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UNITED STATES File No. 33-92540
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-9048
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _______ [ ]
Post Effective Amendment No. 2 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No 4
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Farrell Alpha Strategies
(Exact name of Registrant as Specified in Charter)
780 Third Avenue
38th Floor
New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 319-3944
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Shuichi Yamada, President
Farrell-Wako Global Investment Management, Inc.
780 Third Avenue, 38th Floor
New York, New York 10017
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(Name and Address of Agent for Service)
COPIES TO:
Monte Wetzler, Esq. Carolyn F. Mead, Esq.
Whitman Breed Abbott & Morgan Fund/Plan Services, Inc.
200 Park Avenue 2 West Elm Street
New York, New York 10166 Conshohocken, Pennsylvania 19428
Approximate date of proposed public offering:
It is proposed that this filing become effective: July 29, 1996
[X] immediately upon filing pursuant to Paragraph (b) of Rule 485.
[ ] on (date) , pursuant to Paragraph (b).
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[ ] 60 days after filing pursuant to paragraph (a).
[ ] on (date) pursuant to paragraph (a) of Rule 485.
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[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
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If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
previously files post-effective amendment.
Registrant has previously registered an indefinite number of shares of its
securities under the Securities Act of 1933 pursuant to Rule 24f-2 of the
Investment Company Act of 1940, as amended. Registrant filed a Notice pursuant
to Rule 24f-2 for the fiscal year ended March 31, 1996 on May 30, 1996.
As filed with the U.S. Securities and Exchange TOTAL PAGES: 143
Commission on July 29, 1996 INDEX TO EXHIBITS, PAGE: 49
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FARRELL ALPHA STRATEGIES
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
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<CAPTION>
Form N-1A Item Caption in Prospectus
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Part A INFORMATION REQUIRED IN A PROSPECTUS
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1. Cover Page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense Summary
3. Condensed Financial Information *Financial Highlights
4. General Description of
Registrant Investment Objective and Policies;
Risk Factors; Prospectus Summary;
The Trust and the Fund; Investment
Limitations; Description of
Permitted Investments and Risk
Factors; General Information
5. Management of the Fund Prospectus Summary; Management of
the Fund
5A. Management's Discussion of Fund *Included in Registrant's Annual
Performance Report to Shareholders
6. Capital Stock and Other Prospectus Summary; General
Securities Information; Dividends and Taxes;
Net Asset Value
7. Purchase of Securities Being Prospectus Summary; How to Purchase
Offered Shares; Shareholder Services
8. Redemption or Repurchase Prospectus Summary; How to Redeem
Shares
9. Pending Legal Proceedings *
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page of the Statement of
Additional Information
11. Table of Contents Table of Contents
12. General Information and History *Covered in Part A
13. Investment Objectives and Investment Policies and Techniques;
Policies Investment Restrictions; Portfolio
Transactions
14. Management of the Fund The Trust; Investment Advisory and
Other Services; Trustees and
Officers
15. Control Persons and Principal *Principal Shareholders
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other
Services Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
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Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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(continued)
<TABLE>
<S> <C>
18. Capital Stock and Other Principal Shareholders
Securities
19. Purchase, Redemption and Purchases; Redemptions
Pricing of Securities Being
Offered
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
Part C OTHER INFORMATION
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Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
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* Item is inapplicable at this time or answer is negative.
Page 3
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Effective July 29, 1996, Class A Shares of The Japan Alpha Fund are abolished
and there are no outstanding shareholders. With this Registation Statement the
Trust is deregistering the Class A Shares of The Japan Alpha Fund.
Page 4
<PAGE>
FARRELL ALPHA STRATEGIES PROSPECTUS
780 Third Avenue
38th Floor
New York, New York 10017
July 29, 1996
THE JAPAN ALPHA FUND
Farrell Alpha Strategies (the "Trust") is an open-end diversified investment
company which currently consists of a separate investment fund called The Japan
Alpha Fund (the "Fund"). The Fund is a separate series of the Trust, which is
organized as a Delaware business trust. Farrell-Wako Global Investment
Management, Inc. (the "Advisor") serves as the investment advisor of the Fund
according to its investment objectives. See "Management of the Fund."
The Fund seeks to achieve long-term capital appreciation by investing in equity
securities of Japanese companies. Under normal circumstances, the Fund will
invest at least 80% of its total assets in equity securities of Japanese
companies. See "Investment Objective and Policies."
Shares of the Fund are offered primarily to certain individual and institutional
investors. The initial minimum investment in the Fund is $1,000. Subsequent
investments will be accepted in amounts not less than $100. See "How to Purchase
Shares." Shares of the Fund are offered at net asset value per share without a
sales charge or 12b-1 distribution fee. Redemptions of the Fund's shares are
made at net asset value per share.
The Fund is designed for long-term investors and not as a trading vehicle, and
is not intended to present a complete investment program.
This Prospectus sets forth concisely the information regarding the Fund that an
investor should know before investing in the Fund. Investors should read this
Prospectus and retain it for future reference. Additional information about the
Fund is contained in the Statement of Additional Information dated July 29,
1996, as amended from time to time, which has been filed with the Securities and
Exchange Commission and is available upon request, without charge, by writing to
the Fund at the address above or by calling (800) 471-7174 (or (212) 319-3944
for overseas investors). The Statement of Additional Information is incorporated
by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE U.S.
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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Page
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Prospectus Summary.....................................................
Expense Summary........................................................
Financial Highlights...................................................
Historical Investment Results of the Advisor...........................
The Trust and the Fund.................................................
Investment Objective and Policies......................................
Risk Factors...........................................................
Description of Permitted Investment Practices and Risk Factors.........
Investment Limitations.................................................
Management of the Fund.................................................
How to Purchase Shares.................................................
How to Redeem Shares...................................................
Shareholder Services...................................................
Net Asset Value........................................................
Dividends and Taxes....................................................
Performance Information................................................
General Information....................................................
</TABLE>
<TABLE>
<CAPTION>
Underwriter: Advisor:
<S> <C>
Fund/Plan Broker Services, Inc. Farrell-Wako Global Investment Management, Inc.
2 W. Elm Street 780 Third Avenue, 38th Floor
Conshohocken, Pennsylvania 19428 New York, NewYork 10017
(800) 262-7751 (212) 319-944
(610) 834-3694
</TABLE>
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE SUCH
AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
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PROSPECTUS SUMMARY
===============================================================================
What is the Investment Objective? The Japan Alpha Fund (the "Fund") seeks to
achieve long-term capital appreciation. There can be no assurance that the Fund
will be able to achieve its investment objective. See "Investment Objective and
Policies."
What are the Permitted Investments? The Fund intends to invest substantially all
its assets in equity securities of Japanese companies. The Fund will seek to
achieve its investment objective through the Advisor's use of the Farrell Alpha
Investment Strategy, which is based upon the philosophy of combining sound
fundamental analysis with disciplined stock selection and systematic portfolio
construction. See "Investment Objective and Policies" and "Description of
Permitted Investments and Risk Factors."
What are the Risks Involved with an Investment in the Fund? The investment
policies of the Fund have certain risks and considerations of which investors
should be aware. The Fund invests in securities that fluctuate in value, and
investors should expect the Fund's net asset value per share to fluctuate.
Investing in the equity securities of Japanese companies involves special risks
and considerations not typically associated with investing in the equity
securities of U.S. companies. These may include different accounting standards,
differences in securities regulation, higher brokerage costs, currency exchange
rate fluctuations and conversion costs, less liquidity, and less publicly
available information about Japanese companies and securities issued thereby.
See "Investment Objective and Policies," "Risk Factors" and "Description of
Permitted Investments and Risk Factors."
Who is the Investment Advisor? Farrell-Wako Global Investment Management, Inc.
(the "Advisor") serves as the investment advisor of the Fund. See "Expense
Summary" and "Management of the Fund."
Who is the Administrator, Transfer Agent and Fund Accounting Agent? Fund/Plan
Services, Inc. serves as the administrator, transfer agent and fund accounting
agent. See "Management of the Fund."
Who is the Underwriter/Distributor? Fund/Plan Broker Services, Inc. serves as
the underwriter/distributor of the Fund's shares. See "Management of the Fund."
Is There a Sales Load? No. Shares of the Fund are offered on a no-load basis.
See "How to Purchase Shares."
Is There a Minimum Investment? The Fund has a minimum initial investment of
$1,000 ($500 for IRA and SEP accounts) and $100 for subsequent investments.
How do I Purchase Shares? Shares of the Fund are offered continuously at the
current net asset value per share next determined after receipt of a purchase
order in proper form by the transfer agent. See "How to Purchase Shares."
How do I Redeem Shares? Shares of the Fund may be redeemed at the current net
asset value per share next determined after receipt by the transfer agent of a
redemption request in proper form. Signature guarantees may be required for
certain redemption requests. See "How to Redeem Shares."
How are Distributions Paid? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of annual
dividends. If any capital gains are realized, substantially all of them will be
distributed by the Fund at least annually. Distributions are paid in additional
shares unless the shareholder elects to take the payment in cash. See "Dividends
and Taxes."
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EXPENSE SUMMARY
===============================================================================
The Japan Alpha Fund
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................... None
Deferred Sales Charge (as a
percentage of original purchase price)................................. None
Redemption Fees (as a percentage
of amount redeemed)/1/................................................. None
/1/ If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $9.00) for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at higher
rates. Purchases and redemptions may also be made through broker-dealers
and others who may charge a commission or other transaction fee for
their services.
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory Fees (after fee waivers)/2/................................... 0.72%
12b-1 Fees............................................................. None
Other Expenses......................................................... 1.53%
Total Operating Expenses (after fee waivers)/2/........................ 2.25%
/2/ The Advisor has, on a voluntary basis, agreed to waive all or a portion
of its fees and to reimburse certain expenses so that the Fund's total
operating expenses will not exceed 2.25% of the Fund's average daily net
assets. The Advisor reserves the right to terminate this waiver or any
reimbursement at any time, in its sole discretion. Absent such waivers,
advisory fees for the Fund would be 0.98% and total operating expenses
for the fiscal year ended March 31, 1996 would have been 2.51%.
Example
Based on the level of expenses listed above, the total expenses relating to an
investment of $1,000 would be as follows, assuming a 5% annual return and
redemption at the end of each time period.
1 Year 3 Years 5 Years 10 Years
$23 $70 $120 $258
The foregoing example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. The
purpose of the expense tables and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by shareholders of the Fund. Additional information may be found under
"Management of the Fund." See "How to Purchase Shares" and "How to Redeem
Shares."
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JAPAN ALPHA FUND
FINANCIAL HIGHLIGHTS
The following financial highlights for the fiscal year ended March 31, 1996 were
derived from the Fund's financial statements dated March 31, 1996, which were
audited by Coopers & Lybrand L.L.P., independent accountants, and whose
unqualified report thereon is incorporated by reference into the Statement of
Additional Information. The Fund's Statement of Additional Information is
incorporated by reference into this Prospectus and may be obtained without
charge by writing the Fund or calling (800) 471-7174 (or (212) 319-3944) for
overseas investors). The table below sets forth financial data for one share of
capital stock outstanding throughout the period presented.
<TABLE>
<CAPTION>
For the Period
April 18, 1995*
through
March 31, 1996
<S> <C>
Net asset value, beginning of period......................... $ 10.00
Loss from investment operations:
Net investment loss.......................................... (0.12)/1/
Net realized and unrealized loss on investments and
foreign currency related transactions.................... (0.57)/1/
Total loss from investment operations.................... (0.69)
Net asset value, end of period............................... $ 9.31
Total return................................................. (6.90%)
Ratios/Supplemental Data
Net assets, end of period (in 000s)...................... $153
Ratio of expenses to average net assets:
Before expense reimbursement and waiver............... 8.54%/2/
After expense reimbursement and waiver................ 2.25%/2/
Ratio of net investment income to average net assets:
Before expense reimbursement and waiver............... (7.67%)/2/
After expense reimbursement and waiver................ (1.38%)/2/
Portfolio turnover rate.................................. 122.71%
Average commission rate.................................. 0.0658
</TABLE>
* Commencement of operations
/1/ Calculated using the average shares method
/2/ Annualized
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<PAGE>
HISTORICAL INVESTMENT RESULTS OF THE ADVISOR
Set forth below is performance data provided by the Advisor relating to average
investment results of assets managed by the Advisor. These results were derived
from a single private account which represents all assets managed by the Advisor
other than the assets of The Japan Alpha Fund (the "Fund"). As of March 31,
1995, the assets held within this private account were valued at $58.5
million.
The private account has the same investment objective as that of the Fund and is
managed using substantially similar, though not necessarily identical,
investment strategies and techniques as those employed by the Fund. See
"Investment Objective and Policies." Because of the similarities in investment
strategies and techniques, the Advisor believes that data listed below is
relevant to investors in the Fund. The results presented are not intended to
predict or suggest the returns that will be experienced by the Fund or the
return an investor will achieve by investing in the Fund. Different methods of
determining performance from those described in the footnote to the chart below
may result in different performance figures. All performance data was supplied
by the Advisor and has not been verified or audited. The private account was not
registered under the Investment Company Act of 1940, as amended (the "Act"), and
therefore is not subject to certain investment restrictions imposed by the Act,
which may have adversely affected its performance. An investor should not rely
on the following performance information as an indication of future performance
of the Fund.
<TABLE>
<CAPTION>
Farrell-Wako Global Investment Management, Inc. Quarterly Total Return Figures
<S> <C> <C>
Quarter Value of Initial Quarterly
Ended $10,000 Investment Return
9/92 10,000 --
12/92 9,609 -3.91%
3/93 11,756 22.35%
6/93 14,072 19.70%
9/93 14,875 5.70%
12/93 12,382 -16.76%
3/94 14,799 19.52%
6/94 16,342 10.43%
9/94 15,476 -5.30%
12/94 14,756 -4.66%
3/95 14,831 0.51%
</TABLE>
2.5 Year Annualized Return: 17.08%
Another way to consider the above performance figures is as follows: $10,000
invested in the account on September 30, 1992 would have grown to $14,831 by
March 31, 1995.
Note: Total return includes realized and unrealized gains and losses
plus income, net of advisory fees, transaction expenses and other
expenses charged to the account by the Advisor. Performance results
have been calculated in accordance with the standardized formula for
such computation as required by the U.S. Securities and Exchange
Commission for use by open-end investment companies.
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THE TRUST AND THE FUND
===============================================================================
Farrell Alpha Strategies (the "Trust") is an open-end management company
organized as a business trust under the laws of the State of Delaware. The Trust
is organized to offer separate series of shares and is currently comprised of
one series, The Japan Alpha Fund (the "Fund").
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The Fund's investment objective is to achieve long-term capital appreciation by
investing in equity securities of Japanese companies. However, there can be no
assurance that the Fund will be able to achieve its investment objective.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of the majority of the voting securities of the
Fund. Unless otherwise stated in this Prospectus, the Fund's investment policies
are not fundamental and may be changed without shareholder approval. While a
non-fundamental policy or restriction may be changed by the Trustees of the
Trust without shareholder approval, the Fund intends to notify shareholders
before making any material change in such policy or restriction. Additional
investment policies and restrictions are described in the Statement of
Additional Information.
The Fund intends to invest as fully as practicable in equity securities of
Japanese companies, and under normal circumstances will be at least 80% invested
in such securities. These include securities of companies which (i) are
organized under the laws of Japan, (ii) regardless of where organized, derive at
least 50% of their revenues or profits from goods produced or sold, investments
made, or services performed or have at least 50% of their assets located in
Japan, or (iii) have the primary trading market for their securities in Japan.
Equity securities are comprised of common and preferred stock, debt securities
convertible into common stock (sometimes referred to as "convertible
debentures"), common stock purchase warrants, restricted securities and American
Depository Receipts.
The Fund will seek to achieve its investment objective through the Advisor's use
of the Farrell Alpha Investment Strategy, which is based on the philosophy of
combining sound fundamental analysis with disciplined stock selection and
systematic portfolio construction. Using a large body of current market and
fundamental data, over 3,000 equity securities listed in the United States and
700 equity securities listed in Japan are systematically valued and rated by
applying the Advisor's proprietary series of up to 25 statistical and
quantitative techniques that have been developed and refined in the United
States throughout the past 20 years and applied to Japanese equity securities in
recent years. The equity securities evaluated by the Advisor are examined from a
variety of perspectives, such as long-term fundamental securities analysis
technique, short-term fundamental securities analysis technique, trading
patterns, economic conditions and the judgment of outside analysts. The result
of this rigorous process is the Advisor's rating of the relative attractiveness
of each equity security, called the "alpha" rating. Equity securities with the
highest alpha ratings become candidates for investment by the Fund. The converse
is true for those with low alpha ratings.
The Nikkei Stock Average and the Morgan Stanley Capital International Japan
Index (the "MSCI Japan Index") have been selected as the standards or benchmarks
against which the Fund's performance will be compared. The Nikkei Stock Average
is an index of 225 leading stocks traded on the Tokyo Stock Exchange. It is
composed of representative blue chip companies (termed first-section companies
in Japan) and is a price-weighted index. This means that the movement of each
stock, in Japanese yen or U.S. dollars, respectively, is weighted equally
regardless of its market capitalization. The Nikkei Stock Average, informally
called the Nikkei Index and often still referred to as the Nikkei Dow, is
published by the Nihon Keizai Shimbun (Japan Economic Journal) and is the most
widely quoted Japanese stock index. The MSCI Japan Index is a widely followed
measure of Japan's equity market performance, and is a market capitalization
weighted index that represents approximately 60% of Japan's equity market
capitalization, designed to replicate the industry
Page 11
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composition of the local market. Only companies domiciled in Japan which are
subject to restrictive float or cross ownership are included in the MSCI Japan
Index.
The Fund may invest a portion of its assets in cash and money market instruments
in order to maintain liquidity or if the Advisor determines that securities
meeting the Fund's investment objective and policies are not readily available
for purchase. For temporary defensive purposes, when the Advisor determines that
market conditions warrant, the Fund may invest up to 100% of its assets in cash
and money market instruments. Money market instruments consist of securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities;
short-term, yen-denominated securities or obligations of the Japanese
government; certificates of deposit, time deposits and bankers' acceptances
issued by banks or savings and loan associations, including banks organized or
operating in Japan, having net assets of at least $500 million as stated on
their most recently published financial statements; commercial paper rated in
one of the two highest rating categories by at least one nationally recognized
statistical rating organization; investment-grade obligations of companies
incorporated in and having principal business activities in Japan; repurchase
agreements involving such securities; and, to the extent permitted by applicable
law and the Fund's investment restrictions, shares of other investment companies
investing solely in money market securities. To the extent that the Fund is
invested in temporary defensive instruments, it will not be pursuing its
investment objective. See "Description of Permitted Investments and Risk
Factors" and the Statement of Additional Information.
As a result of the Fund's investment policies, its portfolio turnover rate may
exceed 100%. High portfolio turnover rates (over 100%) may involve
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Fund and ultimately by the Fund's shareholders. In
addition, high portfolio turnover may result in increased short-term capital
gains, which when distributed to shareholders, are treated as ordinary
income.
