<PAGE> 1
Filed with the Securities and Exchange Commission on March 2, 1998.
1933 Act Registration File No. 33-91770
1940 Act File No. 811-9038
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
---------
Post-Effective Amendment No. 5 [X]
---------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 [X]
---------
THE OLSTEIN FUNDS
-----------------
(Exact Name of Registrant as Specified in Charter)
4 Manhattanville Road, Purchase, NY 10577
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (914) 701-7565
Robert A. Olstein, President Copy to:
The Olstein Funds Michael P. O'Hare, Esq.
4 Manhattanville Road Stradley, Ronon, Stevens & Young, LLP
Purchase, NY 10577 2600 One Commerce Square
(Name and Address of Agent for Service) Philadelphia, PA 19103-7098
It is proposed that this filing will become effective
X immediately upon filing pursuant to paragraph (b)
---
on pursuant to paragraph (b)
--- ----------------------
60 days after filing pursuant to paragraph (a)(1)
---
on pursuant to paragraph (a)(1)
--- ----------------------
75 days after filing pursuant to paragraph (a)(2)
---
on pursuant to paragraph (a)(2) of Rule 485.
--- ----------------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Registrant filed the notice required by Rule 24f-2 for its fiscal year
ended August 31, 1997 on November 26, 1997.
<PAGE> 2
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
THE OLSTEIN FUNDS
Items Required By Form N-1A
PART A - PROSPECTUS
<TABLE>
<CAPTION>
N-1A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and Policies; Risks and
Registrant Special Considerations
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Shares of Beneficial Interest; Dividends, Capital
Securities Gains Distributions and Taxes
7. Purchase of Securities Determination of Net Asset Value; How to Purchase
Being Offered Shares
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Not Applicable
</TABLE>
<PAGE> 3
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
THE OLSTEIN FUNDS
Items Required By Form N-1A (continued)
PART B - STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives The Olstein Financial Alert Fund - Investments;
and Policies Portfolio Turnover; Investment Restrictions
14. Management of the Registrant Officers and Trustees of the Trust
15. Control Persons and Principal Control Persons and Principal Holders
Holders of Securities of Securities
16. Investment Advisory and Investment Manager; Distributors; Administrator
Other Services
17. Brokerage Allocation Allocation of Portfolio Brokerage
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption and Purchase of Shares; Redemptions
Pricing of Securities
Being Offered
20. Tax Status Taxation
21. Underwriters Distributors; Distribution Plan; Purchase of Shares
22. Calculation of Performance Performance
Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 4
THE OLSTEIN FINANCIAL ALERT FUND
A SERIES OF
THE OLSTEIN FUNDS
4 MANHATTANVILLE RD.
PURCHASE, NY 10577
(914) 701-7565
PROSPECTUS DATED MARCH 2, 1998
This prospectus offers shares of The Olstein Financial Alert Fund (the
"Fund"), the first series of The Olstein Funds (the "Trust"), an open-end
diversified management investment company which was organized as a Delaware
business trust on March 31, 1995. The primary investment objective of the Fund
is to achieve long-term capital appreciation with a secondary objective of
income.
The Fund was created to provide a mutual fund format by which the
public could invest according to the value-oriented philosophy developed and
utilized over the past thirty years by Robert A. Olstein, the president of the
Fund's investment manager, Olstein & Associates, L.P. ("Olstein & Associates" or
the "Investment Manager"). This investment philosophy involves a detailed
inferential analysis of company financial statements, to alert the Investment
Manager to positive or negative factors affecting a company's future earnings
power and value of a company's stock, which may not have been recognized by the
financial markets. The philosophy was originated in the 1970s when Robert A.
Olstein co-authored the "Quality of Earnings Report" service, a financial
statement "alert" service for institutional investors.
The Fund seeks to achieve its objectives by investing primarily in
equity securities that the Investment Manager determines to be under-valued
after an intensive analysis of a company's financial statements. The Fund may
also engage in short-selling of equity securities that the Investment Manager
believes are over-valued. Consistent with the secondary objective of income, in
the event that suitable undervalued securities are not available, the Fund may
invest in fixed-income securities until such time as desirable equity securities
are identified. There can be no assurance that the Fund's investment objective
will be achieved. See "Investment Objectives and Policies" and "Risks and
Special Considerations."
Fund shares may be purchased or redeemed at any time. Purchase and
redemption prices are based on the net asset value per share next determined
following receipt and acceptance of a purchase order or redemption request.
Redemptions of shares purchased within two years may be subject to a deferred
sales charge. See "Determination of Net Asset Value," "Expenses of the Fund,"
"How to Purchase Shares" and "How to Redeem Shares."
This Prospectus sets forth information about the Fund that prospective
investors should know before investing. The Prospectus should be read carefully
and retained for future reference. More information about the Fund has been
filed with the Securities and Exchange Commission, and is contained in a
"Statement of Additional Information" dated March 2, 1998, which is available at
no charge upon written request to the Fund. The Fund's Statement of Additional
Information is incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY .......................................................................................................... 3
Investment Objectives .............................................................................................. 3
Investment Manager ................................................................................................. 3
Investment Performance ............................................................................................. 3
Distributor and Transfer Agent ..................................................................................... 3
How to Purchase and Redeem Shares .................................................................................. 4
Minimum Investment ................................................................................................. 4
Investment Management Fees ......................................................................................... 4
Risks and Special Considerations ................................................................................... 4
FUND EXPENSES ............................................................................................................... 5
FINANCIAL HIGHLIGHTS ........................................................................................................ 6
INVESTMENT PERFORMANCE ...................................................................................................... 7
INVESTMENT OBJECTIVES AND POLICIES .......................................................................................... 9
RISKS AND SPECIAL CONSIDERATIONS ............................................................................................ 12
Reliance on Management/Stock Market Risk ........................................................................... 12
Short-Selling ...................................................................................................... 12
Purchasing Options ................................................................................................. 12
Illiquid Securities ................................................................................................ 12
Repurchase Agreements .............................................................................................. 13
Portfolio Turnover.................................................................................................. 13
MANAGEMENT OF THE FUND ...................................................................................................... 13
Board of Trustees .................................................................................................. 13
Investment Manager ................................................................................................. 14
Distribution of Shares ............................................................................................. 14
Administrator, Transfer Agent, Custodian and Fund Accounting/Pricing Agent ......................................... 15
Expenses ........................................................................................................... 16
SHARES OF BENEFICIAL INTEREST ............................................................................................... 16
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES ............................................................................ 16
DETERMINATION OF NET ASSET VALUE ............................................................................................ 18
HOW TO PURCHASE SHARES ...................................................................................................... 18
Purchases by Mail .................................................................................................. 19
Purchases by Overnight or Express Mail ............................................................................. 19
Purchases by Wire .................................................................................................. 19
Additional Investments ............................................................................................. 20
Purchases by Telephone ............................................................................................. 20
Automatic Investment Plan .......................................................................................... 20
HOW TO REDEEM SHARES ........................................................................................................ 20
Redemption by Mail ................................................................................................. 21
Redemption by Telephone ............................................................................................ 23
Systematic Withdrawal Plan ......................................................................................... 23
RETIREMENT PLANS ............................................................................................................ 24
Individual Retirement Accounts ("IRAs") ............................................................................ 24
401(k) Plans and Other Defined Contribution Plans .................................................................. 25
403(b)(7) Retirement Plans ......................................................................................... 25
PERFORMANCE ................................................................................................................. 25
</TABLE>
2
<PAGE> 6
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVES
The primary objective of the Fund is to achieve long-term capital
appreciation with a secondary objective of income. The Fund seeks to achieve its
objectives by investing primarily in a diversified portfolio of under-valued
equity securities as determined by the Investment Manager for the Fund. The Fund
may also engage in short sales of securities that the Investment Manager
believes are over-valued. During periods in which suitable undervalued equity
securities are not available, the Fund may also invest in fixed-income
securities.
When evaluating stocks for the Fund's portfolio, the Investment Manager
emphasizes an inferential analysis of financial statements, rather than more
conventional analytical methodologies such as macro-economic analysis,
management contact or market timing techniques. The Investment Manager's stock
selection process emphasizes a company's financial conservatism and considers
the possibility of downside risk before evaluating a stock's upside potential in
its effort to achieve capital appreciation. When screening investments for the
Fund's portfolio, the Investment Manager believes that the quality of a company
is associated with its financial strength, its ability to provide excess cash
flow, the quality of its earnings and the confidence in the predictability of
the earnings based on the company's unique business fundamentals as opposed to
more conventional characteristics such as size, number of years in business,
sensitivity to economic cycles, industry categorization, or the volatility of
its stock price. The Investment Manager similarly believes that the search for
undervalued securities should not be restricted by such conventional
characteristics. As a result, the Fund will invest in securities without regard
to whether they are characterized as small-capitalization, large-capitalization,
growth stock, cyclical stock, technology stock, or otherwise. With this
approach, the Fund intends to capitalize on opportunities that develop anywhere
in the equity markets. There can be no assurance that the Fund's investment
objectives will be achieved. See "Investment Objectives and Policies."
INVESTMENT MANAGER
Olstein & Associates is the investment manager of the Fund. Robert A.
Olstein, the president of Olstein & Associates, has been engaged for the past
thirty years as a securities analyst and portfolio manager. For fifteen years
prior to the Fund's inception, Robert A. Olstein was a Senior Vice
President/Senior Portfolio Manager at Smith Barney Inc., managing private
employee benefit plans and individual client portfolios. In 1971, Mr. Olstein
co-founded the "Quality of Earnings Report" service which pioneered the concept
of using inferential financial screening techniques to analyze balance sheets
and income statements to alert portfolio managers to positive and negative
factors affecting a company's future earnings power and value of a company's
stock, which may not yet have been recognized by the financial markets.
INVESTMENT PERFORMANCE
Information about the performance record of the Fund since its
inception, as well as the performance record of Olstein & Associates' portfolio
management team for its Smith Barney Inc. separately managed accounts from
December 31, 1990 through the quarter immediately preceding the commencement of
the Fund's operations is included in the section of the Prospectus called
"Investment Performance."
DISTRIBUTOR AND TRANSFER AGENT
Olstein & Associates serves as principal underwriter and distributor
for the Fund's shares (the "Distributor"). Firstar Trust Company ("Firstar") is
the administrator, transfer agent and dividend disbursing agent for the Fund.
See "Management of the Fund."
Selected brokers, dealers, financial institutions or other entities
("Selling Dealers") may enter into
3
<PAGE> 7
agreements which permit them to sell shares of the Fund. Selling Dealers may be
eligible to receive an up-front commission of up to 1.5%, which is financed
solely by Olstein & Associates, and is not charged to the Fund or its
shareholders. In addition, Selling Dealers may receive up to 90% of the total
12b-1 Plan fees payable by the Fund with respect to assets in the Fund
attributable to investments by clients of such Selling Dealers. Such fees
currently total 1.00%.
HOW TO PURCHASE AND REDEEM SHARES
Shares of the Fund are offered continuously by the Distributor directly
and through certain Selling Dealers, and may be purchased and redeemed at any
time. To obtain information about purchasing or redeeming shares of the Fund,
investors and dealers should contact the Fund at (800) 799-2113. Brokerage
clients of Olstein & Associates may contact Olstein & Associates directly.
The Fund does not impose front-end sales charges on purchases. Certain
redemptions of Fund shares may be subject to a contingent deferred sales charge
("CDSC") if redeemed within the first two years after purchase, and investments
are subject to 12b-1 Plan fees. The public offering price or redemption price of
shares of the Fund is the net asset value per share next determined after the
receipt and acceptance of the purchase order or redemption request. See
"Expenses of the Fund" and "How to Purchase Shares."
MINIMUM INVESTMENT
The minimum initial investment is $1,000 and subsequent investments
must total at least $100. The minimum initial investment requirement for
qualified tax sheltered retirement plans is $250 and $100 for subsequent
investments. See "How to Purchase Shares."
INVESTMENT MANAGEMENT FEES
The Investment Manager selects investments for and supervises the
assets of the Fund in accordance with the investment objectives, policies and
restrictions of the Fund, subject to the supervision and direction of the Board
of Trustees. For its services, the Investment Manager is paid a monthly fee at
the annual rate of 1.00% of the Fund's average daily net assets. This fee is
higher than that paid by most mutual funds. The Investment Manager also provides
administrative and clerical services, office space and other facilities for the
Fund, and keeps certain books and records for the Fund to the extent that such
services are not provided by the Administrator or other persons. See "Management
of the Fund."
RISKS AND SPECIAL CONSIDERATIONS
An investment in the Fund is subject to a number of risks, including
the risk that stock prices may decline over short or even extended periods, the
risk that the Investment Manager may be incorrect in its assessment of the
appropriate valuation of a particular security resulting in an investment that
does not perform as anticipated and the risk that the market will not recognize
a security's intrinsic value for an unexpectedly long period of time.
The Fund may engage in short sales of equity securities when the
Investment Manager believes that the price of a security is over-valued and may
decline. At no time will the Fund make short sales in excess of 25% of its net
assets. Short-selling is a technique that may be considered speculative and
involves risk beyond the initial capital necessary to secure each transaction.
For defensive or hedging purposes, the Fund may seek to lower some of the risk
associated with short sales by purchasing call options on securities sold short
by the Fund, which would lock in a purchase price for the underlying security.
Short-selling by the Fund, as well as the purchase of options on securities to
hedge short positions, may be considered investments in derivative securities.
In addition, the Fund may enter into
4
<PAGE> 8
repurchase agreements which carry risks of loss if the parties to such
agreements default or enter into bankruptcy proceedings. See "Risks and Special
Considerations."
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES: The following table illustrates estimated
expenses and fees that a shareholder of the Fund will incur.
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Maximum Sales Charge Imposed on Reinvested Dividends None
Maximum Contingent Deferred Sales Charge 2.50% (1)
Redemption Fees None (2)
Exchange Fee None
</TABLE>
ESTIMATED ANNUAL OPERATING EXPENSES: These expenses, which cover the cost of
investment management, administration, distribution, marketing and shareholder
communication, are quoted as a percentage of average daily net assets of the
Fund. The expenses are factored into the Fund's share price and are not billed
directly to shareholders.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Rule 12b-1 Fees 1.00% (3)
Other Expenses .38%
----
TOTAL OPERATING COSTS 2.38%
</TABLE>
The purpose of these tables is to assist the investor in understanding
the various expenses that an investor in the Fund will bear directly or
indirectly. The amount of "Other Expenses" is based on the fiscal year ended
August 31, 1997.
(1) There is no CDSC if an investor redeems Fund shares more than two years
after such shares are purchased. Shares may be subject to a CDSC of: (i)
2.50% if shares are redeemed within one year of purchase; and (ii) 1.25% if
shares are redeemed during the second year following purchase. The CDSC may
be waived under certain circumstances. See "How To Redeem Shares."
(2) A fee of $12.00 is charged for each wire redemption.
(3) The Board of Trustees has adopted a Plan of Distribution for the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940 , as
amended. A portion of the fees payable under this plan will be used to pay
distribution expenses (0.75%) and a portion will be used for shareholder
servicing costs (0.25%). Over an extended period of time, the aggregate
distribution payments made by the Fund under the plan could cause long-term
shareholders to bear distribution costs that exceed the amount of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. (the "NASD"). See "Distribution of
Shares."
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods assuming (1) a 5% annual
rate of return and (2) redemption at the end of each time period. As noted in
the table above, redemptions of shares of the Fund are subject to a CDSC if the
shares are redeemed during the first or second year following purchase.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$49 $74 $127 $272
5
<PAGE> 9
An investor would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period (and therefore no
CDSC):
1 year 3 years 5 years 10 years
------ ------- ------- --------
$24 $74 $127 $272
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
FINANCIAL HIGHLIGHTS
The following table includes selected per share data and other performance
information for the Fund throughout each period and is derived from the audited
financial statements of the Fund. It should be read in conjunction with the
Fund's financial statements, notes thereto and the unqualified report of
independent auditors, along with management's discussion and analysis of the
Fund's performance, appearing in the Fund's Annual Report to Shareholders for
the year ended August 31, 1997. The Fund's Annual Report may be obtained without
charge by writing or calling the Fund at the address and number listed on the
prospectus cover.
<TABLE>
<CAPTION>
For the Period
For the September 21, 1995+
Fiscal Year Ended through
August 31, 1997 August 31, 1996
--------------- ---------------
<S> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD .............. $ 11.21 $ 10.00
------------- -------------
INVESTMENT OPERATIONS:
Net investment loss ............................. (0.05) (0.07)
Net realized and unrealized gain on investments.. 4.66 1.29
------------- -------------
Total from investment operations ................ 4.61 1.22
------------- -------------
DISTRIBUTIONS:
From net realized gain on investments ........... (1.03) (0.01)
------------- -------------
Total distributions .......................... (1.03) (0.01)
------------- -------------
NET ASSET VALUE - END OF PERIOD .................... $ 14.79 $ 11.21
============= =============
TOTAL RETURN++ ..................................... 43.61% 12.22%
Ratios (to average net assets)/Supplemental Data:
Expenses ........................................ 2.38% 2.43%*
Net investment loss ............................. (0.45)% (0.68)%*
Portfolio turnover rate ............................ 164.92% 139.77%*
Average commission rate paid ....................... $ 0.0581 $ 0.0592
Net assets at end of period ($000 omitted) ......... $ 175,602 $ 109,005
</TABLE>
+ Commencement of Operations.
++ Total returns do not reflect any deferred sales charge. The total return for
the period September 21, 1995 through August 31, 1996, has not been
annualized.
* Annualized.
6
<PAGE> 10
INVESTMENT PERFORMANCE
FUND PERFORMANCE
Set forth below is information about the performance of the Fund, the Lipper
Capital Appreciation Funds Index and the Standard & Poor's 500 Composite Index
(the "S&P 500") since the Fund's inception on September 21, 1995. The S&P 500 is
a capitalization weighted index of five hundred larger capitalized stocks
designed to measure performance of the broad domestic securities market through
changes in the aggregate market value of five hundred stocks representing all
major industries. The "Total Return S&P 500" reflects the reinvestment of
dividends and capital gains, but represents a "gross" return, without the
deduction of any fees. The Lipper Capital Appreciation Funds Index consists of
the average return of the 30 largest capital appreciation funds. Lipper
Analytical Services, the mutual fund tracking company which computes this Index,
classifies the Fund as a capital appreciation fund.
<TABLE>
<CAPTION>
LIPPER
OLSTEIN FINANCIAL CAPITAL APPRECIATION S&P 500 INDEX
PERIOD ALERT FUND(1) FUNDS INDEX(1) TOTAL RETURN(2)
------ ------------- -------------- ---------------
If no
redemption at If redemption at
end of period end of period(3)
------------- ----------------
<S> <C> <C> <C> <C>
ONE YEAR TOTAL RETURN
(fiscal year ended
8/31/97) 43.61% 41.11% 24.95% 40.65%
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION OF THE FUND
(9/21/95 - 8/31/97) 27.76% 27.25% 17.17% 27.72%
AGGREGATE TOTAL RETURN
SINCE INCEPTION OF THE FUND
(9/21/95 - 8/31/97) 61.16% 59.91% 36.17% 61.05%
</TABLE>
(1) Performance is presented after the deduction of all fees.
(2) Represents a "gross" return, without the deduction of any fees.
(3) These figures assume the deduction of the maximum contingent deferred sales
charge (CDSC) for redemptions at the end of each period. Shares redeemed
within one year of purchase are subject to a 2.5% CDSC and shares redeemed
during the second year following purchase are subject to a 1.25% CDSC, with
no CDSC imposed on redemptions of shares held for more than two years.
7
<PAGE> 11
OLSTEIN & ASSOCIATES' PERFORMANCE
Set forth below is information about the performance record of the
Olstein & Associates' portfolio management team for its Smith Barney Inc.
separately managed accounts from December 31, 1990 through the quarter
immediately preceding the commencement of the Fund's operations, at which time
Olstein & Associates discontinued managing separate accounts. These accounts
were managed according to the same investment objectives and philosophy, and
were subject to substantially similar investment policies and techniques as
those used by the Fund. See "Investment Objectives and Policies." The results
presented are not intended to predict or suggest the return to be experienced by
the Fund or the return that an individual investor might achieve by investing in
the Fund. The Fund's results may be different from the composite of separate
accounts shown because of, among other things, differences in fees and expenses,
and because private accounts are not subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940, as amended (the "1940 Act") and the Internal Revenue Code,
as amended, which, if applicable, may have adversely affected the performance of
such accounts.
<TABLE>
<CAPTION>
Net Olstein Performance(2) Total Return S&P 500(3)
<S> <C> <C>
1991 +32.26% +30.48%
1992 +12.29% +7.77%
1993 +11.63% +10.07%
1994 +4.90% +1.32%
1995 (1st six mos.) +15.09%(1) +20.25%(1)
</TABLE>
(1) As separate account investment performance was calculated on a quarterly
basis, and the Fund commenced operations in the third quarter of 1995,
comparative performance statistics are supplied for only the first six
months of 1995.
(2) The results shown above represent a composite of discretionary, fee paying,
separate accounts, reflect the reinvestment of any dividends or capital
gains, and are shown after deduction of fees of 3.0%, which represents the
highest possible account management fee (including all investment
management, transaction, administrative and custodial fees) charged to such
accounts by Smith Barney Inc.
(3) The "Total Return S&P 500" reflects the reinvestment of dividends and
capital gains, but represents a "gross" return, without the deduction of any
fees.
8
<PAGE> 12
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is to achieve long-term
capital appreciation with a secondary objective of income. The Fund's primary
investment objective is a fundamental policy, which means that it may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities. There can be no assurance that the Fund will
achieve its objectives.
The Fund seeks to achieve its objectives by investing primarily in
common stocks of companies that are determined to be under-valued when comparing
the "private market value," as determined by the Investment Manager, with the
value of the securities as established in the public trading markets. The Fund
believes that, in order to achieve long-term capital appreciation, downside risk
should be emphasized before considering the upside potential in the stock
selection process. Accordingly, the Fund will not purchase equity securities
unless they meet the Fund's value criteria. To the extent that suitable
undervalued securities are not available, the Fund will invest its assets in
fixed-income or money market securities. In addition to purchasing under-valued
equity securities, if the Investment Manager determines that a security is
over-valued, the Fund may engage in short sales of the security.
The Fund will select equity securities based on a value-oriented
philosophy developed and employed by the Investment Manager which emphasizes the
analysis of financial statements to alert the Investment Manager to the items
that may positively or negatively affect prices of securities. This philosophy
enables the Investment Manager to identify and select companies which, in the
Manager's opinion: (i) generate more cash flow than is necessary to sustain the
operations of the business (including capital expenditures); (ii) avoid
aggressive accounting practices; (iii) demonstrate balance sheet fundamentals
consistent with the Investment Manager's philosophy of emphasizing downside risk
before upside potential; and (iv) are selling at a discount to the "private
market value" as estimated by the Investment Manager. Rather than relying on
macro-economic analysis, market timing techniques or information obtained
through management contact, the Investment Manager identifies such companies by
engaging in an intensive analysis of a company's balance sheet, income
statement, cash flow statement and related footnotes. The Investment Manager
believes that a historical and investigative analysis of information disclosed
in a company's publicly disclosed financial statements and accompanying
footnotes, shareholder reports and filings made with the U.S. Securities and
Exchange Commission (the "SEC") is the best method of assessing the capabilities
of the management of a company.
