value.
5.11 Certificates. Subject to the requirements of the Maryland General
------------
Corporation Law, the Board of Directors may authorize the issuance of some or
all of the shares of any or all classes or series without certificates and may
establish such conditions as it may determine in connection with the issuance of
certificates.
5.12 Shares Subject to Articles and Bylaws. All persons who shall acquire
-------------------------------------
shares of capital stock in the Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation and the By-Laws of the
Corporation, as each may be amended, supplemented and/or restated from time to
time.
ARTICLE VI
BOARD OF DIRECTORS
------------------
6.1 Number of Directors. Prior to the issuance of stock, the number of
-------------------
directors of the Corporation shall be at least one and after the issuance of
stock shall be as provided in the By-Laws, provided that the By-Laws may,
subject to the limitations of the Maryland General Corporation Law, fix a
different number of directors and may authorize a majority of the directors to
increase or decrease the number of directors set by these Articles or the By-
Laws within limits set by the By-Laws and to fill vacancies created by an
increase in the number of directors. Unless otherwise provided by the By-Laws,
the directors of the Corporation need not be stockholders of the Corporation.
The name of the director who will serve until the first meeting of stockholders
and until his successor is elected and qualifies is:
Robert G. Hagstrom, Jr.
6.2 Removal of Directors. Subject to the limits of the Investment Company Act
--------------------
of 1940 and unless otherwise provided by the By-Laws, a director may be removed,
with or without cause, by the affirmative vote of a majority of (a) the Board of
Directors, (b) a committee of the Board of Directors appointed for such purpose,
or (c) the stockholders by vote of a majority of the outstanding shares of the
Corporation.
6.3 Liability of Directors and Officers.
-----------------------------------
(a) To the fullest extent permitted by the Maryland General Corporation
Law and the Investment Company Act of 1940, no director or officer of the
Corporation shall be liable to the Corporation or to its stockholders for
money damages. No amendment to these Articles of Incorporation or repeal of
any of its provisions shall limit or eliminate the benefits provided to
directors and officers under this provision with respect to any act or
omission which occurred prior to such amendment or repeal.
(b) In performance of his duties, a director is entitled to rely on any
information, opinion, report, or statement,
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<PAGE>
including any financial statement or other financial data, prepared by
others, to the extent not inconsistent with the General Laws of the State
of Maryland. A person who performs his duties in accordance with the
standards of Article 2-405.1 of the Maryland General Corporation Law or
otherwise in accordance with applicable law shall have no liability by
reason of being or having been a director of the Corporation.
6.4 Powers of Directors. In addition to any powers conferred herein or in the
-------------------
By-Laws, the Board of Directors may, subject to any express limitations
contained in these Articles of Incorporation or in the By-Laws, exercise the
full extent of powers conferred by the General Laws of the State of Maryland or
other applicable law upon corporations or directors thereof and the enumeration
and definition of particular powers herein or in the By-Laws shall in no way be
deemed to restrict or otherwise limit those lawfully conferred powers. In
furtherance and without limitation of the foregoing, the Board of Directors
shall have power:
(a) to make, alter, amend or repeal from time to time the By-Laws of the
Corporation except as otherwise provided by the By-Laws;
(b) subject to requirements of the Investment Company Act of 1940 and the
General Laws of the State of Maryland, to authorize the Corporation to
enter into contracts with any person, including any firm, corporation,
trust or association in which a director, officer, employee or stockholder
of the Corporation may be interested. Such contracts may be for any lawful
purpose, whether or not such purpose involves delegating functions normally
performed by the board of directors or officers of a corporation,
including, but not limited to, the provision of investment management for
the Corporation's investment portfolio, the distribution of securities
issued by the Corporation, the administration of the Corporation's affairs,
the provision of transfer agent services with respect to the Corporation's
shares of capital stock, and the custody of the Corporation's assets. Any
person (including its affiliates) may be retained in multiple capacities
pursuant to one or more contracts and may also perform services, including
similar or identical services, for others, including other investment
companies. Subject to the requirements of applicable law, such contracts
may provide for compensation to be paid by the Corporation in such amounts,
including payments of multiple amounts for persons (including their
affiliates) acting in multiple capacities, as the Board of Directors shall
determine in its discretion to be proper and reasonable.
(c) to authorize from time to time the payment of compensation to the
Directors for services to the Corporation, including fees for attendance at
meetings of the Board of Directors and committees thereof.
6.5 Determinations by Board of Directors. Any determination made by or
------------------------------------
pursuant to the direction of the Board of Directors and in accordance with the
standards set by the General Laws of the State of Maryland shall be final and
conclusive and shall be binding upon the Corporation and upon all stockholders,
past, present and future, of each class and series.
ARTICLE VII
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
THE POWERS OF THE CORPORATION AND THE DIRECTORS
AND STOCKHOLDERS
------------------------------------------------
7.1 Location of Meetings, Offices and Books. Both directors and stockholders
---------------------------------------
may hold meetings within or without the State of Maryland and abroad, and the
Corporation may have one or more offices and may keep its books within or
without the State of Maryland and abroad at such places as the directors shall
determine.
7.2 Meetings of Shareholders. Except as otherwise provided in the By-Laws, in
------------------------
accordance with applicable law, the Corporation shall not be required to hold an
annual meeting of shareholders in any year unless required by applicable law.
Election of directors, whether by the directors or by stockholders, need not be
by ballot unless the By-Laws so provide.
7.3 Inspection of Records. Stockholders of the Corporation shall have only
---------------------
such rights to inspect and copy the records, documents, accounts and books of
the Corporation and to request statements regarding its affairs as are provided
by the Maryland General Corporation Law, subject to such reasonable regulations,
not contrary to the General Laws of the State of Maryland, as the Board of
Directors may from time to time adopt regarding the conditions and limits of
such rights.
7.4 Indemnification. The Corporation, including its successors and assigns,
---------------
shall indemnify its directors and officers
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and make advance payment of related expenses to the fullest extent permitted,
and in accordance with the procedures required, by the General Laws of the State
of Maryland and the Investment Company Act of 1940. The By-Laws may provide that
the Corporation shall indemnify its employees and/or agents in any manner and
within such limits as permitted by applicable law. Such indemnification shall be
in addition to any other right or claim to which any director, officer, employee
or agent may otherwise be entitled. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise
or employee benefit plan, against any liability (including, with respect to
employee benefit plans, excise taxes) asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have had the power to indemnify against such
liability. The rights provided to any person by this Article 7.4 shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon such rights in serving or continuing to serve in the capacities
indicated herein. No amendment of these Articles of Incorporation shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment.
7.5 Wholly-Owned Subsidiaries. The Corporation may own all or any portion of
-------------------------
the securities of, make loans to, or contribute to the costs or other financial
requirements of any company which is wholly owned by the Corporation or by the
Corporation and by one or more other investment companies and is primarily
engaged in the business of providing, at cost, management, administrative or
related services to the Corporation or to the Corporation and other investment
companies.
7.6 Amendments. The Corporation reserves the right to amend, alter, change or
----------
repeal any provision of these Articles of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
7.7 References to Statutes, Articles and By-Laws. All references herein to
--------------------------------------------
statutes, to these Articles of Incorporation or to the By-Laws shall be deemed
to refer to those statutes, Articles or By-Laws as they are amended and in
effect from time to time.
IN WITNESS WHEREOF, the undersigned incorporator of Focus Trust, Inc. hereby
executes the foregoing Articles of Incorporation and acknowledges the same to be
his act.
Dated this 26 day of January, 1995.
----
\s\
------------------------------
Joseph M. O'Donnell, Esq.
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Exhibit (3.2)
BY-LAWS OF FOCUS TRUST, INC.
ARTICLE I
Offices
-------
Section 1. Principal Office. The principal office of the Corporation in the
----------------
State of Maryland shall be in the City of Baltimore.
Section 2. Other Offices. The Corporation may have such other offices in
-------------
such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. Subject to this Article II, an annual meeting of
--------------
stockholders for the election of Directors and the transaction of such other
business as may properly come before the meeting shall be held at such time and
place as the Board of Directors shall select. The Corporation shall not be
required to hold an annual meeting of its stockholders in any year in which the
election of directors is not required to be acted upon under the Investment
Company Act of 1940.
Section 2. Special Meetings. Special meetings of stockholders may be
------------------
called at any time by the President, the Secretary or by a majority of the Board
of Directors and shall be held at such time and place as may be stated in the
notice of the meeting.
Special meetings of the stockholders shall be called by the Secretary upon
receipt of written request of the holders of shares entitled to cast not less
than 10% of the votes entitled to be cast at such meeting, provided that (1)
such request shall state the purposes of such meeting and the matters proposed
to be acted on, and (2) the stockholders requesting such meeting shall have paid
to the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
shareholders. No special meeting shall be called upon the request of
stockholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the stockholders held during the preceding
12 months, unless requested by the holders of a majority of all shares entitled
to be voted at such meeting.
Section 3. Place of Meetings. Meetings of stockholders shall be held at
-----------------
such place within the United States as the Board of Directors may from time to
time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
------------------------------------
and time of the holding of each stockholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the meeting, shall be given
personally or by mail, not less than ten nor more than ninety days before the
date of such meeting, to each stockholder entitled to vote at such meeting and
to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his or her address as it appears on the records
of the Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting.
Section 5. Quorum, Adjournment of Meetings. The presence at any
-------------------------------
stockholders' meeting, in person or by proxy, of stockholders of one third of
the shares of the stock of the Corporation thereat shall be necessary and
sufficient to constitute a quorum for the transaction of business, except for
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of stockholders of one third of the shares of
stock of each class required to vote as a class on the matter shall constitute a
quorum. The holders of a majority of shares entitled to vote at the meeting and
present in person or by proxy, whether or not sufficient to constitute a quorum,
or, any officer present entitled to preside or act as Secretary of such meeting
may adjourn the meeting without determining the date of the new meeting or from
time to time without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
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Section 6. Organization. At each meeting of the stockholders, the Chairman
------------
of the Board (if one has been designated by the Board), or in his or her absence
or inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Senior Vice President or a Vice
President, shall act as chairman of the meeting; provided, however, that if no
such officer is present or able to act, a chairman of the meeting shall be
elected at the meeting. The Secretary, or in his or her absence or inability to
act, any person appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of business at all meetings of the
-----------------
stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles
------
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every full share of such stock, with a fractional vote for any
fractional shares, standing in his or her name on the record of stockholders of
the Corporation as of the record date determined pursuant to Section 9 of this
Article or if such record date shall not have been so fixed, then at the later
of (i) the close of business on the day on which notice of the meeting is mailed
or (ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him or her by a proxy signed by such
stockholder or his or her attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes validly cast at a meeting of stockholders at
which a quorum is present.
If a vote shall be taken on any question other than the election of directors,
which shall be by written ballot, then unless required by statute or these By-
Laws, or determined by the chairman of the meeting to be advisable, any such
vote need not be by ballot. On a vote by ballot, each ballot shall be signed by
the stockholder voting, or by his or her proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may fix a time not
---------------------
less than 10 nor more than 90 days prior to the date of any meeting of
stockholders or prior to the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose without a meeting, as
the time as of which stockholders entitled to notice of and to vote at such a
meeting or whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined; and all persons who were
holders of record of voting stock at such time and no other shall be entitled to
notice of and to vote at such meeting or to express their consent or dissent, as
the case may be. If no record date has been fixed, the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, or, if
notice is waived by all stockholders, at the close of business on the tenth day
next preceding the day on which the meeting is held. The Board of Directors may
fix a record date for determining stockholders entitled to receive payment of a
dividend or distribution, but such date shall be not more than 90 days before
the date on which such payment is made. If no record date has been fixed, the
record date for determinating stockholders entitled to receive dividends or
distributions shall be the close of business on the day on which the resolution
of the Board of Directors declaring the dividend or distribution is adopted, but
the payment shall not be made more than 60 days after the date on which the
resolution is adopted.
Section 10. Consent of Stockholders in Lieu of Meeting. Except as otherwise
------------------------------------------
provided by statute or the Articles of Incorporation, any action required to be
taken at any meeting of stockholders, or any action which may be taken at any
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
stockholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. The business and affairs of the Corporation
--------------
shall be managed under the direction of the Board of Directors and all powers of
the Corporation may be exercised by or under authority of the Board of
Directors.
Section 2. Number of Directors. The number of directors shall be fixed from
-------------------
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of
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Directors shall in no event be less than three (3) nor more than fifteen (15)
except that the Corporation may have less than three (3) but no less than one
(1) Director if there is no stock outstanding, and may have a number of
Directors no fewer than the number of stockholders so long as there are fewer
than three (3) stockholders. Any vacancy created by an increase in Directors may
be filled in accordance with Section 6 of this Article III. No reduction in the
number of Directors shall have the effect of removing any Director from office
prior to the expiration of his or her term unless such Director is specifically
removed pursuant to Section 5 of this Article III at the time of such decrease.
Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
------------------------------
annually, by written ballot at the annual meeting of stockholders or a special
meeting held for that purpose; provided, however, that if no annual meeting of
the stockholders of the Corporation is required to be held in a particular year
pursuant to Section 1 of Article II of these By-Laws, Directors shall be elected
at the next annual meeting held. The term of office of each Director shall be
from the time of his or her election and qualification until the election of
Directors next succeeding his or her election and until his or her successor
shall have been elected and shall have qualified.
Section 4. Resignation. A Director of the Corporation may resign at any
-----------
time by giving written notice of his or her resignation to the Board or the
Chairman of the Board or the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be
--------------------
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of Directors.
Section 6. Vacancies. If any vacancies shall occur in the Board of
---------
Directors (i) by reason of death, resignation, removal or otherwise, the
remaining Directors shall continue to act, and, subject to the provisions of the
Investment Company Act of 1940, such vacancies (if not previously filled by the
stockholders) may be filled by a majority of the remaining Directors, although
less than a quorum, and (ii) by reason of an increase in the authorized number
of Directors, such vacancies (if not previously filled by the stockholders) may
be filled only by a majority vote of the entire Board of Directors.
Section 7. Place of Meeting. The Directors may hold their meetings, have
----------------
one or more offices, and keep the books of the Corporation, outside the State of
Maryland, and within or without the United States of America, at any office or
offices of the Corporation or at any other place as they may from time to time
by resolution determine, or in the case of meetings, as they may from time to
time by resolution determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
Section 8. Regular Meetings. The Board of Directors from time to time may
----------------
provide by resolution for the holding of regular meetings and fix their time and
place as the Board of Directors may determine. Notice of such regular meetings
need not be in writing, provided that notice of any change in the time or place
or such fixed regular meetings shall be communicated promptly to each Director
not present at the meeting at which such change was made in the manner provided
in Section 9 of this Article III for notice of special meetings. Members of the
Board of Directors or any committee designated thereby may participate in a
meeting of such Board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting.
Section 9. Special Meetings. Special meetings of the Board of Directors may
----------------
be held at any time or place and for any purpose when called by the President,
the Secretary or two or more of the Directors. Notice of special meetings,
stating the time and place, shall be communicated to each Director personally by
telephone or transmitted to him or her by telegraph, telefax, telex, cable or
wireless at least one day before the meeting.
Section 10. Waiver of Notice. No notice of any meeting of the Board of
----------------
Directors or a committee of the Board need be given to any Director who is
present at the meeting or who waives notice of such meeting in writing (which
waiver shall be filed with the records of such meeting), either before or after
the time of the meeting.
Section 11. Quorum and Voting. At all meetings of the Board of Directors,
-----------------
the presence of one third of the entire Board of Directors shall constitute a
quorum unless there are only two or three Directors, in which case two Directors
shall constitute a quorum. If there is only one Director, the sole Director
shall constitute a quorum. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called.
Section 12. Organization. The Board may, by resolution adopted by a
-------------
majority of the entire Board, designate
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a Chairman of the Board, who shall preside at each meeting of the Board. In the
absence or inability of the Chairman of the Board to preside at a meeting, the
President, or, in his or her absence or inability to act, another Director
chosen by a majority of the Directors present, shall act as chairman of the
meeting and preside thereat. The Secretary (or, in his or her absence or
inability to act, any person appointed by the Chairman) shall act as secretary
of the meeting and keep the minutes thereof.
Section 13. Written Consent of Directors in Lieu of a Meeting. Subject to
-------------------------------------------------
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board or committee.
Section 14. Compensation. Directors may receive compensation for services
-------------
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.
ARTICLE IV
Committees
----------
Section 1. Organization. By resolution adopted by the Board of Directors,
-------------
the Board may designate one or more committees, including an Executive
Committee, composed of two or more Directors. The Chairmen of such committees
shall be elected by the Board of Directors. The Board of Directors shall have
the power at any time to change the members of such committees and to fill
vacancies in the committees. The Board may delegate to these committees any of
its powers, except the power to authorize the issuance of stock, declare a
dividend or distribution on stock, recommend to stockholders any action
requiring stockholder approval, amend these By-Laws, or approve any merger or
share exchange which does not require stockholder approval. If the Board of
Directors has given general authorization for the issuance of stock, a committee
of the Board, in accordance with a general formula or method specified by the
Board by resolution or by adoption of a stock option or other plan, may fix the
terms of stock subject to classification or reclassification and the terms on
which any stock may be issued, including all terms and conditions required or
permitted to be established or authorized by the Board of Directors.
Section 2. Proceedings and Quorum. In the absence of an appropriate
----------------------
resolution of the Board of Directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the event any member of any committee is absent
from any meeting, the members thereof present at the meeting, whether or not
they constitute a quorum, may appoint a member of the Board of Directors to act
in the place of such absent member.
ARTICLE V
Officers, Agents and Employees
------------------------------
Section 1. General. The officers of the Corporation shall be a President, a
--------
Secretary and a Treasurer, and may include one or more additional, Vice
Presidents, Assistant Secretaries or Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 8 of
this Article.
Section 2. Election Tenure and Qualifications. The officers of the
----------------------------------
Corporation, except those appointed as provided in Section 8 of this Article V,
shall be elected by the Board of Directors at its first meeting and thereafter
annually at an annual meeting. If any officers are not chosen at any annual
meeting, such officers may be chosen at any subsequent regular or special
meeting of the Board. Except as otherwise provided in this Article V, each
officer chosen by the Board of Directors shall hold office until the next annual
meeting of the Board of Directors and until his or her successor shall have been
elected and qualified. Any person may hold one or more offices of the
Corporation except the offices of President and Vice President.
Section 3. Removal and Resignation. Whenever in the judgment of the Board
-----------------------
of Directors the best interest of the Corporation will be served thereby, any
officer may be removed from office by the vote of a majority of the members of
the Board of Directors at any regular meeting or at a special meeting called for
such purpose. Any officer may resign his office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or
any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 4. President. The President shall be the chief executive officer of
-----------
the Corporation. Subject to the supervision of the Board of Directors, he or she
shall have general charge of the business, affairs and property of the
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Corporation and general supervision over its officers, employees and agents.
Except as the Board of Directors may otherwise order, he or she may sign in the
name and on behalf of the Corporation all deeds, bonds, contracts, or
agreements. He or she shall exercise such other powers and perform such other
duties as from time to time may be assigned to him or her by the Board of
Directors.
Section 5. Vice President. The Board of Directors may from time to time
---------------
elect one or more Vice Presidents who shall have such powers and perform such
duties as from time to time may be assigned to them by the Board of Directors or
the President. At the request or in the absence or disability of the President,
the Vice President (or, if there are two or more Vice Presidents, then the more
senior of such officers present and able to act) may perform all the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may perform such
duties as the Board of Directors may assign.
Section 6. Treasurer and Assistant Treasurer. The Treasurer shall be the
---------------------------------
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he or she shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He or she shall render to
the Board of Directors, whenever directed by the Board, an account of the
financial condition of the Corporation and of all his or her transactions as
Treasurer; and as soon as possible after the close of each fiscal year he or she
shall make and submit to the Board of Directors a like report for such fiscal
year. He or she shall perform all acts incidental to the Office of Treasurer,
subject to the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, the Assistant Treasurer (or if there are two or more Assistant
Treasurers, then the more senior of such officers present and able to act) may
perform all of the duties of the Treasurer.
Section 7. Secretary and Assistant Secretaries. The Secretary shall attend
-----------------------------------
to the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the stockholders and Directors in books to be
kept for that purpose. He or she shall keep in safe custody the seal of the
Corporation, and shall have charge of the records of the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Director. He or she shall perform such other duties as appertain to his or
her office or as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary of the Board of Directors may assign, and, in the absence of the
Secretary, he or she may perform all the duties of the Secretary.
Section 8. Subordinate Officers. The Board of Directors from time to time
--------------------
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
rights, terms of office, authorities and duties.
Section 9. Remuneration. The salaries or other compensation of the officers
-------------
of the Corporation shall be fixed from time to time by resolution of the Board
of Directors, except that the Board of Directors may be resolution delegate to
any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 8 of this Article V.
Section 10. Surety Bonds. The Board of Directors may require any officer or
-------------
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his or her duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.