For a further discussion of the Fund's permitted investments, see "Description
of Permitted Investments and Risk Factors" and the Statement of Additional
Information.
RISK FACTORS
===============================================================================
Investments in securities of Japanese issuers may be subject to certain risks
not typically associated with securities of U.S. issuers. Because of its
emphasis on Japan, the Fund should be considered as a vehicle for
diversification of investments and not as a balanced investment program. See
"Description of Permitted Investments and Risk Factors."
Japan's Economy
Japan's economy has typically exhibited low inflation and low interest rates.
There can be no assurance that low inflation and low interest rates will
continue, and it is likely that a reversal of such factors would adversely
affect the Japanese economy. Moreover, the Japanese economy may differ,
favorably or unfavorably, from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position.
Trade Issues
Because of the concentration of Japanese exports in highly visible products such
as automobiles, machine tools and semiconductors, and the large trade surpluses
ensuing therefrom, Japan is in a difficult phase in its relation with its
trading partners, particularly the United States where the trade imbalance is
the greatest. Retaliatory action taken by such trading partners could affect the
ability of Japanese companies to export goods to these countries, which could
decrease the value of the securities in the Fund.
Page 12
<PAGE>
Currency Factors
Because the Fund invests primarily in securities denominated in yen, changes in
exchange rates between the U.S. dollar and the Japanese yen affect the U.S.
dollar value of the Fund's assets. Such rate of exchange is determined by forces
of supply and demand on the foreign exchange markets. These forces are in turn
affected by the international balance of payments and other economic, political
and financial conditions, government intervention, speculation and other
factors. The Fund's net asset value will be reported, and distributions from the
Fund will be made, in U.S. dollars. Therefore, the Fund's reported net asset
value and distributions will be adversely affected by depreciation of the
Japanese yen relative to the U.S. dollar. Over a long period of years, the
Japanese yen has generally appreciated in relation to the dollar, adding to the
return of dollars invested through the Fund. A decline in the value of the
Japanese yen would adversely affect the value of the Fund in dollar terms.
The Japanese Stock Market
Like other stock markets, the Japanese stock market can be volatile. A decline
in the market may have an adverse effect on the availability of credit and on
the value of the substantial stock holdings of Japanese companies in particular,
Japanese banks, insurance companies and other financial institutions. A decline
in the market may also contribute to weakness in Japan's economy. The common
stock of many Japanese companies continue to trade at high price-earnings ratios
even after the recent market decline. Trading of equity securities in the
Japanese over-the-counter market is conducted by securities firms, and not on a
recognized stock exchange. Consequently, securities traded in the Japanese over-
the-counter market may, from time to time, and especially in falling markets,
become illiquid and experience short-term price volatility and wide spreads
between bid and offer prices.
Investments in Japanese Equity Securities
Japanese equity securities have historically exhibited a high price-to-earnings
ratio relative to securities traded in the U.S. securities markets, although
recently the disparity between average price-to-earnings ratios of Japanese and
U.S. securities has lessened. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States. However, reported net income
in Japan is generally believed to be understated relative to U.S. accounting
standards and this is one reason why price-earnings ratios of the stocks of
Japanese companies tend to be higher than those for U.S. stocks. In addition,
Japanese companies have tended historically to have higher growth rates than
U.S. companies, and Japanese interest rates have generally been lower than in
the United States, both of which factors tend to result in lower discount rates
and higher price-earnings ratios in Japan than in the United States.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
===============================================================================
The following is a description of permitted investments for the Fund, and the
associated risk factors:
American Depository Receipts ("ADRs") - ADRs are securities, typically issued by
a U.S. financial institution (a "depository"), that evidence ownership interests
in a security or a pool of securities issued by a foreign issuer and deposited
with the depository. ADRs may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depository; whereas, an unsponsored
facility may be established by a depository without participation by the issuer
of the underlying security. Holders of the unsponsored depository receipts
generally bear all the costs of the unsponsored facility. 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, to the holders of the receipts, voting rights with respect to the
deposited securities.
Bankers' Acceptances - Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank or trust company. Bankers'
acceptances are used by manufacturers and exporters to finance the shipment and
storage of goods. Maturities are generally six months or less.
Page 13
<PAGE>
Certificates of Deposit - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
Commercial Paper - Commercial paper is a term used to describe unsecured short-
term promissory notes issued by banks, corporations and other entities.
Maturities on these issues vary from a few to 270 days.
Convertible Securities - Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
Equity Securities - Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. Changes in the value of
portfolio securities will not necessarily affect cash income derived from these
securities but will affect the Fund's net asset value.
Fixed Income Securities - Fixed income securities are debt obligations issued by
corporations and other borrowers. The market value of fixed income investments
will change in response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. Moreover, while securities with
longer maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect the Fund's net asset value.
Repurchase Agreements - Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. The Fund bears a risk of loss in the event the
other party defaults on its obligations and the Fund is delayed or prevented
from exercising its right to dispose of the collateral, or if the Fund realizes
a loss on the sale of the collateral. The Fund will enter into repurchase
agreements only with financial institutions deemed to present minimal risk of
bankruptcy during the term of the agreement based on established guidelines.
Repurchase agreements are considered loans under the Act.
Restricted Securities - Restricted securities are securities that may not be
sold to the public without registration under the Securities Act of 1933, as
amended, absent an exemption from registration.
Securities of Foreign Issuers - There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments (including possible governmental seizure or nationalization of
assets), the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information regarding such securities and
their issuers available to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments in other
jurisdictions, difficulties in effecting repatriation of capital invested
abroad, and difficulties in transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to foreign taxes, and may
be less marketable than comparable U.S. securities. The value of the Fund's
investments denominated in foreign currencies will depend on the relative
strengths of those currencies and the U.S. dollar, and the Fund may be affected
favorably or unfavorably by changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar. Changes in foreign
currency exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders by the Fund.
Page 14
<PAGE>
U.S. Government Securities - U.S. government securities include obligations
issued by agencies or instrumentalities of the U.S. government including, among
others, Export Import Bank of the United States, Farmers Home Administration,
Federal Farm Credit System, Federal Housing Administration, Maritime
Administration, Small Business Administration, and The Tennessee Valley
Authority. Obligations of instrumentalities of the U.S. government include
securities issued by, among others, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association and the U.S. Postal Service. Some of these
securities are supported by the full faith and credit of the U.S. Treasury
(e.g., Government National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank)
and still others are supported only by the credit of the instrumentality (e.g.,
Federal National Mortgage Association). Guarantees of principal by agencies or
instrumentalities of the U.S. government may be a guarantee of payment at the
maturity of the obligation so that in the event of a default prior to maturity
there might not be a market and thus no means of realizing on the obligation
prior to maturity. Guarantees as to the timely payment principal and interest do
not extend to the value or yield of these securities nor to the value of the
Fund's shares.
Variable and Floating Rate Instruments - Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
Warrants - Warrants are instruments that give holders the right, but not the
obligation, to buy shares of a company at a given price during a specified
period.
INVESTMENT LIMITATIONS
===============================================================================
The investment objective and the investment limitations set forth here and in
the Statement of Additional Information are fundamental policies of the Fund.
Fundamental policies cannot be changed without the consent of the holders of a
majority of the Fund's outstanding shares. The Fund may not: (1) purchase
securities of any one issuer (except securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities and repurchase agreements
involving such securities if, as a result, not more than 5% of the total assets
of the Fund would be invested in the securities of such issuer (This restriction
applies to 75% of the Fund's total assets); (2) purchase any securities which
would cause 25% or more of the total assets of the Fund to be invested in the
securities of one or more issuers that conduct their principal business
activities in the same industry, provided that this limitation does not apply to
investments in the obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities and repurchase agreements involving such
securities (For purposes of this limitation, (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry and (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry); (3) make loans, except
that the Fund may purchase or hold debt instruments in accordance with its
investment objective and policies; and (4) borrow money, except for temporary or
emergency purposes and then only in an amount not exceeding one-third of the
value of its total assets at the time of such borrowing.
The foregoing percentages will apply at the time of the purchase of a security,
except for the percentage limitation specified in paragraph (4) above, which
will apply at all times.
Page 15
<PAGE>
MANAGEMENT OF THE FUND
================================================================================
The Board of Trustees
The Trust has a Board of Trustees that establishes the Trust's policies and
supervises and reviews the management of the Trust. The day-to-day operations of
the Fund are administered by the officers of the Trust and by the Advisor
pursuant to the terms of the Investment Advisory Agreement with the Fund. The
Trustees review the various services provided by the Advisor to ensure that the
Fund's general investment policies and programs are being properly carried out
and that administrative services are being provided to the Fund in a
satisfactory manner. Information pertaining to the Trustees and executive
officers is set forth in the Statement of Additional Information.
The Investment Advisor
Farrell-Wako Global Investment Management, Inc. (the "Advisor") serves as the
Fund's investment advisor and manager, and is an investment advisor registered
as such under the Investment Advisers Act of 1940, as amended. The Advisor was
incorporated in Delaware and is a wholly-owned indirect subsidiary of Wako
Securities Co., Ltd. ("Wako Securities"), a leading securities firm organized
under the laws of Japan. The Advisor has had more than three years experience
providing management services for a Japanese equity fund that is not an
investment company registered in the United States. As of July 1, 1996, total
assets under management by the Advisor were approximately $258 million,
including $ 124 million in equity securities of Japanese issuers managed using
the Farrell Alpha Investment Strategy utilized by the Fund. The principal
business address of the Advisor is 780 Third Avenue, 38th Floor, New York, New
York 10017.
Founded in 1947, Wako Securities is headquartered in Tokyo and has 70 branch
offices in Japan and 11 overseas offices. It is one of the largest Japanese
brokerage firms. Wako Securities and its affiliated companies have in excess of
$23 billion in mutual fund, pension plan and corporate assets under management.
The Fund expects to conduct substantially all or a majority of its brokerage
transactions through Wako Securities, an affiliated broker of the Advisor.
As the Fund's investment advisor, the Advisor makes the investment decisions
concerning the assets of the Fund and continuously reviews, supervises and
administers the Fund's investment programs, subject to the supervision of, and
policies established by, the Trustees of the Trust .
Dr. James L. Farrell, Jr., CFA, Chairman of the Advisor since 1991, manages the
Fund. Prior to 1991, he was Chairman and Chief Investment Officer of MPT
Associates, a New York based independent investment counseling subsidiary of an
insurance company, where he managed $1 billion of equity assets. He has
extensive experience in portfolio management and applied financial research at a
major U.S. bank and The College Retirement Equities Fund (CREF). Mr. Farrell is
also Chairman of the Institute for Quantitative Research in Finance, a co-
operative group of 100 financial institutions, securities brokers, investment
plan sponsors and international investment organizations.
For providing investment advisory services, the Fund pays the Advisor a monthly
fee which is calculated daily by applying an annual rate of 0.98% of the average
daily net assets of the Fund. The investment advisory fee is higher than that
paid by most investment companies, although the Advisor believes the fee to be
comparable to that paid by investment companies with similar investment
objectives and policies. From time to time, the Advisor may voluntarily waive
all or a portion of its management fee, and/or absorb certain expenses of the
Fund without further notification of the commencement or termination of any such
waiver or absorption. Any such waiver or absorption will have the effect of
lowering the overall expense ratio of the Fund and increasing the Fund's overall
return to investors at the time any such amounts are waived and/or absorbed. The
Advisor has voluntarily agreed to waive all or a portion of its fee, and/or to
reimburse expenses of the Fund to the extent necessary in order to limit total
operating expenses to an annual rate of not more than 2.25% of the Fund's
average daily net assets. The Advisor reserves the right to terminate its
voluntary fee waiver and expense reimbursement at any time, in its sole
discretion. Any reductions in its fee that are made by the Advisor are subject
to reimbursement by the Fund within the following three years, provided that the
Fund is able to effect such reimbursement and remain in compliance with
applicable expense limitations.
Page 16
<PAGE>
================================================================================
========
THE
JAPAN
ALPHA
FUND
========
ACCOUNT APPLICATION FORM
==============================================================================
A. Initial Investment
Indicate amount of investment:
The minimum initial investment is $1,000 and subsequent purchases must be
at least $100.
The minimum may be waived at the Distributor's discretion.
The Japan Alpha Fund $ [_] Enclosed is my check (payable to
--------------
The Japan Alpha Fund)
Total $ [_] Bank wire sent (Instructions to
-------------- be provided upon establishment of
account.)
==============================================================================
B. Registration (Please print)
(Complete one)
[_] Individual (Use line l) [_] Joint Account (Use lines 1 & 2)
[_] Gift/Transfer to Minor (Use [_] Corporations, Partnerships, Trusts and
lines 3,4,& 5) Others (Use lines 6 & 7)
--------------------------------------------------------------------------
1. Individual First name Initial Last name
------------------------------------------------------
Social Security number U.S. Citizen? [_] Yes [_] No
--------------------------------------------------------------------------
2. Joint Tenant First name Initial Last name
------------------------------------------------------
Social Security number U.S. Citizen? [_] Yes [_] No
------------------------------------------------------
Check one: [_] Joint Tenancy (Rights of Survivorship)
[_] Tenants in Common
--------------------------------------------------------------------------
3. Uniform Gift/ Custodian's name
Transfer to Minor is the custodian for
------------------------------------------------------
4. Minor's Name Minor's name
under the
------------------------------------------------------
5. State Name of State
Uniform Gift/Transfer to Minors Act
------------------------------------------------------
Minor's Social Security number
--------------------------------------------------------------------------
6. Corporations, Corporation or Entity name Please attach a copy of
Partnerships, a Corporate Resolution.
Trusts, and ------------------------------------------------------
Others Tax ID number
7. Type of
Registration ------------------------------------------------------
--------------------------------------------------------------------------
[_]Corporation [_]Partnership [_]Trust [_]Retirement
[_]IRA (Complete attached IRA application) [_] Other
==============================================================================
C. Mailing Address Street or P.O. Box City State Zip Code
------------------------------------------------------
Home Telephone County of residence Daytime Telephone
--------------------------------------------------------------------------
Street or P.O. Box City State Zip Code
Duplicate
Confirmation/ ------------------------------------------------------
Statement sent to: Home Telephone Daytime Telephone
------------------------------------------------------
[_]Please check here if this is a modification to an existing account. Existing
account number:
-----------------------------------------------------------
================================================================================
<PAGE>
================================================================================
D. Dividend Option
Check one only, if none are checked all dividend income and capital gains, if
any, will be reinvested.
[_] All dividend income and capital gains, reinvested
[_] All dividend income and capital gains paid by check.
[_] Dividend income paid by check and capital gains reinvested.
================================================================================
E. Telephone Privilege
Proceeds of telephone redemption requests are paid by check and mailed to the
address of record or wired to your bank account.
I (we) authorize Fund/Plan Services to act upon instructions received by
telephone from me (us) to redeem shares. Neither the Fund nor Fund/Plan
Services will be liable for properly acting upon telephone instructions believed
to be genuine. Please attach a voided personal check and complete below.
Bank Name Branch Office (if applicable)
------------------------------------------------------------------------
Bank Address City State Zip Code
------------------------------------------------------------------------
Bank Wire Routing Number Bank Account Number
================================================================================
F. Customer Agreement
1. I (We) have full right, power, authority and legal capacity, and am (are) of
legal age in my (our) state of residence to purchase shares of the Fund. I (We)
affirm that I (we) have received and read the current prospectus of the Fund and
agree to its terms. I (We) understand the investment objectives and program,
and have determined that the Fund is a suitable investment, based upon my (our)
investment needs and financial situation. I (We) agree that Fund/Plan Services
or any of their affiliate officers, directors or employees will not be liable
for any loss, expense or cost for acting upon any instructions or inquiries
believed genuine.
2. I (We) understand and acknowledge that a return on the selected fund(s) is
not guaranteed.
3. This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
===============================================================================
G. Signatures
Taxpayer Identification Number Certification. Under the penalties of perjury, I
(we) certify the following:
1. I (we) certify that the number shown on this form is my (our) correct tax
identification number.
2. I (We) am not (are not) subject to back-up withholding as a result of a
failure to report all interest and dividends, or the Internal Revenue Service
has notified me (us) that I (we) am (are) no longer subject to back-up
withholding.
================================================================================
"The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding".
- ----------------------------------------------------- ------------------------
Signature [_] Owner [_] Custodian [_] Trustee Date
- ----------------------------------------------------- ------------------------
Signature Joint Owner (if applicable) Date
- -------------------------------------------------------------------------------
[_] Check box if you have been notified by the IRS that you are subject to
back-up withholding.
===============================================================================
Mail completed application forms to:
The Japan Alpha Fund Effective on or about Nov. 1, 1996
#2 W. Elm Street The Japan Alpha Fund
P.O. Box 874 3200 Horizon Drive
Conshohocken, PA 19428-0874 P.O. Box 61503
King of Prussia, PA 19406-0903
For assistance call: (800) 471-7174 For non-U.S. investors call
(212) 319-3944
================================================================================
Dealer Name Branch # and Location
-------------------------- ------------------
Name of Representative Rep #
-------------- -----------------------------------
Authorized Signature of Dealer
------------------------------------------------
================================================================================
<PAGE>
The Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken,
Pennsylvania 19428, was engaged pursuant to an agreement dated June 28, 1995 for
the limited purpose of acting as underwriter to facilitate the registration of
shares of the Fund under state securities laws and to assist in the sale of
shares. Effective on or about November 1, 1996 Fund/Plan Broker Services, Inc.
address will be 3200 Horizon Drive P.O. Box 61503 King of Prussia, Pennsylvania
19406-0903
The Administrator
Fund/Plan Services, Inc. ("Fund/Plan"), which has its principal business address
at 2 W. Elm Street, Conshohocken, Pennsylvania 19428, serves as administrator
pursuant to an Administrative Services Agreement. Effective on or about
November 1, 1996 Fund/Plan Services, Inc. address will be 3200 Horizon Drive
P.O. Box 61503 King of Prussia, Pennsylvania 19406-0903. The services that
Fund/Plan provides to the Fund include: coordinating and monitoring any third
parties which furnish services to the Fund; providing the necessary office
space, equipment and personnel to perform administrative and clerical functions
for the Fund; preparing, filing and distributing proxy materials, periodic
reports to shareholders, registration statements and other documents; and
responding to shareholder inquiries. Pursuant to the Administrative Services
Agreement, Fund/Plan receives a fee computed at the annual rate of 0.15% of the
first $75 million of total average net assets, 0.10% of the next $75 million of
total average net assets and 0.05% of total net assets in excess of $150
million. Pursuant to the Administrative Services Agreement, aggregate
administration fees shall not be less than $95,000.
The Custodian, Transfer Agent and Fund Accounting/Pricing Agent
Sumitomo Bank of New York Trust Company, 2 World Financial Center Tower B 225
Liberty Street 35th Floor, New York, New York 10281 is the custodian for the
cash and securities of the Fund. Fund/Plan serves as the Fund's transfer agent
and, in its capacity as such, maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. As fund
accounting agent, Fund/Plan performs certain accounting and pricing services for
the Fund, including the daily calculation of the Fund's net asset value.