The "private market value" of a company's common stock is determined by
the Investment Manager under an inferential investigative analysis of the
company's financial statements, shareholder reports and SEC filings. Instead of
relying on conventional price/earnings ratio analysis, the Investment Manager
calculates an internal cash rate of return for each company which is then
compared to available rates of return on three to five year U.S. Treasury Notes
to calculate the company's "private market value." The Investment Manager seeks
to identify deviations between the Manager's calculation of a company's private
market value and the stock market value of securities that the Investment
Manager believes are temporarily unpopular or not being properly valued by
investors or the public trading markets. The Investment Manager believes that
such securities offer the potential for above average appreciation if and when
the deviations in value are corrected by market forces. The possibility of such
appreciation may not be realized immediately, therefore the Fund's shares should
only be purchased by investors with at least a three to five year investment
time horizon. Although the Fund's primary objective is to achieve long-term
appreciation, the Fund would recognize short-term gains and losses by trading
securities in its portfolio when price fluctuations, or other fundamental
changes may lead the Investment Manager to effect sales to reduce the potential
severity of future portfolio valuation declines.
The Fund will invest in a diversified portfolio of equity securities of
companies chosen solely because they meet the financial characteristics
determined under the value-oriented philosophy utilized by the Investment
Manager. The Investment Manager believes that the quality of a company is
associated
9
<PAGE> 13
with its financial strength, its ability to provide excess cash flow, the
quality of earnings and the confidence in the predictability of the earnings
based on the company's unique business fundamentals as opposed to more
conventional characteristics such as size, number of years in business,
sensitivity to economic cycles, industry categorization, or the volatility of
its stock price. The Investment Manager similarly believes that the search for
undervalued securities should not be restricted by such conventional
characteristics. As a result, the Fund will invest in securities without regard
to whether the securities are characterized as small-capitalization,
large-capitalization, growth stock, cyclical stock, technology stock, or
otherwise. With this approach, the Fund intends to capitalize on opportunities
that develop anywhere in the equity markets. Securities will be sold when they
reach a price objective based on a computation of private market value or when
circumstances change such that the security no longer meets the value criteria
of the Fund. A secondary consideration is given, when appropriate, to holding
period.
The Fund may also purchase and sell American Depository Receipts
("ADRs") as more fully described in the Statement of Additional Information.
ADRs are receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation. The
Fund generally does not expect to invest more than 5% of its assets in ADRs.
In situations where the Investment Manager determines that a company
engages in aggressive accounting practices, is over-leveraged, or investors
appear to have unrealistic expectations of future earnings potential which
results in the company's stock being over-valued in comparison to the Investment
Manager's calculation of its private market value, the Fund may engage in short
sales of the company's stock. This process allows the Fund to realize profits if
the value of the company's stock is reduced to a level that was anticipated by
the Investment Manager. The Investment Manager considers aggressive accounting
practices to include but not be limited to, (i) "front end" accounting methods
that immediately flow non-recurring revenues such as up-front franchise fees
through the company's income statement; (ii) capitalization of research and
development, advertising, or promotional payments which contribute materially to
year to year earnings growth; and (iii) reversing previously established
reserves which result in material increments to income. In addition, the
Investment Manager seeks to identify companies using accounting practices for
shareholder reporting that are more aggressive than the company's tax reporting
practices. For example, capitalizing marketing costs for shareholder reporting
purposes, while expensing such costs for tax reporting purposes can result in
substantially increased earnings figures reported to shareholders, which may not
accurately reflect the company's earnings potential, and therefore, its value.
The Fund will not make short sales in excess of 25% of its total net assets and
the value of any securities of any one issuer in which the Fund is short may not
exceed the lesser of 2% of the Fund's net assets or 2% of the securities of any
class of any issuer's securities. In addition, short sales will only be made in
those securities that are listed on a national exchange.
The Fund is also authorized to purchase call options on securities as a
hedging technique as more fully described in the Statement of Additional
Information. Generally, the Fund may seek to offset positions that are sold
short by the Fund. The purchase of call options gives the Fund the right, but
not the obligation, to buy (call) a security at a fixed price during a specified
period. When purchasing options in securities, the Fund pays a non-refundable
premium to the party who sells (writes) the option. Premiums paid by the Fund in
connection with option purchases will not exceed 5% of the Fund's net assets.
When engaging in short sales, the Fund may hedge a short position by purchasing
a call option to purchase the underlying security at a given price in the
future. This practice allows the Fund to protect itself in the event of an
unexpected increase in the price of a security sold short. The Fund's activities
relating to short sales and any purchase of options on securities for hedging
purposes may be considered investments in derivative securities. "Derivative"
securities include instruments whose value is based upon, or derived from, some
underlying security. See "Risks and Special Considerations."
If the Investment Manager determines that suitable undervalued equity
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<PAGE> 14
securities are not available, the Fund may seek income by investing a
substantial portion of its assets in other types of securities, such as
securities convertible into common stocks and common stock equivalents
(including rights and warrants), preferred stocks, debt securities issued or
guaranteed as to principal by the U.S. government, its agencies or
instrumentalities ("U.S. Government Securities"), and/or other high-quality,
short-term debt securities (commercial paper, repurchase agreements, bankers'
acceptances, certificates of deposit and other fixed-income securities
including, non-convertible and convertible bonds, debentures and notes issued by
U.S. corporations and certain bank obligations and participation). High-quality,
investment grade debt securities are those that are rated A or better by Moody's
Investors Services, Inc. ("Moody's"), or A or better by Standard & Poor's
Ratings Services("S&P"), or that are of comparable quality. The Fund's
investment in repurchase agreements that do not mature in seven days and other
securities for which there is no readily available market for resale, or that
are subject to legal or contractual restrictions on resale, may be considered
illiquid securities under federal or state law. The Fund will restrict its
investment in illiquid securities to not more than 10% of its net assets. See
"Risks and Special Considerations." In accordance with the Fund's secondary
objective of income, the Fund may also invest in non-equity securities pending
the investment of proceeds of sales of Fund shares, or of the proceeds of
certain sales of portfolio securities, but such investments will only be
maintained for the periods during which the Manager believes that suitable
undervalued equity securities are unavailable.
The Fund will select money market securities for investment when such
securities offer a current market rate of return which the Fund considers
reasonable in relation to the risk of the investment, and the issuer can satisfy
suitable standards of credit-worthiness set by the Fund. The money market
securities in which the Fund may invest are repurchase agreements, certificates
of deposit, U.S. Government Securities, commercial paper and securities of money
market mutual funds. Other than its investments in money market mutual funds,
the Fund will not invest in other investment companies. The Fund's investments
in money market mutual funds may be made only in accordance with the limitations
imposed by the 1940 Act and the rules thereunder.
U.S. Government Securities include a variety of Treasury securities,
which differ in their interest rates, maturities and dates of issuance. Treasury
bills have a maturity of one year or less; Treasury notes have maturities of one
to ten years; Treasury bonds generally have a maturity of greater than ten
years. The Fund will only acquire U.S. Government Securities which are supported
by the "full faith and credit" of the United States. Securities which are backed
by the full faith and credit of the United States include Treasury bills,
Treasury notes, Treasury bonds, and obligations of the Government National
Mortgage Association, the Farmers Home Administration, and the Export-Import
Bank. The Fund's direct investments in money market securities will generally
favor securities with shorter maturities (maturities of less than 60 days) which
are less affected by price fluctuations than are those with longer maturities.
Certificates of deposit are certificates issued against funds deposited
in a commercial bank or a savings and loan association for a definite period of
time and earning a specified return. Bankers' acceptances are negotiable drafts
or bills of exchange, normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank, meaning, in effect, that
the bank unconditionally agrees to pay the face value of the instrument on
maturity. Investments in bank certificates of deposit and bankers' acceptances
are generally limited to domestic banks and savings and loan associations that
are members of the Federal Deposit Insurance Corporation or Federal Savings and
Loan Insurance Corporation having a net worth of at least $100 million dollars
("Domestic Banks") and domestic branches of foreign banks (limited to
institutions having total assets not less than $1 billion or its equivalent).
Investments in prime commercial paper may be made in notes, drafts, or
similar instruments payable on demand or having a maturity at the time of
issuance not exceeding nine months, exclusive of days of grace, or any renewal
thereof payable on demand or having a maturity likewise limited.
As a matter of fundamental policy, the Fund will generally not borrow
money. However, the Fund may borrow from banks (i) for temporary or emergency
purposes in an amount not exceeding 5% of
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<PAGE> 15
the Fund's assets; or (ii) to meet redemption requests that might otherwise
require the untimely disposition of portfolio securities, in an amount up to
33 1/3% of the value of the Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed) at the
time the borrowing was made. While borrowings exceed 5% of the value of the
Fund's total assets, the Fund will not make additional investments. Interest
paid on borrowings will reduce net income.
RISKS AND SPECIAL CONSIDERATIONS
RELIANCE ON MANAGEMENT/STOCK MARKET RISK
All decisions with respect to the Fund's investments will be made
exclusively by the Investment Manager and therefore the Fund's investment
success depends on the skill of the Investment Manager in evaluating, selecting
and monitoring the Fund's assets. An investment in the Fund is subject to the
risk that securities prices may decline over short, or even extended periods, or
that the investments chosen by the Investment Manager may not perform as
anticipated. In addition, a value-oriented approach to investing includes the
risks that the market will not recognize a security's intrinsic value for an
unexpectedly long time, or that the Investment Manager's perception of the
underlying value is not reflected in the market price.
SHORT-SELLING
If the Fund anticipates that the price of a security will decline, it
may sell the security short and borrow the same security from a broker or other
institution to complete the sale. The Fund may realize a profit or loss
depending upon whether the market price of a security decreases or increases
between the date of the short sale and the date on which the Fund must replace
the borrowed security. As a hedging technique, the Fund may purchase options to
buy securities sold short by the Fund. Such options would lock in a future
purchase price and protect the Fund in case of an unanticipated increase in the
price of a security sold short by the Fund. Short-selling is a technique that
may be considered speculative and involves risk beyond the initial capital
necessary to secure each transaction. In addition, the technique could result in
higher operating costs for the Fund and have adverse tax effects for the
investor. Investors should consider the risks of such investments before
investing in the Fund.
Whenever the Fund effects a short sale, it will set aside in segregated
accounts cash, U.S. Government Securities or other liquid assets equal to the
difference between (i) the market value of the securities sold short; and (ii)
any cash or U.S. Government Securities required to be deposited as collateral
with the broker in connection with the short sale (but not including the
proceeds of the short sale). Until the Fund replaces the security it borrowed to
make the short sale it must maintain daily the segregated accounts at such
levels that the amount deposited plus the amount deposited with the broker as
collateral will equal the current market value of the securities sold short. No
more than 25% of the value of the Fund's total net assets will be, when added
together, (i) deposited as collateral for the obligation to replace securities
borrowed to effect short sales; and (ii) allocated to segregated accounts in
connection with short sales.
PURCHASING OPTIONS
The success of purchasing call options for hedging purposes depends on
the Investment Manager's judgment and ability to predict the movement of stock
prices. There is generally an imperfect correlation between options and the
securities being hedged. If the Investment Manager correctly anticipates the
direction of the price of the underlying security that is the subject of the
hedge, the option will not be exercised, and any premium paid for the option may
lower the Fund's return. If an option position is no longer needed for hedging
purposes, it may be closed out by selling an option of the same series
previously purchased. There is a risk that a liquid secondary market may not
exist and the Fund may not be able to close out an option position, and
therefore would not be able to offset any portion of the premium paid for that
option. The risk that the Fund will not be able to close out an options contract
will be minimized because the Fund will only enter into options transactions on
a national exchange and for
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<PAGE> 16
which there appears to be a liquid secondary market.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its total assets in securities which
may be considered illiquid, which include securities with contractual
restrictions on resale, repurchase agreements maturing in greater than seven
days, and other securities which may not be readily marketable. The relative
illiquidity of some of the Fund's securities may adversely affect the ability of
the Fund to dispose of such securities in a timely manner and at a fair price at
times when it may be necessary or advantageous for the Fund to liquidate
portfolio securities. Certain securities in which the Fund may invest are
subject to legal or contractual restrictions as to resale and therefore may be
illiquid by their terms.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements, under which the Fund
acquires a debt instrument subject to the obligation of the seller to repurchase
and the Fund to resell such debt instrument at a fixed price. The Fund will only
enter into repurchase agreements with counterparties who meet certain
creditworthiness standards and all repurchase agreements will be collateralized
in amounts equal to at least 102% of the dollar amount to be paid to the Fund
under each repurchase agreement at its maturity. Repurchase agreements involve a
risk of losses to the Fund if a seller defaults or if the value of the
collateral securing the repurchase agreement declines, and the Fund might incur
disposition costs in connection with liquidation of the collateral. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
security, collection of the collateral by the Fund may be delayed or limited or
the Fund may not be able to substantiate its interests in the underlying
securities. While management of the Fund acknowledges these risks, it is
expected that such risks can be controlled through stringent security selection
and careful monitoring procedures.
PORTFOLIO TURNOVER
The Fund intends to follow a strict "buy and sell discipline," under
which it will purchase or sell securities whenever the Fund's value criteria are
met. A secondary consideration is given, when appropriate, to holding period.
The Manager believes that adhering to a strict sell discipline when the Fund's
value criteria are met, reduces the potential severity of future portfolio
valuation declines. However, such discipline may result in portfolio changes,
and a portfolio turnover rate higher than that reached by many capital
appreciation funds. Portfolio transactions relating to the Fund's secondary
objective of income may contribute to this portfolio turnover rate. High
portfolio turnover involves additional transaction costs (such as brokerage
commissions), which are borne by the Fund, and might involve adverse tax
effects. See "Dividends, Distributions and Taxes."
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Board of Trustees of the Fund consists of seven individuals, four of whom
are not "interested persons" of the Fund as that term is defined in the 1940
Act. The Trustees are fiduciaries for the Fund's shareholders and are governed
by the laws of the State of Delaware in this regard. They establish policy for
the operation of the Fund and appoint the officers who conduct the daily
business of the Fund. The Statement of Additional Information contains more
information regarding the Officers and Trustees of the Fund, and following is a
list of the Trustees and a brief statement of their present positions:
Robert A. Olstein* President and Chairman of the Trust;
President of Olstein & Associates, L.P.
Erik K. Olstein* Secretary and Assistant Treasurer of the
Trust; Vice President of Sales of Olstein &
Associates, L.P.
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<PAGE> 17
Neil C. Klarfeld* Executive Vice President, Park Tower Realty
Corp.
Fred W. Lange President and Portfolio Manager of Lange
Financial Services; Board of Trustees of
Wagner College
John Lohr Principal, Lockwood Financial Group Ltd.
D. Michael Murray President, Murray, Sheer & Montgomery
Lawrence K. Wein Managing Director of Global Transit Services
of AT&T
* These Trustees are deemed to be "interested persons" of the Trust as that
term is defined in the 1940 Act.
INVESTMENT MANAGER
Olstein & Associates, L.P. (previously defined as the "Investment
Manager") serves as the investment manager for the Fund pursuant to an
investment management agreement with the Trust, on behalf of the Fund, dated
August 18, 1995 (the "Management Agreement"). Subject to the supervision of the
Trustees and officers of the Trust, the Investment Manager selects investments
and supervises the assets of the Fund, and places portfolio transactions for the
Fund. The Investment Manager is governed by the policies set forth under
"Investment Objectives and Policies." For its services, the Investment Manager
is paid an annual fee equal to 1.00% of the Fund's average daily net assets,
which is higher than that paid by most mutual funds.
Robert A. Olstein is the president of the Investment Manager and is
principally responsible for the management of the Fund's portfolio of
securities. Mr. Olstein has been engaged in various aspects of securities
research and portfolio management for both institutional and retail clients
since 1968. In 1971, he co-founded the "Quality of Earnings Report" service,
which pioneered the concept of using inferential financial screening techniques
to analyze balance sheets and income statements to alert institutional portfolio
managers to positive or negative factors affecting a company's future earnings
power and value of a company's stock. Prior to forming the Investment Manager,
Mr. Olstein managed portfolios for individuals, corporations and employee
benefit plans at Smith Barney Inc. ("Smith Barney") and its predecessor
companies between 1981 and 1995. Mr. Olstein was a Senior Vice President/Senior
Portfolio Manager at Smith Barney where he managed approximately $158 million of
individual and employee benefit accounts, $73 million of which were managed
under the auspices of the Smith Barney Equity Portfolio Management Program. Mr.
Olstein is a senior member of the New York Society of Securities Analysts and a
fellow of the Financial Analysts Federation. He is a past recipient of the
Graham & Dodd and Gerald M. Loeb Research Awards, has testified before the
Senate Banking Committee on bank accounting, and has been quoted in and is the
author of numerous articles on corporate reporting and disclosure practices. Mr.
Olstein periodically serves as co-host CNBC's "Squawk Box" show.
Olstein & Associates is a New York limited partnership established in
June of 1994, with offices located at 4 Manhattanville Road, Purchase, New York
10577. The corporate general partner of the Investment Manager is Olstein, Inc.,
which was formed for the primary purpose of acting as the Investment Manager's
general partner, and whose sole shareholder, officer and director is Robert A.
Olstein.
Pursuant to the Management Agreement with the Trust for the Fund, the
Investment Manager will also provide, on a reimbursable basis, administrative
and clerical services, office space and other facilities for the Fund, and keep
certain books and records for the Fund to the extent that such services are not
provided by the Administrator or other persons. To date, the Investment Manager
has chosen not to accrue or seek reimbursement for such expenses from the Fund.
The Investment Manager is responsible for selecting brokers and dealers
to execute portfolio transactions for the Fund. The Investment Manager, which is
itself a broker-dealer registered under the Securities Exchange Act of 1934 and
a member of the NASD, may place Fund securities transactions through itself or
other Fund affiliates, and the Investment Manager and the Fund's officers may
consider
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<PAGE> 18
sales of the Fund's shares when allocating brokerage, in either case subject to
the policy of obtaining best price and execution on such transactions. Any
portfolio transactions which are effected by brokers or dealers who are
considered to be affiliated persons of the Fund will be subject to SEC Rules
designed to ensure that the commissions for such transactions are fair to the
Fund's shareholders. See "Allocation of Portfolio Brokerage" in the Fund's
Statement of Additional Information.
DISTRIBUTION OF SHARES
The Distributor has entered into a distribution and underwriting
agreement with the Trust, on behalf of the Fund (the "Distribution Agreement")
dated August 18, 1995, under which the Distributor will act as principal
underwriter to engage in activities designed to assist the Fund in securing
purchasers for its shares. The Distributor will receive compensation for its
services under the 12b-1 Plan described below. Either directly or through
affiliates, the Distributor will provide services under the Distribution
Agreement including the direct sale of the Fund's shares, further underwriting,
coordination and approval of selling dealers, investor support services,
administrative services and 12b-1 Plan administration.
The Fund has adopted a Shareholder Servicing and Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"). The total amount
which the Fund will pay under the 12b-1 Plan is 1.00% per annum of the Fund's
average daily net assets payable on a monthly basis. Seventy-five percent of the
total fee is a distribution fee that can be used to compensate the Distributor
or others for distribution activities, including but not limited to, the
preparation, printing and distribution of prospectuses, sales materials,
reports, advertising and other distribution-related materials, as well as media
relations and payments to Selling Dealers with respect to the sales of Fund
shares. The remaining twenty-five percent is a shareholder servicing fee used to
compensate the Distributor, Selling Dealers or others for ongoing servicing and
maintenance of shareholder accounts with the Fund. Such shareholder servicing
activities include responding to inquiries of shareholders of the Fund regarding
their ownership of shares of the Fund or providing other similar services not
otherwise required to be provided by the Investment Manager or the
Administrator. Payments under the 12b-1 Plan are not tied exclusively to
distribution or shareholder servicing expenses actually incurred by the
Distributor or others, and the payments may exceed the amount of expenses
actually incurred.
To promote the sale of the Fund's shares, Olstein & Associates may
enter into agreements with Selling Dealers under which the Selling Dealers may
be compensated for their distribution and shareholder servicing activities. It
is presently contemplated that certain Selling Dealer agreements, subject to
Olstein & Associates' discretion, will provide for Olstein & Associates to pay
the Selling Dealer, from its own resources, an up-front commission of up to 1.5%
of the amount invested. No portion of such up-front commissions will be borne by
the Fund or its shareholders. While Olstein & Associates has advised the Fund it
hopes to recover such up-front commission payments by receipt of 12b-1 fees paid
by the Fund, the Fund is not legally obligated to repay such excess amounts or
to continue the 12b-1 Plan for such purpose. The Selling Dealer Agreements which
provide for a 1.5% up-front commission will also provide for Selling Dealers to
receive up to 90% of the total 12b-1 fees attributable to the amount originally
invested that remains invested in the Fund during the second through fifth years
at current market value. In subsequent years, the Selling Dealers will receive
up to 75% of the total 12b-1 fees for assets that remain invested in the Fund at
current market values. In the event that a Selling Dealer Agreement does not
provide for an up-front commission payment by Olstein & Associates to the
Selling Dealer, the Selling Dealer may be paid up to 90% of the total 12b-1 fee
beginning in the first year. The 12b-1 fees payable to Selling Dealers will
consist in part of a shareholder servicing fee and, in part, a distribution fee.
If investors elect to redeem their shares of the Fund within the first
two years of purchase, thereby incurring a CDSC, the CDSC will be paid to
Olstein & Associates. Any CDSC payments received by Olstein & Associates will
not reduce the payments Olstein & Associates may receive under the 12b-1 Plan
during a particular year. By receiving the CDSC upon early redemptions, Olstein
& Associates will recapture some of the up-front commissions it may have paid to
Selling Dealers when the original purchase was made, as opposed to receiving
ongoing fees under the 12b-1 Plan with respect to those assets if the
shareholder had retained the investment in the Fund.
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<PAGE> 19
ADMINISTRATOR, TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTING/PRICING AGENT
The Fund has entered into an administration agreement (the
"Administration Agreement") with Firstar Trust Company (the "Administrator"),
615 East Michigan Street, Milwaukee, Wisconsin 53202. Under the Administration
Agreement, the Administrator maintains the books, accounts and other documents
required by the 1940 Act, responds to shareholder inquiries, prepares the Fund's
financial statements and tax returns, prepares certain reports and filings with
the SEC and with state Blue Sky authorities, furnishes statistical and research
data, clerical, accounting and bookkeeping services and stationery and office
supplies, keeps and maintains the Fund's financial and accounting records and
generally assists in all aspects of the Fund's operations. The Administrator, at
its own expense and without reimbursement from the Fund, furnishes office space
and all necessary office facilities, equipment and executive personnel for
performing the services required to be performed by it under the Administration
Agreement. For the foregoing, the Administrator receives from the Fund a fee,
paid monthly, at an annual rate of .06% of the first $200,000,000 of the Fund's
average net assets, .05% of the next $300,000,000 of the Fund's average net
assets, and .03% of the Fund's net assets in excess of $500,000,000.
Notwithstanding the foregoing, the Administrator's minimum annual fee is
$30,000.
Firstar Trust Company also provides custodial, transfer agency and
accounting services for the Fund. Information regarding these services is
provided in the Statement of Additional Information.
EXPENSES
In addition to the expenses indicated above, the Fund is responsible
for the payment of its expenses, other than those borne by the Investment
Manager and such expenses may include, but are not limited to: (i) general
management fees; (ii) the charges and expenses of the Fund's legal counsel and
independent auditors; (iii) brokers' commissions, mark-ups and mark-downs and
any issue or transfer taxes chargeable to the Fund in connection with its
securities transactions; (iv) all taxes and corporate fees payable by the Fund
to governmental agencies; (v) the fees of any trade association of which the
Fund is a member; (vi) the cost of certificates, if any, representing shares of
the Fund; (vii) amortization and reimbursements of the organization expenses of
the Fund and the fees and expenses involved in registering and maintaining
registration of the Fund and its shares with the SEC, and the preparation and
printing of the Fund's registration statements and prospectuses for such
purposes; (viii) allocable communications expenses with respect to investor
services and all expenses of shareholders and directors meetings and of
preparing, printing and mailing prospectuses and reports to shareholders; (ix)
certain rent or office expenses not assumed by others, (x) premiums for fidelity
bond and liability insurance covering trustees and officers of the Trust; (xi)
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business; and (xii) compensation
for employees of the Trust.