ARTICLE VI
Indemnification
---------------
The Corporation shall indemnify (a) its Directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
required or permitted by (i) Maryland law now or hereafter in force, including
the advance of expenses under the procedures and to the full extent permitted by
law, and (ii) the Investment Company Act of 1940, as amended, and (b) other
employees and agents to such extent as shall be authorized by the Board of
Directors and be permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights
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to which those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from time to
time such resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law.
ARTICLE VII
Capital Stock
-------------
Section 1. Stock Certificates. The interest of each stockholder of the
------------------
Corporation may be evidenced by certificates for shares of stock in such form as
the Board of Directors may from time to time prescribe. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
Certificates may be sealed with the actual corporate seal or a facsimile of it
or in any other form. Any or all of the signatures or the seal on the
certificate may be manual or a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue unless written instructions of the Corporation to
the contrary are delivered to such officer, transfer agent or registrar
Section 2. Stock Ledgers. The stock ledgers of the Corporation, containing
-------------
the names and addresses of the stockholders and the number of shares held by
them respectively, shall be kept at the principal offices of the Corporation or,
if the Corporation employs a transfer agent, at the offices of the transfer
agent of the Corporation.
Section 3. Transfers of Shares. Transfers of shares of stock of the
--------------------
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and the payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any share or shares stand on the record of stockholders as
the owner of such share or shares for all purposes, including, without
limitation, the rights to receive dividends or other distributions, and to vote
as such owner, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in any such share or shares on the part of any
other person. The Board may make such additional rules and regulations, not
inconsistent with these By-Laws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation.
Section 4. Transfer Agents and Registrars. The Board of Directors may from
------------------------------
time to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 5. Lost Destroyed or Mutilated Certificates. The holder of any
----------------------------------------
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his or her legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
ARTICLE VIII
Seal
----
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." The form of the seal may be altered by the Board of
Directors. Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced. Any Officer or Director
of the Corporation shall have the authority to affix the corporate seal of the
Corporation to any
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document requiring the same.
ARTICLE IX
Fiscal Year
-----------
The fiscal year of the Company shall be determined by resolution of the Board
of Directors.
ARTICLE X
Depositories and Custodians
---------------------------
Section 1. Depositories. The funds of the Corporation shall be deposited
-------------
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
----------
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
ARTICLE XI
Execution of Instruments
------------------------
Section 1. Checks. Notes, Drafts, etc. Checks, notes, drafts, acceptances,
---------------------------
bills of exchange and other orders obligations for the payment of money shall be
signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate or as these By-Laws
provide.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
------------------------------
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or so, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President, any Vice President or the Treasurer or pursuant
to any procedure approved by the Board of Directors, subject to applicable law.
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ARTICLE XII
Independent Public Accountants
------------------------------
The Corporation shall employ an independent public accountant or a firm of
independent public accountants as its accountants to examine the accounts of the
Corporation and to sign and certify financial statements filed by the
Corporation.
ARTICLE XIII
Amendments
----------
These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the stockholders or at any special meeting of the
stockholders at which a quorum is present or represented, provided that notice
of the proposed amendment, alteration or repeal be contained in the notice of
such special meeting. These By-Laws may also be amended, altered or repealed by
the affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, except any particular By-Law which is
specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.
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INVESTMENT ADVISORY AGREEMENT Exhibit (10.1)
-----------------------------
AGREEMENT made this _4th_day of_April____, 1995 by and between FOCUS
TRUST, INC. (the "Corporation"), a Maryland corporation and LLOYD, LEITH & SAWIN
(the "Adviser"), a Pennsylvania corporation.
1. DUTIES OF ADVISER. The Corporation hereby appoints the Adviser to act
-----------------
as investment adviser to FOCUS TRUST, INC. for the period and on such terms set
-----------------
forth in this Agreement. The Corporation employs the Adviser to manage the
investment and reinvestment of the assets of the Corporation, to determine in it
discretion the assets to be held uninvested, to provide the Corporation with
records concerning the Adviser's activities which the Corporation is required to
maintain, and to render regular reports to the Corporation's officers and Board
of Directors concerning the Adviser's discharge of the foregoing
responsibilities. The Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Directors of the
Corporation, and in compliance with the objectives, policies and limitations set
forth in the Corporation's Prospectus and Statement of Additional Information
then in effect. The Adviser accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS. The Adviser shall provide the Corporation
----------------------
with a trading department. The Adviser shall select the brokers or dealers that
will execute the purchases and sales of securities for the Corporation and is
directed to use its best efforts to ensure that the best available price and
most favorable execution of securities transactions for the Corporation are
obtained. The Corporation will bear all expenses associated with its investment
activities, including, without limitation, brokerage commissions and custody
expenses. Subject to policies established by the Board of Directors of the
Corporation and communicated to the Adviser, it is understood that the Adviser
will not be deemed to have acted unlawfully, or to have breached a fiduciary
duty to the Corporation or in respect of the Corporation, or be in breach of any
obligation owing to the Corporation or in respect of the Corporation under this
Agreement, or otherwise, solely by reason of its having caused the Corporation
to pay a member of a securities exchange, a broker or a dealer a commission for
effecting a securities transaction for the Corporation in excess of the amount
of commission another member of an exchange, broker or dealer would have charged
if the Adviser determines in good faith that the commission paid was reasonable
in relation to the brokerage or research services provided by such member,
broker or dealer, viewed in terms of that particular transaction or the
Adviser's overall responsibilities with respect to the accounts, including the
Corporation, as to which it exercises investment discretion. The Adviser will
communicate on a quarterly to the officers and directors of the Corporation such
information relating to Corporation transactions as they may reasonably request.
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
---------------------------
Adviser as provided in Section 1 and 2 of this Agreement, the Corporation shall
pay to the Adviser within five business days after the end of each calendar
month, a monthly fee of one twelfth of 0.70% of the Corporation's average daily
net assets for the month. The net asset value shall be calculated in the manner
as provided in the Corporation's Prospectus and Statement of Additional
Information then in effect.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rate basis, based on the number of days when
this Agreement was in effect.
4. REPORTS. The Corporation and the Adviser agree to furnish to each
-------
other such information regarding their operations with regard to their affairs
as each may reasonably request.
5. STATUS OF ADVISER. The services of the Adviser to the Corporation are
-----------------
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Corporation are not impaired
thereby.
6. LIABILITY OF ADVISER. In the absence of willful misfeasance, bad
--------------------
faith, gross negligence or reckless disregard by the Adviser of its obligations
and duties hereunder, the Adviser shall not be subject to any liability
whatsoever to the Corporation, or to any shareholder of the Corporation, for any
error of judgment, mistake of law or any other act or omission in the course of,
or connected with, rendering services hereunder including, without limitation,
for any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Corporation.
7. DURATION AND TERMINATION. This Agreement shall become effective on
------------------------
the date which the U.S. Securities and Exchange Commission declares effective,
the Corporation's registration statement provided that first it is approved by
the Board of Directors of the Corporation, including a majority of those
directors who are not parties to this Agreement or interested persons of any
party hereto, in the manner provided in section 15(c) of the Investment Company
Act of 1940, and by the holders of a majority of the outstanding voting
securities of the Corporation; and shall continue in effect for two years.
Thereafter, this Agreement may continue in effect only if such continuance is
approved at least annually by: (i) the Corporation's Board of Directors or, (ii)
by the vote of a majority of the outstanding voting securities of the
Corporation; and in either event by a vote of a majority of those directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party in the
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manner provided in section 15(c) of the Investment Company Act of 1940. This
Agreement may be terminated by the Corporation at any time, without the payment
of any penalty, by the Board of Directors of the Corporation or by vote of the
holders of a majority of the outstanding voting securities of the Corporation on
60 days' written notice to the Adviser. This Agreement may be terminated by the
Adviser at any time, without the payment of any penalty, upon 60 days' written
notice to the Corporation. This Agreement will automatically terminate in the
event of its assignment. Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed postpaid, to the other party at the
principal office of such party.
As used in this Section 8, the terms "assignment" "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
8. NAME OF ADVISER. The parties agree that the Adviser has a proprietary
---------------
interest in the name "Focus Trust, Inc." and the Corporation agrees to promptly
take such action as may be necessary to delete from its corporate name and/or
the name of the Corporation any reference to the name of the Adviser on the name
"Focus Trust, Inc." promptly after receipt from the Adviser of a written request
therefore.
9. SEVERABILITY. If any provisions of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. GOVERNING LAW. This agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date hereinabove set forth.
ATTEST: FOCUS TRUST, INC.
______________________________ __________________________________
John S. Lloyd, Secretary Robert G. Hagstrom, Jr., President
ATTEST: LLOYD, LEITH & SAWIN
______________________________ __________________________________
, Secretary John S. Lloyd, Principal
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Custody Administration and Agency Agreement Exhibit (10.2)
This Agreement, dated as of the 22 day of April , 1996 made by
---- -------
and between Focus Trust, Inc. ("Focus Trust"), a corporation duly organized
-----------------
under the laws of the state of Maryland and operating as an open-end management
investment company registered under the Investment Company Act of 1940, as
amended, and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
------------------------
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, Focus Trust is authorized by its Articles of Incorporation to
issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "B" attached
hereto, and which Schedule "B" may be amended from time to time by mutual
agreement of Focus Trust and Fund/Plan; and
WHEREAS, Focus Trust desires to retain Fund/Plan to perform certain custody
administration services on behalf of Focus Trust; and
WHEREAS, Focus Trust desires that Fund/Plan act as its agent for the
specific purpose of taking receipt of, and making payment for, custody services
performed on Focus Trust's behalf by The Bank of New York pursuant to an
agreement between The Bank of New York and Focus Trust; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for good and valuable consideration, the receipt and
sufficiency is hereby acknowledged, the Parties hereto, intending to be legally
bound, do hereby agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
Section 1. Focus Trust hereby appoints Fund/Plan as an agent of Focus
---------
Trust, and Fund/Plan hereby accepts such appointment, for the limited purpose
of: (i) accepting invoices charged to Focus Trust for custody services performed
by The Bank of New York on Focus Trust's behalf, and (ii) remitting payment to
The Bank of New York for such services performed in amounts as set forth in
Schedule "A" attached hereto.
Custody Administration Services
Section 2. As Custody Administrator, Fund/Plan shall:
----------
a) coordinate and process portfolio trades through terminal links
with The Bank of New York.
b) input and verify portfolio trades
c) monitor pending and failed security trades
d) coordinate communications between brokers and banks to resolve any
operational problems
e) advise Focus Trust of any corporate action information, address and
follow up on any dividend or interest discrepancies
f) process Focus Trust's expenses
g) interface with the accounting services provider and the transfer
agent to research and resolve custody cash problems
h) provide daily and monthly reports
Term and Fees
Section 3.
----------
(a) The term of this Agreement shall be for a period of two (2) years
commencing on the date hereinabove first written and shall continue thereafter
on a year to year term subject to termination by either Party as set forth
below.
(b) After the initial term of this Agreement, Focus Trust or Fund/Plan
may give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than ninety (90) days after the date of receipt of such notice.
Upon the effective termination date, Focus Trust shall pay to Fund/Plan such
compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements reasonably
incurred by Fund/Plan to such date.
(c) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by Focus Trust by written notice to Fund/Plan
in connection with the termination of this Agreement, Fund/Plan shall promptly
upon such termination and at the expense of Focus Trust, transfer all required
records and shall cooperate in the transfer of such duties and responsibilities.
(d) Focus Trust agrees to pay Fund/Plan compensation for its
services and to reimburse it for expenses at the rates and amounts as set forth
in Schedule "A" attached hereto, and as shall be set forth in any amendments to
such Schedule "A" approved by Focus Trust and Fund/Plan. Focus Trust agrees and
understands that Fund/Plan's compensation be comprised of two components,
payable on a monthly basis, as follows:
Page 67
<PAGE>
(i) a fixed fee for each Series, together with an asset based
fee which Focus Trust hereby authorizes Fund/Plan to collect by debiting Focus
Trust's custody account for invoices which are rendered for the services
performed for the applicable function. The invoices for the services performed
will be sent to Focus Trust after such debiting with the indication that payment
has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by
Fund/Plan on behalf of Focus Trust, which out-of-pocket expenses will be billed
to Focus Trust within the first ten calendar days of the month following the
month in which such out-of-pocket expenses were incurred. Focus Trust agrees to
reimburse Fund/Plan for such expenses within ten calendar days of receipt of
such bill.
For the purpose of determining fees payable to Fund/Plan, the value of a
Series' net assets shall be computed at the times and in the manner specified in
Focus Trust's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should Focus Trust seek services or
functions in addition to those stated, a written amendment to this Agreement
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and Focus Trust.
GENERAL PROVISIONS
Section 4.
----------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by Focus Trust in connection with the performance of this
Agreement that results from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of Focus Trust, shall be deemed, when rendering services to
such entity or acting on any business of Focus Trust (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for Focus Trust and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, Focus Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith hereunder or (ii) any action
taken or omitted to be taken by Fund/Plan in connection with its appointment
under this Agreement, which action or omission was taken in good faith in
reliance upon any law, act, regulation or interpretation of the same even though
the same may thereafter have been altered, changed, amended, or repealed.
Indemnification under this subparagraph, however, shall not apply to actions or
omissions of Fund/Plan or its directors, officers, employees, shareholders, or
agents in cases of its or their willful misfeasance, bad faith, gross negligence
or reckless disregard of its or their duties hereunder.
(d) Fund/Plan shall give written notice to Focus Trust within thirty
(30) business days of receipt by Fund/Plan of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify Focus Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve Focus
Trust of any liability arising under this Section or otherwise, except to the
extent that failure to give notice prejudices Focus Trust.
(e) For any legal proceeding giving rise to this indemnification, Focus
Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
Focus Trust chooses to defend or prosecute such claim, the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
(f) Focus Trust shall not settle any claim under (d) and (e) above
without Fund/Plan's express written consent, which consent shall not be
unreasonably withheld. Fund/Plan shall not settle any such claim under (d) and
(e) above without Focus Trust's express written consent which likewise shall not
be unreasonably withheld.
Section 5. This Agreement may be amended from time to time by a
----------
supplemental agreement executed by Focus Trust and Fund/Plan.
Section 6. Except as otherwise provided in this Agreement, any notice or
----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:
IF TO FOCUS TRUST: FUND/PLAN:
------------------ ----------
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<PAGE>
Focus Trust, Inc. Fund/Plan Services, Inc.
Two Penn Center Plaza, Suite 1810 2 West Elm Street
Philadelphia, PA 19102 Conshohocken, PA 19428
Attention: Robert G. Hagstrom, Jr. Attention: Kenneth J. Kempf,
President President
Section 7. Focus Trust represents and warrants to Fund/Plan that the
----------
execution and delivery of this Agreement by the undersigned officers of Focus
Trust has been duly and validly authorized by resolution of the Board of
Directors of Focus Trust.
Section 8. This Agreement may be executed in two or more counterparts,
----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 9. This Agreement shall extend to and shall be binding upon the
----------
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by Focus Trust without the written
consent of Fund/Plan or by Fund/Plan without the written consent of Focus Trust,
authorized or approved by a resolution of their respective Board of Directors.
Section 10. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 11. No provision of this Agreement may be amended or modified, in
-----------
any manner except in writing, properly authorized and executed by Fund/Plan and
Focus Trust.
Section 12. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
--------
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
consisting in its entirety of six typewritten pages, together with Schedules "A"
and "B" to be signed by their duly authorized officers, as of the day and year
first above written.
Focus Trust, Inc. Fund/Plan Services, Inc.
- ----------------- ------------------------
__________________________________________ __________________________________
By: Robert G. Hagstrom, Jr., President By: Kenneth J. Kempf, President
Page 69
<PAGE>
SCHEDULE "A"
============
Custody Agency and Administration Fee Schedule
for
Focus Trust, Inc.
I. Annual Custody Fee Schedule Per Separate Series of Shares: Subject to a
---------------------------------------------------------
minimum monthly fee of $300 for each Series, Custody Agency and Administration
Fees shall be calculated and payable monthly at the following annual dates:
A) Domestic Securities and ADR's
-----------------------------
<TABLE>
<S> <C> <C>
.0003 On the First $ 50 Million of Average Net Assets
.0002 On the Next $ 150 Million of Average Net Assets
.000125 Over $ 200 Million of Average Net Assets
</TABLE>
B) Custody Domestic Securities Transactions Charge
-----------------------------------------------
<TABLE>
<S> <C>
Book Entry DTC, Federal Book Entry, PTC $12.50
Physical Securities, Options, Futures $20.00
RICs GICs $24.00
Mortgage Backed Securities - Principal Pay Down Per Pool $7.00
Wire Transfers, In/Out not related to Securities Transactions $6.50
</TABLE>
* A transaction includes Buys, Sells, Maturities or free security
movement.
C) When Issued, Securities Lending, Index Futures:
-----------------------------------------------
Should any of these investment vehicles require a separate segregated
custody account, a fee of $250 per account per month will apply.
II. Out-of-Pocket Expenses
----------------------
Focus Trust will reimburse Fund/Plan monthly for all out-of-pocket
expenses, including telephone, postage, telecommunications, special
reports, record retention and copying and sending materials to independent
accountants for off-site audits.
III. Additional Services
-------------------
To the extent Focus Trust commences using investment techniques such as
Security Lending, Short Sales, Interest Rate Swaps, Futures, Leveraging,
Precious Metals and foreign securities, additional fees will apply.
Activities of a non-recurring nature such as fund consolidations, mergers,
or reorganizations will be subject to negotiation. To the extent Focus
Trust should decide to issue multiple/separate classes of shares,
additional fees will apply. Any enhanced services, programming requests or
reports will be quoted upon request.
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<PAGE>
SCHEDULE "B"
============
Identification of Series
------------------------
Below are listed the Series to which services under this Agreement are to be
performed as of the Execution Date of this Agreement:
"FOCUS TRUST, INC."
This Schedule "B" may be amended from time to time by agreement of the Parties.
Page 71
<PAGE>
CUSTODY AGREEMENT Exhibit (10.3)
Agreement made as of this 22 day of April , 1996 , between FOCUS TRUST, INC., a
corporation organized and existing under the laws of the state of Maryland,
having its principal office and place of business at 2 Penn Center Plaza Suite
1810, Philadelphia, PA 19102 (hereinafter called the "Fund"), and THE BANK OF
NEW YORK, a New York corporation authorized to do a banking business, having its
principal office and place of business at 48 Wall Street, New York, NewYork
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to the Custody Administration and
Agency Agreement between Fund/Plan Services, Inc. ("Fund/Plan") and the Fund,
Fund/Plan (a) has agreed to perform certain administrative functions which may
include the functions of administrator, transfer agent and accounting services
agent and (b) has been appointed by the Fund to act as its agent in respect of
certain transactions contemplated in this Agreement; and
WHEREAS, the Fund represents that (a) Fund/Plan has agreed to act as Fund's
agent in respect of certain transactions contemplated in this Agreement and (b)
the Bank is authorized and directed to rely upon and follow Certificates and
instructions given by Fund/Plan, the Fund's agent, in respect of transactions
contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth,
the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
1. "Administrator" shall mean Fund/Plan Services, Inc. and such successors or
permitted assigns as may succeed and perform its duties under the Administration
Agreement.
2. "Administration Agreement" shall mean that certain separate agreement
entitled "Custody Administration and Agency Agreement" dated as of _April
22______, 1996 between the Fund and the Fund/Plan Services, Inc.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system
for United States and federal agency securities, its successor or successors and
its nominee or nominees.
4. "Call Option" shall mean an exchange traded optionwith respect to Securities
other than Stock Index Options, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include instructions
communicated to the Custodian by the Administrator by Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a clearing
member under the rules of O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated which is
specifically allocated to a Series and pledged to the Custodian as security for,
and in consideration of, the Custodian's issuance of (a) any Put Option
guarantee letter or similar document described in paragraph 8 of Article V
herein, or (b) any receipt described in Article V or VIII herein.
8. "Covered Call Option" shall mean an exchange traded option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate
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<PAGE>
restrictions.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission, its successor or
successors and its nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Fund's Board of Directors specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or sell
fixed income securities including, without limitation, U.S. Treasury Bills, U.S.
Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an agreed upon
price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with respect to a Futures
Contract.
13. "Margin Account" shall mean a segregated account in the name of a broker,
dealer, futures commission merchant, or a Clearing Member, or in the name of the
Fund for the benefit of a broker, dealer, futures commission merchant, or
Clearing Member, or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant or a Clearing
Member (a "Margin Account Agreement"), separate and distinct from the custody
account, in which certain Securities and/or money of the Fund shall be deposited
and withdrawn from time to time in connection with such transactions as the Fund
may from time to time determine. Securities held in the Book-Entry System or the
Depository shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in its books
and records.
14. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
15. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
16. "Officers" shall be deemed to include the President, any Vice President,
the Secretary, the Clerk, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Clerk, any Assistant Treasurer, and any other person or
persons, including officers or employees of the Administrator, whether or not
any such other person is an officer of the Fund, duly authorized by the Board of
Directors of the Fund to execute any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the Custodian from
time to time.
17. "Option" shall mean a Call Option, Covered Call Option, Stock Index Option
and/or a Put Option.
18. "Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an Officer or from a person reasonably believed by the Custodian
to be an Officer.
19. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
20. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which
the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
21. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial
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<PAGE>
Futures Contracts, Financial Futures Contract Options, Reverse Repurchase
Agreements, common stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
22. "Senior Security Account" shall mean an account maintained and specifically
allocated to a Series under the terms of this Agreement as a segregated account,
by recordation or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically allocated to such Series
shall be deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such transactions as
the Fund may from time to time determine.
23. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the Fund
and listed on Appendix B hereto as amended from time to time.
24. "Shares" shall mean the shares of beneficial interest of the Fund, each of
which is, in the case of a Fund having Series, allocated to a particular Series.
25. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
stock index at the close of the last business day of the contract and the price
at which the futures contract is originally struck.
26. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
26. "Terminal Link" shall mean an electronic data transmission link between the
Administrator on behalf of the Fund and the Custodian requiring in connection
with each use of the Terminal Link by or on behalf of the Administrator on
behalf of the Fund use of an authorization code provided by the Custodian and at
least two access codes established by the Administrator on behalf of the Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, the Fund will deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and
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<PAGE>
deliveries and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in the Depository, the Fund shall
deliver to the Custodian a certified resolution of the Board of Directors of the
Fund, substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities specifically allocated to such Series eligible for
deposit therein, and to utilize the Depository to the extent possible with
respect to such Securities in connection with its performance hereunder,
including, without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys deposited in either the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Custodian for customers, including, but not limited to,
accounts in which the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's accepting, utilizing
and acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board of
Directors, substantially in the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the name
of each Series, and shall credit to the separate account for each Series all
moneys received by it for the account of the Fund with respect to such Series.
Money credited to a separate account for a Series shall be disbursed by the
Custodian only: (a) As hereinafter provided; (b) Pursuant to Certificates
setting forth the name and address of the person to whom the payment is to be
made, the Series account from which payment is to be made and the purpose for
which payment is to be made; or (c) In payment of the fees and in reimbursement
of the expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Administrator with confirmations and a summary, on a per Series
basis, of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Administrator with a detailed statement, on a per Series basis, of the
Securities and moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in Article
VIII, all Securities held by the Custodian hereunder, which are issued or
issuable only in bearer form, except such Securities as are held in the Book-
Entry System, shall be held by the Custodian in that form; all other Securities
held hereunder may be registered in the name of the Fund, in the name of any
duly appointed registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish or cause to be furnished to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository any Securities which it may hold
hereunder and which may from time to time be registered in the name of the Fund.
The Custodian shall hold all such Securities specifically allocated to a Series
which are not held in the Book-Entry System or in the Depository in a separate
account in the name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4: (a) Collect all
income due or payable; (b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the Custodian
receives a written notice of such call, or (ii) notice of such call appears in
one or more of the publications listed in Appendix C annexed hereto, which may
be amended at any time by the Custodian without the prior notification or
consent of the Fund; (c) Present for payment and collect the amount payable upon
all Securities which mature; (d) Surrender Securities in temporary form for
definitive Securities; (e) Execute, as custodian, any necessary declarations or
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certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and (f)
Hold directly, or through the Book-Entry System or the Depository with respect
to Securities therein deposited, for the account of a Series, all rights and
similar securities issued with respect to any Securities held by the Custodian
for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or
through the use of the Book-Entry System or the Depository, shall: (a) Execute
and deliver to such persons as may be designated in such Certificate proxies,
consents, authorizations, and any other instruments whereby the authority of the
Fund as owner of any Securities held by the Custodian hereunder for the Series
specified in such Certificate may be exercised; (b) Deliver any Securities held
by the Custodian hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion privilege
and receive and hold hereunder specifically allocated to such Series any cash or
other Securities received in exchange; (c) Deliver any Securities held by the
Custodian hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold hereunder specifically
allocated to such Series such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such delivery; (d)
Make such transfers or exchanges of the assets of the Series specified in such
Certificate, and take such other steps as shall be stated in such Certificate to
be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund; and (e)
Present for payment and collect the amount payable upon Securities not described
in preceding paragraph 5(b) of this Article which may be called as specified in
the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in book-
entry form or otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that notwithstanding
the foregoing, payments to or deliveries from the Margin Account and payments
with respect to Securities to which a Margin Account relates, shall be made in
accordance with the terms and conditions of the Margin Account Agreement.
Whenever any such instruments or certificates are available, the Custodian
shall, notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only against the delivery to
the Custodian of such instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such instruments or such
certificates are available only against receipt by the Custodian of payment
therefor. Any such instrument or certificate delivered to the Custodian shall be
held by the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS, FUTURES
CONTRACTS AND FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver or cause the Administrator to deliver to the Custodian (i)
with respect to each purchase of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate or Oral Instructions, specifying with respect
to each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable
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upon such purchase; (g) the name of the person from whom or the broker through
whom the purchase was made, and the name of the clearing broker, if any; and (h)
the name of the broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the broker specified
in the Certificate out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale of
any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver or cause the Administrator to deliver to the
Custodian (i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate or Oral Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were specifically allocated;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or principal amount sold, and accrued interest, if any; (d) the date of
sale; (e) the sale price per unit; (f) the total amount payable to the Fund upon
such sale; (g) the name of the broker through whom or the person to whom the
sale was made, and the name of the clearing broker, if any; and (h) the name of
the broker to whom the Securities are to be delivered. The Custodian shall
deliver the Securities specifically allocated to such Series to the broker
specified in the Certificate against payment upon receipt of the total amount
payable to the Fund upon such sale, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the Series to which such
Option is specifically allocated; (b) the type of Option (put or call); (c) the
name of the issuer and the title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Stock Index Options purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the
total amount payable by the Fund in connection with such purchase; (h) the name
of the Clearing Member through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian shall pay, upon
receipt of a Clearing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as custodian for the Fund,
out of moneys held for the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such purchase to the
Clearing Member through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to each such sale: (a)
the Series to which such Option was specifically allocated; (b) the type of
Option (put or call); (c) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options sold;
(d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the
total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-
custodian for each Series' Foreign Securities (as such term is defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as
amended) and other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on Schedule I hereto
("Foreign Sub-Custodians") to carry out their respective responsibilities in
accordance with the terms of the sub-custodian agreement between each such
Foreign Sub-Custodian and the Custodian, copies of which have been previously
delivered to the Fund and receipt of which is hereby acknowledged (each such
agreement, a "Foreign Sub-Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution substantially in the form attached as
Exhibit E of the Fund's Board of Directors, the Fund may designate any
additional foreign sub-custodian with which the Custodian has an agreement for
such entity to act as the Custodian's agent, as its sub-custodian and any such
additional foreign
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sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate
from the Fund, the Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's assets and such
Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the form
previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series of
the Fund the Foreign Securities of such Series held by each Foreign Sub-
Custodian. At the election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims by the Fund or any Series
against a Foreign Sub-Custodian as a consequence of any loss, damage, cost,
expense, liability or claim sustained or incurred by the Fund or any Series if
and to the extent that the Fund or such Series has not been made whole for any
such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms of
the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to
arrange forthe independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and other assets of each Series
held by Foreign Sub-Custodians, including but not limited to, an identification
of entities having possession of each Series' Foreign Securities and other
assets, and advices or notifications of any transfers of Foreign Securities to
or from each custodial account maintained by a Foreign Sub-Custodian for the
Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually agreed upon,
information concerning the Foreign Sub-Custodians employed by the Custodian.
Such information shall be similar in kind and scope to that furnished to theFund
in connection with the Fund's initial approval of such Foreign Sub-Custodians
and, in any event, shall include information pertaining to (i) the Foreign
Custodians' financial strength, general reputation and standing in the countries
in which they are located and their ability to provide the custodial services
required, and (ii) whether the Foreign Sub-Custodians would provide a level of
safeguards for safekeeping and custody of securities not materially different
form those prevailing in the United States. The Custodian shall monitor the
general operating performance of each Foreign Sub-Custodian. The Custodian
agrees that it will use reasonable care in monitoring compliance by each Foreign
Sub-Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and
that if it learns of any breach of such Foreign Sub-Custodian Agreement believed
by the Custodian to have a material adverse effect on the Fund or any Series it
will promptly notify the Fund of such breach. The Custodian also agrees to use
reasonable and diligent efforts to enforce its rights under the relevant Foreign
Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices, reports or
other written information received pertaining to the Fund's Foreign Securities,
including without limitation, notices of corporate action, proxies and proxy
solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary, settlement
and payment for securities received for the account of any Series and delivery
of securities maintained for the account of such Series may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the contrary, with
respect to any losses or damages arising out of or relating to any actions or
omissions of any Foreign Sub-Custodian the sole responsibility and liability of
the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the ForeignSub-Custodian.
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ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI neither the
Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, result ing from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund, at the Fund's expense or of its own counsel, at its expense, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for: (a) The
validity of the issue of any Securities purchased, sold, or written by or for
the Fund, the legality of the purchase, sale or writing thereof, or the
propriety of the amount paid or received therefor; (b) The legality of the sale
or redemption of any Shares, or the propriety of the amount to be received or
paid therefor; (c) The legality of the declaration or payment of any dividend by
the Fund; (d) The legality of any borrowing by the Fund using Securities as
collateral; (e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article XIV of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or (f) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In addition, the
Custodian shall be under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or non-
receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Fund until
the Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository. Notwithstanding the foregoing, the Custodian shall be
considered the custodian of such check, draft, or other instrument until the
same is placed in the collection process.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense
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and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount due to the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-Custodians
pursuant to Article XVI appoint one or more banking institutions as Depository
or Depositories, as Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-
Custodians including, but not limited to, banking institutions located in
foreign countries, of Securities and moneys at any time owned by the Fund, upon
such terms and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it or by any Foreign
Sub-Custodian, for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to
the Custodian all out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund. The Fund represents
that the Administrator has agreed to pay such compensation and expenses promptly
upon receipt of statements therefor, and hereby directs the Custodian to (i)
send all statements for compensation to its attention care of Fund/Plan at the
following address: Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA
19428, Attention: Mr. Elmer Gardner, Senior Vice President, and (ii) accept all
payments made by Fund/Plan in the Fund's name as if such payments were made
directly by the Fund. The Fund shall pay to Fund/Plan fees for services
(including custodian services provided by the Custodian) in accordance with the
Administration Agreement. The Custodian's compensation for services rendered
hereunder is set forth in a separate agreement between the Custodian and
Fund/Plan. Should Fund/Plan fail to pay or remit such compensation to the
Custodian, the Custodian will be entitled to debit the Custody Account directly
for such compensation. The Custodian may charge such compensation and any
expenses with respect to a Series incurred by the Custodian in the performance
of its duties pursuant to such agreement against any money specifically
allocated to such Series. Unless and until the Fund or the Administrator
instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian. The Fund agrees to
forward or cause the Administrator to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not received
by the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided
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such instructions reasonably appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument, instruction or
notice received by the Custodian and reasonably believed by the Custodian to be
given in accordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing, the Custodian shall
be under no duty to inquire into, and shall not be liable for, the accuracy of
any statements or representations contained in any such instrument or other
notice including, without limitation, any specification of any amount to be paid
to a broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the possession of
the Custodian shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the Investment Company Act of 1940, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records during the Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
the Custodian to the Fund or the Fund's authorized representative, and the Fund
shall reimburse the Custodian its expenses of providing such copies. Upon
reasonable request of the Fund, the Custodian shall provide in hard copy or on
micro-film, whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or are
similarly maintained, and the Fund shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the Custodian
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or non-payment of checks
pursuant to paragraph 6 of Article XIII as part of any check redemption
privilege program of the Fund, except for any such liability, claim, loss and
demand arising out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, including, without
limitation, those contained in Article XVI the Custodian may deliver and receive
Securities, and receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in accordance with the customs
prevailing from time to time among brokers or dealers in such Securities. When
the Custodian is instructed to deliver Securities against payment, delivery of
such Securities and receipt of payment therefor may not be completed
simultaneously. The Fund assumes all responsibility and liability for all credit
risks involved in connection with the Custodian's delivery of Securities
pursuant to Certificates or instructions of the Fund or the Administrator which
responsibility and liability shall continue until final payment in full has been
received by the Custodian.
16. In the event the Custodian is advised by the Fund that the Fund is no
longer utilizing the services of the Administrator, then the Custodian shall
furnish or give to the Fund the statements or notices described above as to be
furnished or given to the Administrator.
17. The Custodian shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason of any terms or
provisions in the Administration Agreement, and if such Administration Agreement
shall cease to be in effect the Custodian shall have no additional duties
hereunder.
ARTICLE XVIII
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 Board of Directors of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing
to terminate this Agreement and designating a successor or custodians, each of
which shall be a
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bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a successor custodian which
shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon receipt of a notice
of acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and moneys then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian in
accordance with the preceding paragraph, the Fund shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by the Fund be
deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present
Officers of the Fund under its seal, setting forth the names and the signatures
of the present Officers. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present Officer ceases to
be an Officer or in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the present Officers as set forth in the last
delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, shall be sufficiently given if addressed
to the Custodian and mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as the Custodian may
from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Fund shall be sufficiently given if addressed to
the Fund and mailed or delivered to it at its office at the address for the Fund
first above written, or at such other place as the Fund may from time to time
designate in writing, and any notice or other instrument in writing authorized
or required to be given to the Administrator shall be sufficiently given if
addressed to the Administrator at such address as the Administrator may from
time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the State of
New York without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute arising hereunder and
hereby waives its right to trial by jury.
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.
Page 82
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
FOCUS TRUST, INC.
[SEAL]
By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL]
By:_______________________
Attest:
______________________
Page 83
<PAGE>
APPENDIX A
I, , President and I,
, of FOCUS TRUST, INC.,
a corporation organized and existing under the laws of the state of Maryland
(the "Fund"), do hereby certify that:
The following individuals including officers and employees of the
Administrator have been duly authorized by the Board of Directors of the Fund in
conformity with the Fund's Articles of Incorporation and By-Laws to give
Certificates or Oral Instructions on behalf of the Fund, and the signatures set
forth opposite their respective names are their true and correct signatures:
Name Signature
_____________________ _________________________
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<PAGE>
APPENDIX B
SERIES
Focus Trust
<PAGE>
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
Page 86
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of FOCUS TRUST, INC., a corporation organized and existing
under the laws of the state of Maryland (the "Fund"), and further certifies that
the following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of FOCUS
TRUST, INC., as of the day of , 199 .
[SEAL]
Page 87
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of FOCUS TRUST, INC., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors of
the Fund at a meeting duly held on , 199 , at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the Depository to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales
of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of FOCUS
TRUST, INC., as of the day of , 199 .
[SEAL]
Page 88
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of FOCUS TRUST, INC., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Directors
of the Fund at a meeting duly held on , 199 , at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Participants Trust Company as Depository, as defined in the
Custody Agreement, all securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated, and to utilize
the Participants Trust Company to the extent possible in connection with
its performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of FOCUS
TRUST, INC., as of the day of , 199 .
[SEAL]
Page 89
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of FOCUS TRUST, INC., a corporation organized and existing
under the laws of the state of Maryland (the "Fund"), and further certifies that
the following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary, to accept, utilize
and act with respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which the same are
specifically allocated, as such terms are defined in the Custody Agreement,
as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of FOCUS
TRUST, INC., as of the day of , 199 .
[SEAL]
Page 90
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she is the duly
elected and acting of FOCUS TRUST, INC., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), further
certifies that the following resolutions were adopted by the Board of
Directors of the Fund at a meeting duly held on , 199 , at which a
quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with, and to rely on
Certificates (as defined in the Custody Agreement) given by to the
Custodian by a Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant us of
such access codes only to Officers of the fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of such access codes, shall
limit its use of the Terminal Link to those purposes permitted by the
Custody Agreement, shall require at least two such Officers to utilize
their respective access codes in connection with each such Certificate, and
shall use the Terminal Link only in a manner that does not contravene the
Investment Company Act of 1940, as amended, or the rules and regulations
thereunder.
RESOLVED, that Officers of the Fund shall, following the establishment
of such access codes and such internal safekeeping procedures, advise the
Custodian that the same have been established by delivering a Certificate,
as defined in the Custody Agreement, and the Custodian shall be entitled to
rely upon such advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of FOCUS
TRUST, INC., as of the day of , 199 .
[SEAL]
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<PAGE>
EXHIBIT E
The undersigned, , hereby certifies that he or she is the duly
elected and acting of FOCUS TRUST, INC., a corporation organized and
existing under the laws of the state of Maryland (the "Fund"), further
certifies that the following resolutions were adopted by the Board of
Directors of the Fund at a meeting duly held on , 199 , at which a
quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date
hereof.
RESOLVED, that the maintenance of the Fund's assets in each country
listed in Schedule I hereto be, and hereby is, approved by the Board of
Directors as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located
in the countries specified therein, and with the foreign sub-custodians
and depositories listed in Schedule I located in the countries specified
therein be, and hereby is, approved by the Board of Directors as
consistent with the best interest of the Fund and its shareholders; and
further
RESOLVED, that the Subcustodian Agreements presented to this meeting
between the Bank and each of the foreign sub-custodians and depositories
listed in Schedule I providing for the maintenance of the Fund's assets
with the applicable entity, be and hereby are, approved by the Board of
Directors as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby
authorized to place assets of the Fund with the aforementioned foreign
branches and foreign sub-custodians and depositories as hereinabove
provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them,
are authorized to do any and all other acts, in the name of the Fund and on
its behalf, as they, or any of them, may determine to be necessary or
desirable and proper in connection with or in furtherance of the foregoing
resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of FOCUS
TRUST, INC., as of the day of , 199 .
[SEAL]
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<PAGE>
Exhibit (10.4)
TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the 4th day of April , 1995, made
------- ----------------
by and between Focus Trust, Inc. ("Focus Trust"), a Corporation duly organized
-----------------
and existing under the laws of the state of Maryland and operating as a
registered investment company under the Investment Company Act of 1940, as
amended (the "Act"), and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
------------------------
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, Focus Trust is authorized by its Articles of Incorporation to
issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto and which Schedule "C" may be amended from time to time by mutual
agreement of Focus Trust and Fund/Plan; and
WHEREAS, Focus Trust desires to retain Fund/Plan to perform share transfer
agency, redemption and dividend disbursing services as set forth in this
Agreement and in Schedule "A" attached hereto, and to perform certain other
functions in connection with these duties; and
WHEREAS, Fund/Plan is registered with the Securities and Exchange
Commission as a Transfer Agent as required under Section 17(A)(c) of the
Securities Exchange Act of 1934, as amended; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for good and valuable consideration, the receipt and
sufficiency is hereby acknowledged, the Parties hereto, intending to be legally
bound, do hereby agree as follows:
Section 1. The terms as defined in this Section wherever used in this
----------
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
Share Certificates shall mean the certificates representing shares of stock
------------------
of each Series.
Shareholders shall mean the registered owners of the Shares of the Series
------------
in accordance with the share registry records maintained by Fund/Plan for
Focus Trust.
Shares shall mean the issued and outstanding shares of the Series.
------
Signature Guarantee shall mean the guarantee of signatures by an "eligible
-------------------
guarantor institution" as defined in rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended. Eligible guarantor institutions include banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. Broker-
dealers guaranteeing signatures must be members of a clearing corporation or
maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
Oral Instruction shall mean an authorization, instruction, approval, item
----------------
or set of data, or information of any kind transmitted to Fund/Plan in person or
by telephone, telegram, telecopy or other mechanical or documentary means
lacking an original signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons so authorized by a resolution of the Board
of Directors of Focus Trust.
Written Instruction shall mean an authorization, instruction, approval,
-------------------
item or set of data or information of any kind transmitted to Fund/Plan in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person or persons so authorized
by a resolution of the Board of Directors of Focus Trust to give Written
Instructions to Fund/Plan.
TRANSFER AGENCY SERVICES
Section 2. Fund/Plan as Transfer Agent shall make original issues of
----------
Shares in accordance with Section 9 and 10 below and with each Series'
Prospectus and Statement of Additional Information then in effect, upon the
written request of Focus Trust, and upon being furnished with (i) a certified
copy of a resolution or resolutions of the Board of Directors of Focus Trust
authorizing such issue; (ii) an opinion of counsel as to the validity of such
Shares; and (iii) necessary funds for the payment of any original issue tax
applicable to such additional Shares.
Section 3. Transfers of Shares shall be registered and new Shares issued
----------
by Fund/Plan upon redemption of outstanding Shares, (i) in the form deemed by
Fund/Plan to be properly endorsed for transfer, (ii) with all necessary
endorser's signatures guaranteed pursuant to Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, accompanied by, (iii) such assurances as
Fund/Plan shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement, and (iv) satisfactory evidence of
compliance with all applicable laws relating to the payment or collection of
taxes.