Expenses
The Fund shall be responsible for all of its own operating expenses. Such
expenses may include, but are not limited to: management fees; expenses for
printing, and distribution costs of, prospectuses and reports to existing
shareholders; brokerage fees and commissions; fees for the registration or
qualification of Fund shares under federal or state securities laws; expenses of
the organization of the Fund; transfer agent, custodian, administrator, legal
and auditing fees; the expenses of obtaining quotations of portfolio securities
and pricing the Fund's shares; trade association dues; all costs associated with
shareholder meetings and the preparation and dissemination of proxy materials;
costs of liability insurance and fidelity bonds; fees for Trustees who are not
officers, directors or employees of the Advisor; and any extraordinary and
nonrecurring expenses which are not expressly assumed by the Advisor.
Page 17
<PAGE>
HOW TO PURCHASE SHARES
===============================================================================
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Fund's distributor, FPBS, either by mail or by telephone. Shares of the
Fund are offered only to residents of states in which the shares are eligible
for purchase.
Shares of the Fund are offered at the public offering price. The public offering
price is equal to the current net asset value per share next determined after
receipt of a purchase order in proper form, by the transfer agent. Shares may
also be bought and sold through any securities dealer having a dealer agreement
with FPBS, the Fund's principal underwriter.
The minimum initial investment is $ 1,000 ($500 for IRA and SEP accounts) and
subsequent purchases must be at least $100. The Fund reserves the right to
reject any purchase order and to suspend the offering of shares of the Fund. The
Fund reserves the right to vary the initial investment minimum and minimums for
additional investments, at any time. In addition, the Advisor may waive the
minimum initial investment requirement for any investor.
Purchase orders for shares of the Fund that are received by Fund/Plan in proper
form by the close of regular trading on the New York Stock Exchange
("NYSE")(currently 4:00 p.m. Eastern time), on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined public offering price.
Orders for Fund shares received after 4:00 p.m. Eastern time will be purchased
at the public offering price determined on the following business day. When
market conditions are extremely busy, it is possible that investors may
experience difficulties placing orders by telephone, and investors may wish to
place orders by mail.
If a check received for the purchase of shares does not clear, the purchase will
be cancelled, and the investor could be liable for any losses or fees incurred.
The Fund reserves the right to reject a purchase order when the Fund determines
that it is not in the best interest of the Fund or its shareholders to accept
such order. For example, the Fund may refuse purchases of shares of the Fund by
any person or group if, in the Advisor's judgment, the Fund would be unable to
invest effectively in accordance with its investment objectives and policies, or
would otherwise potentially be adversely affected.
Shareholders may purchase shares of the Fund in one of the ways explained below.
Purchases By Mail
Shares of the Fund may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the transfer agent, together with
a check payable to "The Japan Alpha Fund." The check or money order and
application should be mailed to Fund/Plan Services, Inc, 2 W. Elm Street, P.O.
Box 874, Conshohocken, Pennsylvania 19428-0874. Effective on or about November
1, 1996 Fund/Plan Services, Inc. address will be 3200 Horizon Drive P.O. Box
61503 King of Prussia, PA 19406-0903. If this is an initial purchase, please
send a minimum of $ 1,000 (or $500 for IRA and SEP accounts).
Page 18
<PAGE>
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check payable to The Japan Alpha Fund, c/o Fund/Plan Services,
Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797. Please enclose the stub
of your account statement and indicate the amount of the investment.
Purchases By Wire
Before making an initial investment by wire, an investor must first telephone
the transfer agent at (800) 262-7751 or (610) 834-3694 in order to be assigned
an account number. The investor's name, account number, taxpayer identification
number or Social Security number and address must be specified in the wire. In
addition, an account application should be promptly forwarded to: Fund/Plan
Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428-
0874. Effective on or about November 1, 1996 Fund/Plan Services, Inc. address
will be 3200 Horizon Drive P.O. Box 61503 King of Prussia, Pennnsylvania 19406-
0903. Shareholders having an account with a commercial bank that is a member of
the Federal Reserve System may purchase shares of the Fund by requesting their
bank to transmit funds by wire to:
United Missouri Bank KC NA
ABA #10-10-00695
For: Fund/Plan Services, Inc.
A/C 98-7037-071-9
FBO "The Japan Alpha Fund"
Shareholder Name and Account Number
Additional investments may be made at any time through the wire procedures
described above, which must include a shareholder's name and account number. The
shareholder's bank may impose a fee for investments by wire. The Fund will not
be responsible for the consequence of delays, including delays in the banking or
Federal Reserve wire systems.
Purchases Through Broker-Dealers
The Fund may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Fund. It is
the responsibility of such brokers, financial institutions or service
organizations to promptly forward purchase orders and payments for the same to
the Fund. Shares of the Fund purchased through brokers, financial institutions,
service organizations, banks and bank trust departments, may charge the
shareholder a transaction fee or other fee for its services at the time of
purchase. Banks and other financial institutions may be subject to various
state laws regarding the services described above, and may be required to
register as dealers pursuant to state law.
Wire orders for shares of the Fund received by dealers prior to 4:00 p.m.
Eastern time, and received by Fund/Plan before 5:00 p.m. Eastern time on the
same day, are confirmed at that day's public offering price. Orders received by
dealers after 4:00 p.m. Eastern time are confirmed at the public offering price
on the following business day. It is the dealer's obligation to place the order
with Fund/Plan before 5:00 p.m. Eastern time.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by mail, bank
wire, automatic investing or direct deposit. The minimum for subsequent
investments is $100 for all accounts. When making additional investments by
mail, simply return the remittance portion of a previous confirmation with your
investment in the envelope that is provided with each confirmation statement.
Your check should be made payable to The Japan Alpha Fund and mailed to
Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797.
Orders to purchase shares are effective on the day Fund/Plan receives your check
or money order.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the United States. A charge
(minimum of $20) will be imposed if any check used for the purchase of shares is
returned. The Fund and Fund/Plan each reserve the right to reject any purchase
order in whole or in part.
Page 19
<PAGE>
HOW TO REDEEM SHARES
===============================================================================
Shareholders may redeem their shares of the Fund on any business day that the
NYSE is open for business.
Redemptions will be effective at the current net asset value per share next
determined after the receipt by the transfer agent of a redemption request
meeting the requirements described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request for
redemption to Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874,
Conshohocken, Pennsylvania 19428-0874. Effective on or about November 1, 1996
Fund/Plan Services, Inc. address will be 3200 Horizon Drive P.O. Box 61503 King
of Prussia, Pennnsylvania 19406-0903.
A written request must be in good order, which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed and (iii) be signed by each registered
owner exactly as the shares are registered. To prevent fraudulent redemptions,
a signature guarantee for the signature of each person in whose name an account
is registered is required for all written redemption requests exceeding $10,000.
A guarantee may be obtained from any commercial bank, credit union, member firm
of a national securities exchange, registered securities association, clearing
agency and savings and loan association. A credit union must be authorized to
issue signature guarantees; notary public endorsements will not be accepted.
Signature guarantees will be accepted from any eligible guarantor institution
that participates in a signature guarantee program. The transfer agent may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians and retirement plans.
Redemption By Telephone
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by calling the transfer agent at
(800) 262-7751 or (610) 834-3694 during normal business hours. In order to
arrange for redemption by wire or telephone after an account has been opened, or
to change the bank or account designated to receive redemption proceeds, a
written request with a signature guarantee must be sent to the transfer agent at
the address listed above, under the caption "Redemption By Mail."
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time.
During periods of unusual economic or market changes, telephone redemptions may
be difficult to implement. In such event, shareholders should follow the
procedures for redemption by mail.
General Redemption Information
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. If you have any
questions with respect to the proper form for redemption requests you should
contact the transfer agent at (800) 262-7751 or (610) 834-3694.
Redemptions will be processed only on a business day during which the NYSE is
open for business. Redemptions will be effective at the net asset value per
share next determined after the receipt by the transfer agent of a redemption
request meeting the requirements described above. The Fund normally sends
redemption proceeds on the next business day, but, in any event, redemption
proceeds are sent within seven calendar days of receipt of a redemption request
in proper form. Payment may also be made by wire directly to any bank
previously designated by an investor on his or her new account application.
There is a $9.00 charge for redemptions made by wire to domestic banks. Wires
to foreign or overseas banks may be charged higher rates. It should also be
noted that banks may impose a fee for wire services. In addition, there may be
fees for redemptions made through brokers, financial institutions and service
organizations.
Page 20
<PAGE>
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day on which the Fund calculates its net asset value are effective as
of that day. Redemption requests received after the close of the NYSE will be
effected at the net asset value per share determined on the next business day
following receipt. No redemption will be processed until the transfer agent has
received a completed application with respect to the account.
The Fund will satisfy redemption requests for cash to the fullest extent
feasible, as long as such payments would not, in the opinion of the Board of
Trustees, result in the necessity of the Fund to sell assets under
disadvantageous conditions or to the detriment of the remaining shareholders of
the Fund.
Pursuant to the Fund's Trust Instrument, however, payment for shares redeemed
may also be made in kind, or partly in cash and partly in-kind. The Fund has
elected, pursuant to Rule 18f-1 under the Act to redeem its shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the Fund,
during any 90 day period for any one shareholder. Any portfolio securities paid
or distributed in-kind would be in readily marketable securities and valued in
the manner described below. See "Net Asset Value." In the event that an in-
kind distribution is made, a shareholder may incur additional expenses, such as
brokerage commissions, on the sale or other disposition of the securities
received from the Fund. In-kind payments need not constitute a cross-section of
the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the U.S. Securities and Exchange Commission has, by order,
permitted such suspension; (3) an emergency, as defined by rules of the
Securities and Exchange Commission, exists making disposal of portfolio
investments or determination of the value of the net assets of the Fund not
reasonably practicable.
Shares of the Fund may be redeemed through certain brokers, financial
institutions, service organizations, banks, and bank trust departments who may
charge the investor a transaction or other fee for their services at the time of
redemption. Such additional transaction fees would not otherwise be charged if
the shares were redeemed directly from the Fund.
Telephone Transactions
Shareholders who wish to initiate redemption transactions by telephone must
first elect the option, as described above. The Fund and the transfer agent
will each employ reasonable procedures to confirm that telephone instructions
are genuine, and may be liable for losses resulting from unauthorized or
fraudulent telephone transactions if they do not employ those procedures. The
Fund and its transfer agent require personal identification information before
accepting a telephone redemption. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Written confirmation
will be provided for all redemption transactions initiated by telephone.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntarily redeem shares in any account at its then
current net asset value (which will be promptly paid to the shareholder) if at
any time the total investment does not have a value of at least $500 as a result
of redemptions but not market fluctuations. A shareholder will be notified that
the value of his or her account is less than the required minimum and such
shareholder will be allowed at least 60 days to bring the value of his or her
account up to the minimum before the redemption is processed.
SHAREHOLDER SERVICES
===============================================================================
The following special services are available to shareholders of the Fund. There
are no charges for the programs noted below and a shareholder may change or stop
these plans at any time by written notice to the Fund.
Page 21
<PAGE>
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional monthly
purchases of shares of the Fund through an automatic investment plan. An
investor may authorize the automatic withdrawal of funds from his or her bank
account by opening his or her account with a minimum $ 1 ,000 purchase and
completing the appropriate section on the new account application enclosed with
this Prospectus. Subsequent monthly investments are subject to a minimum
required amount of $50.
Retirement Plans
The Fund is available for investment by pension and profit sharing plans
including Individual Retirement Accounts, through which an investor may purchase
Fund shares. For details concerning any of the retirement plans, please call
the Fund at (800) 471-7174.
NET ASSET VALUE
================================================================================
The net asset value per share of the Fund is computed once daily as of the close
of regular trading on the NYSE, currently 4:00 p.m. Eastern time. Currently,
the NYSE is closed on the following holidays or days on which the following
holidays are observed: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities, and dividing by
the total number of outstanding shares. Expenses are accrued daily and applied
when determining the net asset value. The Fund's equity securities are valued
based on market quotations or, when no market quotations are available, at fair
value as determined in good faith by, or under direction of, the Board of
Trustees.
Foreign securities are valued as of the close of trading on the primary exchange
on which they trade. The value is then converted to U.S. dollars using current
exchange rates. Securities listed on any national securities exchange are
valued at their last sale price on the exchange where the securities are
principally traded or, if there has been no sale on that date, at the mean
between the last reported bid and asked prices. Securities traded over-the-
counter are priced at the mean of the last bid and asked prices. Listed
securities which are traded by foreign investors in Japan in over-the-counter
transactions are valued at prices at which it is expected that such securities
may be sold, as determined in good faith by, or under the direction of, the
Board of Trustees.
Securities are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Trustees.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Board of Trustees.
Foreign currency exchange rates are generally determined prior to the close of
trading on the NYSE. Occasionally, events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of trading on the NYSE. Such events would not normally
be reflected in a calculation of the Fund's net asset value on that day. If
events that materially affect the value of the Fund's foreign investments or the
foreign currency exchange rates occur during such period, the investments will
be valued at their fair value as determined in good faith by, or under the
direction of, the Board of Trustees. Foreign securities held by the Fund may
be traded on days and at times when the NYSE is closed. Accordingly, the net
asset value of the Fund may be significantly affected on days when shareholders
have no access to the Fund.
Page 22
<PAGE>
The Japanese stock exchanges are: Tokyo, Hiroshima, Osaka, Nagoya, Kyoto,
Sapporo, Niigata, Fukuoka and JASDAQ (collectively the "Japanese Exchanges").
The Fund will, in some cases, value its portfolio securities as of a day on
which the Japanese Exchanges are closed for Japanese holidays or other reasons.
At such times, the Fund will follow such procedures as the Board of Trustees has
determined to be reasonable.
For valuation purposes, quotations of foreign portfolio securities, other
assets and liabilities and forward contracts stated in foreign currency are
translated into U.S. dollar equivalents at the prevailing market rates.
DIVIDENDS AND TAXES
===============================================================================
Dividends
The Fund will distribute its net investment income annually in December. Any
net gain realized from the sale of portfolio securities and net gains realized
from foreign currency transactions are distributed at least once each year
unless they are used to offset losses carried forward from prior years, in which
case no such gain will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at net asset
value, unless a shareholder elects to receive them in cash. Distribution
options may be changed at any time by requesting a change in writing.
Any check tendered in payment of dividends or other distributions which cannot
be delivered by the post office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then current
net asset value, and the dividend option may be changed from cash to reinvest.
Dividends are reinvested on the ex-dividend date (the "ex-date") at the net
asset value determined at the close of business on that date. Dividends and
distributions are treated the same for tax purposes whether received in cash or
reinvested in additional shares. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
Taxes
The Fund has qualified, and intends to continue to qualify, as a "regulated
investment company" for purposes of the Internal Revenue Code (the "Code"),
which will relieve the Fund of any liability for federal income tax to the
extent that its earnings and net realized capital gains are distributed to
shareholders. To so qualify, the Fund will, among other things limit its
investments so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be invested in
the securities of any single issuer and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of any single issuer, and the Fund
will not own more than 10% of the outstanding voting securities of a single
issuer.
An investment in the Fund has certain tax consequences, depending on the type of
account. The Fund will distribute all of its net investment income to
shareholders. Distributions are subject to federal income tax and may also be
subject to state and local income taxes. Distributions are generally taxable
when they are paid, whether in cash or by reinvestment in additional shares,
except that distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December 31. If you
have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.
Page 23
<PAGE>
For federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss) are
usually taxed as long-term capital gains, regardless of how long a shareholder
has held the Fund's shares. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareholder reinvests the
distributions or elects to receive them in cash.
Shareholders may be subject to a 31 percent back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Fund, or if to the Fund's
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Information accompanying a
shareholder's statement will show the portion of those distributions that are
not taxable in certain states. Further information regarding the tax
consequences of investing in the Fund is included in the Statement of Additional
Information. The above discussion is intended for general information only.
Investors should consult their own tax advisers for more specific information on
the tax consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of each
calendar year in order to avoid liability for federal excise tax.
Dividends and interest received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that the Fund is liable for foreign income taxes so withheld, the Fund
intends to operate so as to meet the requirements of the Code to pass through to
the shareholders credit for foreign income taxes paid. Although the Fund
intends to meet Code requirements in order to pass through credit for such
taxes, there can be no assurance that the Fund will be able to do so. Sale,
exchange or redemption of the Fund's shares is a taxable event to the
shareholder.
PERFORMANCE INFORMATION
===============================================================================
Performance information such as total return for the Fund may be quoted in
advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
because net investment return of the Fund changes in response to fluctuations in
market conditions, interest rates and Fund expenses, any given performance
quotation should not be considered representative of the Fund's performance for
any future period. The value of an investment in the Fund will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund's total return is the change in value of an investment in the Fund over
a particular period, assuming that all distributions have been reinvested.
Thus, total return reflects not only income earned, but also variations in share
prices at the beginning and end of the period. Average annual return reflects
the average percentage change per year in the value of an investment in the
Fund. Aggregate total return reflects the total percentage change over the
stated period. Please refer to the Statement of Additional Information for more
information on performance. Shareholders may obtain current performance
information about the Fund by calling (800) 471-7174 (or (212) 319-3944 for
overseas investors).
Page 24
<PAGE>
GENERAL INFORMATION
===============================================================================
Organization
Farrell Alpha Strategies is organized as a Delaware business trust pursuant to a
Trust Instrument dated April 6, 1995. The Trust is registered under the Act as
an open-end management investment company, commonly known as a mutual fund. The
Trustees of the Trust may establish additional series or classes of shares
without the approval of shareholders. The assets of each series will belong only
to that series, and the liabilities of each series will be borne solely by that
series and no other.
Trustees and Officers of the Fund
The Trustees of the Fund have overall responsibility for the operation of the
Fund. The officers of the Fund who are employees or officers of the Advisor
serve without compensation from the Fund.
Description of Shares
The Trust is authorized to issue an unlimited number of shares of beneficial
interest with no par value. Shares of the Fund represent equal proportionate
interests in the assets of the Fund only, and have identical voting, dividend,
redemption, liquidation and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to subscribe
to any additional shares. Currently, only one class of shares is being offered
by the Fund. The validity of shares of beneficial interest offered by this
prospectus will be passed on by Whitman Breed Abbott & Morgan, 200 Park Avenue,
New York, New York 10166. All accounts will be maintained in book-entry form;
therefore, no share certificates will be issued.
Voting Rights
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held). All shares of the Fund participate
equally in regard to dividends, distributions, and liquidations with respect to
the Fund. Shareholders do not have preemptive, conversion or cumulative voting
rights.
As of July 26, 1996, Wako Securities America of New York, New York was a control
person of the Fund by nature of its shareholdings. Under the Act, a control
person possesses the ability to control the outcome of matters submitted for
shareholder vote.
Shareholder Meetings
The Trustees are not required, and do not intend, to hold annual meetings of
shareholders. The Trustees have undertaken to the U.S. Securities and Exchange
Commission , however, that they will promptly call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee when requested
to do so by holders of not less than 10% of the outstanding shares of the Fund.
In addition, subject to certain conditions, shareholders of the Fund may apply
to the Fund to communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Trustee or Trustees.