SHARES OF BENEFICIAL INTEREST
The beneficial interest of the Trust is divided into an unlimited
number of shares ("Shares"), with a par value of $.001 each and the Shares are
issued in a single series, which is the Fund. Each Share has equal dividend,
voting, liquidation and redemption rights. There are no conversion or preemptive
rights. Shares, when issued, will be fully paid and nonassessable. Fractional
shares have proportional voting rights. Shares of the Fund do not have
cumulative voting rights, which means that the holders of more than 50% of the
shares voting for the election of trustees can elect all of the trustees 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 Trustees. Shares will be maintained
in open accounts on the books of the Transfer Agent, and certificates for shares
will generally not be issued.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Fund intends to declare and pay annual dividends to its
shareholders of substantially all of its
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<PAGE> 20
net investment income, if any, earned during the year from its investments, and
the Fund will distribute net realized capital gains, if any, once with respect
to each year. Expenses of the Fund, including investment management and 12b-1
fees, are accrued daily. Reinvestments of dividends and distributions in
additional shares of the Fund will be made at the net asset value determined on
the date of the dividend or distribution unless the shareholder has elected in
writing to receive dividends or distributions in cash. An election may be
changed by notifying the Fund in writing thirty days prior to the record date.
Shareholders may call the Fund at (800) 799-2113 for more information.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the
Internal Revenue Code. Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they are discussed in
the SAI.
The Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code as of 1986, as amended
(the "Code"). As such, the Fund will not be subject to federal income tax, or to
any excise tax, to the extent its earnings are distributed and by meeting
certain other requirements relating to the sources of its income and
diversification of its assets as provided in the Code. Dividends from net
investment income or net short-term capital gains will be taxable to
shareholders as ordinary income, whether received in cash or in additional
shares. For corporate investors, dividends from net investment income will
generally qualify in part for the 70% corporate dividends received deduction,
subject to certain holding period and debt financing restrictions. The portion
of the dividends so qualified depends on the aggregate qualifying dividend
income received by the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from net long-term capital gains,
whether received in cash or in additional shares, are taxable to those investors
who are subject to income taxes as long-term capital gains, regardless of the
length of time an investor has owned shares in the Fund. The 1997 Act creates a
category of long-term capital gain for individuals that will be taxed at new
lower tax rates. For investors who are in the 28% or higher federal income tax
brackets, these gains will be taxed at a maximum of 20%. For investors who are
in the 15% federal income tax bracket, these gains will be taxed at a maximum of
10%. Capital gain distributions will qualify for these new maximum tax rates,
depending on when the Fund's securities were sold and how long they were held by
the Fund before they were sold. Investors who want more information on holding
periods and other qualifying rules relating to these new rates should review the
expanded discussion in the SAI, or should contact their personal tax advisors.
The Fund does not seek to realize any particular amount of capital gains during
a year; rather, realized gains are a by-product of Fund management activities.
Consequently, capital gains distributions may be expected to vary considerably
from year to year. Also, for those investors subject to tax, if purchases of
shares in the Fund are made shortly before the record date for a dividend or
capital gains distribution, a portion of the investment will be returned as a
taxable distribution.
Dividends which are declared in October, November or December to
shareholders of record in such a month, but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
tax purposes as if paid by the Fund and received by the shareholder on December
31 of the calendar year in which they are declared.
The redemption of shares of the Fund is treated as a sale and therefore
is a taxable event and may result in a capital gain or loss to shareholders
subject to tax. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two portfolios
of a mutual fund). Any loss incurred on a sale or exchange of the Fund's shares,
held for six months or less, will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares.
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<PAGE> 21
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government Securities may be exempt from
state personal income taxes. Each year, the Fund will mail information on the
tax status of the Fund's dividends and distributions to shareholders. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Fund. The Fund is required to
withhold 31% of taxable dividends, capital gains distributions, and redemptions
paid to shareholders who have not complied with IRS taxpayer identification
regulations. Shareholders may avoid this withholding requirement by certifying
on the Shareholder Application the proper Taxpayer Identification Number and by
certifying that they are not subject to backup withholding.
The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the Fund.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share ("net asset value") is determined
by the Fund as of the close of regular trading on each day that the NYSE is open
for unrestricted trading from Monday through Friday (generally 4:00 p.m.,
Eastern time). The net asset value is determined by the Fund by dividing the
value of the Fund's securities, plus any cash and other assets, less all
liabilities, by the number of shares outstanding. Expenses and fees of the Fund,
including management, distribution and shareholder servicing fees, are accrued
daily and taken into account for the purpose of determining the net asset value.
Fund securities listed or traded on a securities exchange for which
representative market quotations are available will be valued at the last quoted
sales price on the security's principal exchange on that day. Listed securities
not traded on an exchange that day, and other securities which are not traded in
the over-the-counter market on any given day will be valued at the mean between
the last bid and ask price in the market on that day, if any. Securities for
which market quotations are not readily available or not deemed representative
of actual market values and all other assets will be valued at their respective
fair market value as determined in good faith by, or under procedures
established by, the Board of Trustees. In determining fair value, the Trustees
may employ an independent pricing service.
Short-term investments with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by the Fund,
excluding unrealized gains or losses thereon from the valuation. This is
accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Fund acquires a
short-term security with more than sixty days remaining to its maturity, it will
be valued at current market value until the 60th day prior to maturity, and will
then be valued on an amortized cost basis based upon the value on such date
unless the Trustees determine during such 60 day period that this amortized cost
value does not represent fair market value.
HOW TO PURCHASE SHARES
Shares of the Fund are offered on a continuous basis by the Distributor
and through Selling Dealers who have entered into Selling Dealer Agreements with
the Distributor. Brokerage clients of Olstein & Associates who maintain private
brokerage accounts with Olstein & Associates, may contact Olstein & Associates
directly. Selling Dealers may receive compensation for their marketing and
shareholder servicing activities in the form of up-front commission payments
funded by Olstein & Associates from its own resources, and/or by receiving a
portion of the 12b-1 fees payable by the Fund under the 12b-1 Plan. See
"Distribution of Shares."
Shares are sold to investors at the net asset value next determined
after receipt and acceptance of an investor's purchase order in proper form as
described below. Shares of the Fund are subject to annual 12b-1 Plan expenses
and, if shares are redeemed within two years of purchase, may be subject to a
CDSC. See "Expenses of the Fund" and "How to Redeem Shares." The Fund reserves
the right to reject any
18
<PAGE> 22
purchase order and to suspend the offering of shares of the Fund. The minimum
initial investment is $1,000, and subsequent investments must total at least
$100. The minimum initial investment requirement for qualified tax sheltered
retirement plans is $250 and $100 for subsequent investments. The Fund reserves
the right to vary the initial investment minimum and minimums for additional
investments at any time.
At the discretion of the Fund, investors may be permitted to purchase
Fund shares by transferring securities to the Fund that: (i) meet the Fund's
investment objective and policies; (ii) are acquired by the Fund for investment
and not for retail purposes; (iii) are liquid securities which are not
restricted as to transfer either by law or liquidity of market; (iv) have a
value which is readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on the American Stock Exchange, the NYSE,
or NASDAQ; and (v) at the discretion of the Fund, the value of any such security
(except U.S. Government securities) being exchanged together with other
securities of the same issuer owned by the Fund will not exceed 5% of the net
assets of the Fund immediately after the transactions.
Securities transferred to the Fund will be valued in accordance with
the same procedures used to determine the Fund's net asset value. All dividends,
interests, subscription, or other rights pertaining to such securities shall
become the property of the Fund and must be delivered to the Fund by the
investor upon receipt from the issuer. Investors who are permitted to transfer
such securities will be required to recognize all gains or losses on such
transfers, and pay taxes thereon, if applicable, measured by the difference
between the fair market value of the securities and the investors' bases
therein.
Purchase orders for shares of the Fund which are received by Firstar
Trust Company and accepted by the Distributor prior to the close of regular
trading hours on the NYSE on any day that the Fund calculates its net asset
value, are priced according to the net asset value determined on that day.
Purchase orders for shares of the Fund received after the close of the NYSE on a
particular day are priced as of the time the net asset value per share is next
determined.
Purchases may be made in one of the following ways:
PURCHASES BY MAIL
Please complete and sign the New Account Application form included with
this Prospectus and send it, together with your check or money order ($1000
minimum; $250 IRA minimum; any lesser amount must be approved by the Fund), made
payable to The Olstein Financial Alert Fund, TO: THE OLSTEIN FINANCIAL ALERT
FUND, c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
Note: A different procedure is used for establishing Individual Retirement
Accounts. Please call the Fund at (800) 799-2113 for details. All purchases must
be made in U.S. dollars and checks must be drawn on U.S. banks. No cash will be
accepted. Firstar Trust Company will charge a $20 fee against a shareholder's
account for any check returned to it for insufficient funds. The shareholder
will also be responsible for any losses suffered by the Fund as a result.
PURCHASES BY OVERNIGHT OR EXPRESS MAIL
Please use the following address to insure proper delivery: Firstar
Trust Company, Mutual Fund Services, 3rd Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
PURCHASES BY WIRE
To establish a new account by wire please first call the Fund, (800)
799-2113, to advise it of the investment and the dollar amount. This will ensure
prompt and accurate handling of your investment. A completed New Account
Application form must also be sent to the Fund at the address above immediately
after your investment is made so the necessary remaining information can be
recorded to your account. Your purchase request should be wired through the
Federal Reserve Bank as follows:
19
<PAGE> 23
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 075000022
For credit to Firstar Trust M.F.S.
Account Number 112-952-137
For further credit to The Olstein Financial Alert Fund
(Your account name and account number)
((For new accounts, include taxpayer identification number))
ADDITIONAL INVESTMENTS
You may add to your account at any time by purchasing shares by mail
(minimum $100) or by wire (minimum $1,000) according to the aforementioned
wiring instructions. You must notify the Fund at (800) 799-2113 prior to sending
your wire. A remittance form which is attached to your individual account
statement should accompany any investments made through the mail, when possible.
All purchase requests must include your account registration number in order to
assure that your funds are credited properly.
PURCHASES BY TELEPHONE
By using the Fund's telephone purchase option you may move money from
your bank account to your Fund account at your request. Only bank accounts held
at domestic financial institutions that are Automated Clearing House (ACH)
members may be used for telephone transactions. To have your Fund shares
purchased at the net asset value determined at the close of regular trading on a
given date, Firstar Trust Company must receive both your purchase order and
payment by Electronic Funds Transfer through the ACH System before the close of
regular trading on such date. Most transfers are completed within three business
days. You may not use telephone transactions for initial purchases of Fund
shares. The minimum amount that can be transferred by telephone is $100.
AUTOMATIC INVESTMENT PLAN
Shares of the Fund may be purchased through an Automatic Investment
Plan. The Plan provides a convenient method by which investors may have monies
deducted directly from their checking, savings or bank money market accounts for
investment in the Fund on a monthly, bi-monthly, quarterly, semi-annual or
annual basis. The minimum investment pursuant to this Plan is $100 per month
(subsequent to the $1000 initial investment). The account designated will be
debited in the specified amount, on the schedule (e.g. monthly, bimonthly (every
other month), quarterly or yearly) you select, and Fund shares will be
purchased. Only an account maintained at a domestic financial institution which
is an ACH member may be so designated. The Fund may alter, modify or terminate
this Plan at any time. You may establish this option and the telephone purchase
option by completing the appropriate section of the New Account Application. For
information about participating in the Automatic Investment Plan, call the Fund
at (800) 799-2113.
HOW TO REDEEM SHARES
Shareholders may redeem their shares of the Fund on any business day
that the Fund calculates its net asset value. See "Determination of Net Asset
Value." Redemption requests are generally made to the Fund's transfer agent (see
below), however, brokerage clients of Olstein & Associates who maintain private
brokerage accounts with Olstein & Associates may contact Olstein & Associates
directly. Redemptions will be effected at the net asset value per share next
determined after the receipt by the transfer agent of a redemption request
meeting the requirements described below, subject to any applicable CDSC. 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,
20
<PAGE> 24
or sooner if required under applicable law. Payment may also be made by wire
directly to any bank previously designated by the shareholder in a shareholder
account application. The Fund's custodian or the shareholder's bank may impose a
fee for wire service. The Fund will honor redemption requests of shareholders
who recently purchased shares by check, but will not mail the proceeds
attributable to such purchase until it is reasonably satisfied that the purchase
check has cleared, which may take up to twelve days from the purchase date, at
which time the redemption proceeds will be sent to the shareholder. Purchases
made with a check that does not clear, will be canceled and the investor will be
responsible for any losses or fees incurred in that transaction.
Except as noted below, redemption requests received in proper form by
the Fund prior to the close of regular trading hours on the NYSE on any business
day that the Fund calculates its per share net asset value are effective that
day. Redemption requests received after the close of the NYSE are effective as
of the time the net asset value per share is next determined.
If a shareholder submits a redemption request for a specific dollar
amount, and the redemption request is subject to a CDSC, the Fund will redeem
that number of shares necessary to deduct the applicable CDSC and tender to the
shareholder the requested amount to the extent shares are still held in the
account. Shares purchased on or after November 18, 1996 which are sold within
the first two years of their purchase will be assessed the applicable CDSC on
the original purchase price of such shares. Shares purchased prior to November
18, 1996 which are sold within the first two years of their purchase will be
assessed the applicable CDSC on the lesser of the then-current net asset value
or the original purchase price of such shares. If a shareholder decides to
repurchase the same amount of shares within 90 days of a redemption which was
subject to a CDSC, the shareholder will receive an amount of shares equal to the
repurchase plus the number of shares necessary to reimburse the amount of the
CDSC. The following table sets forth the rates of the CDSC for the shares of the
Fund:
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
(as a percentage
Year After of Dollar Amount
Purchase Made Subject to Charge)
------------- ------------------
<S> <C>
Up to 1 year 2.50%
Up to 2 years 1.25%
After 2 full years None
</TABLE>
Redemptions by clients of Olstein & Associates who maintain private
brokerage accounts at the time of purchase will not be subject to the CDSC
described in this Prospectus. In addition, purchases by participants in 401(k)
or 403(b) plans for which the Fund is listed as an investment option and Olstein
& Associates is listed as broker of record, shall not be subject to any CDSC.
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 Investment
Manager or the Board of Trustees, result in the necessity of the Fund selling
assets under disadvantageous conditions and to the detriment of the remaining
shareholders of the Fund. Pursuant to the Fund's Agreement and Declaration of
Trust, payment for shares redeemed may be made either in cash or in kind, or
partly in cash and partly in kind. However, 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. Payments in excess of this limit will also be
made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Fund. Any portfolio securities paid or distributed in kind
would be valued as described under "Net Asset Value." In the event that an
in-kind distribution is made, a shareholder 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. Where a shareholder receives a redemption of
all or a part of their investment, and where the Fund completes such redemption
in kind, the Fund will not recognize gain or loss for federal tax purposes, on
the securities used to complete
21
<PAGE> 25
the redemption but the shareholder will recognize gain or loss equal to the
difference between the fair market value of the securities received and the
shareholder's basis in the Fund shares redeemed.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL
At any time during normal business hours you may request that the Fund
redeem your shares in whole or in part. Written redemption requests must be
directed to The Olstein Financial Alert Fund, c/o Firstar Trust Company, P.O.
Box 701, Milwaukee, Wisconsin, 53201-0701. If a redemption request is
inadvertently sent to the Fund at its corporate address, it will be forwarded to
Firstar Trust Company, but the effective date of redemption will be delayed
until the request is received by Firstar Trust Company. Requests for redemption
which are subject to any special conditions or which specify an effective date
other than as provided herein cannot be honored.
A redemption request must be received in "Good Order" by Firstar Trust
Company for the request to be processed. "Good Order" means the request for
redemption must include:
Your letter of instruction specifying the name of the Fund and either
the number of shares or the dollar amount of shares to be redeemed. The letter
of instruction must be signed by all registered shareholders exactly as the
shares are registered and must include your account registration number and the
additional requirements listed below that apply to the particular account.
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
-------------------- ------------
<S> <C>
Individual, Joint Tenants, Sole Redemption requests must be signed by all person(s)
Proprietorship, Custodial (Uniform required to sign for the account, exactly as it is
Gift To Minors Act), General Partners registered.
Corporations, Associations Redemption request and a corporate resolution,
signed by person(s) required to sign for the account,
accompanied by signature guarantee(s).
Trusts Redemption request signed by the trustee(s), with a
signature guarantee. (If the Trustee's name is not
registered on the account, a copy of the trust
document certified within the past 60 days is also
required.
</TABLE>
A redemption request for amounts above $25,000, or redemption requests
for which proceeds are to be mailed somewhere other than the address of record,
must be accompanied by signature guarantees. Signatures must be guaranteed by an
"eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934. 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 a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. The
transfer agent may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees and guardians.
If you have an IRA, you must indicate on your redemption request
whether or not to withhold federal income tax. Redemption requests not
indicating an election to have federal tax withheld will be subject to
withholding. If you are uncertain of the redemption requirements, please
contact, in advance, Firstar Trust Company.
The redemption price is the next determined net asset value after
Firstar Trust Company receives a
22
<PAGE> 26
redemption request in "Good Order". The amount paid will depend on the market
value of the investments in the Fund's portfolio at the time of determination of
net asset value, and may be more or less than the cost of the shares redeemed.
Payment for shares redeemed will be mailed to you typically within one or two
days, but no later than the seventh day (or earlier if required under applicable
law) after receipt by Firstar Trust Company of the redemption request in "Good
Order" unless the Fund is requested to redeem shares purchased by check. In such
an event the Fund may delay the mailing of a redemption check until the purchase
check has cleared which may take up to 12 days. Wire transfers may be arranged
through Firstar Trust Company, which will assess a $12.00 wire fee against your
account.
REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the New Account Application, or
have subsequently arranged in writing to do so, may redeem shares in any amount
up to $50,000 by instructing the transfer agent by telephone at (800) 799-2113.
If the proceeds are sent by wire, a $12.00 wire fee will apply. A $100 minimum
per phone redemption is required. Redemption requests for amounts exceeding
$50,000 must be made in writing. 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, a written request must be sent to the
transfer agent at the address listed above. A signature guarantee is required of
all shareholders in order to qualify for or to change telephone redemption
privileges. The application contains appropriate information and instructions
and a form on which to make the signature guarantee.
Neither the Fund nor any of its service contractors will be liable for
any loss or expense in acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Fund will use such procedures as are considered
reasonable, including requesting a shareholder to correctly state his or her
Fund account number, the name in which his or her account is registered, his or
her banking institution, bank account number and the name in which his or her
bank account is registered. To the extent that the Fund fails to use reasonable
procedures to verify the genuineness of telephone instructions, it and/or its
service contractors may be liable for any such instructions that prove to be
fraudulent or unauthorized.
Redemption proceeds can be sent to your bank account by ACH transfer.
You can elect this option by completing the appropriate section of the New
Account Application form. If money is moved by ACH transfer, you will not be
charged by the Fund for these services. There is a $100 minimum per ACH
transfer.
During times of drastic economic or market changes, the telephone
redemption privilege may be difficult to implement. In the event that you are
unable to reach Firstar Trust Company by telephone, you may make a redemption
request by mail. The Fund and Firstar Trust Company each reserve 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 by the Fund.
Checks will be made payable to you and will be sent to your address of
record. If the proceeds of the redemption are requested to be sent to other than
the address of record or if the address of record has been changed within 15
days of the redemption request, the request must be in writing with your
signature(s) guaranteed.
The Fund also reserves the right to involuntarily redeem an investor's
account where the account is worth less than the minimum initial investment
required when the account is established, presently $1,000. The shares will not
be involuntarily redeemed solely due to market fluctuations and the effect such
fluctuations may have on an investor's account balance. (Any redemption of
shares from an inactive
23
<PAGE> 27
account established with a minimum investment may reduce the account below the
minimum initial investment, and could subject the account to redemption
initiated by the Fund.) The Fund will advise the shareholder of such intention
in writing at least sixty (60) days prior to effecting such redemption, during
which time the shareholder may purchase additional shares in any amount
necessary to bring the account back to the minimum.
If the Trustees determine that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment in cash, the
Fund may pay the redemption price in whole or in part by distribution in kind of
readily marketable securities, from the Fund, within certain limits prescribed
by the SEC. Such securities will be valued on the basis of the procedures used
to determine the net asset value at the time of the redemption. If shares are
redeemed in kind, the redeeming shareholder will incur brokerage costs in
converting the assets into cash.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who own shares with a value of $10,000 or more may
participate in the Systematic Withdrawal Plan. If you select the Fund's
systematic withdrawal option, you may move money automatically from your Fund
account to your bank account according to the schedule you select. The
systematic withdrawal option may be in any amount subject to a $100 minimum. To
select the systematic withdrawal option you must check the appropriate box on
the New Account Application. A systematic withdrawal may be subject to a CDSC.
If you expect to purchase additional Fund shares, it may not be to your
advantage to participate in the Systematic Withdrawal Plan because contemporary
purchases and redemption may result in adverse tax consequences. For further
details about this service, see the Application or call the transfer agent at
(800) 799-2113.
RETIREMENT PLANS
Shares of the Fund are available for use in all types of tax-deferred
retirement plans such as IRA's, employer-sponsored defined contribution plans
(including 401(k) plans) and tax-sheltered custodial accounts described in
Section 403(b)(7) of the Internal Revenue Code. Qualified investors benefit from
the tax-free compounding of income dividends and capital gains distributions.
Application forms and brochures describing investments in the Fund for
retirement plans can be obtained from the Fund by calling the Fund at (800)
799-2113. The following is a description of the types of retirement plans for
which the Fund's shares may be used for investment:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS")
Individuals, who are not active participants (and, when a joint return
is filed, who do not have a spouse who is an active participant) in an employer
maintained retirement plan are eligible to contribute on a deductible basis to
an IRA account. The IRA deduction is also retained for individual taxpayers and
married couples with adjusted gross incomes not in excess of certain specified
limits. All individuals who have earned income may make nondeductible IRA
contributions to the extent that they are not eligible for a deductible
contribution. Income earned by an IRA account will continue to be tax deferred.
A special IRA program is available for employers under which the employers may
establish IRA accounts for their employees in lieu of establishing tax qualified
retirement plans. Known as SEP-IRA's (Simplified Employee Pension-IRA), they
free the employer of many of the recordkeeping requirements of establishing and
maintaining a tax qualified retirement plan trust.
If you are entitled to receive a distribution from a qualified
retirement plan, you may rollover all or part of that distribution into the
Fund's IRA. Your rollover contribution is not subject to the limits on annual
IRA contributions. You can continue to defer Federal income taxes on your
contribution and on any income that is earned on that contribution.
24
<PAGE> 28
Firstar Trust Company makes available its services as an IRA Custodian
for each shareholder account that is established as an IRA. For these services,
Firstar Trust Company receives an annual fee of $12.50 per account with a cap of
$25.00 per social security number, which fee is paid directly to Firstar Trust
Company by the IRA shareholder. If the fee is not paid by the date due, shares
of the Fund owned by the shareholder in the IRA account will be redeemed
automatically for purposes of making the payment.
The 1997 Act also creates several new or expanded Individual Retirement
Accounts which will be available to the Fund's investors beginning on January 1,
1998.
The 1997 Act creates a new "Roth IRA" which will permit tax free
distributions of account balances if the assets have been invested for five
years or more, and the distributions meet certain qualifying restrictions.
Investors filing as single taxpayers who have adjusted gross incomes ("AGI") of
$95,000 or more, and investors filing as joint taxpayers with adjusted gross
incomes of $150,000 or more may find their participation in this IRA to be
restricted.
IRAs are subject to special rules and conditions that must be reviewed
by the investor when opening a new account.