Section 4. In registering transfers, Fund/Plan as Transfer Agent may rely
----------
upon the applicable commercial code or any other applicable law which, in the
written opinion (a copy of which shall previously have been
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<PAGE>
furnished to Focus Trust) of counsel, protect Fund/Plan and Focus Trust in not
requiring complete documentation, in registering transfer without inquiry into
adverse claims, in delaying registration for purposes of such inquiry, or in
refusing registration where in its judgment an adverse claim requires such
refusal.
Section 5. Focus Trust agrees not to issue Shares through the use of
----------
confirm trades.
Section 6. Fund/Plan will maintain stock registry records in the usual
----------
form in which it will note the issuance, transfer and redemption of Shares.
Fund/Plan is responsible to provide reports of Share purchases, redemptions, and
total Shares outstanding on the next business day after each net asset
valuation. Fund/Plan is authorized to keep records, which will be part of the
stock transfer records, in which it will note the names and registered address
of Shareholders and the number of Shares and fractions thereof owned by them.
Section 7. Under this Agreement, Fund/Plan shall, in addition to the
----------
duties and functions above-mentioned, perform the usual duties and functions of
a stock transfer agent for an investment company as listed in Schedule "A"
attached hereto. Fund/Plan may rely conclusively and act without further
investigation upon any list, instruction, certification, authorization or other
instrument or paper believed by it in good faith to be genuine and unaltered,
and to have been signed, countersigned, or executed by duly authorized person or
persons, or upon the instructions of any officer of Focus Trust, or upon the
advice of counsel for Focus Trust or for Fund/Plan. Fund/Plan may record any
transfer of Shares which is reasonably believed by it to have been duly
authorized or may refuse to record any transfer of Shares if in good faith
Fund/Plan in its capacity as Transfer Agent deems such refusal necessary in
order to avoid any liability either of Focus Trust or Fund/Plan. Focus Trust
agrees to indemnify and hold harmless Fund/Plan from and against any and all
losses, costs, claims, and liability which it may suffer or incur by reason of
so relying or acting or refusing to act. Fund/Plan shall maintain and reconcile
all operating bank accounts necessary to facilitate all transfer agency
processes; including, but not limited to, distribution disbursements,
redemptions and payment clearance accounts.
Section 8. In case of any request or demand for the inspection of the
----------
Share records of the Series, Fund/Plan as Transfer Agent shall endeavor to
notify Focus Trust and to secure instructions as to permitting or refusing such
inspection. Fund/Plan may, however, exhibit such records to any person in any
case where it is advised by its counsel that it may be held liable for failure
to do so.
Section 9. Fund/Plan acknowledges that all records that it maintains on
----------
behalf of Focus Trust are the property of Focus Trust and will be surrendered
promptly to Focus Trust upon written request. Fund/Plan will preserve, for the
periods prescribed under Rule 31a-2 under the Act, all such records required to
be maintained under Rule 31a-1 of the Act.
ISSUANCE OF SHARES
Section 10. Prior to the daily determination of net asset value in
-----------
accordance with the Series' Prospectus and Statement of Additional Information,
Fund/Plan shall process all purchase orders received since the last
determination of the Series' net asset value.
Fund/Plan shall calculate on a daily basis the amount available for
investment in Shares at the net asset value determined by the Series' pricing
agent as of the close of regular trading on the New York Stock Exchange, the
number of Shares and fractional Shares to be purchased and the net asset value
to be deposited with the custodian of the assets of Focus Trust (the
"Custodian"). Fund/Plan shall place a purchase order daily with the appropriate
Series for the proper number of Shares and fractional Shares to be purchased and
confirm such number to Focus Trust, in writing.
Section 11. Fund/Plan having made the calculations provided for in Section
-----------
9, shall thereupon pay over the net asset value of Shares purchased to the
Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder Registration Records.
The Shares and fractional Shares purchased for each Shareholder will be credited
by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to
each Shareholder a confirmation of each purchase with, if requested, copies to
Focus Trust. Such confirmations will show the prior Share balance, the new
Share balance, the amount invested and the price paid for the newly purchased
Shares.
REDEMPTIONS
Section 12. Prior to the daily determination of net asset value in
-----------
accordance with the Series' Prospectus and Statement of Additional Information
then in effect, Fund/Plan shall process all requests from Shareholders to redeem
Shares and determine the number of Shares required to be redeemed to make
monthly payments, automatic payments or the like. Thereupon, Fund/Plan shall
advise Focus Trust of the total number of Shares available for redemption and
the number of Shares and fractional Shares requested to be redeemed. Focus
Trust's pricing agent shall then determine the applicable net asset value.
Thereafter Fund/Plan shall furnish Focus Trust with an appropriate confirmation
of the redemption and process the redemption by filing with the Custodian an
appropriate statement and make the proper distribution and application of the
redemption proceeds in accordance with each Series' Prospectus and Statement of
Additional Information then in effect. The stock registry books recording
outstanding Shares, the Shareholder Registration Records and the individual
account of the Shareholder shall be
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<PAGE>
properly debited.
Section 13. The proceeds of redemption shall be remitted by Fund/Plan in
-----------
accordance with the appropriate Series' Prospectus and Statement of Additional
Information then in effect, by check mailed to the Shareholder at the
Shareholder's registered address or wired to an authorized bank account.
For the purposes of redemption of Shares which have been purchased within
15 days of a redemption request, Focus Trust shall provide Fund/Plan, from time
to time, with Written Instructions concerning the time within which such
requests may be honored.
DIVIDENDS
Section 14. Focus Trust shall notify Fund/Plan of the date of each
-----------
dividend declaration or capital gains distribution. In addition, Focus Trust
shall provide to Fund/Plan five business days' prior written notice of the
record date for determining the Shareholders entitled to payment. The per-share
payment amount of any dividend or capital gain shall be determined by Focus
Trust after receipt of necessary information from and consultation with Focus
Trust's accounting agent and auditors.
Section 15. On or before each payment date, Focus Trust will notify
-----------
Fund/Plan of the total amount of the dividend or distribution currently payable.
Fund/Plan will, on the designated payment date, automatically reinvest all
dividends in additional Shares except in cases where Shareholders have elected
to receive distribution in cash, in which case Fund/Plan will mail distribution
checks to the Shareholders for the proper amounts payable to them from monies
transferred by the Custodian to Fund/Plan for that purpose.
FEES
Section 16. Focus Trust agrees to pay Fund/Plan compensation for its
-----------
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by Focus Trust and Fund/Plan. Focus Trust agrees and
understands that Fund/Plan's compensation will be comprised of two components,
payable on a monthly basis, as follows:
(i) Subject to a minimum fee per Series, Focus Trust agrees to pay
Fund/Plan an annual Shareholder account maintenance fee calculated by
multiplying the monthly average number of accounts in each Series by one twelfth
(1/12th) the per account fee as stated in Schedule "B", which fee Focus Trust
hereby authorizes Fund/Plan to collect by debiting Focus Trust's custody account
for invoices which are rendered for such services performed. The invoices for
the services performed will be sent to Focus Trust after such debiting with the
indication that payment has been made; and
(ii) reimbursement of any reasonable out-of-pocket expenses paid by
Fund/Plan on behalf of Focus Trust, which out-of-pocket expenses will be billed
to Focus Trust within the first ten calendar days of the month following the
month in which such out-of-pocket expenses were incurred. Focus Trust agrees to
reimburse Fund/Plan for such expenses within ten calendar days of receipt of
such bill.
For the purpose of determining fees payable to Fund/Plan, the value of each
Series' net assets shall be computed at the times and in the manner specified in
each Series' Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should Focus Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and Focus Trust.
GENERAL PROVISIONS
Section 17. Fund/Plan shall maintain records (which may be part of the
-----------
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestments, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each Shareholder. Fund/Plan agrees to
make available upon request and to preserve for the periods prescribed in Rule
31a-2 under the Investment Company Act of 1940, as amended, any records relating
to services provided under this Agreement which are required to be maintained by
Rule 31a-1 under the Act.
Section 18. In addition to the services as Transfer Agent and dividend
-----------
disbursing agent set forth above, Fund/Plan will perform other services for
Focus Trust as agreed upon from time to time, including but not limited to,
preparation of and mailing Federal Tax Information Forms and mailing semi-annual
reports to shareholders of Focus Trust.
Section 19. Nothing contained in this Agreement is intended to or shall
-----------
require Fund/Plan in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange are closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next business day on which both the New York Stock Exchange and the
Custodian are open.
Section 20.
-----------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by Focus Trust, in connection with the performance of
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<PAGE>
this Agreement that result from willful misfeasance, bad faith, gross negligence
or reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of Focus Trust, shall be deemed, when rendering services
to such entity or acting on any business of Focus Trust, (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for Focus Trust and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, Focus Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith hereunder; (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon any
certificate, instrument, order, or stock certificate or other document
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions or Written
Instructions of an authorized person of Focus Trust or upon the opinion of legal
counsel to Focus Trust, or its own counsel; or (iii) any action taken or omitted
to be taken by Fund/Plan in connection with its appointment under this
agreement, which action or omission was taken in good faith in reliance upon any
law, act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended, or repealed. Indemnification
under this subparagraph, however, shall not apply to actions or omissions of
Fund/Plan or its directors, officers, employees, shareholders, or agents in
cases of its or their willful misfeasance, bad faith, gross negligence or
reckless disregard of its or their duties hereunder.
(d) Fund/Plan shall give written notice to Focus Trust within thirty
(30) business days of receipt by Fund/Plan of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify Focus Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve Focus
Trust of any liability arising under this Section or otherwise, except to the
extent that failure to give notice prejudices Focus Trust.
(e) For any legal proceeding giving rise to this indemnification, Focus
Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. In the event
Focus Trust chooses to defend or prosecute such claim, the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
(f) Focus Trust shall not settle any claim under Section 19(d) and 19(e)
without Fund/Plan's express written consent, which consent shall not be
unreasonably withheld. Fund/Plan shall not settle any such claim without the
Trust's express written consent, which likewise shall not be unreasonably
withheld.
Section 21. Fund/Plan is authorized, upon receipt of Written Instructions
-----------
from Focus Trust, to make payment upon redemption of Shares without a signature
guarantee. Focus Trust hereby agrees to indemnify and hold Fund/Plan, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands, losses whatsoever arising out of
or in connection with a payment by Fund/Plan upon redemption of Shares pursuant
to Written Instructions and without a signature guarantee; upon the request of
Fund/Plan, Focus Trust shall assume the entire defense of any action, suit or
claim subject to the foregoing indemnity. Fund/Plan shall notify Focus Trust of
any such action, suit or claim within thirty (30) days after receipt by
Fund/Plan of notice thereof.
Section 22.
-----------
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which Focus Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed for
two (2) years commencing on the Effective Date of this Agreement.
(c) After the initial term of this Agreement, Focus Trust or Fund/Plan may
give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred twenty (120) days after the date of receipt of such
notice. Upon the effective termination date, Focus Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities under
this Agreement is designated by
Page 96
<PAGE>
Focus Trust by written notice to Fund/Plan in connection with the termination of
this Agreement, Fund/Plan shall promptly upon such termination and at the
expense of Focus Trust, transfer all required records and shall cooperate in the
transfer of such duties and responsibilities.
Section 23. Focus Trust shall file with Fund/Plan a certified copy of each
-----------
resolution of its Board of Directors authorizing the execution of Written
Instructions or the transmittal of Oral Instructions, as provided in Section 1
of this Agreement.
Section 24. This Agreement may be amended from time to time by a
-----------
supplemental agreement executed by Focus Trust and Fund/Plan.
Section 25. Except as otherwise provided in this Agreement, any notice or
-----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:
If to Focus Trust: If to Fund/Plan:
------------------ ----------------
Focus Trust, Inc. Fund/Plan Services, Inc.
Two Penn Center Plaza 2 West Elm Street
Philadelphia, PA 19102 Conshohocken, PA 19428
Attention: Robert Hagstrom, Jr., Attention: Kenneth J. Kempf,
President President
Section 26. Focus Trust represents and warrants to Fund/Plan that the
-----------
execution and delivery of this Agreement by the undersigned officers of Focus
Trust has been duly and validly authorized by resolution of the Board of
Directors of Focus Trust.
Section 27. This Agreement may be executed in two or more counterparts,
-----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 28. This Agreement shall extend to and shall be binding upon the
-----------
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by Focus Trust without the written
consent of Fund/Plan or by Fund/Plan without the written consent of Focus Trust,
authorized or approved by a resolution of their respective Boards of Directors.
Section 29. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 30. No provision of this Agreement may be amended or modified, in
-----------
any manner except in writing, properly authorized and executed by Fund/Plan and
Focus Trust.
Section 31. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting in its entirety, of eleven typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as of the day
and year first above written.
Focus Trust, Inc. Fund/Plan Services, Inc.
- ----------------- ------------------------
_____________________________________________ _______________________________
By: Robert G. Hagstrom, Jr., President By: Kenneth J. Kempf, President
Page 97
<PAGE>
SCHEDULE "A"
Transfer Agent/Shareholder Services
for
The Focus Trust, Inc.
---------------------
THE FOLLOWING TRANSFER AGENCY SERVICES SHALL BE PROVIDED UNDER THIS AGREEMENT:
. Opening new accounts and entering demographic data into shareholder base.
. Real-time Customer Information File (CIF) to link accounts within a Series
and across all Series.
. 100% Quality Control of new accounts opened on a same-day/next day basis.
. Account Maintenance
. Processing all investments including:
- initial investments
- subsequent investments through lock box computer interface
- pre-authorized investments through ACH
- government allotments through ACH
. Processing tax ID certifications and Non-Resident Alien (NRA) and reporting
back-up withholding.
. Processing legal transfers of accounts.
. Automated exchange processing.
. Recording and retaining on tape all shareholder calls.
. Research and respond to shareholder calls and written inquiries.
. Generating account statements with copies to appropriate interested
parties. (Up to four statements.)
. Redemption processing includes:
- complete and partial redemptions
- check redemption processing (if applicable)
. Distribution options:
- federal wires*
- mailing checks
- ACH*
. Certificate issuance and cancellation.
. Replacement of certificates through surety bonds.*
. Process dividends and capital gains distributions.
. Producing daily and monthly reports of shareholder activity.
DAILY REPORTS
-------------
<TABLE>
<CAPTION>
Report Number Report Description
------------- ------------------
<S> <C>
(no report number) Daily Transaction Journal
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
</TABLE>
Page 98
<PAGE>
<TABLE>
<S> <C>
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
501 New Account Report
</TABLE>
MONTHLY REPORTS
---------------
Report Description
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
. Preparation of federal tax information forms to include 1099-DIV's, 1099-
B's, 1042's, etc. to shareholders with tape to IRS.
. Microfilming and indexing in PC system of all application, correspondence
and other pertinent shareholder documents to provide automated location of
these records.
. Microfilming all checks presented for investment and check redemptions.
. Provide quarterly shareholder listing.
* Service Fee paid by shareholder.
THE FOLLOWING SERVICES ARE AVAILABLE FROM FUND/PLAN BUT ARE NOT INCLUDED UNDER
THIS AGREEMENT OR FEE STRUCTURE:
. Processing reinvestment of dividends of one fund into another fund. (If
applicable)
. Processing sweep purchases and redemptions for brokerage, bank, or other
accounts via tape or transmission.
. Combined shareholder statements.
. Selected group redemptions.
. Producing shareholder lists, labels, ad hoc reports to management, etc.
. Addressing, mailing, and tabulation of proxy cards, as necessary.
. System access by PC dial-up or by dedicated line (if applicable).
. Retirement Plan processing (IRA, SEP, Omnibus Qualified Plans)
- Systematic tracking of current, prior year and rollover contributions
- 5498 tax reporting
- 1099R reporting on distributions
- Processing transfer of assets between custodians
- PC based recalculation of required minimum distributions for IRA SWP's
for shareholders over 59 1/2 years of age.
Page 99
<PAGE>
SCHEDULE "B"
Shareholder Services and Transfer Agent Fee Schedule
for
Focus Trust, Inc.
-----------------
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Base Fee: Subject to a minimum monthly fee of $2,250 for each Series
----------------------------------------------------------------------
$15.00 for each Account
B) IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
--------------------------------------------------------
$12.00 per Account Annual Maintenance Fee (charged directly to
shareholder)
II. Out-of-Pocket Expenses:
----------------------
Focus Trust will reimburse Fund/Plan Services monthly for all reasonable
out-of-pocket expenses, including postage, stationery (statements),
telecommunications (telephone, fax, dedicated 800 line, on-line access),
special reports, transmissions, records retention, tapes, couriers and any
pre-approved travel expenses.
III. Additional Services
-------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies are not included
herein, and will be quoted separately. To the extent Focus Trust should
decide to issue multiple/separate classes of shares, additional fees will
apply. Any enhanced services, programming requests or reports will be
quoted upon request.
Page 100
<PAGE>
SCHEDULE "C"
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"FOCUS TRUST, INC."
This Schedule "C" may be amended from time to time by agreement of the Parties.
Page 101
<PAGE>
ADMINISTRATION AGREEMENT Exhibit 10.5
This Agreement, dated as of the ___________ day of ______________________,
1995, made by and between Focus Trust, Inc., a corporation duly organized and
-----------------
existing under the laws of the state of Maryland ("Focus Trust"), operating as a
registered investment company under the Investment Company Act of 1940, as
amended (the "Act"), and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
------------------------
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, Focus Trust is authorized by its Articles of Incorporation to
issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of Focus Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby Fund/Plan
will provide certain administration services to Focus Trust on the terms and
conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
administrative services under the terms and conditions set forth below; and
WHEREAS, Focus Trust will provide all necessary information to Fund/Plan
concerning the Series so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment Focus Trust hereby appoints Fund/Plan as
---------- -----------
administrator and Fund/Plan hereby accepts such appointment. Also, Focus Trust
agrees to appoint Fund/Plan as administrator to any additional Series which,
from time to time may be added to Focus Trust.
Section 2. Duties and Obligations of Fund/Plan
---------- -----------------------------------
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Board of Directors of Focus Trust, Fund/Plan
shall provide to each of the Series all administrative services as set forth in
Schedule "A" attached hereto and incorporated by reference in its entirety into
this Agreement. In addition to the obligations set forth in Schedule "A",
Fund/Plan shall (i) provide its own office space, facilities, equipment and
personnel for the performance of its duties under this Agreement; and (ii) take
all actions it deems necessary to properly execute the administrative
responsibilities of Focus Trust.
(b) So that Fund/Plan may perform its duties under the terms of this
Agreement, the Board of Directors of Focus Trust shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of Focus Trust to cooperate fully with Fund/Plan and to provide such
information, documents and advice relating to Focus Trust as is within the
possession or knowledge of such persons provided that no such person need
provide any information to Fund/Plan if to do so would result in the loss of any
privilege or confidential treatment with respect to such information. In
connection with its duties, Fund/Plan shall be entitled to rely, and shall be
held harmless by Focus Trust when acting in reasonable reliance upon the
instruction, advice or any documents as provided by Focus Trust to Fund/Plan by
any of the aforementioned persons. All fees charged by any such persons shall
be deemed an expense of Focus Trust.
(c) Any activities performed by Fund/Plan under this Agreement shall
conform to the requirements of:
(1) the provisions of the Investment Company Act of 1940, as amended
(the "Act") and the Securities Act of 1933, as amended, and of any rules or
regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Articles of Incorporation and By-Laws of
Focus Trust as amended from time to time;
(4) any policies and determinations of the Board of Directors of Focus
Trust; and
(5) the fundamental policies of Focus Trust as reflected in the
registration statement under the Act.
Fund/Plan acknowledges that all records that it maintains for Focus Trust
are the property of Focus Trust and will be surrendered promptly to Focus Trust
upon written request. Fund/Plan will preserve, for the periods prescribed under
Rule 31a-2 under the Act, all such records required to be maintained under Rule
31a-1 of the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any officer
thereof from acting as administrator for or with any other person, firm or
corporation. While the administrative services supplied to Focus Trust may be
different than those supplied to other persons, firms or corporations, Fund/Plan
shall provide Focus Trust equitable treatment in supplying services. Focus
Trust recognizes that it will not receive preferential treatment from Fund/Plan
as compared with the treatment provided to other Fund/Plan clients. Fund/Plan
agrees to maintain the records and all other information of Focus Trust in a
confidential manner and shall not use such information for any purpose other
than the performance of Fund/Plan's duties under this Agreement.