Shareholder Reports and Inquiries
The Trust issues unaudited financial information semiannually and audited
financial statements annually. Shareholder inquiries should be addressed to the
Fund c/o Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428,
(800) 262-7751 or (610) 834-3694. Effective on or about November 1, 1996
Fund/Plan Services, Inc. address will be 3200 Horizon Drive P.O. Box 61503 King
of Prussia, Pennnsylvania 19406-0903. Purchase and redemption transactions
should be made through the transfer agent by calling (800) 262-7751 or (610)
834-3694.
Page 25
<PAGE>
INVESTMENT ADVISOR
Farrell-Wako Global Investment Management, Inc.
780 Third Avenue, 38th Floor
New York, New York 10017
(212) 319-3944
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800) 262-7751
(610) 834-3694
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800) 262-7751
(610) 834-3694
CUSTODIAN
Sumitomo Bank of New York Trust Company
2 World Financial Center Tower B
225 Liberty Street 35th Floor
New York, New York 10281
LEGAL COUNSEL
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
For Additional Information about The Japan Alpha Fund call:
(800) 471-7174
(or (212) 319-3944 for overseas investors)
Page 26
<PAGE>
FARRELL ALPHA STRATEGIES
THE JAPAN ALPHA FUND
STATEMENT OF ADDITIONAL INFORMATION
July 29, 1996
This Statement of Additional Information dated July 29, 1996, is not a
prospectus but should be read in conjunction with the Prospectus of The Japan
Alpha Fund (the "Fund") dated July 29, 1996, as amended or supplemented from
time to time. This Statement of Additional Information is intended to provide
additional information regarding the activities and operations of the Fund. No
investment in shares should be made without first reading the Prospectus. A copy
of the Fund's Prospectus may be obtained without charge from Farrell Alpha
Strategies (the "Trust") at the addresses and telephone numbers below.
Underwriter: Advisor:
Farrell-Wako Global
Fund/Plan Broker Services, Inc. Investment Management, Inc.
2 W. Elm Street 780 Third Avenue, 38th Floor
Conshohocken, Pennsylvania 19428 New York, New York 10017
(800) 262-7751 (212) 319-3944
(800) 471-7174
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its distributor. The Prospectus does not
constitute an offering by the Trust or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
Page 27
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
The Trust and the Fund..........................................................
Investment Policies and Techniques..............................................
American Depository Receipts..................................................
Convertible Securities........................................................
Foreign Securities............................................................
Repurchase Agreements.........................................................
Loans of Portfolio Securities.................................................
Securities of Other Investment Companies......................................
Illiquid Securities...........................................................
Rule 144A Securities..........................................................
Other Investments.............................................................
Investment Restrictions.........................................................
Trustees and Officers...........................................................
Principal Shareholders..........................................................
Investment Advisory and Other Services..........................................
Investment Advisory Agreement.................................................
Administrator.................................................................
Underwriter...................................................................
Custodian.....................................................................
Independent Accountants.......................................................
Distribution Plan.............................................................
Net Asset Value.................................................................
Taxes...........................................................................
Federal Income Tax............................................................
Foreign Taxes.................................................................
Portfolio Transactions..........................................................
Portfolio Turnover............................................................
Performance Information.........................................................
In General....................................................................
Total Return Calculation......................................................
Yield Calculation.............................................................
Performance and Advertisements................................................
Other Information...............................................................
Shareholder Liability.........................................................
Limitations on Trustees' Liability............................................
Description of Commercial Paper Ratings.........................................
Financial Statements............................................................
</TABLE>
Page 28
<PAGE>
THE TRUST AND THE FUND
This Statement of Additional Information relates to The Japan Alpha Fund (the
"Fund"), a separate series of Farrell Alpha Strategies (the "Trust"), a
diversified, open-end management company established on April 6, 1995 under
Delaware law as a Delaware business trust. The Trust Instrument permits the
Trust to offer separate series of shares of beneficial interest. The Trust
currently is comprised of one series, The Japan Alpha Fund.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Fund's Prospectus
regarding the permitted investments and risk factors and the investment
objective and policies of the Fund.
American Depository Receipts
The Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are denominated in U.S. dollars and are designed for
use in the U.S. securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
For purposes of the Fund's investment policies, ADRs are deemed to have the same
classification as the underlying securities they represent. Thus, an ADR
representing ownership of common stock will be treated as common stock. ADR
facilities may be established as either "unsponsored" or "sponsored". While
ADRs issued under these two types of facilities are similar in some respects,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants.
Convertible Securities
The Fund may invest in convertible securities. Common stock occupies the most
junior position in a company's capital structure. Convertible securities
entitle the holder to exchange such securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time, and to receive interest or dividends until the holder
elects to convert. The provisions of any convertible security determine its
ranking in a company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings are
subordinated to the claims of other creditors, and are senior to the claims of
preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value, and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as is the case with a fixed income security.
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. At such times, the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
Foreign Securities
Investments in securities of foreign issuers may subject the Fund to investment
risks that differ in some respects from those related to investments in
obligations of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other income, possible seizure, nationalization or
expropriation of foreign deposits, the possible establishment of exchange
controls or taxation at the source, greater fluctuations in value due to changes
in currency exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also have higher custodial fees and
sales commission than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those regarding domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may
Part 29
<PAGE>
be subject to less stringent reserve requirements than those applicable to
domestic branches of U.S. banks. In addition, foreign markets may be
characterized by lower liquidity, greater price volatility, less regulation and
higher transaction costs than U.S. markets.
Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement).
Repurchase agreements may be considered to be loans by the Fund under the
Investment Company Act of 1940, as amended (the "1940 Act").
The financial institutions with whom the Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by Farrell-
Wako Global Investment Management, Inc. (the "Advisor"). The Advisor will
continue to monitor the creditworthiness of the seller under a repurchase
agreement, and will require the seller to maintain during the term of the
agreement the value of the securities subject to the agreement at not less than
the repurchase price. The Fund will only enter into a repurchase agreement
where the market value of the underlying security, including interest accrued,
will at all times be equal to or exceed the value of the repurchase agreement.
The Fund may invest in repurchase agreements with foreign parties or a
repurchase agreement based on securities denominated in foreign currencies.
Legal structures in foreign countries, including bankruptcy laws, may offer less
protection to investors such as the Fund. Furthermore, foreign repurchase
agreements generally involve greater risks than repurchase agreements made in
the United States.
Loans of Portfolio Securities
The Fund may lend portfolio securities to broker-dealers and financial
institutions provided that (1) the loan is secured continuously by collateral
marked-to-market daily, and maintained in an amount at least equal to the
current market value of the securities loaned; (2) the Fund may call the loan at
any time and receive the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities and (4) the aggregate market
value of securities loaned by the Fund will not at any time exceed 33% of the
total assets of the Fund.
Collateral will consist of U.S. government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Fund will only enter into portfolio loans
after a review by the Advisor, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will
be monitored on an ongoing basis.
Securities of Other Investment Companies
The Fund may invest in the securities of other investment companies that invest
solely in money market securities, which may result in duplicative fees and
expenses. The Fund currently intends to limit its investments in securities
issued by other investment companies so that, as determined immediately after a
purchase of such securities is made, (i) not more than 5% of the value of the
Fund's total assets will be invested in the securities of any one investment
company; (ii) not more than 10% of its total assets will be invested in the
aggregate in securities of investment companies as a group and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund.
Illiquid Securities
The Fund may invest up to 10% of its net assets in securities that are illiquid,
which means that they cannot be expected to be sold within seven days at
approximately the price at which they are valued. The Board of Trustees has
delegated the function of making day-to-day determinations of liquidity to the
Advisor pursuant to guidelines reviewed by the Board of Trustees. The Advisor
will monitor the liquidity of securities held by the Fund, and report
periodically on such determinations to the Board of Trustees.
Page 30
<PAGE>
Rule 144A Securities
The Fund may invest in securities that are exempt from the registration
requirements of the Securities Act of 1933 pursuant to Securities Exchange
Commission ("SEC") Rule 144A. Those securities, purchased pursuant to Rule
144A, are traded among qualified institutional buyers, and are subject to the
Fund's limitation on illiquid investment.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The
Fund will limit its investments in securities of issuers which the Fund is
restricted from selling to the public without registration under the Securities
Act of 1933 to no more than 10% of the Fund's net assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid by the Fund's Board of Trustees.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize the Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the Fund's investment objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental restrictions and may
not be changed without the approval of a majority of the outstanding voting
shares (as defined in the 1940 Act) of the Fund. Unless otherwise indicated,
all percentage limitations listed below apply only at the time of the
transaction. Accordingly, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in the percentage which results from
a relative change in values or from a change in the Fund's total assets will not
be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE AND POLICIES" and "DESCRIPTION
OF PERMITTED INVESTMENTS AND RISK FACTORS" in each Prospectus, the Fund may not:
1. Purchase or sell real estate (but this restriction shall not prevent the
Fund from investing directly or indirectly in portfolio instruments secured
by real estate or interests therein, or acquiring securities of real estate
investment trusts or other issuers that deal in real estate), real estate
limited partnership interests, interests in oil, gas and/or mineral
exploration or development programs or leases. However, in order to comply
with the "blue sky" restrictions of certain states, the Fund will limit its
purchases of readily marketable real estate investment trusts to 10% of its
total assets, and the Fund will not invest in real estate limited
partnerships;
2. Purchase or sell commodities or commodity contracts;
3. Make investments in securities for the purpose of exercising control;
4. Purchase the securities of any one issuer if, immediately after such
purchase, the Fund would own more than 10% of the outstanding voting
securities of such issuer;
5. Sell securities short or purchase securities on margin, except for such
short-term credits as are necessary for the clearance of transactions;
6. Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of debt instruments in accordance with the Fund's
investment objectives and policies, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or broker-
dealers;
Page 31
<PAGE>
7. Borrow money or issue senior securities, except that the Fund may borrow
from banks in amounts up to one-third of the value of its total assets at
the time of such borrowing; or mortgage, pledge or hypothecate any assets,
except in connection with any such borrowing and in amounts not in excess
of the lesser of the dollar amounts borrowed or 10% of the value of the
total assets of the Fund at the time of its borrowing. All borrowings will
be done from a bank and asset coverage of at least 300% is required. The
Fund will not purchase securities when borrowings exceed 5% of its total
assets;
8. Purchase the securities of issuers conducting their principal business
activities in the same industry (other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities) if
immediately after such purchase the value of its investments in such
industry would exceed 25% of the value of the total assets of the Fund;
9. Act as an underwriter of securities, except that, in connection with the
disposition of a security, the Fund may be deemed to be an "underwriter" as
that term is defined in the Securities Act of 1933;
10. Invest in puts, calls, straddles or combinations thereof.
11. Purchase securities of other investment companies except as permitted
by the 1940 Act and the rules and regulations thereunder.
Although not considered fundamental, in order to comply with certain state "blue
sky" restrictions, the Fund will not: (1) invest more than 5% of its net assets
in warrants, including within that amount no more than 2% in warrants which are
not listed on the New York or American Stock Exchanges, except warrants acquired
as a result of its holdings of common stocks; (2) purchase or retain the
securities of any issuer if any officer, or trustee or director of the Fund or
of its investment manager owns beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, and such officers and trustees or
directors of the Fund or of its investment manager who own more than 1/2 of 1%,
own in the aggregate more than 5% of the outstanding securities of such issuer
and (3) invest more than 10% of its total assets in securities of companies less
than three years old. Such three-year period shall include the operation of any
predecessor company or companies. To comply with certain state securities
restrictions, the Fund will not invest more than 5% of its total assets in
securities of such issuers; however, if these restrictions are loosened, the
Fund reserves the right to invest up to 10% of its total assets in securities of
such issuers without advance notice to shareholders.
TRUSTEES AND OFFICERS
No officer or Trustee of the Trust who is also an officer or employee of the
Advisor receives any compensation from the Fund for services to the Fund. The
Trust pays each Trustee who is not affiliated with the Advisor a fee of $1,000
per year, plus $250 per meeting and reimburses each Trustee and officer for out-
of-pocket expenses in connection with travel and attendance at Board meetings.
Information pertaining to the Trustees and executive officers of the Fund is set
forth below.
<TABLE>
<CAPTION>
Aggregate
Compensation Total
Position held with the Fund From Trust for Compensation
and Principal Occupation(s) Fiscal Year Ended From Trust Paid
Name and Address Age During Past 5 Years March 31, 1996 to Trustees
- ---------------- --- --------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
James L. Farrell, Jr.* 59 Chairman of the Board and President; $ 0 $ 0
780 Third Avenue Chairman of Farrell-Wako Global
38th Floor Investment Management, Inc. from
New York, NY 10017 January 1991 to present; formerly
Chairman and Chief Investment Officer
of MPT Associates, New York, New York.
Mr. Farrell has extensive experience
in portfolio management and applied
financial research both at
</TABLE>
Page 32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Citibank and College Retirement Equities
Fund (CREF). Mr. Farrell has published
widely and has spoken at conferences in
the U.S., Japan, U.K. and Continental
Europe on approaches to systematic
investing. His book, Guide to Portfolio
------------------
Management, is widely known by investment
----------
practitioners and is utilized in leading
business schools. Mr. Farrell is an
adjunct professor of finance at N.Y.U.
and Columbia University. He has a B.S.
from the University of Notre Dame, an
M.B.A from Wharton and a Ph.D. from
New York University.
Shuichi Yamada* 46 Trustee and Treasurer, President of $ 0 $ 0
780 Third Avenue Farrell-Wako Global investment
38th Floor Management, Inc. from April, 1991 to
New York, NY 10017 present; formerly, Vice President,
Treasurer and Secretary of Wako
Securities (America), Inc., New York,
New York from January, 1988 through
April, 1992.
Herbert Passin 79 Trustee; Professor-Emeritus, Sociology, $1,750 $1,750
25 Claremont Avenue Columbia University; Senior Research
New York, NY 10027 Associate, East Asian Institute, Columbia
University and Chairman, Department of
Sociology. Columbia University (retired
from active teaching in 1987), consultant
or advisor to various global corporations
and foundations during the past ten years
including RAND Corporation, Toyota Motor
Co., Ford Foundation and Morrison and
Foerster, among others; Member, Board of
Directors, International Institute for
Global Peace (Japan).
Arthur Williams, III 55 Trustee; President and founder of Pine $1,750 $1,750
382 Springfield Avenue Grove Associates, Inc., an investment
Summit, NJ 07901 advisory and consulting firm, from
February, 1994 to present; formerly,
Director of Retirement Plan Investments
for McKinsey & Co., Inc.. New York,
New York from June, 1987 through
February, 1994; Director, The Investment
Fund for Foundations since February 1994.
Monte E. Wetzler, Esq.* 60 Secretary of Trust since June 1995; $ 0 $ 0
200 Park Avenue Partner, Whitman Breed Abbott and
New York, NY 10166 Morgan from 1988 to present.
</TABLE>
* Interested person as that term is defined in the 1940 Act.
Page 33
<PAGE>
PRINCIPAL SHAREHOLDERS
As of July 26, 1996, the Officers and Trustees of the Trust, together as a
group, owned beneficially less than 1% of the Fund and the Trust, respectively.
As of July 26, 1996, the following persons owned of record and beneficially more
than 5% of the outstanding voting shares of the Fund and the Trust:
Name & Address of Beneficial Owners Percentage
Wako International Europe 19.27%
155 Bishopgate 4th Floor
London, EC2
Wako Securities America * 57.82%
One World Trade Center Ste. 8369
New York, NY 10048
Wako International Hong Kong Ltd. 19.27%
2 Pacific Place
88 Queens Way Room 1911-13
Hong Kong
* Person deemed to control the Fund within the meaning of the 1940 Act. Note
that such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Advisor have entered into an investment advisory agreement (the
"Investment Advisory Agreement"). The Investment Advisory Agreement provides
that the Advisor shall not be protected against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Investment Advisory Agreement provides that if, for any fiscal year, any
ratio of expenses of the Fund (including amounts payable to the Advisor but
excluding interest, taxes, brokerage, litigation and other extraordinary
expenses) exceeds limitations established by any state in which the shares of
the Fund are registered, the Advisor will bear the amount of such excess.
If the Fund is registered in California, and to the extent that the Fund
purchases securities of open-end investment companies, the Advisor will waive
its advisory fee on that portion of the Fund's assets invested in such
securities.
The Advisor has agreed to waive its advisory fee in an amount equal to the total
expenses of the Fund for any fiscal year which exceeds the permissible limits
applicable to the Fund in any state in which its shares are then qualified for
sale. At the present time, the most restrictive state expense limitation limits
a fund's annual expenses (excluding interest, taxes, distribution expense,
brokerage commissions and extraordinary expenses, and other expenses subject to
approval by state securities administrators) to 2.5% of the first $30 million of
its average daily net assets, 2.0% of the next $70 million of its average daily
net assets and 1.5% of its average daily net assets in excess of $100 million.
For the period April 18, 1995 (commencement of operations) through
March 31, 1996, the Advisor agreed to waive advisory fees of $39,409 and
reimburse the Fund for expenses totaling $236,343.
The continuance of the Investment Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees
or by a vote of the shareholders of Fund, and (ii) by the vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement
will terminate automatically in the event of its assignment, and is terminable
at any time without penalty by the Trustees of the Trust, or by a majority of
the outstanding shares of the Fund on not less than 30 days' nor more than 60
days' written notice to the Advisor, or by the Advisor on 90 days' written
notice to the Fund.
Page 34
<PAGE>
Administrator
Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, Pennsylvania 19428
(the "Administrator") provides certain administrative services to the Fund
pursuant to an Administrative Services Agreement. Effective on or about
November 1, 1996 Fund/Plan Services, Inc. address will be 3200 Horizon Drive
P.O. Box 61503 King of Prussia, Pennsylvania 19406-0903.
Under the Administrative Services Agreement, the Administrator: (1) coordinates
with the Custodian and Transfer Agent and monitors the services they provide to
the Fund; (2) coordinates with and monitors any other third parties furnishing
services to the Fund; (3) provides the Fund with necessary office space,
telephones and other communications facilities and personnel competent to
perform administrative and clerical functions; (4) supervises the maintenance by
third parties of such books and records of the Fund as may be required by
applicable federal or state law; (5) prepares 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 SEC and other federal and state
regulatory authorities as may be required by applicable law; (8) reviews and
submits to the officers of the Fund for their approval invoices or other
requests for payment of the Fund's expenses and instructs the Custodian to issue
checks in payment thereof and (9) 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.
As compensation for the services performed under the Administrative Services
Agreement, the Administrator receives a fee computed at the annual rate of 0.15%
of the first $75 million of total average net assets, 0.10% of the next $75
million of total average net assets and 0.05% of total net assets in excess of
$150 million. As stated in the Administrative Services Agreement, aggregate
administration fees will not be less $95,000. For the period April 18, 1995
(commencement of operations) through March 31, 1996, the Trust paid $115,203 for
Administration fees.
Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken,
Pennsylvania 19428-0874, was engaged pursuant to an agreement for the limited
purpose of acting as underwriter to facilitate the registration of shares of the
Fund under state securities laws and to assist in the sale of shares. Effective
on or about November 1, 1996 FPBS address will be 3200 Horizon Drive P.O. Box
61503 King of Prussia, Pennsylvania 19406-0903. FPBS is a broker-dealer
registered with the SEC and a member in good standing of the National
Association of Securities Dealers, Inc.