401(k) PLANS AND OTHER DEFINED CONTRIBUTION PLANS
The Fund's shares may be used for investment in defined contribution
plans by both self-employed individuals (sole proprietorships and partnerships)
and corporations who wish to use shares of the Fund as a funding medium for a
retirement plan qualified under the Internal Revenue Code. Such plans typically
allow investors to make annual deductible contributions, which may be matched by
their employers up to certain percentages based on the investor's
pre-contribution earned income.
403(b)(7) RETIREMENT PLANS
The Fund's shares are also available for use by schools, hospitals, and
certain other tax-exempt organizations or associations who wish to use shares of
the Fund as a funding medium for a retirement plan for their employees.
Contributions are made to the 403(b)(7) Plan as a reduction to the employee's
regular compensation. Such contributions, to the extent they do not exceed
applicable limitations (including a generally applicable limitation of $9,500
per year), are excludable from the gross income of the employee for Federal
Income tax purposes.
PERFORMANCE
Total return data may from time to time be included in advertisements
about the Fund. The Fund's total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change per
year in value of an investment in the Fund. Aggregate total return reflects the
total percentage change over the stated period.
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
compare the Fund's investment performance to appropriate market indexes such as
the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400
MidCap Index or the unweighted Value Line Index, which is composed of over 1,600
stocks in the Value Line Investment survey. The Fund may also compare its
investment performance to appropriate mutual fund indexes; and the Fund may
advertise its ranking compared to other similar mutual funds as reported by
industry analysts such as Lipper Analytical Services, Inc.
All data will be based on the Fund's past investment results and does
not predict future
25
<PAGE> 29
performance. Investment performance, which will vary, is based on many factors,
including market conditions, the composition of the investments in the Fund, and
the Fund's operating expenses. Investment performance also often reflects the
risk associated with the Fund's investment objective and policies. These factors
should be considered when comparing the Fund to other mutual funds and other
investment vehicles.
26
<PAGE> 30
THE OLSTEIN FINANCIAL ALERT FUND
a series of THE OLSTEIN FUNDS
4 Manhattanville Road
Purchase, NY 10577
(914) 701-7565
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 2, 1998
The Olstein Funds (the "Trust") is an open-end management investment
company that currently offers one series of shares called The Olstein Financial
Alert Fund (the "Fund"). The Fund maintains a diversified portfolio of
investments selected in accordance with its investment objective and policies.
Information about the Fund is included in a prospectus dated March 2,
1998 which may be obtained without charge from the Fund by writing to the
addresses or calling the telephone numbers listed below. No investment in shares
of the Fund should be made without first reading the prospectus.
INVESTMENT MANAGER
AND DISTRIBUTOR
------------------
Olstein & Associates, L.P.
4 Manhattanville Road
Purchase, NY 10577
(914) 701-7565
- --------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE FUND'S PROSPECTUS DATED MARCH 2, 1998. RETAIN THIS
STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
1
<PAGE> 31
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE OLSTEIN FINANCIAL ALERT FUND-INVESTMENTS................................3
PORTFOLIO TURNOVER..........................................................5
INVESTMENT RESTRICTIONS.....................................................6
INVESTMENT MANAGER..........................................................8
DISTRIBUTOR.................................................................9
ADMINISTRATOR .............................................................10
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT..............................11
ALLOCATION OF PORTFOLIO BROKERAGE..........................................12
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........................14
PURCHASE OF SHARES.........................................................14
REDEMPTIONS................................................................14
OFFICERS AND TRUSTEES OF THE FUND..........................................15
TAXATION...................................................................18
GENERAL INFORMATION........................................................20
PERFORMANCE................................................................21
FINANCIAL STATEMENTS.......................................................22
</TABLE>
2
<PAGE> 32
THE OLSTEIN FINANCIAL ALERT FUND - INVESTMENTS
The Fund seeks to achieve its objectives by making investments selected
in accordance with its investment restrictions and policies. This Statement of
Additional Information contains further information concerning the techniques
and operations of the Fund, the securities in which it will invest, and the
policies it will follow.
COMMON STOCK
Common stock is defined as shares of a corporation that entitle the
holder to a pro rata share of the profits of the corporation, if any, without a
preference over any other shareholder or class of shareholders, including
holders of the corporation's preferred stock and other senior equity. Common
stock usually carries with it the right to vote and frequently an exclusive
right to do so. Holders of common stock also have the right to participate in
the remaining assets of the corporation after all other claims are paid,
including those of debt securities and preferred stock.
PREFERRED STOCK
Generally, preferred stock receives dividends prior to distributions on
common stock and usually has a priority of claim over common stockholders if the
issuer of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock. In order to be payable, dividends on preferred stock must be
declared by the issuer's board of directors. Dividends on the typical preferred
stock are cumulative, causing dividends to accrue even if not declared by the
board of directors. There is, however, no assurance that dividends will be
declared by the boards of directors of issuers of the preferred stocks in which
the Fund invests.
CONVERTIBLE SECURITIES
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Fund may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by the Fund upon
conversion of a convertible security will generally be held for so long as the
Investment
3
<PAGE> 33
Manager anticipates such stock will provide the Fund with opportunities which
are consistent with the Fund's investment objectives and policies.
WARRANTS
The Fund may invest in warrants, in addition to warrants acquired in
units or attached to securities. A warrant is an instrument issued by a
corporation which gives the holder the right to subscribe to a specified amount
of the issuer's capital stock at a set price for a specified period of time.
OPTIONS
The Fund will only purchase options for hedging purposes and not for
speculation. In this regard, the Fund will only purchase call options on
securities which are sold short by the Fund. Purchasing call options allows the
Fund to hedge against an increase in the price of securities that are sold short
by the Fund, by locking in a future purchase price. Such options on securities
will generally be held no longer than the Fund maintains a short position in the
underlying security. Call options on securities give the Fund the right, but not
the obligation, to buy (call) a security at a fixed price during a specified
period. When purchasing call options, the Fund pays a non-refundable premium to
the party who sells (writes) the option. Following the purchase of a call
option, the Fund may liquidate its position by entering into a closing
transaction in which the Fund sells an option of the same series as previously
purchased.
AMERICAN DEPOSITORY RECEIPTS
The Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. Generally,
ADRs in registered form are designed for use in the U.S. securities markets. The
Fund may purchase ADRs whether they are "sponsored" or "unsponsored."
"Sponsored" ADRs are issued jointly by the issuer of the underlying security and
a depository, whereas "unsponsored" ADRs are issued without participation of the
issuer of the deposited security. Holders of unsponsored ADRs generally bear all
the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR. ADRs may
result in a withholding tax by the foreign country of source which will have the
effect of reducing the income distributable to shareholders.
Investments in ADRs may involve greater risks than investments in
domestic securities. Foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those of
U.S. public companies and there is generally less information available to the
public about non-U.S. companies. In addition, foreign investments may include
risks related to legal, political and or diplomatic actions of foreign
governments, such as imposition of
4
<PAGE> 34
withholding taxes on interest and dividend income payable on the securities
held, possible seizure or nationalization of foreign deposits, establishment of
exchange controls as the adoption of other foreign governmental restrictions
which might adversely affect to value of foreign issuer's stock. The Fund
generally does not expect to invest more than 5% of its assets in ADRs.
REPURCHASE AGREEMENTS
Under a repurchase agreement the Fund acquires a debt instrument
subject to the obligation of the seller to repurchase and the Fund to resell
such debt instrument at a fixed price. The Fund will enter into repurchase
agreements only with banks that are members of the Federal Reserve System, or
securities dealers who are members of a national securities exchange or are
market makers in government securities and report to the Market Reports Division
of the Federal Reserve Bank of New York and, in either case, only where the debt
instrument collateralizing the repurchase agreement is a U.S. Treasury or agency
obligation supported by the full faith and credit of the United States. A
repurchase agreement may also be viewed as the loan of money by the Fund to the
seller. The resale price specified is normally in excess of the purchase price,
reflecting an agreed upon interest rate. The rate is effective for the period of
time the Fund is invested in the agreement and may not be related to the coupon
rate on the underlying security. The term of these repurchase agreements will
usually be short (from overnight to one week), and at no time will the Fund
invest in repurchase agreements of more than sixty days. The securities which
are collateral for the repurchase agreements, however, may have maturity dates
in excess of sixty days from the effective date of the repurchase agreement. The
Fund will always receive, as collateral, securities whose market value,
including accrued interest, will at least equal 102% of the dollar amount to be
paid to the Fund under each agreement at its maturity, and the Fund will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines, and might incur disposition costs in connection with
liquidation of the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, collection of the
collateral by the Fund may be delayed or limited. The Fund also may not be able
to substantiate its interests in the underlying securities. While management of
the Fund acknowledges these risks, it is expected that such risks can be
controlled through stringent security selection and careful monitoring
procedures. The Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 10% of the market value of the
Fund's net assets would be invested in such repurchase agreements. For purposes
of the diversification test for qualification as a regulated investment company
under the Internal Revenue Code, repurchase agreements are not counted as cash,
cash items or receivables, but rather as securities issued by the counter-party
to the Repurchase Agreements.
PORTFOLIO TURNOVER
Although the primary objective of the Fund is to achieve long term
capital appreciation, the Fund may sell securities to recognize gains or avoid
potential for loss (without regard to the time it has been held). The Fund
intends to follow a strict "buy and sell discipline," under which it will
purchase or sell securities whenever the Fund's value criteria are met. A
secondary consideration is given, when appropriate, to holding period. The
Manager believes that adhering to a strict sell discipline when the Fund's value
criteria are met reduces the potential severity of future portfolio
5
<PAGE> 35
valuation declines. However, such discipline may result in portfolio changes,
and a portfolio turnover rate higher than that reached by many capital
appreciation funds. The annualized portfolio turnover rate during the fiscal
year ended August 31, 1997 was 164.92% and during the period September 21, 1995
(commencement of operations) through August 31, 1996 was 139.77%. These rates
are higher than many other mutual funds. High portfolio turnover involves
additional transaction costs (such as brokerage commissions) which are borne by
the Fund, or adverse tax effects. See "Dividends, Capital Gains Distributions
and Taxes" in the prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the Investment Restrictions set forth below in
addition to those discussed in the prospectus. Some of these restrictions are
fundamental policies of the Fund, and cannot be changed without the approval of
a majority of the outstanding voting securities. As provided in the Investment
Company Act of 1940 (the "1940 Act") a "vote of a majority of the outstanding
voting securities" means the affirmative vote of the lesser of (i) more than 50%
of the outstanding shares, or (ii) 67% or more of the shares present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
As a matter of fundamental policy, the Fund will not:
(a) as to 75% of the Fund's total assets, invest more than 5% of its
total assets in the securities of any one issuer (this limitation does not apply
to cash and cash items, or obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities, or securities of other investment
companies);
(b) purchase more than 10% of the voting securities, or more than 10%
of any class of securities, of any one issuer; for purposes of this restriction,
all outstanding fixed income securities of an issuer are considered as one
class;
(c) make short sales of securities in excess of 25% of the Fund's total
assets or purchase securities on margin except for such short-term credits as
are necessary for the clearance of transactions;
(d) purchase or sell commodities or commodity contracts;
(e) make loans of money or securities, except (i) by the purchase of
fixed income obligations in which the Fund may invest consistent with its
investment objective and policies; or (ii) by investment in repurchase
agreements (see "Investment Objectives and Policies");
(f) borrow money, except the Fund may borrow from banks (i) for
temporary or emergency purposes not in excess of 5% of the Fund's net assets, or
(ii) to meet redemption requests that might otherwise require the untimely
disposition of portfolio securities, in an amount up to 33 1/3 of the value of
the Fund's net assets at the time the borrowing was made;
6
<PAGE> 36
(g) pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 33 1/3% of the value of its net assets, but only to
secure borrowings authorized in the preceding restriction; this restriction does
not limit the authority of the Fund to maintain accounts for short sales of
securities;
(h) purchase the securities of any issuer, if, as a result, more than
10% of the value of a Fund's net assets would be invested in securities that are
subject to legal or contractual restrictions on resale ("restricted
securities"), in any combination of securities for which there are no readily
available market quotations, or in repurchase agreements maturing in more than
seven days;
(i) engage in the underwriting of securities except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security;
(j) purchase or sell real estate or interests therein, although it may
purchase securities of issuers which engage in real estate operations and may
purchase and sell securities which are secured by interests in real estate;
therefore, the Fund may invest in publicly-held real estate investment trusts or
marketable securities of companies which may represent indirect interests in
real estate such as real estate limited partnerships which are listed on a
national exchange, however, the Fund will not invest more than 10% of its assets
in any one or more real estate investment trusts; and
(k) invest more than 25% of the value of the Fund's total assets in one
particular industry, except for temporary defensive purposes; for purposes of
this limitation, utility companies will be divided according to their services
(e.g. gas, electric, water and telephone) and each will be considered a separate
industry; this restriction does not apply to investments in U.S. Government
securities, and investments in certificates of deposit and bankers' acceptances
are not considered to the investments in the banking industry.
Non-fundamental policies may be changed by the Board of Trustees,
without shareholder approval. As a matter of non-fundamental policy, the Fund
will not:
(a) purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which invest in or sponsor such programs;
(b) invest for the purpose of exercising control or management of
another company;
(c) invest in securities of any open-end investment company, except in
connection with a merger, reorganization or acquisition of assets and except
that the Fund may purchase securities of money market mutual funds, but such
investments in money market mutual funds may be made only in accordance with the
limitations imposed by the 1940 Act and the rules thereunder, as amended; and
(d) invest more than 5% of its total assets in securities of companies
having a record, together with predecessors, of less than three years of
continuous operation; this limitation shall not apply to U.S. Government
securities.
7
<PAGE> 37
So long as percentage restrictions are observed by the Fund at the time
it purchases any security, changes in values of particular Fund assets or the
assets of the Fund as a whole will not cause a violation of any of the foregoing
fundamental or non-fundamental restrictions.
INVESTMENT MANAGER
The Trust on behalf of the Fund has entered into an investment
management agreement with Olstein & Associates, L.P. (the "Investment Manager"),
effective as of August 18, 1995 (the "Investment Management Agreement"), for the
provision of investment advisory services, subject to the supervision and
direction of the Trust's Board of Trustees. Pursuant to the Investment
Management Agreement, the Fund is obligated to pay the Investment Manager a
monthly fee equal to an annual rate of 1% of the Fund's average daily net
assets. This fee is higher than that normally charged by funds with similar
investment objectives. The advisory fee paid to the Investment Manager in
connection with the services provided to the Fund for the fiscal year ended
August 31, 1997, and the period September 21, 1995 (commencement of operations)
through August 31, 1996 amounted to $1,375,148 and $887,728, respectively.
The Investment Management Agreement is subject to annual renewal, and
will be renewed each year only so long as such renewal and continuance are
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund, and only if the terms
of the renewal thereof have been approved by the vote of a majority of the
Trustees of the Fund who are not parties thereto or interested persons of any
such party (the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such approval. The Agreement will terminate
automatically in the event of its assignment.
The Investment Manager is organized as a New York limited partnership
and is controlled and operated by its general partner, Olstein, Inc., a New York
corporation which is wholly-owned by Robert A. Olstein. The Investment Manager
has twenty limited partners, who will receive a portion of the income derived
from the advisory fee received by Olstein & Associates, L.P. ("Olstein &
Associates"). In addition, some of the limited partners are brokers or dealers
who may receive up-front commissions from Olstein & Associates for sales of Fund
shares, distribution fees for ongoing marketing of Fund shares under a Plan of
Distribution adopted pursuant to Rule 12b-1 under the 1940 Act (the "12b-1
Plan"), or compensation as broker-dealer employees of companies who execute
portfolio transactions for the Fund.
8
<PAGE> 38
DISTRIBUTOR
Olstein & Associates acts as distributor of the Fund's shares under a
distribution agreement (the "Distribution Agreement") approved by the Board of
Trustees of the Trust on behalf of the Fund. Olstein & Associates (the
"Distributor") will assist in the sale and distribution of the Fund's shares as
well as assisting with the servicing of shareholder accounts.
Olstein & Associates has sole authority to enter into agreements with
Selling Dealers, and is responsible for the payment of any up-front commissions
and 12b-1 fees payable to Selling Dealers under selling dealer agreements. The
Distribution Agreement also provides that the Distributor, in the absence of
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of reckless disregard of their obligations and duties under
the agreement, will not be liable to the Trust or its shareholders for losses
arising in connection with the sale of Fund shares.
The Distribution Agreement became effective as of August 18, 1995, and
is subject to renewal on an annual basis. The Agreement will be renewed each
year if its continuance is approved at least annually by a majority of the
Trustees, including a majority of the Independent Trustees or, by a vote of a
majority of the outstanding voting securities of the Fund. The Distribution
Agreement terminates automatically in the event of its assignment. The
Distribution Agreement is also terminable without payment of a penalty (i) as to
the Distributor, by the Fund (by vote of a majority of the Independent Trustees
or by a vote of the outstanding voting securities of the Fund) on not less than
sixty (60) days' written notice; or (ii) as to the Distributor's own
participation, by such Distributor upon sixty (60) days' written notice.
DISTRIBUTION PLAN
As noted in the Fund's prospectus, the Fund has adopted a plan pursuant
to Rule 12b-1 under the 1940 Act (the "Plan") whereby the Fund will pay 1.00%
per annum of its average daily net assets to compensate the Distributor or other
persons for expenses incurred in connection with the distribution of the Fund's
shares and the servicing of shareholder accounts. The fees are paid on a monthly
basis, based on the Fund's average daily net assets. Included within the 1.00%
payable under the Plan is a 0.75% fee that may be paid to persons as
compensation for time spent and expenses incurred in the distribution and
promotion of the Fund's shares, including but not limited to, sales calls and
presentations to potential shareholders, media relations, the printing of
prospectuses and reports used for sales purposes, expenses of preparation and
printing of sales literature and related expenses, advertisements, and other
distribution-related expenses as well as any distribution or service fees paid
to securities dealers or others who have executed a dealer agreement with the
Distributor. In addition, the Plan includes a payment of 0.25% per annum of
average daily net assets of the Fund for shareholder servicing costs. Any
expense of distribution in excess of 1.00% per annum will be borne by the
Investment Manager without any reimbursement or payment by the Fund.
The Plan has been approved by the Trust's Board of Trustees, including
all of the Independent Trustees as defined in the 1940 Act. The Board of
Trustees has determined that a consistent cash flow resulting from the sale of
new shares is necessary and appropriate to meet redemptions and to take
advantage of buying opportunities without having to make unwarranted
liquidations of portfolio
9
<PAGE> 39
securities. The Board therefore believes that it will likely benefit the Fund to
have monies available for the direct distribution activities of the Distributor
in promoting the sale of the Fund's shares, and to avoid any uncertainties as to
whether other payments by the Fund constitute distribution expenses on behalf of
the Fund. The Board of Trustees, including the Independent Trustees, has
concluded that in the exercise of their reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders. The Plan must be renewed annually by
the Board of Trustees, including a majority of the Independent Trustees who have
no direct or indirect financial interest in the operation of the Plan, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such Trustees be done by the Independent Trustees.
The Plan and any related agreement may not be amended to increase
materially the amounts to be spent for distribution expenses without approval by
a majority of the Fund's outstanding shares, and all material amendments to the
Plan or any related agreements shall be approved by a vote of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on any
such amendment.
The Distributor is required to report in writing to the Board of
Trustees, at least quarterly, on the amounts and purpose of any payment made
under the Plan, as well as to furnish the Board with such other information as
may reasonably be requested in order to enable the Board to make an informed
determination of whether the Plan should be continued.
During the fiscal year ended August 31, 1997 and the period September
21, 1995 (commencement of operations) through August 31, 1996, the Fund paid a
total of $1,375,148 and $887,728, respectively, under the Plan for expenses
incurred in connection with the distribution of the Fund's shares and the
servicing of shareholder accounts. During the fiscal year ended August 31, 1997,
Olstein & Associates retained $6,745 of the fees paid pursuant to the Plan and
paid the balance to financial institutions or other entities ("Selling
Dealers").
ADMINISTRATOR
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin,
53201, provides certain administrative services to the Fund pursuant to an
Administrative Services Agreement.
Under the Administrative Services Agreement, the administrator: (1)
coordinates with the Custodian and monitors the custodial, transfer agency and
accounting services provided 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)
maintains such books and records of the Fund as may be required by applicable
federal or state law and supervises the maintenance of such books and records if
maintained by third parties; (5) prepares or supervises the preparation by third
parties of all federal, state and local tax returns and reports of the Fund
required by applicable law; (6) 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; (7) prepares and after
approval by the Fund, arranges for the filing of such registration statements
and other documents with the Securities and Exchange Commission (the "SEC") and
other federal and state regulatory authorities
10
<PAGE> 40
as may be required by applicable law; (8) reviews and submits to the officers of
the Trust for their approval invoices or other requests for payment of the
Fund's expenses and instructs the Custodian to issue checks in payment thereof;
(9) assists the Fund in the preparation of documents and information needed for
meetings of the Board of Trustees and prepares the minutes of Board meetings;
(10) monitors the Fund's compliance with applicable state securities laws; (11)
assists the Distributor with the review of advertising literature and the
submission of such advertising literature to the National Association of
Securities Dealers (the "NASD") for review and approval under applicable NASD
rules; (12) assists the Distributor with the preparation of quarterly reports to
the Board of Trustees relating to the distribution plan adopted by the Fund
pursuant to Rule 12b-1; and (13) 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.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
Firstar Trust Company serves as custodian of the Trust's assets
pursuant to a Custody Agreement. Under the Custody Agreement, Firstar Trust
Company has agreed to (i) maintain a separate account in the name of the Fund,
(ii) make receipts and disbursements of money on behalf of the Fund, (iii)
collect and receive all income and other payments and distributions on account
of the Fund's portfolio investments, (iv) respond to correspondence from
shareholders, security brokers and others relating to its duties and (v) make
periodic reports to the Fund concerning the Fund's operations. Firstar Trust
Company does not exercise any supervisory function over the purchase and sale of
securities.
Firstar Trust Company also serves as transfer agent and dividend
disbursing agent for the Fund under a Shareholder Servicing Agreement. As
transfer and dividend disbursing agent, Firstar Trust Company has agreed to (i)
issue and redeem shares of the Fund, (ii) make dividend and other distributions
to shareholders of the Fund, (iii) respond to correspondence by Fund
shareholders and others relating to its duties, (iv) maintain shareholder
accounts and (v) make periodic reports to the Fund.
In addition, the Trust has entered into a Fund Accounting Servicing
Agreement with Firstar Trust Company pursuant to which Firstar Trust Company has
agreed to maintain the financial accounts and records of the Fund and provide
other accounting services to the Fund. For its accounting services, Firstar
Trust Company is entitled to receive fees, payable monthly, based on the total
annual rate of $22,000 for the first $40 million in average net assets of the
Fund, 0.01% on the next $200 million of average net assets and 0.005% on average
net assets exceeding $240 million (subject to an annual minimum of $22,000).
Firstar Trust Company is also entitled to certain out of pocket expenses,
including pricing expenses.
ALLOCATION OF PORTFOLIO BROKERAGE
The Fund's portfolio securities transactions are placed by the
Investment Manager. The objective of the Fund is to obtain the best available
prices in its portfolio transactions, taking into account the costs, promptness
of executions and other qualitative considerations. There is no
11
<PAGE> 41
pre-existing commitment to place orders with any broker, dealer or member of an
exchange. The Investment Manager evaluates a wide range of criteria in seeking
the most favorable price and market for the execution of transactions, including
the broker's commission rate, execution capability, positioning and distribution
capabilities, information in regard to the availability of securities, trading
patterns, statistical or factual information, opinions pertaining to trading
strategy, back office efficiency, ability to handle difficult trades, financial
stability, and prior performance in serving the Investment Manager and its
clients. In transactions on equity securities and U.S. Government securities
executed in the over-the-counter market, purchases and sales are transacted
directly with principal market-makers except in those circumstances where, in
the opinion of the Investment Manager, better prices and executions are
available elsewhere.