Section 3. Allocation of Expenses All costs and expenses of Focus Trust
---------- ----------------------
shall be paid by Focus Trust
Page 102
<PAGE>
including, but not limited to:
(a) fees paid to an investment adviser (the "Adviser");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Directors who are not affiliated
persons of the Adviser;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder servicing agent, fees
and expenses;
(h) fees and expenses incident to the registration of the shares of
Focus Trust under Federal or state securities laws;
(i) expenses related to preparing, setting in type, printing and
mailing prospectuses, statements of additional information,
reports and notices and proxy material to shareholders of Focus
Trust;
(j) all expenses incidental to holding meetings of shareholders and
Directors of Focus Trust;
(k) such extraordinary expenses as may arise, including litigation,
affecting Focus Trust and the legal obligations which Focus Trust
may have regarding indemnification of its officers and directors;
and
(l) fees and out-of-pocket expenses paid on behalf of Focus Trust by
Fund/Plan.
Section 4. Compensation of Fund/Plan Focus Trust agrees to pay Fund/Plan
---------- -------------------------
compensation for its services and to reimburse it for expenses incurred and paid
by Fund/Plan on behalf of Focus Trust, at the rates and amounts as set forth in
Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by Focus Trust and Fund/Plan. Focus Trust agrees and
understands that Fund/Plan's compensation be comprised of two components,
payable on a monthly basis, as follows:
(i) A combined asset-based fee subject to a minimum amount that Focus Trust
hereby authorizes Fund/Plan to collect by debiting Focus Trust's custody account
for invoices which are rendered for the services performed. The invoices for
the services performed will be sent to Focus Trust after such debiting with the
indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by Fund/Plan on
behalf of Focus Trust, which out-of-pocket expenses will be billed to Focus
Trust within the first ten calendar days of the month following the month in
which such out-of-pocket expenses were incurred. Focus Trust agrees to
reimburse Fund/Plan for such expenses within ten calendar days of receipt of
such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
Focus Trust's net assets shall be computed at the times and in the manner
specified in Focus Trust's Prospectus and Statement of Additional Information
then in effect.
During the term of this Agreement, should Focus Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and Focus Trust.
Section 5. Duration
---------- --------
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which Focus Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed for
two (2) years commencing on the Effective Date of this Agreement.
(c) After the initial term of this Agreement, Focus Trust or Fund/Plan may
give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred eighty (180) days after the date of receipt of such
notice. Upon the effective termination date, Focus Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements reasonably
incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities under
this Agreement is designated by Focus Trust by written notice to Fund/Plan in
connection with the termination of this Agreement, Fund/Plan shall promptly upon
such termination and at the expense of Focus Trust, transfer all required
records and shall cooperate in the transfer of such duties and responsibilities.
Section 6. Amendment No provision of this Agreement may be amended
---------- ---------
or modified, in any manner except by a written agreement properly authorized and
executed by Fund/Plan and Focus Trust.
Section 7. Applicable Law This Agreement shall be governed by the laws
---------- --------------
of the Commonwealth of Pennsylvania and the venue of any action arising under
this Agreement shall be Montgomery County,
Page 103
<PAGE>
Commonwealth of Pennsylvania.
Section 8. Limitation of Liability
---------- -----------------------
(a) The execution and delivery of this Agreement has been duly authorized
by the Board of Directors of Focus Trust and executed on behalf of Focus Trust
by the undersigned officer, in that officer's capacity as an officer of Focus
Trust. The obligations under this Agreement shall be binding upon the assets
and property of Focus Trust and shall not be binding upon any officer or
shareholder of the Series individually.
(b) Fund/Plan, its directors, officers, employees, shareholders and agents
shall only be liable for any error of judgment or mistake of law or for any loss
suffered by Focus Trust in connection with the performance of this Agreement
that result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of Fund/Plan in the performance of its obligations and
duties under this Agreement.
(c) Any person, even though a director, officer, employee, shareholder or
agent of Fund/Plan, who may be or become an officer, director, employee or agent
of Focus Trust, shall be deemed when rendering services to such entity or acting
on any business of such entity (other than services or business in connection
with Fund/Plan's duties under the Agreement), to be rendering such services to
or acting solely for Focus Trust and not as a director, officer, employee,
shareholder or agent of, or under the control or direction of Fund/Plan even
though such person may receive compensation from Fund/Plan.
(d) Notwithstanding any other provision of this Agreement, Focus Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instruction of an
authorized person of Focus Trust or upon the opinion of legal counsel for Focus
Trust; or (iii) any action taken in good faith or omitted to be taken by
Fund/Plan in connection with its appointment in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders or agents in cases of its or
their willful misfeasance, bad faith, gross negligence or reckless disregard of
its or their duties hereunder.
(e) Fund/Plan shall give written notice to Focus Trust within thirty (30)
business days of receipt by Fund/Plan of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. The failure to notify Focus Trust of such written assertion or
claim shall not, however, operate in any manner whatsoever to relieve Focus
Trust of any liability arising under this Section or otherwise, unless such
failure prejudices Focus Trust.
(f) For any legal proceeding giving rise to this indemnification, Focus
Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. If Focus
Trust does choose to defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
(g) The terms of this Section 8 shall survive the termination of this
Agreement.
Section 9. Notices Except as otherwise provided in this Agreement,any
---------- -------
notice or other communication required by or permitted to be given in connection
with this Agreement shall be in writing, and shall be delivered in person or
sent by first class mail, postage prepaid to the respective parties as follows:
If to Focus Trust: If to Fund/Plan:
------------------ ----------------
Focus Trust, Inc. Fund/Plan Services, Inc.
Two Penn Center Plaza, Suite 1810 2 West Elm Street
Philadelphia, PA 19102 Conshohocken, PA 19428
Attention: Robert G. Hagstrom, Jr. Attention: Kenneth J. Kempf,
President President
Section 10. Severability If any part, term or provision of this
----------- ------------
Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be considered
severable and not affected, and the rights and obligations of the parties shall
be construed and enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
Section 11. Section Headings Section and Paragraph headings are for
----------- ----------------
convenience only and shall not be construed as part of this Agreement.
Page 104
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of seven type written pages, together with Schedules "A", "B" and
"C," to be signed by their duly authorized officers as of the day and year first
above written.
Focus Trust, Inc. Fund/Plan Services, Inc.
- ----------------- ------------------------
__________________________________________ _______________________________
By: Robert G. Hagstrom, Jr., President By: Kenneth J. Kempf, President
Page 105
<PAGE>
SCHEDULE "A"
Fund Administration Services
for
Focus Trust, Inc.
-----------------
I. Regulatory Compliance
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and present for renewal
a. Investment advisory contracts
b. Fidelity bond
c. Underwriting contract
d. Distribution (12b-1) plan
e. Administration contract
f. Accounting contract
g. Custody contract
h. Transfer agent and shareholder services contract
2. Filings
a. N-SAR (semi-annual report)
b. One Annual post-effective amendment on Form N-1A
----------
c. Notice pursuant to Rule 24f-2 (indefinite registration of
shares)
d. Filing fidelity bond under 17g-1
e. Filing shareholder reports under 30b2-1
3. Annual up-dates of biographical information and questionnaires
for Directors and Officers.
B. Compliance - State "Blue Sky"
1. Blue Sky (state registration)
a. Registration shares
b. Registration issuer/dealer/agent (no loads)
c. Monitor sale shares over/under
d. Report shares sold
e. Filing of federal prospectus and contracts
f. Filing annual and semi-annual reports with states
C. Compliance - Prospectus
1. Analyze and review portfolio reports from investment advisor
regarding:
a. compliance with investment objectives
b. maximum investment by company/industry size
D. Compliance - Other
1. Applicable stock exchange rules
2. Applicable state tax laws
Page 106
<PAGE>
II. Corporate Business and Shareholder/Public Information
-----------------------------------------------------
A. Directors/Management
1. Preparation of Board meetings
a. agendas - all necessary items of compliance
b. arrange meetings
c. draft meeting minutes
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
1. General
2. Blue sky
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. performance information
4. Respond to:
a. financial press, as authorized
b. miscellaneous shareholder inquiries
c. industry questionnaires
5. Prepare, maintain and update monthly information manual
E. Communications to Shareholders
1. Coordinate printing and distribution of annual and semi-annual
reports and prospectus
F. Shareholder Meetings (Additional Fee Applies)
1. Preparation of proxy
2. Conduct meeting
3. Preparation of minutes and record ballot results
III. Financial and Management Reporting
----------------------------------
A. Income and Expenses
1. Expense figures calculated and accrual levels set
2. Monitoring of expenses and expense caps (monthly)
3. Approve and coordinate payment of expenses
4. Projection of income and expenses (with regards to B(2)) - ex-
date will determine of projection will apply
5. Checking account reconciliation (monthly)
6. Calculation of advisory fee, 12b-1 fee and reimbursements to fund
(if applicable)
7. Authorize the recording and amortization of organizational costs
and prepaid expenses (supplied by Adviser)
Page 107
<PAGE>
B. Distributions to Shareholders
1. Projections of distribution amounts
2. Calculations of dividends and capital gain distributions (in
conjunction with the Fund and their auditors)
a. compliance with income tax provisions
b. compliance with exise tax provisions
c. compliance with Investment Company Act of 1940
C. Financial Reporting
1. Liaison between Fund management, independent auditors and
printers for shareholder reports
2. Preparation of semi-annual and annual reports to shareholders
3. 60-day delivery to SEC and shareholders
4. Preparation of semi-annual and annual NSAR's (financial data)
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
3. Income qualification test
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and analyses
can be constructed to meet a fund's specific needs (additional
fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on return of capital
presentation, excise tax calculation
4. Performance (total return) calculation (monthly)
5. 1099 Miscellaneous - prepared for Directors (annual)
6. Analysis of interest derived from various Government obligations
(annual)(if interest income was distributed in a calendar year)
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure proper
update
2. Perform various reviews to ensure accuracy of transfer agency
(subscription/liquidation) schedules, accounting (the monthly
expense analysis) and custody (review of daily bank statements to
ensure accurate money expense payment movement)
3. Review accruals and expenditures where applciable
G. Preparation and distribution of monthly operational reports to
management by 10th Business Day
1. Management Statistics (Recap)
- portfolio
- book gains/losses/per share
- net income, book income per share
- capital stock activity
- distributions
2. Performance Analysis
- total return
- monthly, quarterly, year to date, average annual
3. Expense Analysis
- schedule
- summary of due to/from Adviser
- expenses paid
- expense cap
- accrual monitoring
- advisory fee
4. Short-Short Analysis
- short-short income
- gross income (components)
5. Portfolio Turnover
- cost of purchases
Page 108
<PAGE>
- net proceeds of sales
- average market value
6. Asset Diversification Test
- gross assets
- non-qualifying assets
7. Activity Summary
- shares sold, redeemed and reinvested
- change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
I. Standard schedules for Board Package (quarterly)
1. Activity Summary
2. Broker commissions with per share analysis
3. Expense analysis indicating before/after reimbursement basis
points
4. Other schedules can be provided (additional fees may apply)
Page 109
<PAGE>
SCHEDULE "B"
Administration Services Fee Schedule
for
Focus Trust, Inc.
-----------------
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Base Fee (calculated using average monthly total net assets and
--------
payable monthly)
Subject to a minimum annual fee of $65,000 for the initial Series of Focus
Trust (such minimum annual fee to increase by $10,000 for each additional
Series issued by Focus Trust), the asset based administration fees shall be
calculated at:
<TABLE>
<C> <S> <C>
.0015 On the First $50 Million of Total Average Net Assets
.0010 On the Next $50 Million of Total Average Net Assets; and
.0005 Over $100 Million of Total Average Net Assets
</TABLE>
Maximum annual fee for Focus Trust is $500,000 for one separate series of
shares.
II. Out-of-Pocket Expenses:
----------------------
Focus Trust will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including postage, telecommunications (telephone and fax),
special reports, Board Meeting materials, record retention approved,
transportation costs as incurred and copying and sending materials to
independent accountants for off-site audits.
III. Additional Services
-------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be quoted separately. To the extent Focus Trust should
decide to issue multiple/separate classes of shares, additional fees will
apply. Any additional/enhanced services or reports will be quoted upon
request.
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SCHEDULE "C"
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
"FOCUS TRUST, INC."
This Schedule "C" may be amended from time to time by agreement of the Parties.
Page 111
<PAGE>
ACCOUNTING SERVICES AGREEMENT Exhibit (10.6)
This Agreement, dated as of the ________ day of _________________, 1995
made by and between Focus Trust, Inc. ("Focus Trust"), a corporation duly
-----------------
organized and existing under the laws of the State of Maryland and operating as
an open end management investment company registered under the Investment
Company Act of 1940, as amended, and Fund/Plan Services, Inc. ("Fund/Plan"), a
------------------------
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, Focus Trust is authorized by its Articles of Incorporation to
issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto and which Schedule "C" may be amended from time to time by mutual
agreement of Focus Trust and Fund/Plan; and
WHEREAS, Focus Trust desires to appoint Fund/Plan as Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of Focus Trust (the
"Accounts and Records") and to perform certain other functions in connection
with such Accounts and Records; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below; and
WHEREAS, Focus Trust will provide all necessary information concerning the
Series to Fund/Plan so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. For purposes of this Agreement:
----------
Oral Instructions shall mean an authorization, instruction, approval, item
-----------------
or set of data, or information of any kind transmitted to Fund/Plan in person or
by telephone, telegram, telecopy, or other mechanical or documentary means
lacking an original signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons authorized by a resolution of the Board of
Directors of Focus Trust, to give such Oral Instructions on behalf of Focus
Trust.
Written Instructions shall mean an authorization, instruction, approval,
--------------------
item or set of data or information of any kind transmitted to Fund/Plan in
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person authorized by a
resolution of the Board of Directors of Focus Trust to give written instructions
on behalf of Focus Trust.
Focus Trust shall file with Fund/Plan a certified copy of each resolution
of its Board of Directors authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 2. To the extent Fund/Plan receives the necessary information from
----------
Focus Trust or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records relating to the
business of Focus Trust in such form as may be mutually agreed upon between
Focus Trust and Fund/Plan:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
(m) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of the net asset value of Focus Trust as provided below, is to be
furnished by Written or Oral Instructions to Fund/Plan daily (in accordance with
the time frame identified in Section 7) prior to the close of regular trading on
the New York Stock Exchange.
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<PAGE>
Section 3. Fund/Plan shall perform the ministerial calculations necessary
----------
to calculate each of the Series' net asset value each day that the New York
Stock Exchange is open for business, in accordance with (i) each Series' current
Prospectus and Statement of Additional Information and (ii) procedures with
respect thereto approved by the Board of Directors of Focus Trust and supplied
in writing to Fund/Plan. Portfolio items for which market quotations are
available by Fund/Plan's use of an automated financial information service (the
"Service") shall be based on the closing prices of such Service except where
Focus Trust has given or caused to be given specific Written or Oral
Instructions to utilize a different value subject to the appropriate provisions
in Focus Trust's prospectus and statement of additional information then in
effect. All of the portfolio securities shall be given such values as Focus
Trust provides by Written or Oral Instructions including all restricted
securities and other securities requiring valuation not readily ascertainable
solely by such Service subject to the appropriate provisions in Focus Trust's
prospectus and statement of additional information then in effect. Fund/Plan
shall have no responsibility or liability for the accuracy of prices quoted by
such Service; for the accuracy of the information supplied by Focus Trust; or
for any loss, liability, damage, or cost arising out of any inaccuracy of such
data. Fund/Plan shall have no responsibility or duty to include information or
valuations to be provided by Focus Trust in any computation unless and until it
is timely supplied to Fund/Plan in usable form. Fund/Plan shall record corporate
action information as received from the custodian of Focus Trust's assets (the
"Custodian"), the Service, or Focus Trust. Fund/Plan shall have no duty to
gather or record corporate action information not supplied by these sources.
Fund/Plan will assume no liability for price changes caused by: the
investment adviser(s), custodian, suppliers of security prices and corporate
action and dividend information, or any party other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price change of
an amount greater than or equal to one half of one percent of the correct net
asset value ("NAV"), consideration must be given to the effect of the price
change as described below. Notwithstanding the provisions of Section 11,
the following provisions govern Fund/Plan's liability for errors in calculating
the NAV of the Series:
If the NAV should have been higher for a date or dates in the past,
the error would have the effect of having given more shares to subscribers
and less money to redeemers to which they were entitled. Conversely, if the
NAV should have been lower, the error would have the effect of having given
less shares to subscribers and overpaying redeemers.
If the error affects the prior business day's NAV only, and if
Fund/Plan can rerun the prior day's work before shareholder statements and
checks are mailed, Focus Trust hereby accepts this manner of correcting the
error.
If the error spans five (5) business days or less, Fund/Plan shall
reprocess shareholder purchases and redemptions where redeeming
shareholders have been underpaid. Fund/Plan shall assume liability to Focus
Trust for overpayments to shareholders who have fully redeemed.
If the error spans more than five (5) business days, Fund/Plan would
bear the liability to Focus Trust for, 1) buying in for excess shares given
to shareholders if the NAV should have been higher, or, 2) funding
overpayments to shareholders who have redeemed if the NAV should have been
lower. The cost of any reprocessing required for shareholders who have been
credited with fewer shares than appropriate, or for redeeming shareholders
who are due additional amounts of money will also be borne by Fund/Plan.
Section 4. For all purposes under this Agreement, Fund/Plan is authorized
----------
to act upon receipt of the first of any Written or Oral Instruction it receives
from Focus Trust or its agents on behalf of Focus Trust. In cases where the
first instruction is an Oral Instruction that is not in the form of a document
or written record, a confirmatory Written Instruction or Oral Instruction in the
form of a document or written record shall be delivered, and in cases where
Fund/Plan receives an Instruction, whether Written or Oral, to enter a portfolio
transaction on the records, Focus Trust shall cause the broker/dealer to send a
written confirmation to the Custodian. Fund/Plan shall be entitled to rely on
the first Instruction received, and for any act or omission undertaken in
compliance therewith shall be free of liability and fully indemnified and held
harmless by Focus Trust, provided however, that in the event a Written or Oral
Instruction received by Fund/Plan is countermanded by a timely received
subsequent Written or Oral Instruction prior to acting upon such countermanded
Instruction, Fund/Plan shall act upon such subsequent Written or Oral
Instruction. The sole obligation of Fund/Plan with respect to any follow-up or
confirmatory Written Instruction, Oral Instruction in documentary or written
form, shall be to make reasonable efforts to detect any such discrepancy between
the original Instruction and such confirmation and to report such discrepancy to
Focus Trust. Focus Trust shall be responsible, at Focus Trust's expense, for
taking any action, including any reprocessing, necessary to correct any
discrepancy or error. To the extent such action requires Fund/Plan to act,
Focus Trust shall give Fund/Plan specific Written Instruction as to the action
required.
Section 5. Focus Trust shall cause its Custodian to forward to Fund/Plan a
----------
daily statement of cash and portfolio transactions. At the end of each month,
Focus Trust shall cause the Custodian to forward to Fund/Plan a monthly
statement of portfolio positions, which will be reconciled with Focus Trust's
Accounts and Records
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<PAGE>
maintained by Fund/Plan on its behalf. Fund/Plan will report any discrepancies
to the Custodian, and report any unreconciled items to Focus Trust.
Section 6. Fund/Plan shall promptly supply daily and periodic reports to
----------
Focus Trust as requested by Focus Trust and agreed upon by Fund/Plan.
Section 7. Focus Trust shall provide and shall require each of its agents
----------
(including the Custodian) to provide Fund/Plan as of the close of each business
day, or on such other schedule as Focus Trust determines is necessary, with
Written or Oral Instructions (to be delivered to Fund/Plan by 11:00 a.m.,
Eastern time, the next following business day) containing all data and
information necessary for Fund/Plan to maintain Focus Trust's Accounts and
Records and Fund/Plan may conclusively assume that the information it receives
by Written or Oral Instructions is complete and accurate. Fund/Plan, as
Transfer Agent, accepts responsibility for providing reports of share purchases,
redemptions, and total shares outstanding, on the next business day after each
net asset valuation.
Section 8. The Accounts and Records, in the agreed-upon format, maintained
----------
by Fund/Plan shall be the property of Focus Trust and shall be made available to
Focus Trust promptly upon request and shall be maintained for the periods
prescribed in Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended. Fund/Plan shall assist Focus Trust's independent auditors, or upon
approval of Focus Trust, or upon demand, any regulatory body, in any requested
review of Focus Trust's Accounts and Records but shall be reimbursed for all
expenses and employee time invested in any such review outside of routine and
normal periodic review and audits. Upon receipt from Focus Trust of the
necessary information, Fund/Plan shall supply the necessary data for Focus Trust
or an independent auditor's completion of any necessary tax returns,
questionnaires, periodic reports to Shareholders and such other reports and
information requests as Focus Trust and Fund/Plan shall agree upon from time to
time.
Section 9. In case of any request or demand for the inspection of the
----------
records of Focus Trust, Fund/Plan shall endeavor to notify Focus Trust and to
secure instructions as to permitting or refusing such inspection. Fund/Plan may
however, exhibit such records to any person in any case where it is advised by
its counsel that it may be held liable for failure to do so after notice to
Focus Trust.