Custodian
Sumitomo Bank of New York Trust Company,("Sumitomo Bank") 2 World Financial
Center Tower B, 225 Liberty Street 35th Floor, New York, New York 10281 is the
custodian of the cash and securities of the Fund pursuant to a custodian
agreement. Under the custodian agreement, Sumitomo Bank (i) maintains a
separate account or accounts in the name of the Fund (ii) holds and transfers
portfolio securities on account of the Fund, (iii) accepts receipts and makes
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's securities
and (v) makes periodic reports to the Board of Trustees concerning the Fund's
operation.
Independent Accountants
Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, PA 19103 has
been selected as the independent accountants for the Fund. Coopers & Lybrand
L.L.P. provides audit and tax services along with assistance and consultation
with respect to regulatory filings with the U. S. Securities and Exchange
Commission. The books of the Fund will be audited at least once each year by
Coopers & Lybrand L.L.P.
Page 35
<PAGE>
Distribution Plan
The Board of Trustees of the Trust has adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act ("the Plan") for the Class A Shares of the Fund.
Effective July 29, 1996, the Class A Shares of the Fund were abolished and there
are no remaining shareholders in the Class. The Plan does not apply to the
Class D Shares of the Fund, which are the only shares currently being offered.
Pursuant to the Plan, for the fiscal year ended March 31, 1996, the Trust paid
Fund/Plan Broker Services, Inc. ("FPBS"), the Distributor, $10,664 from the
assets of the Class A Shares for services and expenses incurred in distributing
and promoting sales of the Class A Shares of the Fund. Of this amount, $3,023
was for printing costs and $7,641 was for other costs associated with the
distribution of the Class A Shares of the Fund. Aggregate fees paid under the
Plan to FPBS and others may not exceed 0.25% of the average daily net assets
attributable to the Class A Shares in any year.
NET ASSET VALUE
The net asset value per share is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares of the respective class
of shares outstanding. Portfolio securities are valued and net asset value per
share is determined as of the close of regular trading on the New York Stock
Exchange ("NYSE") which currently is 4:00 p.m. (Eastern time), on each day the
NYSE is open for trading.
The NYSE is open for trading every day except Saturdays, Sundays and the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
Trading in securities on the Japanese exchanges and over-the-counter markets is
normally completed well before the close of the business day in New York. In
addition, Japanese trading may not take place on all business days in New York.
Furthermore, trading takes place in Japanese markets on certain Saturdays and in
various foreign markets on days which are not business days the NYSE is open and
therefore the Fund's net asset values are not calculated.
The calculation of the Fund's net asset values may not take place
contemporaneously with the determination of the prices of portfolio securities
held by the Fund. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the NYSE
will not be reflected in the Fund's calculation of net asset value unless the
Board of Trustees deems that the particular event would materially affect the
net asset value, in which case
Page 36
<PAGE>
an adjustment will be made. Assets or liabilities initially expressed in terms
of foreign currencies are translated prior to the next determination of the net
asset value of the Fund's shares into U.S. dollars at the prevailing market
rates. The fair value of all other assets is added to the value of securities
to arrive at the total assets.
TAXES
The following is only a summary of certain federal tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus, and is not intended as a substitute for careful tax planning.
Shareholders are urged to consult their tax advisors with specific reference to
their own tax situations, including their state and local tax liabilities. Non-
U.S. investors should consult their tax advisors concerning the tax consequences
of ownership of shares of the Fund, including the possibility that distributions
may be subject to a 31% U.S. withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based on the
Internal Revenue Code (the "Code") and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. New
legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
The Fund has qualified, and intends to continue to qualify, as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code. By
following such a policy, the Fund expects to eliminate or reduce to a nominal
amount the federal income taxes to which it may be subject. In order to qualify
for treatment as a RIC under the Code, the Fund generally must distribute
annually to its shareholders at least 90% of its investment company taxable
income (generally, net investment income plus net short-term capital gain) (the
"Distribution Requirement") and also must meet several additional requirements.
Among these requirements are the following: (i) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
stock or securities, or certain other income; (ii) the Fund must derive less
than 30% of its gross income each taxable year from the sale or other
disposition of stocks or securities held for less than three months; (iii) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RlCs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer and (iv) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. government
securities or the securities of other RICs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses. Notwithstanding the Distribution Requirement
described above, which requires only that the Fund distribute at least 90% of
its annual investment company taxable income and does not require any minimum
distribution of net capital gain (the excess of net long-term capital gain over
net short-term capital loss), the Fund will be subject to a nondeductible 4%
federal excise tax to the extent that it fails to distribute by the end of any
calendar year 98% of its ordinary income for that year and 98% of its capital
gain net income (the excess of short- and long-term capital gains over short-
and long-term capital losses) for the one-year period ending on October 31 of
that year, plus certain other amounts. The Fund intends to make sufficient
distributions of its ordinary income and capital gain net income prior to the
end of each calendar year to avoid liability for federal excise tax.
Any gain or loss recognized on a sale, redemption or exchange of shares of the
Fund by a non-exempt shareholder who is not a dealer in securities generally
will be treated as a long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise generally will be treated as a short-
term capital gain or loss. If shares of the Fund on which a net capital gain
distribution has been received are subsequently sold, redeemed or exchanged and
such shares have been held for six months or less, any loss recognized will be
treated as a long-term capital loss to the extent of the long-term capital gain
distribution.
In certain cases, the Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup
Page 37
<PAGE>
withholding by the Internal Revenue Service or (3) has not certified to the Fund
that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be subject
to tax on its taxable income at regular corporate rates. In such an event, all
distributions from the Fund generally would be eligible for the corporate
dividend received deduction for corporate shareholders.
Foreign Taxes
Foreign governments may withhold taxes from dividends or interest paid with
respect to foreign securities typically at a rate between 10% and 35%. Tax
conversions between certain countries and the United States may reduce or
eliminate such taxes. The Fund intends to elect to pass-through foreign taxes
paid in order for a shareholder to take a credit or deduction if, at the close
of its fiscal year, more than 50% of the Fund's total assets are invested in
securities of foreign issuers.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any broker/dealer or group of
broker/dealers in the execution of transactions in portfolio securities.
Subject to policies established by the Trustees, the Advisor is responsible for
placing the orders to execute transactions for the Fund. In placing orders, it
is the policy of the Fund to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. When more than one firm is believed to meet these
criteria, preference may be given to brokers who provide research or statistical
material or other services to the Fund or the Advisor. While the Advisor
generally seeks reasonably competitive spreads, the Fund will not necessarily be
paying the lowest spread available.
The Fund expects to conduct substantially all or a majority of its brokerage
transactions through Wako Securities Co., Ltd., an affiliated broker of the
Advisor. The commissions on these transactions are deemed by the Fund to be
fair and reasonable compared to the commission, fee or other renumeration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period. The Trustees, including those who are not "interested
persons" of the Fund, have adopted procedures for evaluating the reasonableness
of commissions paid and will review these procedures periodically. The Fund
incurred brokerage commissions of $135,054 for the period April 18, 1995
(commencement of operations) through March 31, 1996.
Because the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Advisor may place portfolio orders with qualified
broker/dealers who recommend the Fund to clients, and may, when a number of
brokers and dealers can provide best net results on a particular transaction,
consider such recommendations by a broker or dealer in selecting among
broker/dealers.
Page 38
<PAGE>
Portfolio Turnover
Although the Fund cannot accurately predict its portfolio turnover rate, under
normal circumstances the portfolio turnover rate may exceed 100% per year. A
portfolio turnover rate is excess of 100% may involve correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by the Fund and ultimately by the shareholders. In addition, high portfolio
turnover may result in increased short-term capital gains, which, when
distributed to shareholders, are treated as ordinary income. For the period
April 18, 1995 (commencement of operations) through March 31, 1996, the Fund's
portfolio turnover rate was 123%.
PERFORMANCE INFORMATION
In General
From time to time, the Fund may include general comparative information, such as
statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Fund may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of the Fund.
From time to time, the yield and total return of the Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Total Return Calculation
The Fund computes average annual total return by determining the average annual
compounded rate of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
ERV = P (1 + T)/n/
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ ERV - 1 ]
--------
P
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
Page 39
<PAGE>
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. Based on the foregoing calculations,
the average annual total return for Class A Shares of the Fund, for the period
April 18, 1995 (commencement of operations) through March 31, 1996 was (7.20%).
The average annual total return for Class D Shares of the Fund, for the period
April 18, 1995 (commencement of operations) through March 31, 1996 was (6.90%).
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Yield Calculation
Yield, in its simplest form, is the ratio of income per share derived from the
Fund's investments to a current maximum offering price expressed in terms of a
percentage. The yield is quoted on the basis of earnings after expenses have
been deducted. The yield of the Fund is calculated by dividing the net
investment income per share earned during a 30-day (or one month) period by the
maximum offering price per share on the last day of the period and annualizing
the result. The Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
YIELD = 2 [(a - b + 1)/6/ - 1]
-----
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by the
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by the Fund is calculated by computing the
yield to maturity of each obligation held by the Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by the Fund. For purposes of this
calculation, it is assumed that each month contains 30 days. The date on which
the obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by the Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
Page 40
<PAGE>
Performance and Advertisements
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Fund's
performance may also be compared to the average performance of its Lipper
category.
The Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. ("Morningstar") which ranks funds on the basis of
historical risk and total return. Morningstar's rankings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or necessarily
predictive of future performance.
The Fund may compare its performance to a wide variety of indices including the
Nikkei Stock Average and the Morgan Stanley Capital International Japan Index.
The Nikkei Stock Average is an index of 225 leading stocks traded on the Tokyo
Stock Exchange.
In assessing such comparisons of yield, return or volatility, an investor should
keep in mind that the composition of the investments in the reported indices and
averages is not identical to those of the Fund, that the averages are generally
unmanaged, and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its figures.
Because the Fund's investments primarily are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Fund's investment performance. Historical information
regarding the value of the dollar versus foreign currencies may be used from
time to time in advertisements concerning the Fund.
OTHER INFORMATION
Shareholder Liability
The Trust is an entity of the type commonly known as a "Delaware business
trust". Under Delaware law, shareholders of such a trust could, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. Even if, however, the Fund were held to be a partnership, the possibility
of the shareholders incurring financial loss for that reason appears remote
because the Trust Instrument contains an express disclaimer of shareholder
liability for obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by or on behalf of the Trust or the Trustees, and because the Trust
Instrument provides for indemnification out of the Trust property for any
shareholder held personally liable for the obligations of the Trust.
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only for his own
willful defaults and, if reasonable care has been exercised in the selection of
officers, agents, employees or investment advisors, shall not be liable for any
neglect or wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with actual or threatened litigation in which
they may be involved because of their offices with the Trust unless it is
determined in the manner provided in the Trust Instrument that they have not
acted in good faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Trust Instrument shall protect
or indemnify a Trustee against any liability for his willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties.
Page 41
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1 + and 2, to indicate the relative degree of safety. Issues rated A-
1+ are those with an "overwhelming degree" of credit protection. Those Rated A-1
reflect a "very strong" degree of safety regarding timely payment. Those Rated
A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of superior quality and strong quality, respectively, on the basis
of relative repayment capacity.
F-1 + (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1 + is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated F-1 + or
F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1 + and 1 -
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1 + has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
strong capacity for timely repayment. Those obligations rated A1 + are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a satisfactory capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
FINANCIAL STATEMENTS
The Fund's financial statements, including the notes thereto, dated as of
March 31, 1996, which have been audited by Coopers & Lybrand, L.L.P., are
incorporated by reference from the Fund's 1996 Annual Report to Shareholders.
Page 42
<PAGE>
FARRELL ALPHA STRATEGIES
Form N-1A
Part C - Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
- -------------------------------------------
(a) Financial Statements.
Included in Part A:
(1) Financial Highlights for the period April 18, 1995
(commencement of operations) through March 31, 1996
(audited).
Incorporated by reference in Part B:
The Japan Alpha Fund
--------------------
(1) Schedule of Investments as of March 31, 1996 (audited).
(2) Statement of Assets and Liabilities at March 31, 1996
(audited).
(3) Statement of Operations for period ended March 31, 1996
(audited).
(4) Statement of Changes in Net Assets for the period of
April 18, 1995 (commencement of operations) through
March 31, 1996 (audited).
(5) Notes to Financial Statements dated March 31, 1996.
(6) Financial Highlights (audited).
(7) Report of Independent Accountants
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Copies of Charter -- Trust Instrument is filed herewith
electronically, previously filed as Exhibit No. (1) to
Registration Statement No. 33-92540 filed May 19, 1995.
(2) Copies of existing By-Laws -- Not Applicable.
(3) Copies of any voting trust agreement -- Not Applicable.
(4) Copies of all instruments defining the rights of holders of
the securities -- Not Applicable -Registrant proposes to
maintain investments as non-certificated book entry shares.
(5) Copies of all investment advisory contracts -- Investment
Advisory Agreement is filed herewith electronically,
previously filed as Exhibit No. (5) to Registration
Statement No. 33-92540 filed July 7, 1995.
(6) Copies of each underwriting or distribution contract --
Underwriting Agreement is filed herewith electronically,
previously filed as Exhibit No. (6) to Registration Statement
No. 33-92540 filed July 7, 1995.
Page 43
<PAGE>
(7) Copies of all bonus, profit sharing, pension or other similar
contracts -- Not Applicable.
(8) Copies of all custodian agreements -- Custodian Agreement
and Sub-Custodian Agreement are filed herewith
electronically, previously filed as Exhibit No. (8) to
Registration Statement No. 33-92540 filed July 7, 1995.
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed.
(a) Transfer Agent Services Agreement between Registrant
and Fund/Plan Services, Inc. dated June 28, 1995 is
filed herewith electronically, previously filed as
Exhibit No. (9)(a) to Registration Statement
No. 33-92540 filed July 7, 1995.
(b) Administration Agreement between Registrant and
Fund/Plan Services, Inc. dated June 28, 1995 is filed
herewith electronically, previously filed as Exhibit
No. (9)(b) to Registration Statement No. 33-92540
filed July 7, 1995.
(c) Accounting Services Agreement between Registrant and
Fund/Plan Services, Inc. dated June 28, 1995 is filed
herewith electronically, previously filed as Exhibit
No. (9)(c) to Registration Statement No. 33-92540
filed July 7, 1995.
(10) (a) Opinion and Consent of Counsel as to the legality of the
securities to be issued is incorporated by reference to
Registrant's Rule 24f-2 Notice filed electronically on
May 30, 1996.
(11) Copies of any other opinions, appraisals or rulings --
(a) Consent of Independent Accountants - filed herewith
electronically.
(12) All financial statements omitted from Item 23. --
Not Applicable.
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Registrant -- Not Applicable.
(14) Copies of the model plan -- Not Applicable.
(15) Copies of any plan entered into by Registrant pursuant to
Rule 12b-1 is filed herewith electronically, previously
filed as Exhibit No. (15) to Registration Statement
No. 33-92540 filed July 7, 1995.
(16) Schedule for Computation of Performance Quotations -- filed
herewith electronically.
.
(18) The Multiple Class Plan is filed herewith electronically.
(19) Trustees' Powers of Attorney for (a) Shuichi Yamada;
(b) James L. Farrell, Jr.; (c) Herbert Passin; and
(d) Arthur Williams, III are filed herewith electronically,
previously filed as Exhibit No. (18) to Registration
Statement No. 33-92540 filed July 7, 1995.
Page 44
<PAGE>
(27) Electronic Filers -- The Financial Data Schedule is filed
herewith electronically
Item 25. Persons Controlled by or under Common Control with Registrant.
- -----------------------------------------------------------------------
None.
Item 26. Number of Holders of Securities.
- -----------------------------------------
Number of Record holders as of July 26, 1996
--------------------------------------------
22
Item 27. Indemnification.
- -------------------------
Reference is made to Article X of the Registrant's Trust Instrument
which was filed as Exhibit 1, and is incorporated by reference herein.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to directors, officers
and controlling persons of the Registrant by the Registrant pursuant to
the Trust's Trust Instrument, or otherwise, the Registrant is aware
that in the opinion of the U.S. Securities and Exchange Commission,
such indemnification is against public policy as expressed in the 1933
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such trustees
officers or controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Advisor.
- ---------------------------------------------------
Farrell-Wako Global Investment Management, Inc., 780 Third Avenue,
38th Floor, New York, New York 10017 provides investment advisory
services to individual and institutional investors, and as of
July 1, 1996 had approximately $258 million in assets under
management.
For information as to any other business, vocation or employment of a
substantial nature in which each Director or officer of the
Registrant's investment advisor has been engaged for his own account
or in the capacity of Director, officer, employee, partner or trustee,
reference is made to the Form ADV (File #801-41830) filed by it under
the Investment Advisers Act of 1940.
Item 29. Principal Underwriter.
- -------------------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal
underwriter for the Registrant's securities, currently acts as
principal underwriter for the following entities:
The Brinson Funds
CT&T Funds
Fairport Funds
First Mutual Funds
Page 45
<PAGE>
Focus Trust, Inc.
The Homestate PA Growth Fund
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
(b) The table below sets forth certain information as to the
Underwriter's Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
------------------ ---------------- ------------
<S> <C> <C>
Kenneth J. Kempf Director, President None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and None
2 W. Elm Street Principal
Conshohocken, PA 19428-0874
Rocco C. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874 and Principal
Joseph M. O'Donnell, Esq. Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
</TABLE>
Page 46
<PAGE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
- ------------------------------------------
All records described in Section 31(a) of the 1940 Act and the
Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Trust's Investment Advisor, Farrell-Wako Global
Investment Management, Inc., 780 Third Avenue, 38th Floor,
New York, NY 10017, except for those maintained by the Fund's
Custodian, Sumitomo Bank of New York Trust Company, 277 Park Avenue,
New York, New York 10172 and the Trust's Administrator, Transfer
Agent and Fund Accounting Services Agent, Fund/Plan Services Inc.
2 W. Elm Street, Conshohocken, PA 19428.
Item 31. Management Services.
- -----------------------------
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings.
- ----------------------
(a) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any Trustee when requested in writing to do so by the
record holders of not less than 10 percent of the Registrant's
outstanding shares and to assist its shareholders in accordance
with the requirements of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
Page 47
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Conshohocken, and State of Pennsylvania on the
29th day of July, 1996.
- ----
Farrell Alpha Strategies
---------------------------------
Name of Registrant
By /s/ James L. Farrell, Jr.