The Investment Manager, when effecting purchases and sales of portfolio
securities for the account of the Fund, will seek execution of trades either (i)
at the most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange, or (ii) at a higher rate of commission charges,
if reasonable, in relation to brokerage and research services provided to the
Fund or the Investment Manager by such member, broker, or dealer. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale,
statistical or factual information, or opinions pertaining to investments. The
Investment Manager may use research and services provided to it by brokers and
dealers in servicing all its clients, including the Fund, and not all such
services will be used by the Investment Manager in connection with the Fund.
Brokerage may also be allocated to dealers in consideration of the Fund's share
distribution but only when execution and price are comparable to that offered by
other brokers. During the fiscal year ended August 31, 1997, the Fund paid
$571,532 in brokerage commissions. During the period September 21, 1995
(commencement of operations) through August 31, 1996, the Fund paid $421,109 in
brokerage commissions.
The Investment Manager, which is a member of the NASD and a
broker-dealer registered under the Securities Exchange Act of 1934, and certain
other Fund affiliates, may act as brokers to execute transactions for the Fund
subject to procedures set forth in Rule 17e-1 under the 1940 Act designed to
ensure the fairness of such transactions, which include making quarterly reports
to the Board of Trustees regarding such brokerage transactions. As a result, in
order for such persons to effect any portfolio transactions for the Fund on an
exchange, the commissions, fees or other remuneration received must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow the Investment Manager or other affiliated
brokers to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in an arm's-length transaction of a like size
and nature.
The following table shows the amounts of brokerage commissions paid by
the Fund to affiliated broker-dealers during the two most recently completed
fiscal periods. The table also indicates the identity of such brokers and the
reasons for their affiliation, as well as the percentage of the Fund's total
dollar amount of commission -- based transactions, and the percentage of the
Fund's total commissions paid, during the Fund's most recently completed fiscal
year.
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<PAGE> 42
<TABLE>
<CAPTION>
Percentage of
Brokerage Percentage of Fund's Total
Commissions Fund's Total Commission
Paid Commissions based Reason
FYE FYE for Transactions for for
Broker-Dealer 8/31/97 8/31/96* FYE 8/31/97 FYE 8/31/96 Affiliation
------------- ------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Albert Freid Co. $33,354 $30,185 5.84% 7.17% Ltd. Ptnr. of
Investment
Manager
Bear, Stearns Securities Corp. $52,049 $27,940 9.11% 6.63% Employee's
spouse is
Limited Partner
of Investment
Manager
Olstein & Associates, L.P. $143,538 $9,861 25.11% 2.34% Manager and
Principal
Underwriter of
Fund
Brean Murray Foster Securities $0 $6,072 -- 1.44% Former Limited
Partner of the
Investment
Manager
</TABLE>
*Since commencement of operations on 9/21/95.
The Investment Manager may from time to time provide investment
management services to individuals and other institutional clients, including
corporate pension plans, profit-sharing and other employee benefit trusts, and
other investment pools. There may be occasions on which other investment
advisory clients advised by the Investment Manager may also invest in the same
securities as the Fund. When these clients buy or sell the same securities at
substantially the same time, the Investment Manager may average the transactions
as to price and allocate the amount of available investments in a manner which
it believes to be equitable to each client, including the Fund. On the other
hand, to the extent permitted by law, the Investment Manager may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for other clients managed by it in order to obtain lower brokerage
commissions, if any.
The Investment Manager is responsible for making the Fund's portfolio
decisions subject to the limitations described in the prospectus. The Board of
Trustees may however impose limitations on the allocation of portfolio
brokerage.
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<PAGE> 43
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 24, 1998 the following shareholders were known to own of
record more than 5% of the outstanding shares of the Fund:
Name and Address Percentage Ownership
---------------- --------------------
The Lupa Family Trust 8.69%
ATTN Gary Gladstein
c/o Soros Fund Management
888 Seventh Ave, 33rd Floor
New York, NY 10106
PURCHASE OF SHARES
The shares of the Fund are continuously offered by the Distributor.
Orders will not be considered complete until receipt by Firstar Trust Company
and acceptance by the Distributor of a completed account application form, and
receipt of payment for the shares purchased. Once the completed account
application and payment are received, orders will be confirmed at the next
determined net asset value (based upon valuation procedures described in the
prospectus) as of the close of business of the business day on which the
completed order is received. Completed orders received by the Fund after the
close of the business day will be confirmed at the next day's price.
REDEMPTIONS
Under normal circumstances investors may redeem shares at any time,
subject to any applicable contingent deferred sales charge ("CDSC"). Telephone
redemption privileges are available, upon written request, for amounts up to
$50,000. The redemption price will be based upon the net asset value per share
next determined after receipt of the redemption request, less the amount of any
applicable CDSC, provided the redemption has been submitted in the manner
described in the prospectus. The redemption price may be more or less than your
cost, depending upon the net asset value per share at the time of redemption.
Payment for shares tendered for redemption is generally made by check
within seven days after tender in proper form, or earlier if required under
applicable law, except that the Fund reserves the right to suspend the right of
redemption, or to postpone the date of payment upon redemption beyond seven
days, (i) for any period during which the New York Stock Exchange (the "NYSE")
is closed, or trading on the NYSE is restricted by the SEC, (ii) for any period
during which an emergency exists as determined by the SEC as a result of which
disposal of securities owned by the Fund is not reasonably predictable or it is
not reasonably practicable for the Fund to fairly determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of shareholders of the Fund.
Pursuant to the Fund's Agreement and Declaration of Trust, payment for
shares redeemed may be made either in cash or in-kind, or partly in cash and
partly in-kind. However, 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 assets of the Fund, during any 90-day period for any one shareholder.
14
<PAGE> 44
Payments in excess of this limit will also be made wholly in cash unless the
Board of Trustees believes that economic conditions exist which would make such
a practice detrimental to the best interests of the Fund. Any portfolio
securities paid or distributed in-kind would be valued as described under "Net
Asset Value." In the event that an in-kind distribution is made, a shareholder
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. Where a
shareholder has requested redemption of all or a part of the shareholder's
investment, and where the Fund completes such redemption in-kind, the Fund will
not recognize gain or loss for federal tax purposes, on the securities used to
complete the redemption but the shareholder will recognize gain or loss equal to
the difference between the fair market value of the securities received and the
shareholder's basis in the Fund shares redeemed.
OFFICERS AND TRUSTEES OF THE FUND
The Trustees and principal executive officers and their principal
occupations for the past five years are listed below.
<TABLE>
<CAPTION>
Position and Office Principal Occupation
Name and Address Age with the Trust during the Past Five Years
---------------- --- ------------------- --------------------------
<S> <C> <C> <C>
Robert A. Olstein* 56 Chairman and President President, Olstein &
4 Manhattanville Road Associates, L.P., since
Purchase, NY 10577 1994; President,
Olstein, Inc. since June,
1994; Senior Vice
President/Senior
Portfolio Manager,
Smith Barney Inc. from
1982 until 1994.
Neil C. Klarfeld* 52 Trustee Executive Vice
499 Park Avenue President, Park Tower
New York, NY 10022 Realty Corp., since 1979.
Fred W. Lange 64 Trustee President and Portfolio 199
Stanley Avenue Manager, Lange Staten
Island, NY 10301 Financial Services since
1972; Member of the
Board of Trustees of
Wagner College.
</TABLE>
15
<PAGE> 45
<TABLE>
<S> <C> <C> <C>
John Lohr 52 Trustee Principal, Lockwood
10 Valley Stream Parkway Financial Group Ltd.,
Malvern, PA 19355 since January 1996;
Attorney, sole
practitioner, from 1995
until 1996; Senior Vice
President, Smith Barney
Inc., from 1987 until
1995.
D. Michael Murray 57 Trustee President, Murray,
2715 M Street, NW, #300 Sheer & Montgomery,
Washington, DC 20007 since 1968.
Lawrence K. Wein 55 Trustee Managing Director of
55 Corporate Park Drive Global Transit Services,
Room 23D50 AT&T, Inc., since
Bridgewater, NJ 08807 1990.
Erik K. Olstein* 30 Trustee, Secretary Vice President of Sales,
4 Manhattanville Road Assistant Treasurer and Olstein & Associates,
Purchase, NY 10577 Chief Compliance L.P. since 1994; Client
Officer Liaison, Smith Barney
Inc. from 1994 until
1995; Assistant OTC
Trader, Lehman Brothers
Inc. from 1993
until 1994; Officer and
Pilot, U.S. Navy from
1990 until 1993.
Michael Luper 29 Chief Accounting Vice President, Olstein
4 Manhattanville Road Officer and Treasurer & Associates, L.P.
Purchase, NY 10577 since 1994; Client
Liaison, Smith Barney
Inc. from 1994 until
1995; Auditor (CPA),
J. H. Cohn & Company
from 1991 until 1994.
</TABLE>
* Trustees who are "interested persons" as defined in the Investment Company
Act of 1940.
16
<PAGE> 46
The officers conduct and supervise the daily business operations of the
Trust, while the Trustees, in addition to the functions set forth under
"Investment Manager," and "Distribution of Shares" review such actions and
decide on general policy. Compensation to officers and Trustees of the Trust who
are affiliated with the Investment Manager is paid by the Investment Manager and
not by the Trust. Information relating to the compensation to be paid to the
Trustees of the Trust is set forth below:
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
TRUST AND FUND COMPLEX
NAME AND POSITION PAID TO TRUSTEES
<S> <C>
Robert A. Olstein*
Chairman and President None
Erik K. Olstein*
Trustee, Secretary and Assistant Treasurer None
Neil C. Klarfeld*
Trustee None
Fred W. Lange
Trustee $4,500
John Lohr
Trustee $4,500
D. Michael Murray
Trustee $4,500
Lawrence K. Wein
Trustee $4,500
</TABLE>
The interested Trustees of the Trust receive no compensation for their
service as Trustees. For their service as Trustees, the Independent Trustees
receive a $2,500 annual fee and $500 per meeting attended, as well as
reimbursement for expenses incurred in connection with attendance at such
meetings.
TAXATION
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 qualify as a regulated investment company for federal
income tax purposes, the Fund must meet certain specific requirements,
including:
- --------
* Trustees who are "interested persons" as defined in the Investment Company
Act of 1940.
17
<PAGE> 47
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. Government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income each fiscal year;
and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The 1997 Act repealed the 30% short-short income test for tax years of regulated
investment companies beginning after August 5, 1997; however, this rule may have
continuing effect in some states for purposes of classifying the Fund as a
regulated investment company under state law.
To the extent the Fund qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income and
net capital gains paid to shareholders in the form of dividends or capital gains
distributions.
The Code requires the Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the twelve month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Fund intends as a matter of policy to declare and pay sufficient dividends
annually to avoid excise tax but does not guarantee and can give no assurances
that its distributions will be sufficient to eliminate all such taxes.
Distributions declared by the Fund during October, November or December to
shareholders of record during such month and paid by January 31 of the following
year will be taxable to shareholders in the calendar year in which they are
declared, rather than the calendar year in which they are received.
Shareholders 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
long-term capital gains, if any, will be taxable to shareholders as long-term
capital gains, without regard to how long a shareholder has held shares of the
Fund. 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 long-term capital gain dividend
paid to the shareholder with respect to such shares.
18
<PAGE> 48
Under the 1997 Act, the Fund may designate its capital gain
distributions to you according to the following categories of holding periods:
"Pre-Act long-term capital gains": securities sold by the Fund before
May 7, 1997, that were held for more than 12 months. These gains will be taxable
to individual investors at a maximum rate of 28%.
"Mid-term capital gains" or "28 percent rate gain": securities sold by
the Fund after July 28, 1997 that were held more than one year but not more than
18 months. These gains will be taxable to individual investors at a maximum rate
of 28%.
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold by the Fund between May 7, 1997 and July 28, 1997 that were held
for more than 12 months, and securities sold by the Fund after July 28, 1997
that were held for more than 18 months. These gains will be taxable to
individual investors at a maximum rate of 20% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 10% for investors in the
15% federal income tax bracket.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
5-year gains are net gains on securities held for more than 5 years which are
purchased after December 31, 2000. For individuals who are subject to tax at
higher rate brackets, qualified 5-year gains are net gains on securities which
are purchased after December 31, 2000 and are held for more than 5 years.
Taxpayers subject to tax at the higher rate brackets may also make an election
for shares held on January 1, 2001 to recognize gain on their shares in order to
qualify such shares as qualified 5-year property. These gains will be taxable to
individual investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 18% for investors in the
15% federal income tax bracket.
Dividends eligible for designation under the dividends received
deduction and paid by the Fund may qualify in part for the 70% dividends
received deduction for corporations provided, however, that those shares have
been held for at least 45 days. Under the 1997 Act, the amount that the Fund may
designate as eligible for the dividends-received deduction will be reduced or
eliminated if the shares on which the dividends earned by the Fund were
debt-financed or held by the Fund for less than a 46-day period during a 90-day
period beginning 45 days before the ex-dividend date and ending 45 days after
the ex-dividend date. Similarly, if your Fund shares are debt-financed or held
by you for less than a 46-day period during a 90-day period beginning 45 days
before the ex-dividend date and ending 45 days after the ex-dividend date, then
the dividend-received deduction for Fund dividends on your shares may also be
reduced or eliminated. Even if designated as dividends eligible for the dividend
received deduction, all dividends (including any deducted portion) must be
included in your alternative minimum taxable income calculation.
The Fund will notify shareholders each year of the amount of dividends
and distributions, including the amount of any distribution of long-term capital
gains, and the portion of its dividends which may qualify for the 70% deduction.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not
19
<PAGE> 49
loss) on any constructive sale of an appreciated financial position in stock, a
partnership interest or certain debt instruments. The Fund will generally be
treated as making a constructive sale when it: 1) enters into a short sale on
the same property, 2) enters into an offsetting notional principal contract, or
3) enters into a futures or forward contract to deliver the same or
substantially similar property. Other transactions (including certain financial
instruments called collars) will be treated as constructive sales as provided in
Treasury regulations to be published. There are also certain exceptions that
apply for transactions that are closed before the end of the 30th day after the
close of the taxable year.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action at any time, and retroactively. Dividends and
distributions also may be subject to state and local taxes. Shareholders are
urged to consult their tax advisers regarding specific questions as to federal,
state and local taxes.
GENERAL INFORMATION
AUDITS AND REPORTS
The financial statements of the Fund are audited each year by Ernst &
Young LLP of Philadelphia, Pennsylvania, independent auditors. Shareholders
receive semi-annual and annual reports of the Fund including the annual audited
financial statements and a list of securities owned.
CODE OF ETHICS
The Fund has adopted a Code of Ethics for certain access persons of the
Trust, which includes its Trustees and certain officers and employees of the
Trust and the Investment Manager. The Code of Ethics is designed to ensure that
Fund insiders act in the interest of the Fund and its shareholders with respect
to any personal trading of securities. Under the Code of Ethics, access persons
are prohibited from knowingly buying or selling securities which are being
purchased, sold or considered for purchase or sale by the Fund. The Code of
Ethics contains even more stringent investment restrictions and prohibitions for
insiders who participate in the Fund's investment decisions. The Code of Ethics
also contains certain reporting requirements and securities trading clearance
procedures.
PERFORMANCE
Total return may be quoted in advertisements, shareholder reports or
other communications to shareholders. Total return is the total of all income
and capital gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the original
investment, expressed as a percentage of the purchase price. Occasionally, the
Fund may include its distribution rate in advertisements. The distribution rate
is the amount of distributions per share made by the Fund over a 12-month period
divided by the current maximum offering price.
20
<PAGE> 50
SEC rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
the Fund be accompanied by certain standardized performance information computed
as required by the SEC. Total return quotations used by the Fund are based on
the standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used by the Fund to compute or express
performance follows.
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 annual 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 the maximum sales load is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each one, five or ten-year periods and assumes the
deduction of all applicable charges and fees. According to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the one, five or ten-year periods,
determined at the end of the one, five or ten-year periods (or a
fractional portion thereof).
The Fund's average annual return for the fiscal year ended August 31,
1997, without the CDSC applied, was 43.61%. The return with the CDSC applied was
41.11%. The Fund's average annual total return and aggregate total return for
the period from September 21, 1995 (commencement of operations) through August
31, 1997 were 27.76% and 61.16% respectively. With the CDSC applied, the average
annual total return and aggregate total return for the same period were 27.25%
and 59.91%, respectively.
Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to shareholders
only for the limited historical period used.
COMPARISONS AND ADVERTISEMENTS
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective; advertisements, sales literature and other
shareholder communications regarding a Fund may discuss yield or total return
for such Fund as reported by various financial publications. Advertisements,
sales literature and shareholder communications may also compare yield or total
return to yield or total return as reported by other investments, indices, and
averages. The following publications, indices, and averages may be used:
21
<PAGE> 51
<TABLE>
<S> <C>
Barron's Business Week
CDA Investment Technologies, Inc. Personal Investor
Kiplinger's Personal Finance Personal Investing News
Consumer Digest Russell 2000 Index
Financial World Russell 2000 Value and Growth Indexes
Forbes S&P 500 Composite Stock Price Index
Fortune S&P SmallCap 600 Index
Investment Company Data, Inc. S&P MidCap 400 Index
Investor's Daily S&P/Barra Growth & Value Indexes
Lipper Mutual Fund Performance Analysis Success
Lipper Mutual Fund Indices The New York Times
Money U.S. News and World Report
Morningstar, Inc. USA Today
Mutual Fund Values Wall Street Journal
Nasdaq Indexes Wiesenberger Investment Companies Services
Wilshire Medium & Small Cap Indexes
</TABLE>
Fund may also from time to time along with performance advertisements,
present its investments, as of a current date, in the form of the "Schedule of
Investments" included in the Semi-Annual and Annual Reports to the shareholders
of the Trust.
FINANCIAL STATEMENTS
The financial statements and financial highlights of the Fund for the
fiscal year ended August 31, 1997 which appear in the Fund's Annual Report to
Shareholders and the report thereon by Ernst & Young LLP, the Fund's independent
auditors, also appearing therein, are incorporated by reference into this
Statement of Additional Information. The Annual Report may be obtained, without
charge, by writing or calling the Fund's Distributor at the address or number
listed on the cover page of this Statement of Additional Information.
22
<PAGE> 52
THE OLSTEIN FUNDS
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements
See "Financial Statements" in Part B of this Registration
Statement. The Fund's financial statements were previously
filed with the Securities and Exchange Commission via EDGAR
with the Fund's Annual Report on October 30, 1997 and are
incorporated herein by reference.
(b) Exhibits:
(1) Agreement and Declaration of Trust.*
(2) By-laws.*
(3) Voting Trust Agreement:
Not Applicable.
(4) Specimen copy of each security to be issued by
the registrant.
Not Applicable.
(5) Investment Management Agreement between Registrant
and Olstein & Associates, L.P. dated August 18,
1995.*
(6) (a) Distribution Agreement between the
Registrant and Rodney Square Distributors,
Inc. and Olstein & Associates, L.P dated
August 18, 1995.*
(b) Mutual Fund Dealer Agreement between
Olstein & Associates, L.P. and Smith
Barney Inc. dated September 21, 1995.*
(c) Form of Selling Dealer Agreement
between Olstein & Associates, L.P. and
Selected Dealers.*
(d) Selling Dealer Agreement between
Olstein & Associates, L.P. and Bear,
Stearns Securities Corp. dated November
30, 1995.*
(7) Bonus, Profit Sharing and Pension Contracts:
Not Applicable.
(8) Custody Agreements:
(a) Custody Agreement between the Registrant
and Firstar Trust Company dated
February 2, 1998.
(b) Special Custody Account Agreement between
the Registrant, Firstar Trust Company and
Bear, Stearns Securities Corp.
<PAGE> 53
(9) Other Material Contracts:
(a) Administration Agreement between the
Registrant and Firstar Trust Company dated
February 2, 1998.
(b) Accounting Services Agreement between the
Registrant and Firstar Trust Company dated
February 2, 1998.
(c) Transfer Agency Agreement between the
Registrant and Firstar Trust Company dated
March 2, 1998.
(10) Opinion and Consent of Counsel as to the Legality
of the Securities to be Issued.
(11) Consent of Independent Auditors.
(12) All Financial Statements Omitted from Item 23.
Not Applicable.
(13) Letter of Understanding Relating to Initial
Capital.*
(14) Model Plans.
Not Applicable.
(15) Plan of Distribution Pursuant to Rule 12b-1 under
the Investment Company Act of 1940 for The Olstein
Financial Alert Fund effective as of August 18,
1995.*
(16) Schedule for Computation of Performance
Quotations.
(17) Financial Data Schedule.**
(18) Plan Pursuant to Rule 18f-3.
Not Applicable.
(19) Trustees Power of Attorney.*
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Previously filed with the Securities and Exchange Commission with the
Funds' Form NSAR-B on October 30, 1997 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED OR UNDER COMMON CONTROL WITH THE
REGISTRANT:
NONE.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES:
The number of record holders of securities of the Registrant as of
October 31, 1997 is as follows:
-2-
<PAGE> 54
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
The Olstein Financial Alert Fund 2001
</TABLE>
ITEM 27. INDEMNIFICATION:
Under the terms of the Delaware Business Trust Act and the
Registrant's Agreement and Declaration of Trust and By-Laws, no officer or
trustee of the Fund shall have any liability to the Fund or its shareholders for
damages, except to the extent such limitation of liability is precluded by
Delaware law, the Agreement and Declaration of Trust, or the By-Laws.
Subject to the standards and restrictions set forth in the Fund's
Agreement and Declaration of Trust, the Delaware Business Trust Act, Section
3817, permits a business trust to indemnify any trustee, beneficial owner, or
other person from and against any claims and demands whatsoever. Section 3803
protects a Trustee, when acting in such capacity, from liability to any person
other than the business trust or beneficial owner for any act, omission, or
obligation of the business trust or any trustee thereof, except as otherwise
provided in the Agreement and Declaration of Trust.
The Agreement and Declaration of Trust provides that the Trustees
shall not be liable for any neglect or wrong-doing of any officer, agent,
employee, manager or underwriter of the Fund, nor shall any Trustee be
responsible for the act or omission of any other Trustee. Subject to the
provisions of the By-Laws, the Fund may indemnify to the fullest extent each
Trustee and officer of the Fund acting in such capacity, except that no
provision in the Agreement and Declaration of Trust shall be effective to
protect or purport to protect and indemnify any Trustee or officer of the Fund
from or against any liability to the Fund or any shareholder to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
The By-Laws provide indemnification for each Trustee and officer who
is a party or is threatened to be made a party to any proceeding, by reason of
service in such capacity, to the fullest extent, if it is determined that the
Trustee or officer acted in good faith and reasonably believed: (a) in the case
of conduct in his official capacity as an agent of the Fund, that his conduct
was in the Fund's best interests and (b) in all other cases, that his conduct
was at least not opposed to the Fund's best interests and (c) in the case of a
criminal proceeding, that he had no reasonable cause to believe the conduct of
that person was unlawful. However, there shall be no indemnification for any
liability arising by reason of willful misfeasance, bad faith, gross negligence,
or the reckless disregard of the duties involved in the conduct of the Trustee's
or officer's office. Further, no indemnification shall be made:
(a) In respect of any proceeding as to which any Trustee or
officer of the Fund shall have been adjudged to be liable
on the basis that personal benefit was improperly received
by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(b) In respect of any proceeding as to which any Trustee or
officer of the Fund shall have been adjudged to be liable
in the performance of that person's duty to the Fund,
unless and only to the extent that the court in which that
action was brought shall determine upon application that
in view of all the relevant circumstances of the case,
that person is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; however,
in such
-3-
<PAGE> 55
case, indemnification with respect to any proceeding by or
in the right of the Fund or in which liability shall have
been adjudged by reason of the disabling conduct set forth
in the preceding paragraph shall be limited to expenses;
or
(c) Of amounts paid in settling or otherwise disposing of a
proceeding, with or without court approval, or of expenses
incurred in defending a proceeding which is settled or
otherwise disposed of without court approval, unless the
required court approval set forth in the By-Laws is
obtained.