Section 10. Fund/Plan and Focus Trust may from time to time adopt such
-----------
procedures as agreed upon in writing, and Fund/Plan may conclusively assume that
any procedure approved by Focus Trust or directed by Focus Trust, does not
conflict with or violate any requirements of Focus Trust's Prospectus, Articles
of Incorporation, By-Laws, or any rule or regulation of any regulatory body or
governmental agency. Focus Trust shall be responsible for notifying Fund/Plan
of any changes in regulations or rules which might necessitate changes in
Fund/Plan's procedures, and for working out with Fund/Plan such changes.
Section 11.
-----------
(a) Fund/Plan, its directors, officers, employees, shareholders, and
agents shall not be liable for any error of judgment or mistake of law or for
any loss suffered by Focus Trust in connection with the performance of this
Agreement, except losses resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard on the part of Fund/Plan in the performance of
its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee or agent of Focus Trust shall be deemed, when rendering services to
Focus Trust or acting on any business of Focus Trust (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for Focus Trust, and not as a director, officer,
employee, shareholder or agent of, or one under the control or direction of
Fund/Plan even though receiving a salary from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, Focus
Trust shall indemnify and hold harmless Fund/Plan, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which Fund/Plan may sustain or incur or which may be asserted
against Fund/Plan by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Fund/Plan except
matters resulting from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement; or
(ii) in reliance upon any certificate, instrument, order or stock
certificate or other document reasonably believed by it to be genuine and to be
signed, countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of Focus Trust or
upon the written opinion of legal counsel for Focus Trust or Fund/Plan; or
(iii) any action taken or omitted to be taken in good faith by
Fund/Plan in connection with its appointment, in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended, or repealed. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders, or agents in
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<PAGE>
cases of its or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder.
(d) Fund/Plan shall give written notice to Focus Trust within thirty
(30) business days of receipt by Fund/Plan of a written assertion or claim of
any threatened or pending legal proceeding which may be subject to this
indemnification. The failure to so notify Focus Trust of such written assertion
or claim shall not, however, operate in any manner whatsoever to relieve Focus
Trust of any liability arising from this Section or otherwise, except to the
extent failure to give notice prejudices Focus Trust.
(e) For any legal proceeding giving rise to this indemnification,
Focus Trust shall be entitled to defend or prosecute any claim in the name of
Fund/Plan at its own expense and through counsel of its own choosing if it gives
written notice to Fund/Plan within thirty (30) business days of receiving notice
of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own choosing. If Focus
Trust chooses to defend or prosecute such claim, then the Parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.
Section 12. All financial data provided to, processed by, and reported by
-----------
Fund/Plan under this Agreement shall be stated in United States dollars.
Fund/Plan shall have no obligation to convert to, equate, or deal in foreign
currencies or values, and expressly assumes no liability for any currency
conversion or non-U.S. dollar denominated computations relating to the affairs
of Focus Trust.
Section 13. Focus Trust agrees to pay Fund/Plan compensation for its
-----------
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by Focus Trust and Fund/Plan. Focus Trust agrees and
understands that Fund/Plan's compensation be comprised of two components and
payable on a monthly basis as follows:
(i) An asset based fee subject to a stated minimum fee, which
Focus Trust hereby authorizes Fund/Plan to collect by debiting Focus Trust's
custody account for invoices which are rendered for the services performed for
the applicable function. The invoices for the services performed will be sent to
Focus Trust after such debiting with the indication that payment has been made;
and
(ii) reimbursement of any reasonable out-of-pocket expenses paid
by Fund/Plan on behalf of Focus Trust, which out-of-pocket expenses will be
billed to Focus Trust within the first ten calendar days of the month following
the month in which such out-of-pocket expenses were incurred. Focus Trust agrees
to reimburse Fund/Plan for such expenses within ten calendar days of receipt of
such bill.
For the purpose of determining fees payable to Fund/Plan, the value of the
Series' net assets shall be computed at the times and in the manner specified in
each Series' Prospectuses and Statement of Additional Information then in
effect.
During the term of this Agreement, should Focus Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and Focus Trust.
Section 14. Nothing contained in this Agreement is intended to or shall
-----------
require Fund/Plan, in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be
performed on such days shall be performed on, and as of, the next succeeding
business day on which the New York Stock Exchange is open. Notwithstanding the
foregoing, Fund/Plan shall compute the net asset value of each Series on each
day required pursuant to (i) Rule 22c-1 promulgated under the Investment Company
Act of 1940, as amended, and (ii) Focus Trust's Prospectus and Statement of
Additional Information then in effect.
Section 15.
-----------
(a) The term of this Agreement shall be for a period of two (2)
years, commencing on the date which Focus Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission ("Effective
Date") and shall continue thereafter on a year to year term subject to
termination by either Party as set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for (2) years commencing on the Effective Date of this Agreement and shall
continue thereafter subject to review and adjustment of the fee schedule and
termination notice as set forth in section (c) below.
(c) After the initial term of this Agreement, Focus Trust or Fund/Plan
may give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred eighty (180) days after the date of receipt of such
notice. Upon the effective termination date, Focus Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements reasonably
incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by Focus Trust by written notice to Fund/Plan
in connection with the termination of this Agreement, Fund/Plan shall
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<PAGE>
promptly upon such termination and at the expense of Focus Trust, transfer all
Required Records and shall cooperate in the transfer of such duties and
responsibilities.
Section 16. Except as otherwise provided in this Agreement, any notice or
-----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid to the respective parties as follows:
If to Focus Trust, Inc.: If to Fund/Plan:
------------------------ ----------------
Focus Trust, Inc. Fund/Plan Services, Inc.
Two Penn Center Plaza, Suite 1810 2 West Elm Street
Philadelphia, PA 19102 Conshohocken, PA 19428
Attention: Robert G. Hagstrom, Jr. Attention: KennethJ. Kempf,
President President
Section 17. This Agreement may be amended from time to time by
-----------
supplemental agreement executed by Focus Trust and Fund/Plan and the
compensation stated in Schedule "B" attached hereto may be adjusted accordingly
as mutually agreed upon.
Section 18. Focus Trust represents and warrants to Fund/Plan that the
-----------
execution and delivery of this Agreement by the undersigned officers of Focus
Trust has been duly and validly authorized by resolution of the Board of
Directors of Focus Trust.
Section 19. This Agreement may be executed in two or more counterparts,
-----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 20. This Agreement shall extend to and shall be binding upon the
-----------
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by Focus Trust without the written
consent of Fund/Plan or by Fund/Plan without the written consent of Focus Trust,
authorized or approved by a resolution of its respective Boards of Directors.
Section 21. This Agreement shall be governed by the laws of the
-----------
Commonwealth of Pennsylvania and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 22. No provision of this Agreement may be amended or modified, in
-----------
any manner except by a written agreement properly authorized and executed by
Fund/Plan and Focus Trust.
Section 23. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of ten typewritten pages, together with Schedules "A", "B" and "C",
to be signed by their duly authorized officers as of the day and year first
above written.
Focus Trust, Inc. Fund/Plan Services, Inc.
- ----------------- ------------------------
_________________________________________ ___________________________________
By: Robert G. Hagstrom, Jr., President By: Kenneth J. Kempf, President
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<PAGE>
SCHEDULE "A"
Fund Accounting and Portfolio Valuation Services
for
Focus Trust, Inc.
Daily Accounting Services
-------------------------
1) Calculate Net Asset Value ("NAV") Per Share:
-------------------------------------------
. Update the daily market value of securities held by Focus Trust using
Fund/Plan's standard agents for pricing domestic equity and bond
securities. The standard domestic equity pricing services are
Quotron/Reuters, Inc. or Interactive Data Corporation (IDC). Muller
Data Corporation, Telerate Systems, Inc and IDC are used for bond and
money market issues.
. If necessary, enter limited number of manual prices supplied by Focus
Trust.
. Prepare NAV proof sheet. Review components of change in NAV for
reasonableness.
. Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by Focus
Trust. Verify US dollar security prices exceeding variance levels by
notifying Focus Trust and pricing sources of noted variances.
. Review for ex-dividend items indicated by pricing sources; trace to
general ledger for agreement.
. Communicate required pricing information, NAV, to Focus Trust's
transfer agent (the "Transfer Agent") and, electronically, to NASDAQ.
2) Determine and Report Cash Availability to Fund by approximately 9:30 AM
-----------------------------------------------------------------------
Eastern Time:
------------
. Receive daily cash and transaction statements from Focus Trust's
custodian (the "Custodian") by 8:30 AM Eastern time.
. Receive previous day shareholder activity reports from the Transfer
Agent by 8:30 AM Eastern time.
. Fax hard copy cash availability calculations with all details to Focus
Trust.
. Supply Focus Trust with 5-day cash projection report.
. Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the Custodian and
Focus Trust.
3) Reconcile and Record All Daily Expense Accruals:
-----------------------------------------------
. Accrue expenses based on budget supplied by Focus Trust either as
percentage of net assets or specific dollar amounts.
. If applicable, monitor expense limitations established by Focus Trust.
. If applicable, accrue daily amortization of organizational expense.
4) Verify and Record All Daily Income Accruals for Debt Issues:
-----------------------------------------------------------
. Review and verify all system generated interest and amortization
reports.
. Establish unique security codes for bond issues to permit segregated
trial balance income reporting.
5) Monitor Domestic Securities Held for cash dividends, corporate actions
--------------------------------
and capital changes such as splits, mergers, spinoffs, etc. and
process appropriately.
. Monitor electronically received information from Muller Data
Corporation for all domestic securities.
. Review current daily security trades for dividend activity.
. Interface with custodian to monitor timely collection and postings of
corporate actions, dividends and interest.
6) Enter All Security Trades on Investment Accounting System (IAS) based
--------------------------------------------------------------
on written instructions from Focus Trust.
. Review system verification of trade and interest calculations.
. Verify settlement through the statements supplied by the Custodian.
. Maintain security ledger transaction reporting.
. Maintain tax lot holdings.
. Provide complete broker commission reporting.
. Determine realized gains or losses on security trades.
7) Enter All Fund Share Transactions on IAS:
----------------------------------------
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<PAGE>
. Process activity identified on reports supplied by the Transfer Agent.
. Verify settlement through the statements supplied by the Custodian.
. Reconcile to Fund/Plan's Transfer Agent report balances.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing
---------------------------------------------------------------
all asset, liability, equity, income and expense accounts)
. Post manual entries to the general ledger.
. Post Custodian bank activity.
. Post shareholder and security transactions.
. Post and verify system generated activity, i.e., income and expense
accruals.
. Prepare general ledger net cash proof used in NAV calculation.
9) Review and Reconcile With Custodian Statements:
----------------------------------------------
. Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to
and resolved by the Custodian.)
. Post all cash settlement activity to the trial balance.
. Reconcile to ending cash balance accounts.
. Clear IAS subsidiary reports with settled amounts.
. Track status of past due items and failed trades handled by the
Custodian.
10) Submission of Daily Accounting Reports to Focus Trust, Inc.:
------------------------------------------------------------
(Additional reports readily available.)
. Trial Balance
. Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security.)
. Cash availability and 5-day cash projection report
. NAV calculation report
Monthly Accounting Services
---------------------------
1) Full Financial Statement Preparation (automated Statements of Assets and
------------------------------------
Liabilities, of Operations and of Changes in Net Assets) and submission to
Focus Trust by 10th business day.
2) Submission of Monthly Automated IAS Reports to Focus Trust:
----------------------------------------------------------
. Security Purchase/Sales Journal
. Interest and Maturity Report
. Brokers Ledger (Commission Report)
. Security Ledger Transaction Report with Realized Gains/Losses
. Security Ledger Tax Lot Holdings Report
. Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
-------------------------------------------------------------
. Report any security balance discrepancies to the Custodian/Focus
Trust.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
-----------------------------------------------------------------------
Accounts, such as:
---------
. Security cost and realized gains/losses
. Interest/dividend receivable and income
. Payable/receivable for securities purchased and sold
. Payable/receivable for fund shares; issued and redeemed
. Expense payments and accruals analysis
5) If Appropriate, Prepare and Submit to Focus Trust:
-------------------------------------------------
. SEC yield reporting (non-money market funds with domestic and ADR
securities only).
. Income by state reporting.
. Standard Industry Code Valuation Report.
. Alternative Minimum Tax Income segregation schedule.
Annual (and Semi-Annual) Accounting Services
--------------------------------------------
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<PAGE>
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. during the year
in accordance with standard audit assistance requirements.
2) Provide NSAR Reporting (Accounting Questions):
---------------------------------------------
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63,
64B, 71, 72, 73, 74, 75, and 76.
NOTE: FUND/PLAN ADMINISTRATION COMPLETES ENTIRE NSAR REPORTS.
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<PAGE>
Accounting Services Basic Assumptions for Focus Trust, Inc.
The Accounting Fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or requirements
change, fee revisions may be necessary.
BASIC ASSUMPTIONS:
- -----------------
1) As provided in its prospectus and statement of additional information then
in effect, Focus Trust will be non-diversified generally investing in
twenty (20) domestic securities or less. Trading will be light and turnover
will be very low.
2) Focus Trust has a tax year-end which coincides with its fiscal year-end. No
additional accounting requirements are necessary to identify or maintain
book-tax differences.
Security tax accounting which differs from book accounting will be provided
by Fund/Plan's Administration Group or the Fund's Independent Auditor.
Fund/Plan recommends book/tax differences be minimized.
3) Focus Trust foresees no difficulty in using Fund/Plan's standard current
pricing agents for domestic equity, bond, and ADR securities. We currently
use Quotron/Reuters, Inc. for domestic equities and listed ADR's. Muller
Data Corporation, Telerate Systems, Inc. or Interactive Data Corp. ("IDC")
are used for bonds and money market instruments.
It is assumed that the ASU will work closely with Focus Trust, Inc. to
ensure the accuracy of Focus Trust, Inc.'s NAV and to obtain the most
satisfactory pricing sources and specific methodologies prior to the actual
start-up date.
4) To the extent Focus Trust requires daily security prices (limited in
number) from specific brokers for domestic securities, these manual prices
will be obtained by Focus Trust's investment adviser and faxed to ASU by
approximately 4:00 PM Eastern time for inclusion in the NAV calculations.
Focus Trust, Inc. will supply ASU with the appropriate pricing contacts for
the manual quotes.
5) To the extent Focus Trust should ever purchase/hold open-end registered
investment companies (RIC's), procedural discussions shall take place
between ASU and Fund management to establish the appropriate pricing and
dividend rate sources. Depending on the methodologies selected by Focus
Trust, additional fees may apply.
6) ASU will supply daily Portfolio Valuation Reports to Focus Trust's
investment adviser or manager identifying current security positions,
original/amortized cost, security market values and changes in unrealized
appreciation/depreciation.
It will be the responsibility of the Fund's investment adviser to review
these reports and to promptly notify ASU of any possible problems, trade
discrepancies, incorrect security prices, corporate action/capital change
information that could result in a misstated Fund NAV.
7) Focus Trust does not currently expect to invest in Futures, Swaps,
Derivatives or Foreign (non-US dollar denominated) currency or securities.
To the extent these investment strategies should change, additional fees
will apply after the appropriate procedural discussions have taken place
between ASU and Focus Trust. (Two weeks advance notice is required should
Focus Trust commence trading in these investments.)
8) Focus Trust shall direct the Adviser to supply the ASU with critical income
information such as accrual methods, interest payment frequency details,
coupon payment dates, floating rate reset dates and complete security
descriptions with issue types and cusip numbers. If applicable, for proper
income accrual accounting, ASU will look to the Adviser to supply the yield
to maturity and related cash flow models for any mortgage/asset-backed
securities held by Focus Trust.
9) Focus Trust shall direct the Custodian to provide the ASU with daily
custodian statements reflecting all prior day cash activity by 8:30 AM
Eastern time. Complete descriptions of any postings, inclusive of cusip
numbers, interest/dividend payment dates, capital stock details, expense
authorizations, beginning/ending balances, etc. will be provided by the
Custodian's reports or system.
Page 120
<PAGE>
10) Focus Trust shall direct the Custodian to supply capital change information
and interest rate changes to ASU in a timely manner. The Adviser will
supplement and supply as appropriate.
11) Focus Trust shall direct the Custodian to handle and report upon all
settlement problems, failed trades and resolve unsettled
dividends/interest/paydowns and capital changes. The Custodian will process
all applicable capital change paperwork based upon advice from the Adviser.
ASU agrees to supply segregated Trial Balance reporting and supplemental
reports to assist in this process.
12) With respect to mortgage/asset-backed securities including GNMA's, FHLMC's,
FNMA's, CMO's, ARM's, Focus Trust shall direct the Custodian (or a Focus
Trust supplied source) to provide ASU with current principal repayment
factors on a timely basis in accordance with the appropriate securities'
schedule. Income accrual adjustments (to the extent necessary) based upon
initial estimates will be completed by ASU when actual principal/income
payments are collected by the Custodian and reported to ASU.
13) To the extent applicable, ASU will maintain on a daily basis US dollar
denominated qualified covered call options and index options reporting on
the daily Trail Balance and value the respective options and underlying
positions. This Agreement does not provide for tax classifications if they
are required.
If Focus Trust commences investment in domestic options or designated
hedges, two week's advance notice is required to clarify operational
procedures between ASU and the Adviser.)
14) To the extent Focus Trust, Inc. should establish a Line of Credit in
segregated accounts with the Custodian for temporary administrative
purposes, and/or leveraging/hedging the portfolio, it is not the
responsibility under this Agreement for ASU to complete the appropriate
paperwork/monitoring for segregation of assets and adequacy of collateral.
Focus Trust shall direct the Adviser to execute such responsibilities. ASU
will, however, reflect appropriate Trial Balance account entries and
interest expense accrual charges on the daily Trial Balance adjusting as
necessary at month-end.
15) If Focus Trust commences participation in Security Lending, Leveraging,
Precious Metals or Short Sales, two week's advance notice is required. To
the extent Focus Trust does so in the future, additional fees will apply.
16) Focus Trust shall direct the Adviser or Administrator to supply ASU with
portfolio specific expense accrual procedures and monitor the expense
accrual balances for adequacy based on outstanding liabilities monthly. The
Administrator will promptly communicate to the ASU any adjustments needed.
17) Specific deadlines and complete information shall be supplied by Focus
Trust in order to minimize any settlement problems, NAV miscalculations or
income accrual adjustments.
Focus Trust shall direct the Adviser to provide to ASU Trade Authorization
Forms, with the appropriate officer's signature, on all security trades
placed by Focus Trust no later than 12:30 PM Eastern time on
settlement/value date for money market issues, assuming that trade date
equals settlement date; and by 11:00 AM Eastern time on trade date plus one
for non-money market securities. Receipt by ASU of trade information within
these identified deadlines may be via telex, fax, or on-line system access.
To the extent applicable, the Adviser will communicate all trade
information directly to the Fund/Plan Custody Administrator who will then
supply ASU with the trade details in accordance with the above stated
deadlines.
There is no assurance that security trade information received by ASU after
the above stated deadlines will be included in that day's work.
Focus Trust agrees to direct the Adviser to include all information
required by ASU, including Cusip numbers and/or ticker symbols for all US
dollar denominated trades on the Trade Authorization Form, telex or on-line
support. If requested, ASU shall supply the Adviser with recommended trade
ticket documents to minimize receipt of incomplete information. ASU will
not be responsible for NAV changes or distribution rate adjustments that
result from incomplete trade information.
18) To the extent Focus Trust utilizes Purchases In-Kind (U.S. dollar
denominated securities only) as a method
Page 121
<PAGE>
for shareholder subscriptions, ASU will provide Focus Trust with procedures
to properly handle and process securities in-kind. Should Focus Trust
prefer procedures other than those provided by ASU, additional fees may
apply. (The Parties agree that discussions will take place in advance
between ASU and Focus Trust to clarify the appropriate In-Kind operational
procedures to be followed.)
19) It is assumed that the Adviser or Fund/Plan as Administrator will complete
the applicable performance and rate of return calculations as required by
the SEC for Focus Trust, Inc.
20) The Parties agree to establish amortization procedures and accretion
requirements for debt issues held by Focus Trust prior to commencement of
operations. Adjustments for financial statements regarding any issues with
Original Issue Discounts (OID) are not included under this Agreement. Focus
Trust shall direct its independent auditors to complete the necessary OID
adjustments for financial statements and/or tax reporting.
21) Compliance reporting (Sub-Chapter "M") as well as monitoring of the various
prospectus limitations and restrictions will be completed by the Fund/Plan
Administrator or Adviser.
22) Fund/Plan will provide Custody Administration and Transfer Agency Services.
Page 122
<PAGE>
SCHEDULE "B"
Fund Accounting and Portfolio Valuation Services Fee Schedule
for
Focus Trust, Inc.
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
The Accounting Fees as set forth below are based on the "Basic Assumptions" as
set forth in Schedule "A." To the extent that those assumptions are inaccurate
or requirements change, fee revisions may be necessary.