------------------------------
James L. Farrell, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Farrell Alpha Strategies has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ James L. Farrell, Jr. President, Chairman of the 7/29/96
- --------------------------- Board and Principal Executive
James L. Farrell, Jr. Officer
/s/ Shuichi Yamada Trustee, Treasurer and 7/29/96
- --------------------------- Principal Accounting and
Shuichi Yamada Financial Officer
/s/ Herbert Passin Trustee 7/29/96
- ---------------------------
Herbert Passin
/s/ Arthur Williams, III Trustee 7/29/96
- ---------------------------
Arthur Williams, III
</TABLE>
- ---------------------
By: /s/ Carolyn F. Mead, Esq. as
Attorney-in-Fact and Agent pursuant
to Power of Attorney
Page 48
<PAGE>
FARRELL ALPHA STRATEGIES
Index to Exhibits to Form N-1A
<TABLE>
<CAPTION>
Exhibit Description of Sequentially
Number Exhibit Numbered Page
<S> <C>
(99.B1) Trust Instrument..........................................
(99.B5) Investment Advisory Agreement.............................
(99.B6) Underwriting Agreement....................................
(99.B8) Form of Custodian Agreement and Sub-Custodian Agreement...
(99.B9)(a) Transfer Agent Services Agreement.......................
(99.B9)(b) Administration Services Agreement.......................
(99.B9)(c) Accounting Services Agreement...........................
(99.B11)(a) Consent of Independent Accountants.....................
(99.B15) Distribution and Services Plan pursuant to Rule 12b-1.....
(99B.16) Performance Calculations..................................
(99B.18) The Multiple Class Plan...................................
(99B.24) Trustees' Powers of Attorney..............................
(99B.27)(a) Financial Data Schedule-Class A........................
(99B.27)(b) Financial Data Schedule-Class D........................
</TABLE>
Page 49
<PAGE>
JAPAN ALPHA FUND Exhibit 99.B1
DATED APRIL 6, 1995
TRUST INSTRUMENT dated as of April 6, 1995, among Shuichi Yamada, as
trustee, and each person who becomes a shareholder (as hereinafter defined) in
accordance with the terms hereof.
WHEREAS, the parties hereto desire to create a business trust pursuant to
the Delaware Act (as hereinafter defined) for the investment and reinvestment of
funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument for the benefit of the shareholders (as hereinafter defined) as
herein set forth below.
ARTICLE I
---------
NAME, DEFINITION AND CERTIFICATE OF TRUST
-----------------------------------------
Section 1.1. Name. The name of the business trust created hereby is
----
"Japan Alpha Fund".
Section 1.2. Definitions. Wherever used herein, unless otherwise
-----------
required by the context or specifically provided:
(a) "Bylaws" means the Bylaws referred to in Article IV, Section
4.1(e) hereof, as from time to time amended;
(b) The term "Commission" has the meaning given it in the 1940 Act.
The terms "Affiliated Person", "Assignment", "Interested Person" and "Principal
Underwriter" shall have the meanings given them in the 1940 Act, as modified by
or interpreted by any applicable order or orders of the Commission or any rules
or regulations adopted or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or order of the Commission or
any rules or regulations adopted or interpretive releases of the Commission
thereunder;
(c) The "Delaware Act" refers to the Delaware Business Trust Act,
12 Del.C. (S) 3801, et seq., as such Act may be amended from time to time;
--- - ------
(d) "Net Asset Value" means the net asset value of each Series of
the Trust determined in the manner provided in Article IX, Section 9.3 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time
in the books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust;
(f) "Person" means a natural person, partnership, limited
partnership, trust, estate, association, corporation, custodian, nominee or
any other individual or entity in its own or any representative capacity;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.6 hereof;
(h) "Shareholder means a record owner of Outstanding Shares of the
Trust;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(j) The "Trust" refers to the Japan Alpha Fund business trust
created hereby, and reference to the Trust, when applicable to one or more
Series of the Trust, shall refer to any such Series;
(k) The "Trustees" means the Persons who have signed this Trust
Instrument as trustees so long as they shall continue to serve as trustees of
the Trust in accordance with the terms hereof, and each other Person who may
from time to time be duly appointed as a Trustee in accordance with the
provisions of Section 3.4 hereof, and reference herein to a Trustee or to the
Trustees shall refer to such Persons in their capacity as Trustees hereunder;
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series;
(m) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
<PAGE>
Section 1.3. Certificate of Trust. Immediately upon the execution of
--------------------
this Trust Instrument, the Trustees shall file a Certificate of Trust with
respect to the Trust in the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act.
ARTICLE II
----------
BENEFICIAL INTEREST
-------------------
Section 2.1. Shares of Beneficial Interest. The beneficial interest in
-----------------------------
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including, without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
Section 2.2. Issuance of Shares. The Trustees in their discretion may,
------------------
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into
a greater or lesser number without hereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
Section 2.3. Register of Shares and Share Certificates. A register shall
-----------------------------------------
be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As to
Shares for which no certificate has been issued, such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or other distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive payment of
any dividend or other distribution, nor to have notice given to him as herein or
in the Bylaws provided, until he has given his address to the transfer agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. The Trustees, in their discretion, may authorize the issuance of
share certificates and promulgate appropriate rules and regulations as to their
use. Such certificates may be issuable for any purpose limited in the Trustees'
discretion. In the event that one or more certificates are issued, whether in
the name of a shareholder or a nominee, such certificate or certificates shall
constitute evidence of ownership of Shares for all purposes, including transfer,
assignment or sale of such Shares, subject to such limitations as the Trustees
may, in their discretion, prescribe.
Section 2.4. Transfer of Shares. Except as otherwise provided by the
------------------
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Section 2.5. Treasury Shares. Shares in the treasury shall, until
---------------
reissued pursuant to Section 2.2 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6. Establishment of Series. The Shares issued hereunder shall
-----------------------
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated solely with
any such Series shall be held and accounted for separately from the assets of
the Trust associated solely with any other Series. The Trustees shall have full
power and authority, in their sole discretion, and without obtaining any prior
authorization or vote of the Shareholders of any Series of the Trust, to
establish and designate and to change in any manner any such Series of Shares or
any classes of initial or additional Series or to fix such preferences, voting
<PAGE>
powers, rights and privileges of such Series or classes thereof as the Trustees
may from time to time determine, to divide or combine the Shares or any Series
or classes thereof into a greater or lesser number, to classify or reclassify
any issued Shares or any Series or classes thereof into one or more Series or
classes of Shares, and to take such other action with respect to the Shares as
the Trustees may deem desirable. The establishment and designation of any
Series shall be effective upon the adoption of a resolution by a majority of the
Trustees setting forth such establishment and designation and the relative
rights and preferences of the Shares of such Series. A Series may issue any
number of Shares but need not issue any shares. At any time that there are no
Shares outstanding of any particular Series previously established and
designated, the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require.
All provisions herein relating to the Trust shall apply equally to each Series
of the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Outstanding Shares of
a Series shall be entitled to receive his pro rata share of distributions of
income and capital gains, if any, made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out of the funds
and property of such Series of the Trust.
Section 2.7. Investment in the Trust. The Trustees shall accept
-----------------------
investments in any Series of the Trust from such Persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.3 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however, that
the Trustees may, in their sole discretion, (a) fix the Net Asset Value per
Share of the initial capital contribution, (b) impose a sales charge upon
investments in the Trust in such manner and at such time determined by the
Trustees or (c) issue fractional Shares.
Section 2.8. Assets and Liabilities of Series. All consideration
--------------------------------
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits, or funds,
or payments and proceeds with respect thereto, shall be assets belonging to that
Series. The assets belonging to a particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as belonging to any
particular Series shall be allocated and charged by the Trustees between or
among any one or more of the Series in such manner as the Trustees, in their
sole discretion, deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series for all purposes.
Without limitation of the foregoing provisions of this Section 2.8, but subject
to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of the Trust generally.
Notice of this contractual limitation on inter-Series liabilities shall be set
forth in the certificate of trust of the Trust as filed or to be filed in the
Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act, and upon the giving of such notice in the certificate of trust,
the statutory provisions of Section 3804 of the Delaware Act relating to
limitations on inter-Series liabilities (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any Person extending credit to,
contracting with or having any claim against any Series may look only to the
assets of that Series to satisfy or enforce any debt, liability, obligation or
expense incurred, contracted for or otherwise existing with respect to that
Series. No Shareholder or former Shareholder of any Series shall have a claim
on or any right to any assets allocated or belonging to any other Series.
<PAGE>
Section 2.9. No Preemptive Rights. Shareholders shall have no preemptive
--------------------
or other right to subscribe to any additional Shares or other securities issued
by the Trust or the Trustees, whether of the same or other Series.
Section 2.10. Personal Liability of Shareholders. No Shareholder of the
----------------------------------
Trust shall be personally liable for the debts, liabilities, obligations and
expenses incurred by, contracted for, or otherwise existing with respect to, the
Trust or any Series thereof. The Trustees shall have no power to bind any
Shareholder personally or, except as provided by applicable law, to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to any Series thereof shall include a recitation limiting the
obligation represented thereby to the Trust or to one or more Series thereof and
its or their assets (but the omission of such a recitation shall not operate to
bind any Shareholder or Trustees of the Trust).
Section 2.11. Assent to Trust Instrument. Every Shareholder, by virtue
--------------------------
of having purchased a Share, shall be held to have expressly assented to, and
agreed to be bound by, the terms hereof.
ARTICLE III
-----------
THE TRUSTEES
------------
Section 3.1. Management of the Trust. The Trustees shall have exclusive
-----------------------
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of Delaware, in
any and all states of the United States of America, in the District of Columbia,
in any and all commonwealths, territories, dependencies, colonies, or
possessions of the United States of America, and in any foreign jurisdiction and
to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination
as to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Trust Instrument, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.4 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
Section 3.2. Initial Trustees. The initial Trustees shall be the persons
----------------
named herein. On a date fixed by the Trustees, the Shareholders shall elect at
least ___ but not more than ___ Trustees, as specified by the Trustees pursuant
to Section 3.6 of this Article III.
Section 3.3. Term of Office of Trustees. The Trustees shall hold office
--------------------------
during the lifetime of this Trust, and until its termination as herein provided;
except (a) that any Trustees may resign their trust by written instrument signed
by him and delivered to the other Trustees, which shall take effect upon such
delivery or upon such later date as is specified therein; (b) that any Trustees
may be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when such
removal shall become effective; (c) that any Trustees who requests in writing to
be retired or who has died, become physically or mentally incapacitated by
reason of disease or otherwise, or is otherwise unable to serve, may be retired
by written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least two-
thirds of the outstanding Shares.
Section 3.4. Vacancies and Appointment of Trustees. In case of the
-------------------------------------
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise, or a Trustee is otherwise
unable to serve, or an increase in the number of Trustees, a vacancy shall
occur. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, the other Trustees shall have all the powers hereunder
<PAGE>
and the certificate of the other Trustees of such vacancy shall be conclusive.
In the case of an existing vacancy, the remaining Trustees shall fill such
vacancy by appointing such other person as they in their discretion shall see
fit consistent with the limitations under the 1940 Act. Such appointment shall
be evidenced by a written instrument signed by a majority of the Trustees in
office or by resolution of the Trustee, duly adopted, which shall be recorded in
the minutes of a meeting of the Trustees, whereupon the appointment shall take
effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.4 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustee, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. The power to appoint a Trustee pursuant to this
Section 3.4 is subject to the provisions of Section 16(a) of the 1940 Act.
Section 3.5. Reserved.
--------
Section 3.6. Number of Trustees. The number of Trustees shall initially
------------------
be one, and thereafter shall be such number as shall be fixed from time to time
by a majority of the Trustees; provided, however, that the number of Trustees
shall in no event be less than __________ nor more than ____________.
Section 3.7. Effect of Death, Resignation, etc. of a Trustee. The
-----------------------------------------------
declination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.8. Ownership of Assets of the Trust. The assets of the Trust
--------------------------------
and of each Series thereof shall be held separate and apart from any assets now
or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. Legal title in all of the assets of the
Trust and the right to conduct any business shall at all times be considered as
vested in the Trustees on behalf of the Trust, except that the Trustees may
cause legal title to any Trust Property to be held by or in the name of the
Trust, or in the name of any person or nominee. No Shareholder shall be deemed
to have a severable ownership in any individual asset of the Trust or of any
Series or any right of partition or possession thereof, but each Shareholder
shall have, except as otherwise provided for herein, a proportionate undivided
beneficial interest in the Trust or Series. The Shares shall be personal
property giving only the rights specifically set forth in this Trust Instrument
or the Delaware Act.
ARTICLE IV
----------
POWERS OF THE TRUSTEES
----------------------
Section 4.1. Powers. The Trustees in all instances shall act as
------
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold
cash or other property uninvested, without in any event being bound or limited
by any present or future law or custom in regard to investments by trustees, and
to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and
lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the conduct of
such operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust
either through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both, or otherwise pursuant to a plan of distribution of
any kind;
<PAGE>
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve the right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate
such agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that
are members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the
Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XI, Section 11.4(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a particular Series
or to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor
of or against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the
powers of the Trustees to said committees and to adopt a committee charter
providing for such responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of said
committees as the Trustees may deem proper. Notwithstanding the provisions of
this Article IV, and in addition to such provisions or any other provision of
this Trust Instrument or of the Bylaws, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which shall be pending
or threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations
of any Series;
(w) To establish a registered office and have a registered agent in
the State of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
<PAGE>
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by one or
more of the Trustees in their capacity as such hereunder shall be deemed an
action on behalf of the Trust or the applicable Series, and not an action in an
individual capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.2. Issuance and Repurchase of Shares. The Trustees shall have
---------------------------------
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Articles II and IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust, or the particular Series of the Trust, with respect to
which such Shares are issued.
Section 4.3. Trustees and Officers as Shareholders. Any Trustee, officer
-------------------------------------
or other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if he were not a Trustee, officer or agent; and the Trustees may issue
and sell or cause to be issued and sold Shares to and buy such Shares from any
such person or any firm or company in which he is interested, subject only to
the general limitations herein contained as to the sale and purchase of such
Shares; and all subject to any restrictions which may be contained in the
Bylaws.
Section 4.4. Action by the Trustees. The Trustees act by majority vote
----------------------
at a meeting only called or by unanimous written consent without a meeting or by
telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman of
the Board of Trustees or by any two other Trustees. Notice of the time, date
and place of all meetings of the Trustees shall be given by the party calling
the meeting to each Trustee by telephone, telefax, or telegram sent to his home
or business address at least twenty-four hours in advance of the meeting or by
written notice mailed to his home or business address at least seventy-two hours
in advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a written
waiver of notice with respect to the meeting. Any meeting conducted by telephone
shall be deemed to take place at the principal office of the Trust, as
determined by the Bylaws or the Trustees. Subject to the requirements of the
1940 Act, the Trustees by majority vote may delegate to any one or more of their
number their authority to approve particular matters or take particular actions
on behalf of the Trust. Written consents or waivers of the Trustees may be
executed in one or more counterparts. Execution of a written consent or waiver
and delivery thereof to the Trust may be accomplished by telefax.
Section 4.5. Chairman of the Trustees. The Trustees shall appoint one of
------------------------
their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
Section 4.6. Principal Transactions. Except to the extent prohibited by
----------------------
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, distributor, or transfer agent for the Trust or with any Interested
Person of such person; and the Trust may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, distributor, transfer agent, dividend disbursing
agent, custodian or in any other capacity upon customary terms.
<PAGE>
ARTICLE V
---------
EXPENSES OF THE TRUST
---------------------
Section 5.1. Trustee Reimbursement. Subject to the provisions of
---------------------
Article II, Section 2.8 hereof, the Trustees shall be reimbursed from the Trust
estate or the assets belonging to the appropriate Series for their expenses and
disbursements, including, without limitation, fees and expenses of Trustees who
are not Interested Persons of the Trust, interest expense, taxes, fees and
commissions of every kind, expenses of pricing Trust portfolio securities,
expenses of issue, repurchase and redemption of shares, including expenses
attributable to a program of periodic repurchases or redemptions, expenses of
registering and qualifying the Trust and its Shares under Federal and State laws
and regulations or under the laws of any foreign jurisdiction, charges of third
parties, including investment advisers, managers, custodians, transfer agents,
portfolio
accounting and/or pricing agents, and registrars, expenses of preparing and
setting up in type prospectus and statements of additional information and other
related Trust documents, expenses of printing and distributing prospectus sent
to existing Shareholders, auditing and legal expenses, reports to Shareholders,
expenses of meetings of Shareholders and proxy solicitations therefor, insurance
expenses, association membership dues and for such non-recurring items as may
arise, including litigation to which the Trust (or a Trustee acting as such) is
a party, and for all losses and liabilities by them incurred in administering
the Trust, and for the payment of such expenses, disbursements, losses and
liabilities the Trustees shall have a lien on the assets belonging to the
appropriate Series, or in the case of an expense allocable to more than one
Series, on the assets such Series, prior to any rights or interests of the
Shareholders thereto. This section shall not preclude the Trust from directly
paying any of the aforementioned fees and expenses.
ARTICLE VI
----------
INVESTMENT ADVISOR, PRINCIPAL
UNDERWRITER AND TRANSFER AGENT
------------------------------
Section 6.1. Investment Advisor. The Trustees may in their discretion,
------------ ------------------
from time to time, enter into an investment advisory or management contract or
contracts with respect to the Trust or any series whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such management, investment advisory, statistical and research facilities
and services and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may in their discretion determine;
provided, however, that the initial approval and entering into of such contract
or contracts shall be subject to a Majority Shareholder Vote. Notwithstanding
any other provision of this Trust Instrument, the Trustees may authorize any
investment advisor (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales or exchanges of
portfolio securities, other investment instruments of the Trust, or other Trust
Property on behalf of the Trustees, or may authorize any officer, agent or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment advisor (and all without further action by the Trustee). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, including those relating to Shareholder approval, the investment advisor to
employ, from time to time, one or more sub-advisors to perform such of the acts
and services of the investment advisor, and upon such terms and conditions, as
may be agreed upon between the investment advisor and sub-advisor. Any reference
in this Trust Instrument to the investment advisor shall be deemed to include
such sub-advisors, unless the context otherwise requires.
Section 6.2. Principal Underwriter. The Trustees may in their discretion
---------------------
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of Shares, whereby the Trust may either
agree to sell Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the contract shall be on
such terms and conditions, if any, as may be prescribed in the Bylaws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article VI, or of the Bylaws; and
such contract may also provide for the repurchase or sale of Shares by such
other party as principal or as agent of the Trust.
Section 6.3. Transfer Agent. The Trustees may in their discretion from
--------------
from time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Trust
Instrument or of the Bylaws.
<PAGE>
Section 6.4. Parties to Contract. Any contract of the character described
-------------------
in Sections 6.1, 6.2 and 6.3 of this Article VI or any contract of the character
described in Article VIII hereof may be entered into with any corporation, firm,
partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust
or association) may be the other party to contacts entered into pursuant to
Sections 6.1, 6.2 and 6.3 of this Article VI or pursuant to Article VIII hereof,
and any individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in this Section
6.4.
Section 6.5. Provisions and Amendments. Any contract entered into
-------------------------
pursuant to Section 6.1 or 6.2 of this Article VI shall be consistent with and
subject to the requirements of Section 15 of the 1940 Act or other applicable
Act of Congress hereafter enacted with respect to its continuance in effect, its
termination, and the method of authorization and approval of such contract or
renewal thereof, and no amendment to any contact entered into pursuant to
Section 6.1 of this Article VI shall be effective unless assented to in a manner
consistent with the requirements of said Section 15, as modified by an
applicable rule, regulation or order of the Commission.