In any event, the Fund shall indemnify each officer and Trustee
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which each such officer or Trustee is a party by reason of
service in such capacity, provided that the Board of Trustees, including a
majority who are disinterested, non-party trustees, also determines that such
officer or Trustee was not liable by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of his or her duties of office. The
Fund shall advance to each officer and Trustee who is made a party to a
proceeding by reason of service in such capacity the expenses incurred by such
person in connection therewith, if (a) the officer or Trustee affirms in
writing that his good faith belief that he has met the standard of conduct
necessary for indemnification, and gives a written undertaking to repay the
amount of advance if it is ultimately determined that he has not met those
requirements, and (b) a determination that the facts then known to those making
the determination would not preclude indemnification.
The Trustees and officers of the Fund are entitled and empowered
under the Declaration of Trust and By-Laws, to the fullest extent permitted by
law, to purchase errors and omissions liability insurance with assets of the
Fund, whether or not the Fund would have the power to indemnify him against
such liability under the Declaration of Trust or By-Laws.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, officers, the underwriter
or control persons of the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in that Act and is, therefore, unenforceable. See also Item 32.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE
INVESTMENT MANAGER:
In addition to acting as the investment manager and principal
underwriter for the Fund, Olstein & Associates, L.P. provides brokerage
services and related investment advice to institutional and individual
investors.
ITEM 29. PRINCIPAL UNDERWRITER:
(a) Olstein & Associates, L.P. ("Olstein"), the principal
underwriter for the Registrant's securities, does not act
as principal underwriter for any other investment
companies, but acts as the investment adviser for the
Fund.
-4-
<PAGE> 56
(b) The tables below set forth certain information as to the
Distributor's Directors, Officers, Partners and Control
Persons:
Olstein, Inc. is the General Partner of Olstein. The
following is a list of the individuals who hold positions
either with Olstein, Inc. or are limited partners of
Olstein.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ------------- --------------
<S> <C> <C>
Robert A. Olstein President of Chairman and
4 Manhattanville Road Olstein, Inc.; President
Purchase, New York 10577 Limited Partner
of Olstein
Erik K. Olstein Olstein, Trustee,
4 Manhattanville Road Vice President- Secretary and Assistant Treasurer
Purchase, New York 10577 Sales
Michael Luper Olstein, Chief Accounting Officer
4 Manhattanville Road Vice President- and Treasurer
Purchase, New York 10577 Finance
Olstein, Inc. General Partner None
4 Manhattanville Road
Purchase, New York 10577
Cash Asmussen Limited Partner None
P.O. Box 1861
Laredo, TX 78044-1861
Nick Awad Limited Partner None
144 East 44th Street
New York, NY 10017
Dr. Lewis Bobroff Limited Partner None
4 Catherine Court
Suffern, NY 10901-3104
Harry & Roberta Boltin Limited Partner None
6 Laveta Place
Nyack, NY 10960-1604
James Calabrese Limited Partner None
13 Hendrie Lane
Riverside, CT 06878-1810
Catherine Corless Limited Partner None
44 Halley Drive
Pomona, NY 10970-2003
</TABLE>
-5-
<PAGE> 57
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ------------- --------------
<S> <C> <C>
Patrick Donaghy Limited Partner None
15 East 26th Street
New York, NY 10010-1501
Anita Fleishman Limited Partner None
11 West 69th Street
New York, NY 10023
Albert Fried & Co. Limited Partner None
40 Exchange Place
New York, NY 10005-2701
Neil Klarfeld Limited Partner Trustee
29 Tamarack Lane
Pomona, NY 10970-2006
Dr. David Langerman Limited Partner None
2 Perth Court
West Nyack, NY 10994-1307
Douglas & Diane LeGrande Limited Partner None
97 Birch Hill Road
Weston, CT 06883-1735
Rochelle Nechin Limited Partner None
128 Prospect Avenue
Douglaston, NY 11363-1338
Joan Olstein Limited Partner None
115-7 Hilltop Road
Kinnelon, NJ 07405
Judith Pomerantz Limited Partner None
2 White Pine Drive
Sterlington, NY 10974
Marilyn Portnoy Limited Partner None
7 White Birch Drive
Pomona, NY 10970-3403
Dr. Gary Roebuck Limited Partner None
43 Halley Drive
Pomona, NY 10970-2001
Marie Romano Limited Partner None
447 Windham Court North
Wyckoff, NJ 07481-3472
</TABLE>
-6-
<PAGE> 58
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER THE REGISTRANT
- ---------------- ------------- --------------
<S> <C> <C>
John Vazzana Limited Partner None
40 Exchange Place
New York, NY 10005-2701
Edwin & Harilyn Zimmerman Limited Partner None
13652 Rivoli Drive
Palm Beach Gardens, FL 33410
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS:
Each account, book or other document required to be
maintained by Section 31(a) of the Investment Company Act of 1940
(the "1940 Act") and Rules (17 CFR 270-31a-1 to 31a-3) promulgated
thereunder, is maintained by the Registrant at 4 Manhattanville
Road, Purchase, NY 10577, except for those maintained by the
Registrant's custodian Firstar Trust Company, 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202 and the Registrant's
Administrator, Transfer, Redemption, Dividend Disbursing and
Accounting Agent, Firstar Trust Company, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
ITEM 31. MANAGEMENT SERVICES:
There are no management related service contracts not
discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
(a) Not Applicable.
(b) Not Applicable.
(c) The 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 August 31, upon request and without charge.
(d) Registrant hereby undertakes, if requested to do so by the
holders of at least 10% of the Registrant's outstanding
shares, to call a meeting of shareholders for the purpose
of voting upon the question of removal of a trustee or
trustees and to assist in communication with other
shareholders, as directed by Section 16(c) of the 1940
Act.
-7-
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and the Investment Company Act of 1940
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Purchase, and State of New
York, on the 27th of February, 1998.
THE OLSTEIN FUNDS
By: /s/ Robert A. Olstein
-------------------------------
Robert A. Olstein,
Chairman and President
Pursuant to the requirement of the Securities Act of 1933, this Registration
Statement has been signed below on by the following persons in the capacities
and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert A. Olstein Chairman and February 27, 1998
- ------------------------------ President
Robert A. Olstein
/s/ Erik K. Olstein Trustee and February 27, 1998
- ------------------------------ Secretary
Erik K. Olstein
/s/ Michael Luper Chief Accounting February 27, 1998
- ------------------------------ Officer and Treasurer
Michael Luper
/s/ Neil C. Klarfeld Trustee February 27, 1998
- ------------------------------
Neil C. Klarfeld*
/s/ Fred W. Lange Trustee February 27, 1998
- ------------------------------
Fred W. Lange*
/s/ John Lohr Trustee February 27, 1998
- ------------------------------
John Lohr*
/s/ D. Michael Murray Trustee February 27, 1998
- ------------------------------
D. Michael Murray*
/s/ Lawrence K. Wein Trustee February 27, 1998
- ------------------------------
Lawrence K. Wein*
</TABLE>
* By: /s/ Robert A. Olstein
---------------------------------------------
Robert A. Olstein, Attorney-in-Fact
(Pursuant to Power of Attorney filed herewith)
<PAGE> 1
EXHIBIT 99.B 8
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made on this 2nd day of February, 1998, between
The Olstein Funds, a Delaware business trust (hereinafter called the "Trust"),
on behalf of its separate series of shares ("Series"), and FIRSTAR TRUST
COMPANY, a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),
WHEREAS, the Trust desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Trust by any
two of the President, a Vice President, the Secretary and the Treasurer of the
Trust, or any other persons duly authorized to sign by the Board of Trustees of
the Trust.
The word "Board" shall mean the Board of Trustees of the Trust.
2. NAMES, TITLES, AND SIGNATURES OF THE TRUST'S OFFICERS
An officer of the Trust will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Trustees, together with any changes which may occur from time to time.
3. ADDITIONAL SERIES
The Trust is authorized to issue separate Series of shares of
beneficial interest representing interests in separate series of shares
representing interests in separate investment portfolios ("Series"). The
parties intend that each Series established by the Trust, now or in the future,
be covered by the terms and conditions of this agreement.
<PAGE> 2
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or
accounts in the name of each Series of the Trust, subject only to draft or order
by Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the relevant Series. Custodian shall
make payments of cash to, or for the account of, the relevant Series from such
cash only:
(a) for the purchase of securities for the portfolio of the
Series upon the delivery of such securities to Custodian,
registered in the name of the Series or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of beneficial
interest of the Series upon delivery thereof to
Custodian, or upon proper instructions from the Trust;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and
postage);
(d) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Series held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Trustees of the Trust.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating that it
is for a purpose permitted under the terms of items (a), (b), (c), or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose to be a
proper business purpose, and naming the person or persons to whom such payment
is to be made, provided, however, that an officers' certificate need not
precede the disbursement of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by Custodian
for the account of the Series of the Trust.
2
<PAGE> 3
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Trust as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of checks received in
payment for shares of the Series which are deposited into the relevant Series'
account.
4. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of each
Series, into which account(s) may be transferred cash and/or securities.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any
portfolio securities of the Series of the Trust held by it pursuant to this
Agreement. Custodian agrees to transfer, exchange or deliver portfolio
securities held by it hereunder only:
(a) for sales of such securities for the account of the
Series of the Trust upon receipt by Custodian of payment
therefore;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether
pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of beneficial
interest of the Series of the Trust upon delivery thereof
to Custodian; or
(i) for other proper business purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
3
<PAGE> 4
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this
Section 5 and also, in respect of item (i), upon receipt of an officers'
certificate specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom delivery of
such securities shall be made, provided, however, that an officers' certificate
need not precede any such transfer, exchange or delivery of a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of the relevant Series of the Trust,
which call for payment upon presentation and hold the cash received by it upon
such payment for the account of the Trust; (b) collect interest and cash
dividends received, with notice to the Trust , for the account of the Trust;
(c) hold for the account of the Trust hereunder all stock dividends, rights and
similar securities issued with respect to any securities held by it hereunder;
and (d) execute, as agent on behalf of the Trust, all necessary ownership
certificates required by the Internal Revenue Code or the Income Tax
Regulations of the United States Treasury Department or under the laws of any
state now or hereafter in effect, inserting the Trust's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of Custodian as defined in the Internal
Revenue Code and any Regulations of the Treasury Department issued hereunder or
in any provision of any subsequent federal tax law exempting such transaction
from liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. Custodian shall use its best
efforts to the end that the specific securities held by it hereunder shall be
at all times identifiable in its records.
The Trust shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee, any
securities which it may hold for the account of the Series of the Trust and
which may from time to time be registered in the name of the Series of the
Trust.
4
<PAGE> 5
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Series of the Trust,
except in accordance with the instructions contained in an officers'
certificate. Custodian shall deliver, or cause to be executed and delivered, to
the Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Series of the Trust), but without indicating the manner in which such proxies
are to be voted.
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Series of the Trust shall pay or reimburse Custodian from
time to time for any transfer taxes payable upon transfers of securities made
hereunder, and for all other necessary and proper disbursements and expenses
made or incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries
of any such securities.
10. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be agreed
upon in writing between the two parties. Until modified in writing, such
compensation shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of
the Board, and may rely on the genuineness of any such document which it may in
good faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless Custodian and
its nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by its
nominee in connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct. Custodian is authorized to charge any account of the
relevant Series of the Trust for such items.
In the event of any advance of cash for any purpose made by Custodian resulting
from orders or instructions of the Trust, or in the event that Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Agreement,
except such as may arise from its or its nominee's own negligent
5
<PAGE> 6
action, negligent failure to act or willful misconduct, any property at any
time held for the account of the Series of the Trust shall be security
therefore.
Custodian agrees to indemnify and hold harmless the Trust from all charges,
expenses, assessments, and claims/liabilities (including counsel fees) incurred
or assessed against it in connection with the performance of this agreement,
except such as may arise from the Trust's own negligent action, negligent
failure to act, or willful misconduct.
11. SUBCUSTODIANS
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Trust's assets, so long as
any such bank or trust company is a bank or trust company organized under the
laws of any state of the United States, having an aggregate capital, surplus
and undivided profit, as shown by its last published report, of not less than
Two Million Dollars ($2,000,000) and provided further that, if the Custodian
utilizes the services of a Subcustodian, the Custodian shall obtain preapproval
by the Trust and remain fully liable and responsible for any losses caused to
the Trust by the Subcustodian as fully as if the Custodian was directly
responsible for any such losses under the terms of the Custodian Agreement.
Notwithstanding anything contained herein, if the Trust requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Trust agrees to indemnify and hold harmless Custodian
from all claims, expenses and liabilities incurred or assessed against it in
connection with the use of such Subcustodian in regard to the Trust's assets,
except as may arise from its own negligent action, negligent failure to act or
willful misconduct.
12. REPORTS BY CUSTODIAN
Custodian shall furnish the Trust periodically as agreed upon
with a statement summarizing all transactions and entries for the account of
Trust. Custodian shall furnish to the Trust, at the end of every month, a list
of the portfolio securities showing the aggregate cost of each issue. The books
and records of Custodian pertaining to its actions under this Agreement shall
be open to inspection and audit at reasonable times by officers of, and of
auditors employed by, the Trust.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Trust, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail to
Custodian at Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, or to the Trust at 4 Manhattanville Road, Purchase, NY 10577,
as the case may be. Upon any termination of this Agreement, pending appointment
of a successor to Custodian or a vote of the shareholders of the Series of the
Trust to dissolve or to function without a custodian of its cash, securities
and other property, Custodian shall not deliver cash, securities or other
property of the Trust to the Trust, but may deliver them to a bank or trust
company of its own selection, having an aggregate capital, surplus
6
<PAGE> 7
and undivided profits, as shown by its last published report of not less than
Two Million Dollars ($2,000,000) as a Custodian for the Trust to be held under
terms similar to those of this Agreement, provided, however, that Custodian
shall not be required to make any such delivery or payment until full payment
shall have been made by the Trust of all liabilities constituting a charge on
or against the properties then held by Custodian or on or against Custodian,
and until full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10 of
this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Trust, authorized or approved by a resolution of its Board of
Trustees.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository, provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and state
laws and regulations, and the Board of Trustees of the Trust approves by
resolution the use of such central securities clearing agency or securities
depository.
15. RECORDS
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Trust
pursuant to the provisions of the Investment Company Act of 1940, as amended,
or the rules and regulations promulgated thereunder, Custodian agrees to make
any such records available to the Trust upon request and to preserve such
records for the periods prescribed in Rule 31a-2 under the Investment Company
Act of 1940, as amended.
16. NOTICES
Notices of any kind to be given by either party to the other
party shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FTC shall be sent to:
Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Trust shall be sent to:
The Olstein Funds
4 Manhattanville Road
Purchase, NY 10577
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be affixed
hereto as of the date first above-written by their respective officers
thereunto duly authorized.
This agreement may be executed in several counterparts, each
of which is an original.
The Olstein Funds Firstar Trust Company
Sign: /s/ Robert A. Olstein Sign: /s/ Joe Redwine
------------------------------ -------------------------------
Print Robert A. Olstein Print: Joe Redwine
------------------------------ ------------------------------
Title: Chairman & President Title:
----------------------------- ------------------------------
Date: March 2, 1998 Date: March 2, 1998
------------------------------ -------------------------------
Attest: Michael Luper Attest: Mary Klabunde
---------------------------- -----------------------------
8
<PAGE> 9
Mutual Fund Services
================================================================================
MUTUAL FUND CUSTODIAL AGENT SERVICE
DOMESTIC PORTFOLIOS
ANNUAL FEE SCHEDULE
o OLSTEIN FINANCIAL ALERT FUND
o Annual fee based on market value of assets:
o $0.10 per $1,000 (1 basis point)
o Minimum annual fee per Series: $3,000
o Investment transactions: (purchase, sale, exchange, tender, redemption,
maturity, receipt delivery)
o $9.00 per book entry security (depository or Federal Reserve
system)
o $25.00 per definitive security (physical)
o $75.00 per Euroclear
o $8.00 per principal reduction on pass-through certificates
o $35.00 per option/future contracts
o Variable Amount Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge, which is
1/4 of 1%, is deducted from the variable amount note income at the time is
credited to your account.
o Extraordinary expenses: Based on time and complexity involved
o Out-of-pocket expenses: Charged to the account, including but not limited
to:
o $10.00 per variation margin transaction
o $10.00 per Fed wire deposit or withdrawal
o Fees are billed monthly, based on market value at the beginning of the month
================================================================================
12.8.0 FIRSTAR
9
<PAGE> 1
SPECIAL CUSTODY ACCOUNT AGREEMENT
(Short Sales)
AGREEMENT (hereinafter "Agreement") dated as of February ___, 1998, by
and among Firstar Trust Company, in its capacity as custodian hereunder (the
"Bank"), each series of The Olstein Funds, each of which shall be considered a
separate party to this Agreement and each of which shall be known as the
"Customer", and Bear, Stearns Securities Corp. (the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of
several national securities exchanges; and
WHEREAS, Customer is a registered investment company which desires from
time to time to execute various security transactions, including short sales
(which is permitted by Customer's investment policies), and in connection
therewith has executed Broker's Professional Account Agreement (the "Customer
Agreement") which provides for margin transactions; and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements
("Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin
Rules, Bank is prepared to act as custodian to hold Collateral as defined below.
NOW THEREFORE, be it agreed as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales shall mean such
collateral as is adequate in Broker's reasonable judgment
under the Margin Rules and the internal policies of Broker.
(b) "Advice from Broker" or "Advice" means a written notice sent
to Customer and Bank or transmitted by a facsimile sending
device, except that Advice for initial or additional
Collateral or with respect to Broker's ability to effect a
short sale for the Customer may be given orally. With respect
to any short sale or Closing Transaction, the Advice from
Broker shall mean a standard confirmation in use by Broker and
sent or transmitted to Customer and Bank. With respect to
substitutions or releases of Collateral, Advice from Broker
means a written notice signed by Broker and sent or
transmitted to Customer and Bank. An authorized agent of
<PAGE> 2
Broker will certify to Customer and Bank the names and
signatures of those employees who are authorized to sign
Advice from Broker, which certification may be amended from
time to time. When used herein, the term "Advise" means the
act of sending an Advice from Broker.
(c) "Closing Transaction" is a transaction in which Customer
purchases securities which have been sold short.
(d) "Collateral" shall mean cash or U.S. Government securities or
other securities acceptable to Broker.
(e) "Custody Agreement" shall mean the agreement for general
custodial services between the Bank and Customer.
(f) "Insolvency" means that (A) an order, judgment or decree has
been entered under the bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law (herein called the "Bankruptcy
law") of any competent jurisdiction adjudicating the Customer
insolvent; or (B) the Customer has petitioned or applied to
any tribunal for, or consented to the appointment of, or
taking possession by, a trustee, receiver, liquidator or
similar official, of the Customer, or commenced a voluntary
case under the Bankruptcy Law of the United States or any
proceedings relating to the Customer under the Bankruptcy Law
of any other competent jurisdiction, whether now or
hereinafter in effect; or (C) any such petition or application
has been filed, or any such proceedings commenced, against the
Customer and the Customer by any act has indicated its
approval thereof, consent thereto or acquiescence therein, or
an order for relief has been entered in an involuntary case
under the Bankruptcy Law of the United States, as now or
hereinafter constituted, or an order, judgment or decree has
been entered appointing any such trustee, receiver, liquidator
or similar official, or approving the petition in any such
proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 60 days.
(g) "Instructions from Customer" or "Instructions" means a
request, direction or certification in writing signed by
Customer and delivered to Bank and Broker or transmitted by a
facsimile sending device. An officer of Customer will certify
to Bank and Broker the names and signatures of those persons
authorized to sign the instructions, which certification may
be amended from time to time. When used herein, the term
"Instruct" shall mean the act of sending an Instruction from
Customer.
(h) "Receipt of Payment" means receipt by Bank, of (1) a certified
or official bank check or wire transfer to Bank; (2) a written
or telegraphic advice from a registered
2
<PAGE> 3
clearing agency that funds have been or will be credited to
the account of Bank; or (3) a transfer of funds from any of
Broker's accounts maintained at Bank.
(i) "Receipt of Securities" means receipt by Bank, of (1)
securities in proper form for transfer; or (2) a written or
telegraphic advice from a registered clearing agency that
securities have been credited to the account of Bank for the
Special Custody Account.
(j) "Special Custody Account" shall have the meaning assigned to
that term in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
(a) Opening Custody Account. Bank shall open an account on its
books entitled "Special Custody Account for Bear, Stearns
Securities Corp. as Pledgee of Olstein Financial Alert Fund"
("Special Custody Account") and shall hold therein all
securities and similar property as shall be received and
accepted by it therein pursuant to this Agreement. Customer
agrees to instruct Bank in Instructions from Customer as to
cash and specific securities which Bank is to identify on its
books and records as pledged to Broker as Collateral in the
Special Custody Account. Customer agrees that the value of
such cash and securities shall be at least equal in value to
what Broker shall initially and from time to time advise
Customer in an Advice from Broker is necessary to constitute
Adequate Margin. Such Collateral (i) will be held by Bank for
Broker as agent of Broker, (ii) may be released only in
accordance with the terms of this Agreement, and (iii) except
as required to be released hereunder to Broker, shall not be
made available to Broker or any other person claiming through
Broker, including the creditors of the Broker.
(b) Security Interest. Customer hereby grants a continuing
security interest to Broker in the Collateral in the Special
Custody Account. To perfect Broker's security interest, Bank
will hold the Collateral in the Special Custody Account,
subject to the interest therein of Broker as the pledgee and
secured party thereof in accordance with the terms of this
Agreement. Such security interest will terminate at such time
as Collateral is released as provided herein. Bank shall have
no responsibility for the validity or enforceability of such
security interest.
(c) Confirmation. Bank will confirm in writing to Broker and
Customer all pledges, releases or substitutions of Collateral
and will supply Broker and Customer with a monthly statement
of Collateral and transactions in the Special Custody Account
for such month. Bank will also advise Broker upon request of
the kind and amount of Collateral pledged to Broker.
3
<PAGE> 4
(d) Excess Collateral. Upon the request of Customer, Broker shall
advise Bank and Customer of any excess of Collateral in the
Special Custody Account. Such excess shall at Customer's
request be transferred therefrom upon Advice from Broker.
(e) Accounts and Records. Bank will maintain accounts and records
for the Collateral in the Special Custody Account as more
fully described in sub-paragraph 5(a) below. The Collateral
shall at all times remain the property of the Customer subject
only to the extent of the interest and rights therein of
Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) Short Sales. From time to time, Customer may place orders with
Broker for the short sale of securities. Prior to the
acceptance of such orders Broker will advise Customer of
Broker's ability to borrow such securities or other properties
and acceptance of short sale orders will be contingent upon
same.
(b) Open Short Sales Balance. Broker shall, based on the closing
market price on each business day, compute the aggregate net
credit or debit balance on Customer's open short sales and
advise Customer and/or Customer's designated agent by 11:00
A.M. New York time on the next business day (the
"Determination Day") of the amount of the net debit or credit,
as the case may be. If a net debit balance exists on the
Determination Day, Customer will cause an amount equal to such
net debit balance to be paid to Broker by the close of
business on the Determination Day. If a net credit balance
exists on the Determination Day, Broker will pay such credit
balance to Customer by the close of business on the
Determination Day. As Customer's open short positions are
marked-to-market each business day, payments will be made by
or to Customer to reflect changes (if any) in the credit or
debit balances. To the extent payments are not made as
aforesaid, Broker will charge interest on debit balances, and
Broker will pay interest on credit balances. Balances will be
appropriately adjusted when short sales are closed out.
4. PLACING ORDERS
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such and
hereby authorizes Broker to mark such order as being "short", and when placing
with Broker any order to sell long for Customer's account, will designate the
order as such and hereby authorizes Broker to mark such order as being "long".