I. Annual Fee Schedule Per Portfolio: (1/12th payable monthly)(US dollar
---------------------------------
denominated securities only)
<TABLE>
<S> <C> <C>
$24,000 Minimum to $ 10 Million of Average Net Assets
.0004 On the Next $ 40 Million of Average Net Assets
.0003 On the Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
</TABLE>
II.Pricing Services Quotation Fee (Based on individual CUSIP/SEDOL or security
------------------------------
identification numbers.) Respective fees will be billed monthly.
A) MULLER DATA CORPORATION (if applicable)
*(Based on current vendor costs, subject to change)
<TABLE>
<S> <C>
Government/Mortgage Backed/Corpo
Short & Long Term Quotes $ .50 per Quote per Issue
Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue
CMOs/ARMs/ABS $1.00 per Quote per Issue
Mortgage Backed Factors $1.00 per Issue per Month
</TABLE>
Minimum Weekly File Transmission is Assumed
There are currently no charges for the domestic dividend and capital
--
change information transmitted daily to Fund/Plan services from Muller
Data Corporation.
B) TELERATE SYSTEMS, INC.* (if applicable)
*(Based on current vendor costs, subject to change.)
Specific costs will be identified based upon options selected by the
client and will be billed monthly.
C) QUOTRON/REUTERS, INC.*
*(Based on current vendor costs, subject to change.)
There are currently no charges for the domestic security prices
--
supplied by Quotron/Reuters, Inc.
D) Futures (if applicable) $2.00 per Issue per Day
E) INTERACTIVE DATA CORP.* (if applicable)
*(Based on current vendor costs, subject to change.)
Domestic Equities and Options $ .15 per Quote per Issue
Corporate/Government/Agency Bonds including
Mortgage-Backed Securities (evaluated,
seasoned, and/or closing) $ .50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $ .80 per Quote per Issue
Page 123
<PAGE>
Domestic Dividends and Capitalization
Changes $3.50 per Month per
Holding
Interactive Data also charges monthly transmission costs and disk storage
charges.
Specific costs will be identified based upon options selected by Focus
Trust, Inc. and will be billed monthly.
III. SEC Yield Calculation: (if applicable)
---------------------
Provide up to 12 reports per year to reflect the yield calculations for
non-money market funds required by the SEC. $1,000 per year per portfolio
(US dollar denominated securities only.)
IV. Out-Of-Pocket Expenses
----------------------
Focus Trust will reimburse Fund/Plan Services, Inc. monthly for all out-of-
pocket expenses, including telephone, postage, telecommunications, special
reports, record retention and the cost of copying and sending materials to
independent auditors.
V. Additional Services
-------------------
To the extent Focus Trust, Inc. commences using investment techniques such
as Futures, Security Lending, Short Sales, Derivatives, Leveraging,
Precious Metals or non-US dollar denominated securities, additional fees
will apply.
Activities of a non-recurring nature such as shareholder in-kinds, fund
consolidations, mergers, or reorganizations will be subject to negotiation.
To the extent Focus Trust, Inc. should decide to issue separate/multiple
classes of shares, additional fees shall apply. Any additional enhanced
services, programming requests or reports will be quoted upon request.
THIS SCHEDULE MAY BE AMENDED TO REFLECT THE ADDITION OF OTHER SERVICES/REPORTS.
Page 124
<PAGE>
SCHEDULE "C"
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of this Agreement:
"FOCUS TRUST, INC."
This Schedule "C" may be amended from time to time by agreement of the Parties.
Page 125
<PAGE>
EXHIBIT 11
----------
TOTAL RETURN FORMULA
--------------------
ERV = P(1 + T)/N/
WHERE:
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
T = AVERAGE ANNUAL TOTAL RETURN
N = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE OF AT THE END OF THE PERIOD OF A
HYPOTHETICAL $1,000 PAYMENT ("P") MADE AT THE BEGINNING OF THAT
PERIOD OR FRACTIONAL PORTION THEREOF.
FOCUS TRUST, INC.
- -----------------
Since inception (04/17/95) to 12/31/95
- --------------------------------------
ERV = $1,085.38
T = 12.29%
N = 0.7068 years
Page 141
<PAGE>
CONSENT OF AUDITORS Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 2 and 4 to the
Registration Statement (File No. 811-8966) under the Securities Act of 1933 and
the Investment Company Act of 1940 on Form N-1A of our report dated January 30,
1996 accompanying financial statements and financial highlights of Focus Trust,
Inc. in the Statement of Additional Information. We also consent to the
reference to our Firm under the captions "Financial Highlights", Other
Information-Independent Accountants", and "Financial Statements" in the filing.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 26, 1996
Page 126
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND and JOSEPH M. O'DONNELL and each
of them, with full power to act without the other, as a true and lawful
attorney-in-fact and agent, with full and several power of substitution, to take
any appropriate action to execute any amendment to the registration statement of
Focus Trust, Inc. (the "Corporation"), file for exemptive orders or to qualify
or register all or part of the securities of the Corporation for sale in various
states, to perform on behalf of the Corporation any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of April, 1995.
______________________________
Robert G. Hagstrom, Jr.
President & Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
April, 1995, by Robert G. Hagstrom, Jr., President and Director of Focus Trust,
Inc.
_____________________________________
Notary Public
In and for the County of Philadelphia
State of Pennsylvania
My Commission Expires:______________________
(Notarial Seal)
Page 142
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND and JOSEPH M. O'DONNELL and each
of them, with full power to act without the other, as a true and lawful
attorney-in-fact and agent, with full and several power of substitution, to take
any appropriate action to execute any amendment to the registration statement of
Focus Trust, Inc. (the "Corporation"), file for exemptive orders or to qualify
or register all or part of the securities of the Corporation for sale in various
states, to perform on behalf of the Corporation any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of April, 1995.
_____________________________
Allan S. Mostoff, Esq.
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
April, 1995, by Allan S. Mostoff, Esq., Director of Focus Trust, Inc.
____________________________________
Notary Public
In and for the County of Philadelphia
State of Pennsylvania
My Commission Expires:______________________
(Notarial Seal)
Page 143
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND and JOSEPH M. O'DONNELL and each
of them, with full power to act without the other, as a true and lawful
attorney-in-fact and agent, with full and several power of substitution, to take
any appropriate action to execute any amendment to the registration statement of
Focus Trust, Inc. (the "Corporation"), file for exemptive orders or to qualify
or register all or part of the securities of the Corporation for sale in various
states, to perform on behalf of the Corporation any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of April, 1995.
______________________________
Robert J. Coleman, Jr.
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
April, 1995, by Robert J. Coleman, Director of Focus Trust, Inc.
____________________________________
Notary Public
In and for the County of Philadelphia
State of Pennsylvania
My Commission Expires:______________________
(Notarial Seal)
Page 144
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND and JOSEPH M. O'DONNELL and each
of them, with full power to act without the other, as a true and lawful
attorney-in-fact and agent, with full and several power of substitution, to take
any appropriate action to execute any amendment to the registration statement of
Focus Trust, Inc. (the "Corporation"), file for exemptive orders or to qualify
or register all or part of the securities of the Corporation for sale in various
states, to perform on behalf of the Corporation any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of April, 1995.
______________________________
Joan M. Lamm-Tennant
Director
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
April, 1995, by Joan Lamm-Tennant, Director of Focus Trust, Inc.
____________________________________
Notary Public
In and for the County of Philadelphia
State of Pennsylvania
My Commission Expires:______________________
(Notarial Seal)
Page 145
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints WILLIAM J. BALTRUS, GERALD J. HOLLAND and JOSEPH M. O'DONNELL and each
of them, with full power to act without the other, as a true and lawful
attorney-in-fact and agent, with full and several power of substitution, to take
any appropriate action to execute any amendment to the registration statement of
Focus Trust, Inc. (the "Corporation"), file for exemptive orders or to qualify
or register all or part of the securities of the Corporation for sale in various
states, to perform on behalf of the Corporation any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of any such state, and in connection therewith to execute and
file all requisite papers and documents, including but not limited to,
applications, reports, surety bonds, irrevocable consents and appointments of
attorneys for service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully as each
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of April, 1995.
________________________________
John S. Lloyd
Vice President, Secretary & Principal
Accounting & Financial Officer
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
April, 1995, by John S. Lloyd, Vice President, Secretary & Principal Accounting
& Financial Officer of Focus Trust, Inc.
____________________________________
Notary Public
In and for the County of Philadelphia
State of Pennsylvania
My Commission Expires:______________________
(Notarial Seal)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000936886
<NAME> FOCUS TRUST, INC.
<SERIES>
<NUMBER> 1
<NAME> FOCUS TRUST, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-17-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4,523,199
<INVESTMENTS-AT-VALUE> 4,911,926
<RECEIVABLES> 9,078
<ASSETS-OTHER> 9,739
<OTHER-ITEMS-ASSETS> 460,417
<TOTAL-ASSETS> 5,391,160
<PAYABLE-FOR-SECURITIES> 249,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81,171
<TOTAL-LIABILITIES> 330,171
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,672,262
<SHARES-COMMON-STOCK> 453,220
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 388,727
<NET-ASSETS> 5,060,989
<DIVIDEND-INCOME> 20,533
<INTEREST-INCOME> 47,809
<OTHER-INCOME> 0
<EXPENSES-NET> 42,140
<NET-INVESTMENT-INCOME> 26,202
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 388,727
<NET-CHANGE-FROM-OPS> 414,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26,252)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 454,998
<NUMBER-OF-SHARES-REDEEMED> 14,027
<SHARES-REINVESTED> 2,249
<NET-CHANGE-IN-ASSETS> 4,960,989
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,371
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 173,336
<AVERAGE-NET-ASSETS> 3,094,596
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.17
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.17
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 99.1
April 10, 1995
Securities & Exchange Commission
Division of Investment Management
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, DC 20549
RE: Focus Trust, Inc.
- --- -----------------
To whom it may concern:
I, John S. Lloyd, a principal of Lloyd, Leith & Sawin, propose to acquire as a
separate series of shares:
4,000 shares of common stock (the "Shares") for Focus Trust, Inc. at a
purchase price of $10.00 per share
These Shares will be issued in a private offering prior to the effectiveness of
the Form N-1A Registration Statement filed by Focus Trust, Inc. under the
Securities Act of 1933. The Shares are being purchased pursuant to Section 14
of the Investment Act of 1940 to serve as the seed money for the Fund prior to
the commencement of the public offering of its shares.
In connection with such purchase, I understand that :(i) as the purchaser, I
intend to acquire the Shares for my own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired; and (ii) in the event any of the initial 4,000 Shares are redeemed
during the first five years, the Fund may charge against my redemption proceeds
a pro rata portion of any unamortized organizational expenses which would be
borne by such Shares during the balance of the initial five year period were
they not to be redeemed.
I consent to the filing of this Investment Letter as an exhibit to the Form N-1A
Registration Statement of the Fund.
Sincerely,
John S. Lloyd
Lloyd, Leith & Sawin
Two Penn Center Plaza, Suite 1810
Philadelphia, PA 19102
Page 127
<PAGE>
April 10, 1995
Securities & Exchange Commission
Division of Investment Management
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, DC 20549
RE: Focus Trust, Inc.
- --- -----------------
To whom it may concern:
I, Virginia B. Leith, a principal of Lloyd, Leith & Sawin, propose to acquire as
a separate series of shares:
3,500 shares of common stock (the "Shares") for Focus Trust, Inc. at a
purchase price of $10.00 per share
These Shares will be issued in a private offering prior to the effectiveness of
the Form N-1A Registration Statement filed by Focus Trust, Inc. under the
Securities Act of 1933. The Shares are being purchased pursuant to Section 14
of the Investment Act of 1940 to serve as the seed money for the Fund prior to
the commencement of the public offering of its shares.
In connection with such purchase, I understand that :(i) as the purchaser, I
intend to acquire the Shares for my own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired; and (ii) in the event any of the initial 3,500 Shares are redeemed
during the first five years, the Fund may charge against my redemption proceeds
a pro rata portion of any unamortized organizational expenses which would be
borne by such Shares during the balance of the initial five year period were
they not to be redeemed.
I consent to the filing of this Investment Letter as an exhibit to the Form N-1A
Registration Statement of the Fund.
Sincerely,
Virginia B. Leith
Lloyd, Leith & Sawin
Two Penn Center Plaza, Suite 1810
Philadelphia, PA 19102
Page 128
<PAGE>
April 10, 1995
Securities & Exchange Commission
Division of Investment Management
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, DC 20549
RE: Focus Trust, Inc.
- --- -----------------
To whom it may concern:
I, Ruth M. Hagstrom, propose to acquire as a separate series of shares:
4,456.71 shares of common stock (the "Shares") for Focus Trust, Inc.
at a purchase price of $10.00 per share
These Shares will be issued in a private offering prior to the effectiveness of
the Form N-1A Registration Statement filed by Focus Trust, Inc. under the
Securities Act of 1933. The Shares are being purchased pursuant to Section 14
of the Investment Act of 1940 to serve as the seed money for the Fund prior to
the commencement of the public offering of its shares.
In connection with such purchase, I understand that :(i) as the purchaser, I
intend to acquire the Shares for my own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired; and (ii) in the event any of the initial 4,456.71 Shares are redeemed
during the first five years, the Fund may charge against my redemption proceeds
a pro rata portion of any unamortized organizational expenses which would be
borne by such Shares during the balance of the initial five year period were
they not to be redeemed.
I consent to the filing of this Investment Letter as an exhibit to the Form N-1A
Registration Statement of the Fund.
Sincerely,
Ruth M. Hagstrom
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Exhibit 99.2
INDIVIDUAL
RETIREMENT
ACCOUNT
_________________________________
DISCLOSURE STATEMENT
CUSTODIAL ACCOUNT AGREEMENT
_________________________________
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DISCLOSURE STATEMENT
The following information is provided to you in accordance with the requirements
of the Internal Revenue Code of 1986, as amended (the "Code"). This information
should be reviewed in conjunction with both the Custodial Agreement, which is
included in its entirety beginning on page 8 and the Application for your
Individual Retirement Account ("IRA") which accompanies this booklet. The words
"you," "your," "Depositor" or "Owner" refer to the person who signs the
accompanying application and for whose benefit this IRA is opened.
REVOCATION
You may revoke this account any time within seven calendar days after your funds
are invested by mailing or delivering a written request for revocation to:
Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428.
Your written notice of revocation shall be deemed mailed on the date of the
postmark, certification or registration, whichever the case may be, if it is
deposited in the mail in the United States in an envelope, or other appropriate
wrapper, first class postage prepaid, properly addressed.
If you choose to revoke your application, and you fulfill the requirements as
stated above, you are entitled to a return of the entire amount of the
consideration paid on the account without adjustment for such items as
administration expenses or fluctuations in market value.
READ THE PROSPECTUS OF THE CHOSEN FUND
Carefully read current prospectus(es) of the Fund(s) you have chosen for
investment in your IRA. The prospectus(es) discloses the management fees,
charges and expenses, as well as the method of calculating net asset value and
earnings. The net asset value of the Fund shares held in your IRA may fluctuate;
it is not possible to make a projection of expected growth.
NONFORFEITABILITY
Your IRA is a custodial account created for your exclusive benefit. Your
interest in the account is nonforfeitable.
ELIGIBILITY
If NEITHER you NOR your spouse is covered by an employer sponsored retirement
plan, you may deduct your entire IRA contribution up to the lesser of $2,000 or
100% of compensation, or $2,250 for a spousal IRA, regardless of income level.
CONTRIBUTIONS
If either you or your spouse is an active participant in a retirement plan:
<TABLE>
<CAPTION>
Filing Adjusted Allowable IRA
Status Gross Income/(1)/ Deduction
- -------- --------------- -------------
<S> <C> <C>
Single Up to $24,999 Full Amount
$25,000-$34,999 Deduction reduced by
$200 for every $1,000
over $25,000
$35,000 & Above No Deduction
- --------------------------------------------------------------------------------
Married/ Up to $39,999 Full Amount
Joint /(2)/
$40,000-$49,999 Deduction reduced by
$200 for every $1,000
over $40,000
$50,000 & Above No Deduction
</TABLE>
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/(1)/ Adjusted Gross Income is determined before reduction for any deductible
contribution to an IRA.
/(2)/ Married/Joint -- where either spouse is an active participant.
(Note: special rules apply if you are married and file separately.)
If you or your spouse is an active participant in an employer sponsored
retirement plan, the amount of your IRA contribution which you may deduct
decreases as your adjusted gross income exceeds $40,000 if you are married and
file a joint return, or $25,000 if you are unmarried. If your adjusted gross
income exceeds $50,000 and you are married and filing a joint return, or $35,000
and unmarried, the tax deductibility of your IRA contribution is eliminated.
MOST IMPORTANTLY, if you no longer qualify for a tax deductible contribution,
you may continue to make nondeductible contributions to your IRA; up to the
lesser of $2,000 or 100% of compensation, or $2,250 for a spousal IRA. The
benefit of making nondeductible contributions to your IRA is that earnings on
these contributions will not be subject of Federal income tax until you actually
start making withdrawals from your IRA.
CONTRIBUTIONS
Individual IRA. You may make annual cash contributions to an IRA in any amount
up to 100% of your compensation for the year or $2,000, whichever is less. Your
employer may make contributions to your account, but, except as noted below
under a SEP-IRA, the total contributions from you and your employer may not
exceed this limitation.
Contributions (other than rollover contributions described below) must be made
in cash "and not in kind." Therefore, securities or other assets already owned
cannot be contributed to an IRA but can be converted to cash and then
contributed.
Spousal Accounts. If you are married and file a joint tax return, and your
spouse receives no compensation for a calendar year, you may make cash
contributions to a "spousal" IRA in addition to your own IRA. The total
amounts contributed to your own and to your spouse's IRA may not exceed 100% of
your combined compensation for the year or $2,250, whichever is less. In no
event, however, may the annual contribution to either your account or your
spouse's account exceed $2,000.
Transfer. Funds may be transferred from one individual retirement account to
another without the imposition of any tax. Basically, a transfer contribution
allows the withdrawal of all or part of the interest from one individual
retirement account and the direct reinvestment of it into another account. A
transfer must take place directly between the custodian or trustee and another
custodian or trustee. In order to qualify as a transfer, the participant must
not take possession of the amount being transferred. There is no limit to the
number of transfers effected. A tax deduction is not allowed for the amount
transferred.
No withholding is imposed on an IRA Transfer.
Rollover IRA. You may make a rollover IRA contribution by rolling over all or a
portion of an eligible distribution from a qualified retirement plan such as a
401(k) plan. This type of IRA is distinguished from a Transfer IRA in that there
is no distribution involved in a Transfer IRA. In addition, you are only
permitted one tax-free Rollover every 12 months, while there is no such
limitation on Transfers.
A lump sum distribution of your active retirement plan account and certain forms
of "partial" distributions would be eligible for a rollover. The administrator
of your retirement plan is required to give you an explanation (in writing) of
the rollover rules when making an eligible distribution to you. The distribution
must be rolled over within 60 days of receipt of payment from the qualified
retirement plan. The amount of your Rollover IRA contribution will not be
included in your taxable income for the year in which you receive the qualified
plan distribution.
Keep in mind that if you take possession of the proceeds of a Rollover, you will
be subject to withholding of 20%. To avoid this withholding, you must rollover
directly into your Rollover IRA, without taking possession of the proceeds, and
the rollover must take place within 60 days of the distribution.
Simplified Employee Pension Plan Contributions ("SEP-IRA"). Your IRA may be
used as part of a SEP-IRA established by your employer. Your employer may
contribute to your SEP-IRA up to a maximum of 15% of your compensation or
$30,000, whichever is less. You may contribute, in addition to the amount
contributed by your employer to your SEP-IRA, an amount not in excess of the
limits referred to under Individual IRA, as outlined above. It is your and your
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employer's responsibility to see that contributions in excess of normal IRA
limits are made under a valid SEP-IRA plan and are, therefore, proper.
If you are a participant in a SEP-IRA your employer is required to give you a
copy of the SEP-IRA documents and certain explanatory materials concerning SEP-
IRAs, and to inform you each year of the amounts (if any) contributed on your
behalf.
Time of Contribution. You may make contributions to your IRA any time up to
April 15th of the current tax-year. You may continue to make annual
contributions to your IRA up to (but not including) the calendar year in which
you reach age 70 1/2. You may continue to make annual contributions to your
spouse's IRA up to (but not including) the calendar year in which your spouse
reaches age 70 1/2.
Compensation means wages, salaries, professional fees, or other amounts derived
from or received for personal service actually rendered and includes the earned
income of a self-employed individual, and any alimony or separate maintenance
payment includable in the individual's gross income.
Adjusted gross income is determined prior to adjustments for personal exemptions
and itemized deductions. For purposes of determining the maximum IRA deduction
(see "Eligibility"), adjusted gross income is computed after taking into
account taxable benefits under the Social Security Act and the Railroad
Retirement Act, and passive loss limitations under Code Section 469, but before
the IRA deduction itself.