ARTICLE VII
------------
SHAREHOLDERS VOTING POWERS AND MEETINGS
---------------------------------------
Section 7.1. Voting Powers. The Shareholders shall have power to vote
-------------
only (i) for the election of Trustees as provided in Article III, Sections 3.1
and 3.2 hereof, (ii) for the removal of Trustees as provided in Article III,
Section 3.3(d) hereof, (iii) with respect to any investment advisory or
management contract as provided in Article VI, Sections 6.1 and 6.5 hereof, and
(iv) with respect to such additional matters relating to the Trust as may be
required by law, this Trust Instrument, or the Bylaws or any registration of the
Trust with the Commission or any State, or as the Trustees may consider
desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted separately by individual Series, except (i) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series; and (ii)
when the Trustees have determined that the matter affects the interests of more
than one Series, then the Shareholders of all such Series shall be entitled to
vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. A proxy may
be given in writing. The bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
Section 7.2. Meetings. The first Shareholders' meeting shall be held in
--------
order to elect Trustees as specified in Section 3.2 of Article III hereof at the
principal office of the Trust or such other place as the Trustees may designate.
Meetings may be held within or without the State of Delaware. Special meetings
of the Shareholders of any Series may be called by the Trustees and shall be
called by the Trustees upon the written request of Shareholders owning at least
one-tenth of the Outstanding Shares entitled to vote. Whenever ten or more
Shareholders meeting the qualifications set forth in Section 16(c) of the 1940
Act, [then the same may be amended from time to time,] seek the opportunity of
furnishing materials to the other Shareholders with a view to obtaining
signatures on such a request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of the Shareholders of record of the Trust or the mailing of
such materials to such Shareholders of record, subject to any rights provided to
the Trust or any Trustees provided
<PAGE>
by said Section 16(c). Notice shall be sent, by First Class Mail or such other
means determined by the Trustees, at least 15 days prior to any such meeting.
Section 7.3. Quorum and Required Vote. One-third of Shares entitled to
------------------------
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series or, if required by law, a Majority Shareholder Vote of
that Series (or class) voting on the matter in person or by proxy shall decide
that matter insofar as that Series (or class) is concerned. Shareholders may act
by unanimous written consent. Actions taken by Series (or class) may be
consented to unanimously in writing by Shareholders of that Series.
ARTICLE VIII
------------
CUSTODIAN
---------
Section 8.1. Appointment and Duties. The Trustees shall at all times
----------------------
employ a bank, a company that is a member of a national securities exchange, or
a trust company, each having capital, surplus and undivided profits of at least
two million dollars ($2,000,000), as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers; and the trust
may also employ such custodian as its agent;
(4) to keep the books and accounts of the Trust or of any Series or
class and furnish clerical and accounting services; and
(5) to compute, if authorized to do so by the Trustees, the Net
Asset Value of any Series, or class thereof, in accordance with the provisions
hereof; all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. The Trustees may also authorize the custodian to
employ one or more sub-custodians from time to time to perform such of the acts
and services of the custodian, and upon such terms and conditions, as may be
agreed upon between the custodian and such sub-custodian and approved by the
Trustees, provided that in every case such sub-custodian shall be a bank, a
company that is a member of a national securities exchange, or a trust company
organized under the laws of the United States or one of the states thereof and
having capital, surplus and undivided profits of at least two million dollars
($2,000,000) or such other person as may be permitted by the Commission, or
otherwise in accordance with the 1940 Act.
Section 8.2. Central Certificate System. Subject to such rules,
--------------------------
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, subcustodians or other agents.
ARTICLE IX
----------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
Section 9.1. Distributions.
-------------
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
<PAGE>
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution adopted
only once or with such frequency as the Trustees may determine. The Trustees may
adopt and offer to Shareholders such dividend reinvestment plans, cash dividend
payout plans or related plans as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a dividend
of Shares pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Section
9.1(b) hereof.
Section 9.2. Redemptions. In case any holder of record of Shares of a
-----------
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.2; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase, his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.3 of this Article IX). The Series
shall make payment for any such Shares to be redeemed, as aforesaid, in cash or
property from the assets of that Series and payment for such Shares shall be
made by the Series or the principal underwriter of the Series to the Shareholder
of record within seven (7) days after the date upon which the request is
effective. Upon redemption, shares shall become Treasury shares and may be re-
issued from time to time.
Section 9.3. Determination of Net Asset Value and Valuation of Portfolio
-----------------------------------------------------------
Assets. The term "Net Asset Value" of any Series shall mean that amount by
- ------
which the assets of that Series exceed its liabilities, all as determined by or
under the direction of the Trustees. Such value shall be determined separately
for each Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect to
securities for which market quotations are readily available, at the market
value of such securities; and with respect to other securities and assets, at
the fair value as determined in good faith by the Trustees; provided, however,
that the Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the Commission
or insofar as permitted by any Order of the Commission applicable to the Series.
The Trustees may delegate any of their powers and duties under this Section 9.3
with respect to valuation of assets and liabilities. The resulting amount, which
shall represent the total Net Asset Value of the particular Series, shall be
divided by the total number of shares of that Series outstanding at the time and
the quotient so obtained shall be the Net Asset Value per Share of that Series.
At any time the Trustees may cause the Net Asset Value per Share last determined
to be determined again in a similar manner and may fix the time when such
redetermined value shall become effective. If, for any reason, the net income of
any Series, determined at any time, is a negative amount, the Trustees shall
have the power with respect to that Series (i) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, or (ii) to reduce the number of Outstanding Shares of such Series
by reducing the number of Shares in the account of each Shareholder by a pro
rata portion of that number of full and fractional Shares which represents the
amount of such excess negative net income, or (iii) to cause to be recorded on
the books of such Series an asset account in the amount of such negative net
income (provided that the same shall thereupon become the property of such
Series with respect to such Series and shall not be paid to any Shareholder),
which account may be reduced by the amount of dividends declared thereafter upon
the Outstanding Shares of such Series on the day such negative net income is
experienced, until such asset account is reduced to zero; (iv) to combine the
methods described in clauses (i), (ii) and (iii) of this sentence; or (v) to
take any other action they deem appropriate, in order to cause (or in order to
assist in causing) the Net Asset Value per Share of such Series to remain at a
constant amount per Outstanding Share immediately after each such determination
and declaration. The Trustees shall also have the power not to declare a
dividend out of net income for the purpose of causing the Net Asset Value per
Share to be increased. The Trustees shall not be required to adopt, but may at
any time adopt, discontinue or amend the practice of maintaining the Net Asset
Value per Share of the Series at a constant amount.
Section 9.4. Suspension of the Right of Redemption. The Trustees may
-------------------------------------
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right to redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this
<PAGE>
Section 9.3, to the extent applicable as determined in the discretion of the
Trustees and consistent with applicable law, may be equally applied to each such
class.
Section 9.5. Redemption of Shares in Order to Qualify as Regulated
-----------------------------------------------------
Investment Company. If the Trustees shall, at any time and in good faith, be of
- ------------------
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other means
deemed equitable by them (i) to call for redemption by any such person of a
number, or principal amount, of Shares sufficient to maintain or bring the
direct or indirect ownership of Shares into conformity with the requirements for
such qualification and (ii) to refuse to transfer or issue Shares to any person
whose acquisition of the Shares in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
Section 9.6. Redemption of De Minimis Accounts. If, at any time when a
---------------------------------
request for transfer or redemption of Shares of any Series is received by the
Trust or its agent, the value (computed as set forth in Section 9.3 hereof) of
the Shares of such Series in a Shareholder's account is less than _________
Dollars ($_________), after giving effect to such transfer or redemption, the
Trust may cause the remaining Shares of such Series in such Shareholder's
account to be redeemed in accordance with such procedures as the Trustees shall
adopt.
ARTICLE X
----------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
Section 10.1. Limitation of Liability. A Trustee, when acting in such
-----------------------
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
Section 10.2. Indemnification.
---------------
(a) Subject to the exceptions and limitations contained in Section
10.2(b) below:
(i) every Person who is, or has been, a Trustee or
officer of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim", "action ", "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or thereafter,
and the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been
a determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office,
(A) by the court or other body approving the
settlement;
(B) by at least a majority of those Trustees who
are neither Interested Persons of the Trust nor are parties to the matter based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); or
(C) by written opinion of independent legal
counsel based upon a review of readily available facts (as opposed to a full
trial-type inquiry); provided, however, that any Shareholder may, by appropriate
legal proceedings, challenge any such determination by the Trustees or by
independent counsel.
<PAGE>
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 10.2 may be paid by the Trust or Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.2; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined based upon a review of readily
available facts (as opposed to trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled to
indemnification under this Section 10.2.
Section 10.3. Shareholders. In case any Shareholder or former Shareholder
------------
of any Series shall be held to be personally liable solely by reason of his
being or having been a Shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his heirs, executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the applicable Series to be
held harmless from and indemnified against all loss and expense arising from
such liability. The Trust, on behalf of the affected Series, shall, upon request
by the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
ARTICLE XI
----------
MISCELLANEOUS
-------------
Section 11.1. Trust Not a Partnership. It is hereby expressly declared
-----------------------
declared that a trust and not a partnership is created hereby. No Trustee
hereunder shall have any power to bind personally either the Trust's officers or
any Shareholder. All persons extending credit to, contracting with or having
any claim against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established any
separate Series) of the Trust for payment under such credit, contract or claim;
and neither the Shareholders nor the Trustee, nor any of their agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
Section 11.2. Trustee's Good Faith Action, Expert Advice, No Bond or
------------------------------------------------------
Surety. The exercise by the Trustees of their powers and discretions hereunder
- ------
in good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.1 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.1 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
Section 11.3. Establishment of Record Dates. The Trustees may close the
-----------------------------
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
<PAGE>
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
Section 11.4. Termination of Trust.
--------------------
(a) This Trust shall continue without limitation of time but
subject to the provisions of subsection (b) of this Section 11.4.
(b) The Trustees may, subject to a Majority Shareholder Vote of
each Series affected by the matter or, if applicable, to a Majority Shareholder
Vote of the Trust, and subject to a vote of a majority of the Trustees:
(i) sell and convey all or substantially all of the assets
of any affected Series to another Series of the Trust for adequate
consideration, which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the affected Series, and
which may include Shares of the acquiring Series;
(ii) sell and convey all or substantially all of the assets
of the Trust or any affected Series to another trust, partnership, association
or corporation, or to a separate series of shares thereof, organized under the
laws of any state which trust, partnership, association or corporation is an
open-end management company as defined in the 1940 Act, or is a series thereof,
for adequate consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the Trust or
any affected Series, and which may include shares of beneficial interest stock
or other ownership interests of such trust, partnership, association or
corporation or of a series thereof; or
(iii) at any time sell and convert into money all of the
assets of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities in (i), (ii) or (iii), by such
assumption or otherwise, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) of each Series (or class) ratably among the holders
of Shares of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds
or the remaining assets as provided in subsection (b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties with respect to the Trust or Series shall be canceled
and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
trust's certificate of trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
Section 11.5. Reorganization. Notwithstanding anything else herein, the
--------------
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (i) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth possession or colony of the United
States or (ii) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.5 may affect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the trust
if it is the surviving or resulting trust in the merger or consolidation.
Section 11.6. Filing of Copies, References, Headings. The original or a
--------------------------------------
copy of this Trust Instrument and each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a Copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his, "he," and "him" shall be deemed to include the feminine
and neuter, as well as masculine,
<PAGE>
genders. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this Trust Instrument, rather than the
headings, shall control. This Trust Instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 11.7. Applicable Law. This Trust Agreement has been executed and
--------------
delivered in[, and the Trust created hereby will be administered from,] the
State of Delaware, and the Trust and this Trust Instrument, and the rights,
obligations and remedies of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
other laws of said State; provided, however, that there shall not be applicable
to the Trust, the Trustees, the Shareholders or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts which relate to or regulate (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards or responsibilities or limitations on the indemnification, acts
or powers of trustees or other Persons, which are inconsistent with the
limitations or liabilities or authorities and powers of the Trustee or officers
of the Trust set forth or referenced in this Trust Instrument. The Trust shall
be of the type commonly called a "business trust", and without limiting the
provision, hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust under Delaware law. The Trust specifically reserves
the right to exercise any of the powers or privileges afforded to trusts or to
take actions that may be engaged in by trusts under the Delaware Act, and the
absence of a specific reference herein to any such power, privilege or action
shall not imply that the Trust may not exercise such power or privilege or take
such actions.
Section 11.8. Amendments. Except as specifically provided herein, the
----------
Trustees may, without shareholder vote, amend or otherwise supplement this
Trust Instrument by making an amendment, a Trust Instrument supplemental hereto
or an amended and restated trust instrument. Shareholders shall have the right
to vote (i) on any amendment which would affect their right to vote granted in
Section 7.1 of Article VII hereof, (ii) on any amendment to this Section 11.8,
(iii) on any amendment as may be required by law or by the Trust's registration
statement filed with the Commission and (iv) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and not vote of shareholders of a Series not affected shall be
required. Notwithstanding anything else herein, any amendment to Article 10
hereof shall not limit the rights to indemnification or insurance provided
therein with respect to actions or omissions of Covered Persons to such
amendment.
Section 11.9. Fiscal Year. The fiscal year of the Trust shall end on a
-----------
specified date as set forth in the Bylaws; provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
Section 11.10. Provisions in Conflict with Law. The provisions of this
-------------------------------
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or enforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in any
manner affect such provisions in any other jurisdiction or any other provision
of this Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees
of the Trust, have executed this instrument this 10th day of April, 1995.
______________________________Shuichi Yamada,
Trustee
<PAGE>
INVESTMENT ADVISORY AGREEMENT Exhibit 99.B5
-----------------------------
AGREEMENT made this 28th day of June , 1995 by and between Farrell
------ --------
Alpha Strategies, a Delaware business trust (the "Trust") and Farrell-Wako
Global Investment Management, Inc., a Delaware corporation (the "Advisor").
1. Duties of Advisor. The Trust hereby appoints the Advisor to act as
-----------------
investment advisor to The Japan Alpha Fund (the "Fund") for the period and on
--------------------
such terms set forth in this Agreement. The Trust employs the Advisor to manage
the investment and reinvestment of the assets of the Fund, to determine in its
discretion the assets to be held uninvested, to provide the Trust with records
concerning the Advisor's activities which the Trust is required to maintain, and
to render regular reports to the Trust's officers and Board of Trustees
concerning the Advisor's discharge of the foregoing responsibilities. The
Advisor shall discharge the foregoing responsibilities subject to the control of
the officers and the Board of Trustees of the Trust, and in compliance with the
objectives, policies and limitations set forth in the Trust's Prospectus and
Statement of Additional Information. The Advisor accepts such employment and
agrees to render the services and to provide, at its own expense, the office
space, furnishings, equipment and the personnel required by it to perform the
services on the terms and for the compensation provided herein.
2. Portfolio Transactions. The Advisor shall provide the Fund with a
----------------------
trading department. The Advisor shall select the brokers or dealers that will
execute the purchases and sales of securities for the Fund, and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Fund are obtained. The Fund will
bear all expenses associated with its investment activities, including, without
limitation, brokerage commissions and custody expenses. Subject to policies
established by the Board of Trustees of the Trust and communicated to the
Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Fund, or to be in breach of any obligation owing to the Trust or in respect
of the Fund under this Agreement, or otherwise, solely by reason of its having
caused the Fund to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for the Fund in excess of the
amount of commission that another member of an exchange, broker or dealer would
have charged, if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Fund, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and Trustees of the Trust such information
relating to Fund transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
---------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the Fund shall pay to
the Advisor within five business days after the end of each calendar month, a
monthly fee of one twelfth of 0.98% of the Fund's average daily net assets for
the month. The net asset value shall be calculated in the manner provided in
the Fund's Prospectus and Statement of Additional Information then in effect.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rate basis, based on the number of days during
which this Agreement was in effect.
4. Reports. The Fund and the Advisor agree to furnish to each other such
-------
information regarding
<PAGE>
their operations with regard to their affairs as each may reasonably request.
5. Status of Advisor. The services of the Advisor to the Fund are not to
-----------------
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Fund are not impaired thereby.
6. Liability of Advisor. In the absence of willful misfeasance, bad
--------------------
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Fund, or to any shareholder of the Fund, for any error of
judgement, mistake of law or any other act or omission in the course of, or
connected with, directly or in any way indirectly, rendering services hereunder
including, without limitation, for any losses that may be sustained in
connection with the purchase, holding, redemption or sale of any security on
behalf of the Fund.
7. Duration and Termination. This Agreement shall become effective on
------------------------
July 17, 1995, provided that first it is approved by the Board of Trustees of
- ----------------
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Fund; and shall continue in
effect until July 16, 1997 . Thereafter, this Agreement may continue in
-----------------
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Fund; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust,
at any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor, at any time, without the payment of
any penalty, upon not more than 60 days' written notice to the Trust. This
Agreement will automatically terminate in the event of its assignment. Any
notice under this Agreement shall be given in writing, addressed and delivered
or mailed postpaid, to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment" "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
8. Name of Advisor. The parties agree that the Advisor has a proprietary
---------------
interest in the name "Farrell Alpha Strategies", and the Trust agrees to
promptly take such action as may be necessary to delete from its corporate name
and/or the name of the Trust any reference to the name of the Advisor or the
name "Farrell Alpha Strategies," promptly after receipt from the Advisor of a
written request therefore.
9. Severability. If any provisions of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Governing Law. This agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of ______ day of ____________, 1995.
ATTEST: FARRELL ALPHA STRATEGIES
_________________________________ ________________________________
Monte E. Wetzler, Esq., Secretary James L. Farrell, Jr., President
ATTEST: FARRELL-WAKO GLOBAL
INVESTMENT MANAGEMENT, INC.
_________________________________ _______________________________
, Secretary James L. Farrell, Jr., Chairman
<PAGE>
UNDERWRITING AGREEMENT Exhibit 99.B6
This Agreement, dated as of the 28th day of June , 1995, made by and
------ -------
between Farrell Alpha Strategies, a Delaware business trust (the "Trust")
------------------------
operating as a registered investment company under the Investment Company Act of
1940, as amended (the "Act"); Farrell-Wako Global Investment Management, Inc.
-----------------------------------------------
("Farrell-Wako"), a registered investment adviser existing as a corporation duly
organized and existing under the laws of the State of Delaware; and Fund/Plan
---------
Broker Services, Inc. ("Fund/Plan"), a corporation duly organized and existing
- ---------------------
under the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "A" attached hereto, and
which Schedule "A" may be amended from time to time by mutual agreement among
the Parties;
WHEREAS, Farrell-Wako has been appointed investment adviser to the Trust;
WHEREAS, Fund/Plan is a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement providing
for the distribution by Fund/Plan of the shares of the Trust (the "Shares").
NOW, THEREFORE, in consideration of the promises and agreements of the
Parties contained herein and in exchange of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. Appointment.