Any sell order which Customer shall designate as being for long account as above
provided is for securities then owned by Customer and, if such securities are
not then deliverable by Broker from any account of Customer, the placing of such
order shall constitute a representation by Customer that it is impracticable for
Customer then to deliver such securities to Broker but that Customer shall
deliver them by the settlement date or as soon as possible thereafter.
4
<PAGE> 5
5. RIGHTS AND DUTIES OF THE BANK
(a) Generally. The Bank shall receive and hold in the Special
Custody Account, as custodian upon the terms of this
Agreement, all Collateral deposited and maintained pursuant to
the terms of this Agreement and, except as provided in
sub-paragraph 5(b) below, shall receive and hold all monies
and other property paid, distributed or substituted in respect
of such Collateral or realized on the sale or other
disposition of such Collateral; provided, however, that the
Bank shall have no duty to require any money or securities to
be delivered to it or to determine that the amount and form of
assets delivered to it comply with any applicable
requirements. Collateral held in the Special Custody Account
shall be released only in accordance with this Agreement or as
required by applicable law. The Customer grants its authority
to deposit in such account any money, securities and other
property received by the Bank. The Bank may hold the
securities in the Special Custody Account in bearer, nominee,
book entry, or other form and in a depository or clearing
corporation, with or without indicating that the securities
are held hereunder; provided, however, that all securities
held in the Special Custody Account shall be identified on the
Bank's records as subject to this Agreement and shall be in a
form that permits transfer without additional authorization or
consent of the Customer. The Customer and Broker hereby agree
to hold the Bank and its nominees harmless from any liability
as holder of record.
(b) Dividends and Interest. Any interest, dividends or other
distributions paid with respect to the Collateral held in the
Special Custody Account shall be retained therein as
additional Collateral, unless requested by Customer in
accordance with the provision in this Agreement concerning the
release of excess Collateral.
(c) Reports. The Bank shall, as promptly as practical, provide
Broker and the Customer and/or Customer's designated agent
with written confirmation of each transfer into and out of the
Special Custody Account. The Bank also shall render to the
Broker and the Customer and/or Customer's designated agent a
monthly statement of the Collateral held in the Special
Custody Account. In addition, the Bank will advise the Broker
and the Customer and/or Customer's designated agent, upon
request of the Broker or Customer, at any time of the type and
amount of Collateral held in the account; provided, however,
that the Bank shall have no responsibility for making any
determination as to the value of such Collateral.
(d) Limitation of Bank's Liability. The Bank's duties and
responsibilities are set forth in this Agreement. The Bank
shall act only upon receipt of Advice from Broker regarding
release or substitution of Collateral. The Bank shall not be
liable or responsible for anything done, or omitted to be done
by it in good faith and in the
5
<PAGE> 6
absence of negligence and may rely and shall be protected in
acting upon any notice, instruction or other communication
which it reasonably believes to be genuine and authorized. As
between the Bank and Broker, Broker shall indemnify and hold
the Bank harmless with regard to any losses or liabilities of
the Bank (including counsel fees) imposed on or incurred by
the Bank arising out of any action or omission of the Bank in
accordance with any Advice, notice or instruction of Broker
under this Agreement. In matters concerning or relating to
this Agreement, the Bank shall not be responsible for
compliance with any statute or regulation regarding the
establishment or maintenance of margin credit, including but
not limited to Regulations T or X of the Board of Governors of
the Federal Reserve System, or with any rules or regulations
of the Office of the Controller of the Currency (or the
Securities and Exchange Commission). The Bank shall not be
liable to any party for any acts or omissions of the other
parties to this Agreement.
(e) Compensation. Bank shall be paid as compensation for its
services pursuant to this Agreement such compensation as may
from time to time be agreed upon in writing between Customer
and Bank.
6. DEFAULT
In the event of any failure by Customer to timely comply with any
obligation on Customer's part to be performed or observed under this Agreement
or the Customer Agreement, including, but not limited to, the obligation to
maintain Adequate Margin, or in the event of Customer's Insolvency, Broker may
effect a Closing Transaction or buy-in of any securities of which Customer's
account may be short. In the event of any such default or Customer's Insolvency,
Broker shall also have the right to sell any and all Collateral in the Special
Custody Account and to give Advice to Bank to deliver such Collateral free of
payment to Broker, which Advice shall state that, pursuant to this Agreement,
the condition precedent to Broker's right to receive such Collateral free of
payment has occurred. The Bank will provide immediate notice to Customer by
telephone of any receipt by Bank of an Advice from Broker to deliver Collateral
free of payment, and shall promptly effect delivery of Collateral to Broker.
Such sale or purchase may be made according to Broker's judgement and may be
made at Broker's discretion, on the principal exchange or other market for such
securities, or in the event such principal market is closed, in a manner
commercially reasonable for such securities.
7. LIMITATION OF BROKER LIABILITY
Broker shall not be liable for any losses, costs, damages, liabilities
or expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except
6
<PAGE> 7
to the extent that such loss, cost, damage, liability or expense is the result
of Broker's own recklessness, willful misconduct or bad faith.
8. CUSTOMER REPRESENTATION
Customer represents and warrants that the Collateral will not be
subject to any other liens or encumbrances.
9. TERMINATION
Any of the parties hereto may terminate this Agreement by notice in
writing to the other parties hereto; provided, however, that the status of any
short sales, and of Collateral held at the time of such notice to margin such
short sales shall not be affected by such termination until the release of such
Collateral pursuant to applicable law or regulations or rules of any self
regulatory organization to which the Broker is subject. In the event of the
release of Collateral, the Collateral shall be transferred to a proper custody
account of the Customer in the Bank.
10. NOTICE
Written communications hereunder shall be telegraphed, sent by
facsimile transmission or hand delivered as required herein, when another method
of delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
(a) if to Bank, to:
Firstar Trust Company
Lewis Center
615 East Michigan Street
Milwaukee, Wisconsin 53202
Attn:
Phone:
Facsimile:
(b) if to Customer, to:
The Olstein Funds
105 Corporate Park Drive
White Plains, New York 10604
Attn: Robert Olstein
Phone: (914) 397-7565
Facsimile: (914) 397-7526
7
<PAGE> 8
(c) if to Broker, to:
Bear, Stearns Securities Corp.
245 Park Avenue
New York, New York 10167
Attn: Michael Minikes, Treasurer
Phone: (212) 272-2009
Facsimile: (212) 272-3099
11. CONTROLLING LAW
The construction and enforcement of this Agreement shall be subject to
and governed by the laws of the State of New York.
12. THE AGREEMENT CONTROLS/AMENDMENTS
Customer and Bank agree that the terms of this Agreement shall
supplement and amend the Custody Agreement dated as of August 18, 1995 between
Bank and Customer with respect to the Special Custody Account identified on page
3 hereof, and to the extent inconsistent therewith, the terms of this Agreement
shall control. No amendment of this Agreement shall be effective unless in
writing and signed by an authorized officer of each of Broker, Customer and
Bank.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers as of the day and year first above
written.
THE OLSTEIN FUNDS
By:
------------------------------
Name:
Title:
FIRSTAR TRUST COMPANY
By:
------------------------------
Name:
Title:
BEAR, STEARNS SECURITIES CORP.
By:
------------------------------
Name:
Title:
9
<PAGE> 1
EXHIBIT 99.B9a
FUND ADMINISTRATION SERVICING AGREEMENT
This Agreement is made and entered into on this 2nd day of February, 1998, by
and between The Olstein Funds, a business trust organized under the laws of the
State of Delaware (hereinafter referred to as the "Trust") on behalf of any of
its series as described in Part IV of this Agreement (each such series is
hereafter referred to as a "Fund" and, collectively as the "Funds"), and Firstar
Trust Company, a corporation organized under the laws of the State of Wisconsin
(hereinafter referred to as "FTC").
WHEREAS, The Trust is a open-ended management investment company which is
registered under the Investment Company Act of 1940 (as amended, the "1940
Act");
WHEREAS, FTC is a trust company and, among other things, is in the business of
providing fund administration services for the benefit of its customers;
NOW, THEREFORE, the Trust and FTC do mutually promise and agree as follows:
I. Appointment of Administrator
The Trust hereby appoints FTC as Administrator of the Funds on the
terms and conditions set forth in this Agreement, and FTC hereby
accepts such appointment and agrees to perform the services and duties
set forth in this Agreement in consideration of the compensation
provided for herein.
II. Duties and Responsibilities of FTC
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate corporate formalities and Board communication by:
a. preparing and distributing meeting agendas and board
materials including board resolutions and various
financial, administrative and regulatory reports;
b. attending all regular or special board meetings,
preparing and distributing minutes of such meetings
and maintaining the corporate records and minute book
for the Trust;
c. updating trustees' and officers' biographical
information and questionnaires; and
d. evaluating independent auditor.
<PAGE> 2
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit
process
c. Provide office facilities for auditors and SEC staff
as appropriate
4. Assist in overall operations of the Trust, including the
provision of office facilities, executive and administrative
services and FTC personnel to serve as officers of the Trust
to facilitate Trust operations, all at FTC's expense with
the exception of the costs incurred when attending Board of
Trustee meetings; and to provide stationary and office
supplies at the Trust's expense.
5. Create and maintain operations and compliance calendars
and/or a compliance manual for the Trust, detailing
schedules for the various responsibilities of FTC.
6. Shareholder Communications. Coordinate printing and
distribution of prospectuses, statements of additional
information, stickers (supplements) to prospectuses or
statements of additional information, annual and semi-annual
shareholder reports and proxy statements.
B. Compliance
1. Regulatory Compliance
a. periodically monitor compliance with 1940 Act
requirements, including:
1) Asset diversification tests;
2) Total return and yield calculations;
3) Code of ethics
4) Compliance with fidelity bond coverage
requirements of Rule 17g-1 under the 1940 Act;
and
5) Compliance with the NASD sales charge rule,
including the calculation and monitoring of the
sales charge cap and remaining amount for
asset-based sales charges.
b. Periodically monitor and report at Fund's quarterly
board meeting or more frequently as required,
compliance with the policies investment limitations
and reinvestment restrictions of each Fund as set
forth in its prospectus and statement of additional
information
2
<PAGE> 3
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance or notice
filings relating to the sales, qualification or
registration of the securities of each Fund so as to
enable each Fund to make a continuous offering of its
shares in the fifty states, Puerto Rico, U.S. Virgin
Islands, and Guam ("Blue Sky Jurisdictions").
b. Monitor sales and qualification status and make
appropriate renewal filings in each Blue Sky
Jurisdiction.
c. File prospectuses, statements of additional
information or proxy statements for the Trust in Blue
Sky Jurisdictions as requested by the Trust or such
jurisdictions.
3. SEC Registration and Reporting
a. Assist in the preparation and filing of post-effective
amendments to the Trust's Registration Statement on
Form N-1A to reflect the addition or deletion of
Funds, general amendments, or annual updates including
the preparation of Financial Data Schedules; and
prepare and file supplements ("stickers") to any
prospectus or statement of additional information for
a Fund;
b. Prepare and file annual and semi-annual reports to
shareholders as required under the 1940 Act, along
with annual and semiannual reports on Form N-SAR
(which shall be series and class-specific, as
appropriate);
c. Assist in the preparation and filing of proxy
statements, as requested by the Trust (matters to be
voted on may be class-specific), prepare minutes of
shareholder meetings, and record ballot results and
interface with proxy solicitation companies as
required;
d. Prepare and file documents required to report and
calculate Federal securities registration fees (such
as notices on Form 24F-2);
e. File fidelity bond and any joint insurance agreements
as required by Rule 17g-1 under the 1940 Act; and
f. Provide for the EDGAR-ization or other appropriate
preparation of all documents described above which
must be filed electronically with the SEC.
3
<PAGE> 4
4. IRS Compliance
a. Periodically monitor the Trust's status as a regulated
investment company under Subchapter M of the Internal
Revenue Code, as amended, through review of the
following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Monitor short short testing as required
c. Calculate required distributions as required
(including excise tax distributions)
C. Financial Reporting
1. Prepare monthly expense reports (by series and class where
appropriate) including expense figures and accruals,
monitoring of expense caps or reimbursements and calculation
of advisory fees and 12b-1 accruals or payments; and
calculate expense ratios for quarterly, semiannual or annual
periods.
2. Prepare unaudited financial statements (by series and class
where appropriate) for use in shareholder reports or
prospectuses and statements of additional information.
3. Prepare other monthly operational reports as required
including:
a. Sales figures (including shares sold, redeemed and
reinvested, changes in share price in net sales and
numbers of shareholders);
b. Performance information (including total return or
yield for the month, quarter, year-to-date, fiscal
year or average annual one-, five- or ten-year
periods); and
c. Portfolio information (including turnover, top ten
holdings, book gains/losses per share; net income/book
income per share; basis).
4. Provide financial data required by Fund prospectus and
statements of additional information
5. Prepare financial reports for shareholders, the board, the
SEC, and independent auditors
4
<PAGE> 5
6. Supervise the Trust's Custodian and Fund Accountants in the
maintenance of each Fund's general ledger and in the
preparation of each Fund's financial statements including
oversight of expense accruals and payments, of the
determination of net asset value of each Fund and of the
Fund's shares, and of the declaration and payment of
dividends and other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including forms 1120/8613 with any
necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
III. Compensation
The Trust agrees to pay FTC for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth in
the attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Trust and FTC.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
IV. Additional Funds
In the event that the Trust establishes one or more Funds with respect
to which it desires to have FTC render fund administration services,
under the terms hereof, it shall so notify FTC in writing, and if FTC
agrees in writing to provide such services, such Funds will be subject
to the terms and conditions of this Agreement, and shall be maintained
and accounted for by FTC on a discrete basis. The Funds currently
covered by this Agreement are: The Olstein Financial Alert Fund
V. Performance of Service; Limitation of Liability
A. FTC shall exercise reasonable care in the performance of
its duties under this Agreement. FTC shall not be liable
for any loss suffered by the Fund in connection with
matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of
communication or
5
<PAGE> 6
power supplies beyond FTC's control, except a loss
resulting from FTC's refusal or failure to comply with the
terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its
duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Fund shall indemnify and
hold harmless FTC from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FTC may
sustain or incur or which may be asserted against FTC by
any person arising out of any action taken or omitted to be
taken by it in performing the services hereunder (i) in
accordance with the foregoing standards, or (ii) in
reliance upon any written or oral instruction provided to
FTC by any duly authorized officer of the Trust, such duly
authorized officer to be included in a list of authorized
officers furnished to FTC and as amended from time to time
in writing by resolution of the Board of Trustees of the
Trust.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FTC
shall take all reasonable steps to minimize service
interruptions for any period that such interruption
continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and
correct any errors resulting from such a breakdown at the
expense of FTC. FTC agrees that it shall, at all times,
have contingency plans, that are comparable to those
employed within the financial services industry, with
appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to
the extent appropriate equipment is available.
Representatives of the Trust shall be entitled to inspect
FTC's premises and operating capabilities at any time
during regular business hours of FTC, upon reasonable
notice to FTC.
Regardless of the above, FTC reserves the right to
reprocess and correct administrative errors at its own
expense.
B. In order that the indemnification provisions contained in
this section shall apply, it is understood that if in any
case the Trust may be asked to indemnify or hold FTC
harmless, the Trust shall be fully and promptly advised of
all pertinent facts concerning the situation in question,
and it is further understood that FTC will use all
reasonable care to notify the Trust promptly concerning any
situation which presents or appears likely to present the
probability of such a claim for indemnification against the
Trust. The Trust shall have the option to defend FTC
against any claim which may be the subject of this
indemnification. In the event that the Trust so elects, it
will so notify FTC and thereupon the Trust shall take over
complete defense of the claim, and FTC shall in such
situation initiate no further legal or other expenses for
which it shall seek indemnification under this section. FTC
shall in no case confess any claim or make any compromise
in any case in which the Trust will be asked to indemnify
FTC except with the Trust's prior written consent.
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<PAGE> 7
C. FTC shall indemnify and hold the Trust harmless from and
against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law)
of any and every nature (including reasonable attorneys'
fees) which may be asserted against the Trust by any person
arising out of any action taken or omitted to be taken by
FTC as a result of FTC's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence, or
willful misconduct.
VI. Confidentiality
FTC shall handle, in confidence, all information relating to the
Trust's business which is received by FTC during the course of
rendering any service hereunder.
VII. Data Necessary to Perform Service
The Trust or its agent, which may be FTC, shall furnish to FTC the data
necessary to perform the services described herein at times and in such
form as mutually agreed upon.
VIII. Terms of Agreement
This Agreement shall become effective on February 2, 1998 and, unless
sooner terminated as provided herein, shall continue automatically in
effect for successive annual periods, provided that the continuance of
the Agreement is approved by a majority of the Trustees of the Trust.
The Agreement may also be terminated by either party upon giving ninety
(90) days prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties and will terminate
automatically on its assignment unless the parties hereto consent in
writing.
IX. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any
of FTC's duties or responsibilities hereunder is designated by the
Trust by written notice to FTC, FTC will promptly, upon such
termination and at the expense of the Trust, transfer to such successor
all relevant books, records, correspondence, and other data established
or maintained by FTC under this Agreement in a form reasonably
acceptable to the Trust (if such form differs from the form in which
FTC has maintained, the Trust shall pay any expenses associated with
transferring the data to such form), and will cooperate in the transfer
of such duties and responsibilities, including provision for assistance
from FTC's personnel in the establishment of books, records, and other
data by such successor.
7
<PAGE> 8
X. Choice of Law
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
XI. Notices
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FTC shall be sent to:
Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Trust shall be sent to:
The Olstein Funds
Four Manhattanville Road
Purchase, NY 10577
XII. Records
FTC shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Trust and as required by the rules
and regulations of appropriate government authorities, in particular,
Section 31 of the 1940 Act and the rules thereunder. FTC agrees that
all such records prepared or maintained by FTC relating to the services
to be performed by FTC hereunder are the property of the Trust and will
be preserved, maintained, and made available with such section and
rules of the 1940 Act and will be promptly surrendered to the Trust on
and in accordance with its request.
The Olstein Funds Firstar Trust Company
Sign: /s/ Robert A. Olstein Sign: /s/ Joe Redwine
------------------------------ -------------------------------
Print: Robert A. Olstein Print: Joe Redwine
----------------------------- ------------------------------
Title: Chairman and President Title:
----------------------------- ------------------------------
Date: March 2, 1998 Date: March 2, 1998
------------------------------ -------------------------------
Attest: Michael Luper Attest: Mary Klabunde
---------------------------- -----------------------------
8
<PAGE> 9
Mutual Fund Services
================================================================================
FUND ADMINISTRATION AND COMPLIANCE
ANNUAL FEE SCHEDULE
o Minimum annual fee per Fund: $30,000
o 6 basis points (.0006) on the first $200,000,000 of average daily net
assets
o 5 basis points (.0005) on the next $300,000,000 of average daily net assets
o 3 basis points (.0003) on the balance of average daily net assets in excess
of $500,000,000
o Out-of-Pocket expenses, including, but not limited to:
o Postage
o Stationary
o Programming
o Proxies
o Retention of records
o Special reports
o Federal and state regulatory filing fees
o Certain insurance premiums
o All other out-of-pocket expenses
o Expenses from Board of Trustees meetings
o Fees are billed monthly
================================================================================
12.8.0 FIRSTAR
9
<PAGE> 1
EXHIBIT 99.B9b
FUND ACCOUNTING SERVICING AGREEMENT
This Agreement between The Olstein Funds, a Delaware business trust (hereinafter
called the "Trust," on behalf of its separate series of shares ("Series") or
classes of such Series ("Classes"), all as described in part 11 of this
Agreement (as such part may be amended from time to time), and Firstar Trust
Company, a Wisconsin corporation (hereinafter called "FTC"), is entered into on
this 2nd day of February, 1998.
WHEREAS, the Trust, is an open-ended management investment company
registered under the Investment Company Act of 1940 (as amended, the "1940
Act"); and
WHEREAS, FTC is in the business of providing, among other things, mutual
fund accounting services to investment companies.
NOW, THEREFORE, the Trust and FTC do mutually promise and agree as
follows:
1. SERVICES. FTC agrees to provide the following mutual fund
accounting services to the Trust on a per Series or per Class basis as
appropriate:
A. Portfolio Accounting Services:
(1) Maintain portfolio trading records (purchase and sale
journals for each Series) on a trade date +1 basis using security
trade information communicated from the Series' investment
manager on a timely basis.
(2) Monitor corporate action to identify and record
interest and dividend income on portfolio securities and maintain
accrual balances as of each valuation date and calculate gross
earnings on investments for the accounting period.
(3) Determine gain/loss on portfolio security sales and
identify them as to short-short, short- or long-term status;
account for periodic distributions of gains or losses to
shareholders and maintain undistributed gain or loss balances as
of each valuation date.
(4) Maintain appropriate records of brokerage activity for
transactions in portfolio securities to enable FTC to provide
monthly brokerage reports showing brokers and commission amounts.
(5) Maintain a daily listing of portfolio holdings by
Series showing cost, market value, and the percentage of
portfolio comprised of each security.
(6) Reconcile accounting asset listings against
custodian's asset listings on at least a monthly basis and report
any securities balance discrepancies promptly to the Trust and
Custodian.
1
<PAGE> 2
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Trust as to methodology, rate or
dollar amount.
(2) Upon receipt of written authorization from the Trust,
make and record payments for Trust expenses.
(3) Account for Trust and Series expenditures and maintain
expense accrual balances at the level of accounting detail, as
agreed upon by FTC and the Trust.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Calculate and maintain daily records of the net asset
value (and offering price if appropriate) of each Series (or
class of such Series if appropriate), at such times (each a
"valuation date") as directed and authorized by the Trust through
FTC's questionnaire and in accordance with: (i) relevant
regulatory requirements; (ii) the Trust's Declaration of Trust
and By-Laws; (iii) the Trust's registration statement or Form
N-1A; and (iv) any procedures approved by the Board of Trustees
of the Trust and supplied to FTC in writing.
(2) In connection with the calculation of relevant net
asset values, FTC shall obtain prices for portfolio securities
from pricing services approved by the Trust, and will apply those
prices to the portfolio securities. For those securities where
market quotations are not readily available, the Board of
Trustees shall approve, in good faith, the method for determining
the fair value for such securities. If the Trust desires to
provide a price which varies from the pricing source, the Trust
shall promptly notify and supply FTC with the valuation of any
such security on each valuation date. All pricing changes made by
the Trust will be in writing and must specifically identify the
securities to be changed by CUSIP, name of security, new price or
rate to be applied, and, if applicable, the time period for which
the new price(s) is/are effective.
(3) On trade date +1, account for and record purchases,
sales, exchanges, transfers, dividend reinvestments, and other
transactions in shares of the Trust, its Series as reported by
the transfer agent on a timely basis.
(4) Apply equalization accounting as directed by the
Trust.
(5) Determine net investment income (earnings) for each
Series of the Trust as of each valuation date. Account for
periodic distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation
date.
2
<PAGE> 3
(6) Maintain a general ledger for the Trust and each of
its Series in the form as agreed upon.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to the Trust and its investment
advisers as agreed upon from time to time.
D. Tax Accounting Services:
(1) Maintain accounting records for each Series'
investment portfolio to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for each Series' investment
portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax lot relief method designated by the Trust.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
(5) Maintain schedules of dividends paid and payable.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the Trust's accounting
records available to the Trust and its investment manager, the
Securities and Exchange Commission, and the outside auditors.
(2) Maintain accounting records according to the 1940 Act
and regulations provided thereunder.
3. CHANGES IN ACCOUNTING PROCEDURES. Any resolution passed by the
Board of Trustees of the Trust that affects accounting practices and procedures
under this agreement shall be effective upon written receipt and acceptance by
the FTC.
4. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC. FTC reserves the
right to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Trust under
this Agreement.