Excess Contributions. Contributions which exceed the allowable maximum are
treated as excess contributions. A nondeductible penalty tax of 6% of the excess
amount contributed will be assessed for each year in which the excess
contribution remains in your account. If you make a contribution in excess of
your allowable maximum for any taxable year, you may correct the excess
contribution and avoid the 6% penalty tax for that year by withdrawing the
excess contribution and its earnings on or before the due date, including
extensions, for filing your tax return for that year.
The amount of the excess contribution withdrawn will not be considered a
premature distribution or taxed as ordinary income, but the earnings withdrawn
will be taxed as ordinary income to you. Alternatively, excess contributions for
one year may be carried forward and reported in the next year to the extent that
the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum amount for that year. The 6% excise
tax will be imposed on excess contributions in each year that they are neither
returned nor carried forward.
DISTRIBUTIONS
General. In order to avoid tax penalties, distributions from your IRA should
begin no earlier than the date you reach 59 1/2 (except in cases of your earlier
disability or death) and no later than the April 1 following the year in which
you reach age 70 1/2. Distributions from your account will be included in your
gross income for federal income tax purposes for the year in which you receive
them.
Premature Distributions. Distributions from your IRA made before you reach age
59 1/2 will be subject to a 10% nondeductible penalty tax (in addition to being
taxable as ordinary income) unless the distribution is rolled over to another
qualified retirement plan, or the distribution is made on account of your death
or disability, or the distribution is one of a scheduled series of payments over
your life or life expectancy or the joint life expectancies of you and your
beneficiary. Distributions up to the amount of your nondeductible contributions
are not subject to the 10% penalty tax, but this tax will be assessed against
the earnings on nondeductible contributions.
Latest Time to Withdraw. You must begin receiving distributions of the assets in
your account by April 1 of the calendar year following the calendar year in
which you reach age 70 1/2.
Minimum Distributions. Once annual distributions are required to begin, they
must not be less than the amount (determined by actuarial tables) which would
exhaust the value of the account over the required distribution period, which is
generally your life expectancy or the joint life and last survivor expectancy of
you and an individual you have designated as your beneficiary. You will be
subject to a 50% excise tax on the amount by which the distribution you actually
received in any year falls short of the minimum distribution required for the
year.
Methods of Distribution. Assets may be distributed from your account according
to one or more of the following methods selected by you:
(a) Lump sum.
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(b) Substantially equal installments over a fixed period not longer than
your life expectancy.
(c) Substantially equal installments over a fixed period not longer than
the joint life expectancy of you and your beneficiary.
(See Article IV of your IRA Custodial Agreement on page 9 for a full description
of these distribution methods.)
Distribution Upon Death. If you die before receiving the balance of your
account, the account balance may be distributed to your beneficiary in periodic
payments or in a lump sum.
Distribution of Nondeductible Contributions. To the extent that a distribution
constitutes a return of your nondeductible contributions, it will not be
included in your income. The amount of any distribution not includable in income
is the portion that bears the same ratio to the total distribution that your
aggregate nondeductible contributions bear to the balance at the end of the year
(calculated after adding back distributions during the year) of your IRA. For
this purpose, all of your IRAs are treated as a single IRA. Furthermore, all
distributions from an IRA during a taxable year are to be treated as one
distribution. The aggregate amount of distributions excludible from income for
all years is not to exceed the aggregate nondeductible contributions for all
calendar years. There is a 10% additional income tax assessed against premature
distributions to the extent such distributions are includable in income (See
Premature Distributions above).
Excess Distributions. There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which exceed
the greater of $150,000 or $112,500 as adjusted after 1988 to reflect cost-of-
living increases. To determine whether you have distributions in excess of this
limit, you must aggregate the amounts of all distributions received by you
during the calendar year from all retirement plans, including IRAs. Please
consult with your tax advisor for more complete information, including the
effect of certain elections.
PROHIBITED TRANSACTIONS
If any of the events prohibited by Section 4975 of the Code (such as any sale,
exchange or leasing of any property between you and your IRA) occurs during the
existence of your IRA, your account will be disqualified and the entire balance
in your account will be treated as if distributed to you as of the first day of
the year in which the prohibited event occurs. This "distribution" would be
subject to ordinary income tax and, if you were under age 59 1/2 at the time,
to the 10% penalty tax on premature distributions.
If you or your beneficiary use (pledge) all or any part of your IRA as security
for a loan, then the portion so pledged will be treated as if distributed to
you, and will be taxable to you as ordinary income and subject to the 10%
penalty during the year in which you make such a pledge.
OTHER TAX CONSIDERATIONS
Tax Withholding. Federal income tax will be withheld from distributions you
receive from an IRA unless you elect not to have tax withheld.
Internal Revenue Service Filing Requirements. Contributions to your IRA must be
reported on your tax Form 1040 or 1040A for the taxable year contributed. You
will be required to designate your IRA contribution as deductible or
nondeductible. For any year in which you make nondeductible IRA contributions,
or you receive an IRA distribution after having made nondeductible IRA
contributions, you must file IRS Form 8606, even if you are not required to file
a federal tax return. There is a $50 penalty for failing to file Form 8606.
Other reporting will be required by you in the event that special taxes or
penalties described herein are due. You must also file Treasury Form 5329 with
the IRS for each taxable year in which the contribution limits are exceeded, a
premature distribution takes place, or less than the required minimum amount is
distributed from your IRA. The Tax Reform Act of 1986 also requires you to
report the amount of all distributions you received from your IRA and the
aggregate account balance of all IRAs as of the end of the calendar year if you
ever made any nondeductible contributions to one or more IRAs.
This IRA custodial agreement has not been submitted to the IRS for approval
because the use of IRS Form 5305-A makes such submission unnecessary.
Further information can be obtained from any district office of the IRS.
CUSTODIAN/PLAN ADMINISTRATOR
The Custodian of your IRA is identified in the Individual Retirement Account
Application. If Fund/Plan Services, Inc.
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is not the Custodian, Fund/Plan Services, Inc. serves as the Plan Administrator,
and in such capacity is responsible for all record keeping, applicable tax
reporting and fee collection in connection with IRA accounts. Fund/Plan
Services, Inc. is also the transfer agent for the Funds.
FEES
The custodial fee currently in effect is an annual maintenance fee of $12 per
Fund account.
Your first annual maintenance fee may be paid at the same time that you mail
your IRA Application to Fund/Plan Services, Inc. Forward a separate check for
$12, made payable to Fund/Plan Services, Inc.
In subsequent years, you may pay the annual maintenance fee by forwarding a
check to Fund/Plan Services, Inc. If you do not forward payment for the annual
maintenance fee by August 31 of each year, Fund/Plan Services, Inc. will obtain
payment directly from your IRA by redeeming a sufficient number of the Fund
shares held in your IRA.
The Custodial Fees may be modified upon 30 days' written notice from the
Custodian of your IRA.
One or more of the mutual funds available for investment through your IRA may be
subject to sales charges. Such charges, if any, are listed in the prospectus of
that fund.
INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL ACCOUNT AGREEMENT
As required under Section 408(a) of the Internal Revenue Code, the text of
Articles I through VII of this Agreement are exact duplicates of provisions of
IRS Form 5305-A (October, 1992).
Custodial Account Agreement, entered into on the date stated in the IRA
Application attached hereto and incorporated herein by this reference (the "IRA
Application"), by and between the individual depositor identified in the IRA
Application (the "Depositor"), whose date of birth, Social Security number,
and present residence address are stated in the IRA Application, and the
institution identified in the IRA Application as the Custodian (the
"Custodian"), c/o Fund/Plan Services, Inc., P.O. Box 874, Conshohocken, PA
19428.
WHEREAS, the Depositor desires to provide for his or her retirement and for the
support of his or her beneficiaries upon his or her death;
WHEREAS, to accomplish this purpose, the Depositor desires to establish an
Individual Retirement Account as described in Section 408(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, a disclosure statement has been furnished to the Depositor as required
under Section 408(I) of the Code and related regulations; and WHEREAS, the
Depositor has deposited with the Custodian the sum of money stated on the IRA
Application, in cash;
NOW, THEREFORE, the Depositor and the Custodian hereby agree, as follows:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account
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be commingled with other property except in a common trust fund, or common
investment fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section 1.401(a)(9)-
2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin to
be, distributed by the Depositor's required beginning date, (April 1 following
the calendar year end in which the Depositor reaches age 70 1/2). By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and the Depositor's designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and the Depositor's designated
beneficiary.
4. If the Depositor dies before the Depositor's entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of the Depositor's
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of the Depositor's interest
has begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either:
(I) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or;
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before the Depositor's entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the
close of business on December 31 of the preceding year by the life expectancy of
the Depositor (or the joint life and last
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survivor expectancy of the Depositor and the Depositor's designated beneficiary,
or the life expectancy of the designated beneficiary, whichever applies). In the
case of distributions under paragraph 3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under section 408(I) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. Contributions. The Custodian is under no duty to compel the Depositor to make
any contributions to the Custodial Account (the "Account"). The Depositor must
certify to the Custodian (in form satisfactory to it) that any contribution
other than a regular contribution is:
(a) A rollover contribution under Section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8) or 408(d)(3) of the Code, or;
(b) A direct transfer from another individual retirement account (as
defined in Section 7701(a)(37) of the Code permitted under Article I
of this agreement.
2. Investments. The Depositor shall direct the Custodian with respect to the
investment of all contributions. However, such direction shall be limited to the
purchase of shares of the Fund or Funds. Investments received without direction
may be returned or held uninvested without liability for loss of income,
interest or appreciation while directions are obtained. All dividends and
capital gain distributions received on shares held in the Account shall be
reinvested in additional shares of the issuing Fund(s).
3. Cash Contributions. The Custodian shall not accept any contribution or direct
transfer from another individual retirement account qualified under Section 408
of the Code unless it is made in cash (or its equivalent).
4. Notices and Voting. The Custodian shall deliver to the Depositor (or, in the
event of the Depositor's death, the Depositor's designated beneficiary) all
shareholder notices and reports, prospectuses, financial statements, proxy
material and other materials as they are received from the Fund(s). The
Custodian shall vote at all shareholder meetings of the Fund in accordance with
written instructions of the Depositor which will be secured by the Custodian.
5. Fees and Taxes. The Custodian shall receive, and the Depositor hereby agrees
to pay, such reasonable compensation for its services ("fees") as set forth in
the currently effective Disclosure Statement for the Account. The Custodian may
substitute a different fee schedule at any time upon 30 days' notice in writing
to the Depositor. Such fees may be paid by the Depositor; however, they shall
constitute a charge upon the assets of the Account until paid. Unless otherwise
paid, the Custodian shall have the right to redeem sufficient Fund shares in the
Account and to apply the proceeds to the payment of its annual fees. Any income
taxes or other taxes of any kind that may be levied or assessed against the
Account may be similarly paid from the assets of the Account and shall not be an
obligation of the Custodian.
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6. Custodian's Duties and Obligations. If Fund/Plan Services, Inc. is not the
Custodian, Fund/Plan Services, Inc. serves as the Plan Administrator for the
Custodian and in such capacity is responsible for all record keeping, applicable
tax reporting and fee collection in connection with IRA accounts. Fund/Plan
Services, Inc. also serves as transfer agent for the Fund(s). The Custodian
shall be under no duty whatsoever except such duties as are specifically set
forth in this Agreement, and, notwithstanding Article IV of this Agreement,
shall be under no duty to make any distribution from the Account in the absence
of specific directions from the Depositor or, upon the death of the Depositor,
the Depositor's designated beneficiary, whether or not the Depositor has
attained age 70 1/2 or is deceased. Neither the Custodian, the Plan
Administrator, the Sponsor, the Fund(s) nor any of their respective affiliates
shall have any duty:
(a) To ascertain whether a rollover contribution described in Article I of
this Agreement or a direct transfer from another IRA is properly made
in accordance with applicable provisions of the Code or any other
plan, IRA or other retirement arrangement;
(b) To ascertain whether any distribution is sufficient for purposes of
the rules described in Article IV of this Agreement;
(c) To make distributions in the form of an annuity contract under Article
IV of this Agreement;
(d) To confirm the existence of a disability;
(e) To review or make suggestions regarding the investment of the assets
of the Account; or
(f) To invest, reinvest or dispose of any assets held in the Account
except in accordance with Section 2 or 3 of this Article VIII.
Whenever the Depositor is responsible for any direction, notice,
warranty, representation, or instruction under this Agreement, the
Custodian shall be entitled to assume the truth of any statement made,
or believed to have been made, by the Depositor, and the Custodian
shall be under no duty of further inquiry and shall have no liability
with respect to any action taken in reliance upon the truth of such
statement.
7. Depositor's Warranties. The Depositor hereby agrees that it is not intended
that any fiduciary duties be conferred (by implication or otherwise) upon the
Custodian under this Agreement, and he or she shall look solely to the assets of
his or her Account for the payment of any benefits to which he or she may become
entitled under this Agreement. The Depositor hereby acknowledges his or her
understanding that taxes and penalties may be imposed under the Code for:
(a) Excess contributions;
(b) Premature distributions made before the Depositor dies, becomes
disabled (as defined in Section 72(m) of the Code) or reaches age 59
1/2, except in the case of:
(i) Rollovers or transfers to other IRAs or rollovers to eligible
retirement plans in accordance with applicable provisions of the
Code and related regulations; or
(ii) A series of substantially equal periodic payments (as defined in
Section 72(t) of the Code);
(c) Distributions which are less than the minimum amounts required under
Sections 401(a)(9), 408(a)(6) and 4974 of the Code; and
(d) Prohibited transactions under Section 4975 of the Code.
Any and all such taxes and penalties shall be paid by the Depositor.
8. Amendment. The Depositor hereby delegates to the Custodian the power to amend
this Agreement, and the Depositor shall be deemed to have consented to any such
amendment. The Custodian shall adopt amendments only in accordance with
directions made by the Sponsor. The Depositor shall be furnished a copy of any
such amendment. Notwithstanding the foregoing, the Custodian may not amend this
Agreement in such manner as to permit or cause assets of the Account to be
diverted to purposes other than for the exclusive benefit of the Depositor and
his or her beneficiaries, except to the extent that any such amendment is
necessary to conform this Agreement to any applicable law, governmental
regulation or ruling or to satisfy the requirements of the Code.
9. Termination. This Agreement shall terminate upon the complete distribution of
the Account to the Depositor or his or her beneficiaries or to another IRA. The
Custodian shall have the right to terminate this Account upon 30 days' notice in
writing to the Depositor or (in the event of his or her death) to the
Depositor's beneficiaries. In such event and upon expiration of such period, the
Custodian shall distribute the Account:
(a) To such other IRA as the Depositor (or his or her beneficiaries) shall
designate;
(b) In the absence of such direction, to the Depositor; or
(c) In the event of the Depositor's death, to the beneficiaries, as their
interests shall appear.
10. Resignation. The Custodian may resign at any time, upon 30 days' notice in
writing to the Depositor, and may be removed by the Depositor or the Sponsor at
any time, upon 30 days' notice in writing to the Custodian. Upon such
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resignation or removal, the Depositor or the Sponsor (as appropriate) shall
appoint a qualified successor custodian which shall be a bank, within the
meaning of Section 408(n) of the Code, or another person who has satisfied the
requirements of Section 408(a)(2) of the Code and related regulations.
11. Successor Custodian. Upon receipt by the Custodian of written acceptance of
such appointment by the successor custodian, the Custodian shall transfer and
pay over to the successor custodian the assets of the Account and all records
pertaining thereto. The Custodian is authorized, however, to reserve such sum of
money or assets as it may deem advisable for payment of all of its fees,
compensation, costs and expenses, or for payment of any other liabilities
constituting a charge on or against the assets of the Account or on or against
the Custodian with respect to the Account; and any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor custodian. If assets are retained in accordance with this Section 11,
they may be disposed of in accordance with the provisions of Section 5 of this
Article VIII. The successor custodian shall hold the assets paid over to it
under terms which are consistent with Section 408 of the Code and related
regulations.
12. Failure of Appointment. It shall be a condition of the removal of the
Custodian that the Depositor or the Sponsor shall have appointed a qualified
successor custodian. In the event of the resignation of the Custodian and the
failure to appoint a qualified successor custodian, the Custodian may itself
appoint such successor, unless it elects to terminate this Agreement pursuant to
Section 9 of this Article VIII, and the costs of such appointment shall be
treated in the same manner as fees under Section 5 of this Article VIII.
13. Required Appointment of Successor Custodian. The Depositor may remove the
Custodian and appoint a successor custodian upon notification by the
Commissioner of Internal Revenue that the Custodian has failed to comply with
the applicable requirements of Section 1.401-12(n) or applicable successor
provisions of the Income Tax Regulations or is not keeping such records, making
such returns or rendering such statements as are required by applicable Treasury
Regulations or by forms prescribed by the Internal Revenue Service.
14. Beneficiaries. By separate written document attached as the Beneficiary
Designation to this Agreement, the Depositor may designate a method for payment
of benefits in accordance with Article IV of this Agreement and designate a
beneficiary for the receipt of such benefits in the event of the Depositor's
death. Should the Depositor die without an effective designation of method of
distribution or beneficiary, the assets of the Account shall be distributed to
the surviving spouse in such manner as the Depositor's spouse shall designate
under Article IV of this Agreement. In the absence of a surviving spouse or
surviving designated beneficiary, the assets of the Account shall be distributed
to the Depositor's estate in a lump sum.
15. Indemnification. The Depositor agrees to indemnify and hold harmless the
Custodian, the Plan Administrator (if applicable), the Sponsor, the Fund(s) and
their respective affiliates, agents, employees, successors and assigns, from and
against any claim or liability arising in connection with the Depositor's
Account, except in the case of gross negligence or willful misconduct.
16. Governing Laws. Except to the extent preempted by the Code or other
applicable federal law, this Agreement shall be governed by and construed and
administered under the laws of the Commonwealth of Pennsylvania.
17. Severability. If any provision of this Agreement is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed and enforced
as if such provision had not been included.
18. Captions. The captions contained in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of this Agreement nor in any way shall affect the
construction of any provision of this Agreement.
19. Definitions. For purposes of this Article VIII, "Sponsor" means the
institution identified as such in the IRA Application; and
"Fund" or "Funds" means the regulated investment company or companies, the
investment advisor to which, or the principal underwriter of which, is the
Sponsor.
EXECUTION
IN WITNESS WHEREOF, The Depositor and the Custodian, to evidence their
acceptance of the terms and conditions of this Agreement, have duly executed the
IRA Application.
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INSTRUCTIONS
A. GENERAL INSTRUCTIONS. This Custodial Agreement may be used by an individual
who wishes to adopt an individual retirement account (IRA) pursuant to Section
408(a) of the Code. When this Custodial Agreement and the IRA Application have
been fully executed by a Depositor and the Custodian not later than the time
prescribed by law for filing the federal income tax return for the Depositor's
tax year (not including any extensions thereof), the Depositor will have an IRA
custodial account which meets the requirements of Section 408(a) of the Code.
The IRA Custodial Account must be created in the United States for the exclusive
benefit of the Depositor and his or her beneficiaries.
B. DEFINITIONS. The Custodian of an IRA must be a bank or savings and loan
association (as defined in Section 408(n) of the Code) or other person who has
the approval of the Internal Revenue Service to act as custodian. (The Custodian
named in the IRA Application is a qualified custodian.) The Depositor is the
individual who established this IRA Custodial Account in accordance with this
Custodial Agreement by executing the IRA Application.
C. IRA FOR NONWORKING SPOUSE. Contributions to an IRA Custodial Account for a
nonworking spouse must be made to a separate IRA Custodial Account established
by the nonworking spouse. This Custodial Agreement and the IRA Application may
be used to establish the IRA Custodial Account for the nonworking spouse.
D. OTHER INFORMATION. The Depositor's Social Security number will serve as the
identification number for his or her IRA Custodial Account. An employer
identification number is only required for each participant-directed IRA (for
which an IRS Form 990-T is required to be filed to report unrelated trade or
business income). An employer identification number is required for a common
fund created for IRA Custodial Accounts. For further information, please refer
to the disclosure statement or obtain Publication 590 (Individual Retirement
Arrangements ("IRAs") from your local Internal Revenue Service office.
SPECIFIC INSTRUCTIONS
1. Article IV. Distributions made under this Article may be made in a lump sum,
periodic payments or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to make sure the
requirements of Section 408(a)(6) of the Code have been met.
2. Article VIII. Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
Agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
Custodian, custodial fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc.
3. REQUESTING DISTRIBUTION. A request for a distribution from the IRA must be
submitted in writing to:
Fund/Plan Services, Inc.
Retirement Plans -- Liquidation Desk
P.O. Box 874
Conshohocken, PA 19428.
If a request does not contain all necessary information, Fund/Plan Services,
Inc. will notify the Depositor in writing as to its incompleteness, requesting
the additional information, including signature guarantee if required by the
Fund. When the distribution instructions are in proper order, only then will the
shares be redeemed and the monies distributed.
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