5. COMPENSATION. FTC shall be compensated for providing the services
set forth in this Agreement in accordance with the Fee Schedule attached hereto
as Exhibit A and as mutually agreed upon and amended from time to time.
3
<PAGE> 4
6. PERFORMANCE OF SERVICE.
A. FTC shall exercise reasonable care in the performance
of its duties under this Agreement. FTC shall not be liable for
any loss suffered by the Fund in connection with matters to which
this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power
supplies beyond FTC's control, except a loss resulting from FTC's
refusal or failure to comply with the terms of this Agreement or
from bad faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless FTC from and against any and
all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FTC may sustain or
incur or which may be asserted against FTC by any person arising
out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the
foregoing standards, or (ii) in reliance upon any written or oral
instruction provided to FTC by any duly authorized officer of the
Fund, such duly authorized officer to be included in a list of
authorized officers furnished to FTC and as amended from time to
time in writing by resolution of the Board of Directors of the
Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FTC shall
take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond FTC's control.
FTC will make every reasonable effort to restore any lost or
damaged data and correct any errors resulting from such a
breakdown at the expense of FTC. FTC agrees that it shall, at all
times, have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Fund shall be
entitled to inspect FTC's premises and operating capabilities at
any time during regular business hours of FTC, upon reasonable
notice to FTC.
Regardless of the above, FTC reserves the right to
reprocess and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained
in this section shall apply, it is understood that if in any case
the Trust may be asked to indemnify or hold FTC harmless, the
Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that FTC will use all reasonable care to notify the
Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification against the Trust. The Trust shall have the
option to defend FTC against any claim which may be the subject
of this indemnification. In the event that the Fund so elects, it
will so notify FTC and thereupon the Trust shall take over
complete defense of the claim, and FTC shall in such situation
initiate no further legal or other expenses for which it shall
seek
4
<PAGE> 5
indemnification under this section. FTC shall in no case
confess any claim or make any compromise in any case in which the
Trust will be asked to indemnify FTC except with the Trust's
prior written consent.
C. FTC shall indemnify and hold the Trust harmless from
and against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of any
and every nature (including reasonable attorneys' fees) which may
be asserted against the Trust by any person arising out of any
action taken or omitted to be taken by FTC as a result of FTC's
refusal or failure to comply with the terms of this Agreement,
its bad faith, negligence, or willful misconduct.
7. RECORDS. FTC shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Trust and as required by the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act and the rules thereunder. FTC agrees that all such records prepared
or maintained by FTC relating to the services to be performed by FTC hereunder
are the property of the Trust and will be preserved, maintained, and made
available with such section and rules of the 1940 Act and will be promptly
surrendered to the Trust on and in accordance with its request.
8. CONFIDENTIALITY. FTC shall handle in confidence all information
relating to the Trust's or its investment manager's business, which is received
by FTC during the course of rendering any service hereunder.
9. DATA NECESSARY TO PERFORM SERVICES. The Trust or its agent, which
may be FTC, shall furnish to FTC the data necessary to perform the services
described herein at times and in such form as mutually agreed upon.
10. NOTIFICATION OF ERROR. The Trust will notify FTC of any
balancing or control error caused by FTC within three (3) business days after
receipt of any reports rendered by FTC to the Trust, or within three (3)
business days after discovery of any error or omission not covered in the
balancing or control procedure, or within three (3) business days of receiving
notice from any shareholder.
11. ADDITIONAL SERIES. In the event that the Trust establishes one
or more Series or Classes of shares with respect to which it desires to have FTC
render accounting services, under the terms hereof, it shall so notify FTC in
writing, and if FTC agrees in writing to provide such services, such series will
be subject to the terms and conditions of this Agreement, and shall be
maintained and accounted for by FTC on a discrete basis. The series and classes
currently covered by this Agreement are: "The Olstein Financial Alert Fund."
12. TERM OF AGREEMENT. This Agreement shall become effective on
February 2, 1998 and, unless sooner terminated as provided herein, shall
continue automatically in effect for successive annual periods, provided that
the continuance of the Agreement is approved by a majority of the Trustees of
the Trust. The Agreement may also be terminated by either party upon giving
ninety (90) days prior written notice to the other party or such shorter period
as is mutually agreed upon by the
5
<PAGE> 6
parties and will terminate automatically upon its assignment unless the parties
offer consent in writing. However, this Agreement may be replaced or modified by
a subsequent agreement between the parties.
13. DUTIES IN THE EVENT OF TERMINATION. In the event that in
connection with termination a Successor to any of FTC's duties or
responsibilities hereunder is designated by Trust by written notice to FTC, FTC
will promptly, upon such termination and at the expense of Trust, transfer to
such Successor all relevant books, records, correspondence and other data
established or maintained by FTC under this Agreement in a form reasonably
acceptable to Trust (if such form differs from the form in which FTC has
maintained the same, Trust shall pay any expenses associated with transferring
the same to such form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FTC's personnel in the
establishment of books, records and other data by such successor.
14. NOTICES. Notices of any kind to be given by either party to the
other party shall be in writing and shall be duly given if mailed or delivered
as follows: Notice to FTC shall be sent to:
Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Trust shall be sent to:
The Olstein Funds
4 Manhattanville Road
Purchase, NY 10577
14. CHOICE OF LAW. This Agreement shall be construed in accordance
with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
The Olstein Funds Firstar Trust Company
Sign: /s/ Robert A. Olstein Sign: /s/ Joe Redwine
------------------------------ -------------------------------
Print: Robert A. Olstein Print: Joe Redwine
----------------------------- ------------------------------
Title: Chairman and President Title:
----------------------------- ------------------------------
Date: March 2, 1998 Date: March 2, 1998
------------------------------ -------------------------------
Attest: Michael Luper Attest: Mary Klabunde
---------------------------- -----------------------------
6
<PAGE> 7
Mutual Fund Services
================================================================================
FUND VALUATION AND ACCOUNTING
DOMESTIC PORTFOLIOS
ANNUAL FEE SCHEDULE
Fixed Income Funds
o Annual fee per Series based on market value of assets::
o $25,000 for the first $40,000,000
o 2/100 of 1% (2 basis points) on the next $200,000,000
o 1/100 of 1% (1 basis point) on the balance
o Out-of-pocket expenses, including daily pricing service
Equity Balanced Funds
o Annual fee per Series based on market value of assets:
o $23,500 for the first $40,000,000
o 1.5/100 of 1% (1.5 basis points) on the next $200,000,000
o 1/100 of 1% (1.0 basis point) on the balance
o Out-of-pocket expenses, including daily pricing service
Money Market Funds
o Annual fee per Series based on market value of assets:
o $25,000 for the first $40,000,000
o 1/100 of 1% (1 basis point) on the next $200,000,000
o 5/100 of 1% (1/2 basis point) on the balance
o Out-of-pocket expenses, including daily pricing service
All fees and out-of-pocket expenses are billed monthly.
================================================================================
12.8.0 FIRSTAR
7
<PAGE> 8
Mutual Fund Services
================================================================================
FUND VALUATION AND ACCOUNTING
ASSET PRICING COST
<TABLE>
<CAPTION>
ASSET TYPE CHARGE PER ITEM PER VALUATION
- ---------- -----------------------------
(DAILY, WEEKLY, ETC.)
---------------------
<S> <C>
Domestic and Canadian Equities $0.15
Options $0.15
Corporate/Government/Agency Bonds $0.50
CMOs $0.80
International Equities and Bonds $0.50
Municipal Bonds $0.80
Money Market Instruments $0.80
</TABLE>
Pricing costs are billed monthly.
================================================================================
12.8.0 FIRSTAR
8
<PAGE> 1
EXHIBIT 99.B9c
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into on this 2nd day of March,
1998, by and between The Olstein Funds, a business trust organized under the
laws of the State of Delaware (hereinafter referred to as the "Trust") on behalf
of any of its separate series as described in Exhibit A to this Agreement (each
such series is hereafter referred to as a "Fund" and collectively as the
"Funds") and Firstar Trust Company, a corporation organized under the laws of
the State of Wisconsin (hereinafter referred to as the "Agent").
WHEREAS, the Trust is an open-ended management investment company which
is registered under the Investment Company Act of 1940 (as amended, the "1940
Act"); and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
NOW, THEREFORE, the Trust and the Agent do mutually promise and agree as
follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive and process orders for the purchase of shares of the
Funds received in good order and issue and credit shareholder
accounts with the appropriate number of certified or uncertified
shares. Receive payments by check, Fed wire, or through Automated
Clearing House ("ACH") processing. Prepare and process daily
deposit or delivery of payment and proper supporting
documentation to the Trust's custodian.
B. Establish shareholder accounts with appropriate demographic data,
information regarding participation in plans (i.e., systematic
withdrawal, automatic investment, dividend reinvestment, etc.)
and information regarding tax I.D. certification or non-resident
alien records, including backup withholding. Make changes to
shareholder accounts to reflect changes in demographic data or
participation in plans.
C. Maintain valid and appropriate participation with the National
Securities Clearing Corporation ("NSCC") and provide access to
NSCC's Fund/Serv System for the Funds as agreed from time-to-time
with the Trust.
<PAGE> 2
D. Produce shareholder lists and ad hoc reports for proxy
solicitations or as requested by Trust management, including
lists of linked accounts within Funds or across multiple funds to
facilitate combined statements, or lists of accounts linked by
social security number, last name and/or address to facilitate
household mailings.
E. Create and produce mailing labels for regular, periodic or
special mailings to shareholders or households.
F. Receive and process redemption requests received in good order by
mail, telephone or other proper method, including automated
processing of systematic withdrawal transactions on a monthly
basis. Deliver appropriate redemption documentation to the
Trust's custodian.
G. Administer distribution of redemption proceeds, in coordination
with Trust's custodian, by check, Fed Wire or ACH processing.
H. Process transfers of shares in accordance with the shareowner's
instructions;
I. Process exchanges between Funds within the same family of Funds
upon request by mail, telephone, or other proper method;
J. Issue and/or cancel certificates as instructed; replace lost,
stolen, or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
K. Prepare and transmit payments for dividends and distributions
declared by the Trust by providing automated processing of
dividend and capital gains payments with daily, monthly,
quarterly, or annual distributions. Payment options will include
reinvestment, directed payment to another Fund, or cash via mail,
Fed Wire or ACH.
L. Record the issuance of shares of the Trust and maintain, pursuant
to Securities Exchange Act of 1934 Rule 17ad-10(e), a record of
the total number of shares of the Trust which are authorized,
issued, and outstanding;
M. Prepare shareholder meeting lists and, if applicable, mail,
receive, and tabulate proxies;
N. Provide toll-free telephone lines and sufficient personnel to
answer shareholder calls. Telephone representatives should
provide routine account information; respond to requests for
information regarding transaction details including direct and
wire purchases, redemptions, exchanges, transfers, systematic
withdrawals, or purchases, Fund SERV, or wire order trades;
assist in problem solving; and process telephone transactions.
O. Provide silent monitoring of telephone representatives to ensure
quality of customer service and record and maintain tape
recordings of all shareholder calls for a six-month period.
P. Customer inquiries or problems communicated by mail, telephone,
or other proper method should be researched by Agent personnel in
a reasonably prompt manner and any difficulties should be
reported to the Trust. Such inquiries/problems may include
shareholder account information, historical account information,
stop payments on checks, transaction details or lost
certificates.
2
<PAGE> 3
Q. Prepare and mail laser printed confirmations and/or account
statements for all purchases, redemptions and other confirmable
transactions on a monthly basis, or as requested by the Trust.
Shareholder account statements should show beginning and ending
share price and account value and daily activity including
dividends and distributions, with share price and transaction
amounts.
R. Mail prospectuses (with statements or confirmations if
requested), prospectus stickers or supplements, statements of
additional information and shareholder reports to current
shareholders, as requested by the Trust.
S. Provide appropriate transfer agency services to facilitate
Fund-sponsored IRA and SEP-IRA plans using Firstar Trust Company
as custodian, as well as Fund-sponsored qualified retirement
plans (such as 401(k) and 403(b) plans).
T. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
U. Provide a Blue Sky System which will enable the Trust to monitor
the total number of Fund shares sold in each state. In addition,
the Trust shall identify to the Agent in writing those
transactions and assets to be treated as exempt from the Blue Sky
reporting to the Trust for each state. The responsibility of the
Agent for the Trust's Blue Sky state registration status is
solely limited to the initial compliance by the Trust and the
reporting of such transactions to the Trust.
2. COMPENSATION
The Trust agrees to pay the Agent for performance of the duties listed in
this Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Trust and the Agent.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
3. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Trust that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities Exchange
Act of 1934 as amended.
3
<PAGE> 4
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
G. It will comply with all applicable requirements of the Securities
Act of 1933 and the Securities Exchange Act of 1934, as amended,
the Investment Company Act of 1940, as amended, and any laws,
rules, and regulations of governmental authorities having
jurisdiction.
4. REPRESENTATIONS OF THE TRUST
The Trust represents and warrants to the Agent that:
A. The Trust is an open-ended diversified investment company
registered under the 1940 Act;
B. The Trust is a business Trust organized, existing, and in good
standing under the laws of the State of Delaware;
C. The Trust is empowered under applicable laws and by its Agreement
and Declaration of Trust and bylaws to enter into and perform this
Agreement;
D. All necessary proceedings required by the Agreement and
Declaration of Trust have been taken to authorize it to enter into
and perform this Agreement;
E. The Trust will comply with all applicable requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934, as
amended, the 1940 Act, and any laws, rules, and regulations of
governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to
be made, with respect to all shares of the Trust being offered for
sale.
5. COVENANTS OF THE TRUST AND AGENT
The Trust shall furnish the Agent a certified copy of the resolution of
the Board of Trustees of the Trust authorizing the appointment of the Agent and
the execution of this Agreement. The Trust shall provide to the Agent a copy of
the Agreement and Declaration of Trust , bylaws of the T rust and all
amendments.
4
<PAGE> 5
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable and as required by
the 1940 Act and related rules. To the extent required by Section 31 of the 1940
Act and the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Trust and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Trust on and in accordance with its request.
6. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent shall exercise reasonable care in the performance of its
duties under this Agreement. The Agent shall not be liable for any loss suffered
by the Fund in connection with matters to which this Agreement relates,
including losses resulting from mechanical breakdowns or the failure of
communication or power supplies beyond the Agent's control, except a loss
resulting from the Agent's refusal or failure to comply with the terms of this
Agreement or from bad faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Trust shall indemnify and hold harmless the
Agent from and against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of any and every
nature (including reasonable attorneys' fees) which the Agent may sustain or
incur or which may be asserted against the Agent by any person arising out of
any action taken or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing standards, or (ii) in reliance
upon any written or oral instruction provided to the Agent by any duly
authorized officer of the Trust, such duly authorized officer to be included in
a list of authorized officers furnished to the Agent and as amended from time to
time in writing by resolution of the Board of Trustees of the Trust.
Further, the Trust will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action,
or suit as a result of the negligence of the Trust or the principal underwriter
(unless contributed to by the Agent's breach of this Agreement or other
Agreements between the Trust and the Agent, or the Agent's own negligence or bad
faith); or as a result of the Agent acting upon telephone instructions relating
to the exchange or redemption of shares received by the Agent and reasonably
believed by the Agent under a standard of care customarily used in the industry
to have originated from the record owner of the subject shares; or as a result
of acting in reliance upon any genuine instrument or stock certificate signed,
countersigned, or executed by any person or persons authorized to sign,
countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such a
breakdown at the expense of the Agent. The Agent agrees that it shall, at all
times, have reasonable contingency plans that are comparable to those employed
by the financial services industry, with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Trust shall be
entitled to inspect the Agent's premises and operating capabilities at any time
during regular business hours of the Agent, upon reasonable notice to the Agent.
5
<PAGE> 6
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the Trust may be asked to
indemnify or hold the Agent harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use all reasonable care to notify the
Trust promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Trust.
The Trust shall have the option to defend the Agent against any claim which may
be the subject of this indemnification. In the event that the Trust so elects,
it will so notify the Agent and thereupon the Trust shall take over complete
defense of the claim, and the Agent shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
section. The Agent shall in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify the Agent except with the
Trust's prior written consent.
The Agent shall indemnify and hold the Trust harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which may be asserted against the Trust by any person arising
out of any action taken or omitted to be taken by the Agent as a result of the
Agent's refusal or failure to comply with the terms of this Agreement, its bad
faith, negligence, or willful misconduct.
7. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where the Agent may be exposed
to civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
8. RECORDS
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Trust and as required by the rules and regulations of
appropriate government authorities, in particular, Section 31 of the 1940 Act
and the rules thereunder. The Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Trust and will be preserved, maintained, and
made available with such section and rules of the 1940 Act and will be promptly
surrendered to the Trust on and in accordance with its request.
9. WISCONSIN LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of Wisconsin.
6
<PAGE> 7
10. TERM, AMENDMENT, TERMINATION, ASSIGNMENT, AND NOTICE
A. This Agreement shall be effective on the date above first written
and, unless sooner terminated as provided herein, shall continue
automatically to reflect for successive annual periods, provided
that the continuance of the Agreement is approved by a majority of
the Trustees of the Trust.
B. This Agreement may be amended by the mutual written consent of the
parties.
C. This Agreement may be terminated upon ninety (90) day's written
notice given by one party to the other.
D. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of
the other party. E. Any notice required to be given by the parties
to each other under the terms of this Agreement shall be in
writing, addressed and delivered, or mailed to the principal place
of business of the other party. If to the agent, such notice
should to be sent to:
Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
If to the Trust, such notice should be sent to:
The Olstein Funds
4 Manhattanville Road
Purchase, NY 10577
F. In the event that the Trust gives to the Agent its written
intention to terminate and appoint a successor transfer agent, the
Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the
Agent under this Agreement.
G. Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be paid by the Trust.
The Olstein Funds Firstar Trust Company
Sign: /s/ Robert A. Olstein Sign: /s/ Joe Redwine
------------------------------ -------------------------------
Print: Robert A. Olstein Print: Joe Redwine
------------------------------
Title: Chairman & President Title:
------------------------------
Date: March 2, 1998 Date: March 2, 1998
------------------------------ -------------------------------
Attest: Michael Luper Attest: Mary Klabunde
---------------------------- -----------------------------
7
<PAGE> 8
================================================================================
FIRSTAR TRUST COMPANY
MUTUAL FUND SERVICES
FEE SCHEDULES
FOR
THE OLSTEIN FUNDS
================================================================================
12.1.0 FIRSTAR
8
<PAGE> 9
Mutual Fund Services
================================================================================
SHAREHOLDER ACCOUNTING SERVICES
LOAD FUNDS
ANNUAL FEE SCHEDULE
o $16.00 per shareholder account
o Minimum annual fee of $24,000 for the first Fund and $10,000 for
each additional Fund.
o Plus out-of-pocket expenses, including but not limited to:
o Telephone - toll-free lines
o Postage
o Programming
o Stationery/envelopes
o Mailing
o Insurance
o Proxies
o Retention of records
o Microfilm/fiche of records
o Special reports
o All other out-of-pocket expenses
o ACH fees
o Fees are billed monthly
================================================================================
12.2.0 FIRSTAR
9
<PAGE> 10
Mutual Fund Services
================================================================================
SHAREHOLDER FEES
(CHARGED TO INVESTORS)
<TABLE>
<CAPTION>
Defined Contribution
403(b)(7), 401(k)
IRA ACCOUNTS PLAN ACCOUNTS
------------ -------------
<S> <C> <C>
I. Qualified Plan Fees
Annual maintenance fee per account $ 12.50 $ 12.50
Transfer to successor trustee 15.00 15.00
Distribution to a participant (exclusive
of systematic withdrawal plans) 15.00 15.00
Refund of excess contribution 15.00 15.00
</TABLE>
<TABLE>
<CAPTION>
II. Additional Shareholder Fees AMOUNT
------
<S> <C>
Any outgoing wire $10.00/wire
(No charge for incoming wires)
Telephone exchange 5.00/telephone exchange
Return check fee 20.00/return check
Stop payment fee (liquidation, dividend draft check 20.00/stop payment
Research fee 5.00/research item
(For requested items of the second calendar
year [or previous] to the request)
</TABLE>
These fees are subject to change upon notification by
Firstar Trust Company to the mutual fund client
================================================================================
12.4.0 FIRSTAR
10
<PAGE> 11
Mutual Fund Services
================================================================================
SHAREHOLDER ACCOUNTING SERVICES
AUTOMATIC INVESTMENT PLAN PROCESSING
ACH SERVICE
o Automatic Investment Plan
o Telephone Purchase, Liquidation
o EFT Payments of Dividends, Capital Gains, SWP's
o $125.00 per month per Fund group
o $.50 per account set-up and/or change
o $0.50 per item for AIP purchases
o $0.35 per item for EFT payments, purchases
o $3.50 per correction, reversal, or return item
o Fees are billed monthly
================================================================================
12.6.0 FIRSTAR
11
<PAGE> 1
Law Offices
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8074
March 2, 1998
The Olstein Funds
4 Manhattanville Road
Purchase, New York 10577
Re: The Olstein Funds
Gentlemen:
We have examined the Declaration of Trust of The Olstein Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware on
August 31, 1995, the By-Laws of the Trust, the resolutions adopted by the
Trust's Board of Trustees organizing the business of the Trust, all as amended
to date, and the various pertinent proceedings we deem material. We have also
examined the Notification of Registration and the Registration Statements filed
under the Investment Company Act of 1940 (the "Investment Company Act") and the
Securities Act of 1933 (the "Securities Act"), all as amended to date, as well
as other items we deem material to this opinion.
The Trust is authorized by its Declaration of Trust to issue an
unlimited number of shares of beneficial interest with a par value of $0.001.
The Declaration of Trust designates, or authorizes the Trustees to designate,
one or more series or classes of shares of the Trust, and to allocate shares of
beneficial interest to each such series or class. The Declaration of Trust also
empowers the Board to designate any additional series or classes and allocate
shares to such series or classes.
<PAGE> 2
The Trust has filed with the U.S. Securities and Exchange Commission
(the "Commission"), a Registration Statement under the Securities Act, which
Registration Statement is deemed to register an indefinite number of shares of
the Trust pursuant to the provisions of Rule 24f-2 under the Investment Company
Act. You have further advised us that the Trust has filed, and each year
hereafter, will timely file a Notice pursuant to Rule 24f-2 perfecting the
registration of the shares sold by the Trust during each fiscal year during
which such registration of an indefinite number of shares remains in effect.
You have also informed us that the shares of the Trust have been and
will continue to be sold in accordance with the Trust's usual method of
distributing its registered shares, under which prospectuses are made available
for delivery to offerees and purchasers of such shares in accordance with
Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long as the
Trust remains a valid and subsisting trust under the laws of the State of
Delaware, and the registration of an indefinite number of shares of the Trust
remains effective, the authorized shares of the Trust when issued for the
consideration set by the Board of Trustees pursuant to the Declaration of Trust,
and subject to compliance with Rule 24f-2, will be legally outstanding,
fully-paid, and non-assessable shares, and the holders of such shares will have
all the rights provided for with respect to such holding by the Declaration of
Trust and the laws of the State of Delaware.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement of the Trust, and any amendments thereto, covering the
registration of the shares of the Trust under the Securities Act and the
applications, registration statements or notice filings, and amendments thereto,
filed in accordance with the securities laws of the several states in which
shares of the Trust are offered, and we further consent to reference in the
registration statement of the Trust to the fact that this opinion concerning the
legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY:__Steven M. Felsenstein____________
Steven M. Felsenstein, a partner
<PAGE> 1
EXHIBIT 99.B11
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the caption "Financial
Highlights" in the Prospectus and "Audits and Reports" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in this Post-Effective Amendment No. 5 to the Registration
Statement No. 33-91770 (Form N-1A) of The Olstein Funds of our report dated
September 26, 1997, included in the 1997 Annual Reports to shareholders.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 27, 1998