-----------
The Trust hereby appoints Fund/Plan as its exclusive agent for the
distribution of the Shares in the fifty United States of America, the
District of Columbia and Puerto Rico, and Fund/Plan hereby accepts such
appointment under the terms of this Agreement. The Trust agrees that it
will not sell any shares to any person except to fill orders for the shares
received through Fund/Plan; provided, however, that the foregoing exclusive
right shall not apply: (a) to shares issued or sold in connection with the
merger or consolidation of any other investment company with the Trust or
the acquisition by purchase or otherwise of all or substantially all of the
assets of any investment company or substantially all of the outstanding
shares of any such company by the Trust; (b) to shares which may be offered
by the Trust to its stockholders for reinvestment of cash distributed from
capital gains or net investment income of the Trust; or (c) to shares which
may be issued to shareholders of other funds who exercise any exchange
privilege set forth in the Trust's Prospectus. Notwithstanding any other
provision hereof, the Trust may terminate, suspend, or withdraw the
offering of the Shares whenever, in its sole discretion, it deems such
action to be desirable.
2. Sale and Repurchase of Shares.
-----------------------------
Fund/Plan agrees to provide the services contemplated hereby, and
(a) Fund/Plan is hereby granted the right, as agent for the Trust, to sell
Shares to the public against orders therefor at the public offering
price (as defined in sub-paragraph 2.(c) below).
(b) Fund/Plan will also have the right to take, as agent for the Trust,
all actions which, in Fund/Plan's judgement, and subject to the
Trust's reasonable approval, are necessary to carry into effect the
distribution of the Shares.
(c) The public offering price for Class D Shares shall be the net asset
value per Share then in effect, and the public offering price for
Class A Shares shall be the net asset value per Share plus a sales
charge, if applicable.
(d) The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be
applicable to all transactions as provided in the Prospectus. The net
asset value of the Shares shall be calculated by the Trust or by
another entity on behalf of the Trust. Fund/Plan shall have no duty to
inquire into, or liability for, the accuracy of the net asset value
per Share as calculated.
(e) On every sale, the Distributor shall promptly pay to the Trust the
applicable net asset value of the Shares.
(f) Upon receipt of purchase instructions, Fund/Plan will transmit such
instructions to the
<PAGE>
Trust or its transfer agent for registration of the Shares purchased.
(g) Nothing in this Agreement shall prevent Fund/Plan or any affiliated
person (as defined in the Act) of Fund/Plan from acting as underwriter
or distributor for any other person, firm or corporation (including
other investment companies), or in any way limit or restrict Fund/Plan
or such affiliated person from buying, selling or trading any
securities for its or their own account or for the accounts of others
for whom it or they may be acting; provided, however, that Fund/Plan
expressly agrees that it will not for its own account purchase any
Shares of the Trust except for investment purposes, and that it will
not for its own account sell any such Shares except by redemption of
such Shares by the Trust, and that it will not undertake in any
activities which, in its judgement, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(h) Fund/Plan may repurchase Shares at such prices and upon such terms and
conditions as shall be specified in the Prospectus.
3. Rules of Sale of Shares.
-----------------------
Fund/Plan does not agree to sell any specific number of Shares. Fund/Plan,
as Underwriter for the Trust, undertakes to sell Shares on a best efforts
basis and only against orders received therefor. The Trust reserves the
right to terminate, suspend or withdraw the sale of its Shares for any
reason deemed adequate by it, and the Trust reserves the right to refuse at
any time or times to sell any of its Shares to any person for any reason
deemed adequate by it.
4. Rules of NASD.
-------------
(a) Fund/Plan will conform to the Rules of Fair Practice of the NASD and
the securities laws of any jurisdiction in which it directly or
indirectly sells any Shares.
(b) Fund/Plan will require each dealer with whom Fund/Plan has a selling
agreement to conform to the applicable provisions of the Prospectus,
with respect to the public offering price of the Shares, and Fund/Plan
shall not cause the Trust to withhold the placing of purchase orders
so as to make a profit thereby.
(c) The Trust and Farrell-Wako agree to furnish to Fund/Plan sufficient
copies of any and all: agreements, plans, communications with the
public or other materials which the Trust or Farrell-Wako intends to
use in connection with any sales of Shares, in adequate time for
Fund/Plan to file and clear such materials with the proper authorities
before they are put in use. Fund/Plan and the Trust or Farrell-Wako
may agree that any such material does not need to be filed subsequent
to distribution. In addition, the Trust and Farrell-Wako agree not to
use any such materials until so filed and cleared for use by
appropriate authorities as well as by Fund/Plan.
(d) Fund/Plan, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in
order that the Shares may be sold in such states as may be mutually
agreed upon by the Parties.
(e) Fund/Plan shall remain registered with the U.S. Securities and
Exchange Commission and a member of the National Association of
Securities Dealers for the term of this Agreement.
(f) Fund/Plan shall not, in connection with any sale or solicitation of a
sale of the Shares, make or authorize any representative, service
organization, broker or dealer to make any representations concerning
the Shares, except those contained in the Prospectus covering the
Shares and in communications with the public or sales materials
approved by Fund/Plan as information supplemental to such Prospectus.
Copies of the Prospectus will be supplied by the Trust or Farrell-Wako
to Fund/Plan in reasonable quantities upon request.
5. Records to be Supplied by the Trust.
-----------------------------------
The Trust shall furnish to Fund/Plan copies of all information, financial
statements and other papers which Fund/Plan may reasonably request for use
in connection with the distribution of the Shares including, but not
limited to, one certified copy of all financial statements prepared for the
Trust by its independent public accountants.
6. Expenses.
--------
(a) The Trust will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient copies
of the Prospectuses and Statements of Additional Information for
distribution to shareholders, and the
<PAGE>
distribution of same to the shareholders;
(ii) preparation, printing and distribution of reports and other
communications to shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualification of the Shares for sale in the jurisdictions as
directed by the Trust;
(v) maintaining facilities for the issue and transfer of the Shares;
(vi) supplying information, prices and other data to be furnished by
the Trust under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to the sale
or delivery of the Shares or certificates therefor.
(b) Farrell-Wako will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
7. Term.
----
(a) The term of this Agreement shall commence on the date on which the
Trust's registration statement is declared effective by the U.S.
Securities and Exchange Commission ("Effective Date").
(b) This Agreement shall remain in effect for two (2) years from the
Effective Date. This Agreement shall continue thereafter for periods
not exceeding one (1) year, if approved at least annually (i) by a vote
of a majority of the outstanding voting securities of each Series or by
a vote of the Board of Trustees of the Trust, and (ii) by a vote of a
majority of the Trustees of the Trust who are not parties to this
Agreement (other than as Trustees of the Trust) or interested persons
of any such party, cast in person at a meeting called for the purpose
of voting on such approval.
(c) This Agreement (i) may at any time be terminated without the payment of
any penalty, either by a vote of the Trustees of the Trust or by a vote
of a majority of the outstanding voting securities of each Series with
respect to such Series, on sixty (60) days' written notice to
Fund/Plan; and (ii) may be terminated by Fund/Plan on sixty (60) days'
written notice to the Trust with respect to any Series.
(d) This Agreement shall automatically terminate in the event of its
assignment.
8. Indemnification of Fund/Plan by Farrell-Wako.
--------------------------------------------
Farrell-Wako and the Trust will indemnify and hold Fund/Plan harmless for
the actions of Farrell-Wako's employees registered with the NASD as
Fund/Plan representatives, and will undertake to maintain compliance with
all rules and regulations concerning any and all sales presentations made
by such employees.
9. Liability of Fund/Plan.
----------------------
(a) Fund/Plan, its directors, officers, employees, shareholders and agents
shall not be liable for any error of judgement or mistake of law or
for any loss suffered by the Trust in connection with the performance
of this Agreement, except a loss resulting from a breach of
Fund/Plan's obligation pursuant to Section 4 of this Agreement, a
breach of fiduciary duty with respect to the receipt of compensation
for services or a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of Fund/Plan in the performance of its
obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
(b) The Trust agrees to indemnify and hold harmless Fund/Plan against any
and all liability, loss, damages, costs or expenses (including
reasonable counsel fees) which Fund/Plan may incur or be required to
pay hereafter, in connection with any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which Fund/Plan may be involved
as a party or otherwise or with which Fund/Plan may be threatened, by
reason of the offer or sale of the Trust Shares by persons other than
Fund/Plan or its representatives, prior to the execution of this
Agreement. If a claim is made against Fund/Plan as to which Fund/Plan
may seek indemnity under this Section, Fund/Plan shall notify the
Trust promptly after any written assertion of such claim threatening
to institute an action or proceeding with respect thereto and shall
notify the Trust promptly of any action commenced against Fund/Plan
within 10 days time after Fund/Plan shall have been served with a
summons or other legal process, giving information as to the nature
and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on
account of the indemnity under this Section 9(b) if the Trust has not
been prejudiced in any material respect by such failure. The Trust
shall have the sole right to control the defense of any action, suit
or proceeding in which Fund/Plan is involved and for which indemnity
is being provided by the Trust to Fund/Plan. The Trust shall have the
sole right to control the settlement of any such action, suit or
proceeding
<PAGE>
subject to Fund/Plan's approval, which shall not be unreasonably
withheld. Fund/Plan shall have the right, but not the obligation, to
participate in the defense or settlement of a claim or action, with
its own counsel, but any costs or expenses incurred by Fund/Plan in
connection with, or as a result of, such participation will be borne
solely by Fund/Plan. Fund/Plan shall have the right to participate in
the defense of an action or proceeding and to retain its own counsel,
and the reasonable fees and expenses of such counsel shall be borne by
the Trust (which shall pay such fees, costs and expenses at least
quarterly) if:
(i) Fund/Plan has received an opinion of counsel stating that the
use of counsel chosen by the Trust to represent Fund/Plan
would present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both Fund/Plan and the Trust, and legal
counsel to Fund/Plan shall have reasonably concluded that
there are legal defenses available to it which are different
from or additional to those available to the Trust or which
may be adverse to or inconsistent with defenses available to
the Trust (in which case the Trust shall not have the right
to direct the defense of such action on behalf of Fund/Plan);
or
(iii) the Trust shall authorize Fund/Plan to employ separate
counsel at the expense of the Trust. Notwithstanding anything
to the contrary herein, it is understood that the Trust shall
not, in connection with any action, suit or proceeding, or
related action, suit or proceeding, be liable under this
Agreement for the fees and expenses of more than one firm .
(c) Any person, even though also a director, officer, employee, shareholder or
agent of Fund/Plan, who may be or become an officer, director, trustee,
employee or agent of the Trust, shall be deemed, when rendering services to
the Trust or acting on any business of the Trust (other than services or
business in connection with Fund/Plan's duties hereunder), to be rendering
such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent, or one under the control or
direction of Fund/Plan even though receiving a salary from Fund/Plan.
(d) The Trust agrees to indemnify and hold harmless Fund/Plan, and each person
who controls Fund/Plan within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against
any and all losses, claims, damages and liabilities, joint or several
(including any reasonable investigative, legal and other expenses incurred
in connection therewith) to which they, or any of them, may become subject
under the Act, the Securities Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise insofar as such losses,
claims, damages or liabilities (or actions, suits or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Prospectus, Statement of
Additional Information, supplement thereto, sales literature or other
written information prepared by the Trust and furnished by the Trust to
Fund/Plan for Fund/Plan's use hereunder, disseminated by the Trust or which
arise out of or are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. Such indemnity shall not, however,
inure to the benefit of Fund/Plan (or any person controlling Fund/Plan) on
account of any losses, claims, damages or liabilities (or actions, suits or
proceedings in respect thereof) arising from the sale of the Shares of the
Trust to any person by Fund/Plan (i) if such untrue statement or omission
or alleged untrue statement or omission was made in the Prospectus,
Statement of Additional Information, or supplement, sales or other
literature, in reliance upon and in conformity with information furnished
in writing to the Trust by Fund/Plan specifically for use therein or (ii)
if such losses, claims, damages or liabilities arise out of or are based
upon an untrue statement or omission or alleged untrue statement or
omission found in any Prospectus, Statement of Additional Information,
supplement, sales or other literature, subsequently corrected, but
negligently distributed by Fund/Plan and a copy of the corrected Prospectus
was not delivered to such person at or before the confirmation of the sale
to such person .
(e) Fund/Plan shall not be responsible for any damages, consequential or
otherwise, which Farrell-Wako or the Trust may experience, due to the
disruption of the distribution of Shares caused by any action arising out
of the actions or inactions of any registered representative or affiliate
of Fund/Plan whose registration is not yet effective.
<PAGE>
10. Amendments.
----------
No provision of this Agreement may be amended or modified in any manner
whatsoever, except by a written agreement properly authorized and executed
by the Parties.
11. Section Headings.
----------------
Section and paragraph headings are for convenience only and shall not be
construed as part of this Agreement.
12. Reports.
-------
Fund/Plan shall prepare reports for the Board of Trustees of the Trust, on
a quarterly basis, showing such information as, from time to time, shall
be reasonably requested by such Board.
13. Severability.
------------
If any part, term or provision of this Agreement is held by any court to
be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not affected, and
the rights and obligations of the Parties shall be construed and enforced
as if the Agreement did not contain the particular part, term or provision
held to be illegal or invalid provided that the basic agreement is not
thereby substantially impaired.
14. Governing Law.
-------------
This Agreement shall be governed by the laws of the State of New York and
the exclusive venue of any action arising under this Agreement shall be
Montgomery County, Commonwealth of Pennsylvania.
15. Authority to Execute
--------------------
The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has
been duly and validly authorized; and, when duly executed, this Agreement
will constitute a valid and legally binding and enforceable obligation of
each Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of
ten type written pages, together with Schedule "A", to be signed by their duly
authorized officers, as of the day and year first above written.
<TABLE>
<S> <C>
Fund/Plan Broker Services, Inc. Farrell-Wako Global Investment Management, Inc.
- ------------------------------- -----------------------------------------------
____________________________________ ____________________________________
By: Kenneth J. Kempf, By: James L. Farrell, Jr.
President Chairman
Farrell Alpha Strategies
------------------------
____________________________________
By: James L. Farrell, Jr.
President
</TABLE>
<PAGE>
Schedule "A"
Identification of Series
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Farrell Alpha Strategies"
1. The Japan Alpha Fund - Class A Shares
2. The Japan Alpha Fund - Class D Shares
This Schedule "A" may be amended from time to time by agreement of the Parties.
<PAGE>
INSTITUTIONAL CUSTODY AGREEMENT Exhibit 99.B8
FOR: Farrell Alpha Strategies
on behalf of
The Japan Alpha Fund
---------------------------------------------------------------------
<PAGE>
Sumitomo Bank of New York Trust Company
One World Trade Center, Suite 8505
New York, NY 10048
Ladies and Gentlemen:
By virtue of the authority contained in the resolution set forth in the
Certificate delivered in connection with this Agreement, we hereby request
Sumitomo Bank of New York Trust Company ("Sumitomo") to open a custody account
in the name of Farrell Alpha Strategies (the "Trust") on behalf of The Japan
Alpha Fund (the "Fund") upon the following terms and conditions.
1. Sumitomo is directed to:
(a) hold in this account all funds, stocks, bonds and other securities
belonging to the Fund and deposited with Sumitomo after the date of this
agreement; and
(b) dispose of cash income and principal received by Sumitomo with
respect to this account by crediting all income and principal to the
Fund's custody ledger account, balances to be subject to the instructions
of authorized individuals.
2. Sumitomo is authorized to:
(a) surrender for payment maturing obligations and those called for
redemption;
(b) exchange securities when the exchange is purely ministerial;
(c) accept and open all mail directed to the Fund in care of Sumitomo;
and
(d) sign in the Fund's name any declarations, affidavits or certifi-
cations of ownership required for the collection of income or principal on
the Fund's behalf.
3. The Fund understands and agrees that stocks, bonds and other securities in
registered form that belong to the Fund and are held by Sumitomo as custodian
hereunder are to be registered in nominee name:
(a) the Fund will indemnify and hold harmless both Sumitomo and any
such nominee from all loss, liability and expense incurred as a direct
result of serving as custodian or the custodian's nominee hereunder;
(b) Sumitomo will forward all stockholders' reports to the Fund;
(c) Sumitomo is not authorized to vote proxies on securities held
for the Fund's account and will forward all proxies and proxy materials
to the Fund;
(d) Sumitomo and any Sub-Custodian, as defined in Section 6 of this
Agreement, are not authorized to disclose the Fund's name, address and
securities position to the issuers of such securities when requested to
do so by them;
(e) Sumitomo is authorized to charge to the Fund's account all taxes
and expenses incidental to the transfer of securities on the Fund's
behalf; and
(f) in the event Sumitomo does not receive a dividend or interest
payment in respect of securities held
<PAGE>
in the Fund's account on a scheduled payment date therefor, Sumitomo shall
promptly notify the Fund of such failure and shall contact the corporation
or entity that was to have made such payment in an effort to obtain such
payment.
4. The Fund understands and agrees that:
(a) when Sumitomo is instructed to receive securities against payment,
the Fund will have funds on deposit with Sumitomo or have made funds
available to Sumitomo in advance for such purpose;
(b) when Sumitomo is instructed to deliver securities against payment,
delivery will actually be made before receipt of payment in accordance
with generally accepted market practice. The Fund agrees that it will bear
the risk that the recipient of the securities may fail to make payment,
return the securities or hold the securities or the proceeds of their sale
in trust for the Fund or for Sumitomo as the Fund's agent;
(c) Sumitomo is not under any duty to provide the Fund with investment
advice or to supervise the Fund's investments; and
(d) Sumitomo may, at its sole discretion, accept orders from the Fund
for the purchase or sale of securities and either execute such orders
itself or by means of an agent, such as a broker or other financial
organization of its choice, subject to the fees and commissions in effect
from time to time. Sumitomo shall not be responsible for any act or
omission, or for the solvency, of any broker or agent selected by Sumitomo
or a Sub-Custodian to effect any transaction for the Fund's account unless
such selection and use is made or done negligently or in bad faith. In the
event such a selection and use is made or done negligently or in bad faith,
Sumitomo shall be liable to the Fund only for direct damages and expenses
(which damages for purposes of property only, shall be determined based on
the market value of the property which is the subject of the loss at the
date of discovery of such loss and without reference to any special
condition or circumstances) resulting from such selection and use and, in
the case of any loss due to an act, omission or default of such agent or
broker, only to the extent that such loss occurs as a result of the failure
of the agent or broker to exercise reasonable care.
5. The Fund authorizes Sumitomo to deposit any securities held in our account
in a book-entry account maintained either at the Federal Reserve Bank of New
York or in domestic or foreign depositories such as The Depository Trust
Company. Such securities may be held in the name of a nominee maintained by
Sumitomo or by any such depository and may not be commingled with securities
owned by Sumitomo.
6. Sumitomo may appoint one or more Sub-Custodians to act as depository or
depositories or as Sub-Custodian or Sub-Custodians of securities and monies at
any time owned by the Fund, upon terms and conditions as are specified in this
Agreement. Sumitomo shall oversee the maintenance of any securities or monies of
the Fund by any Sub-Custodian.
(a) For purposes of this section, "Sub-Custodian" shall mean and
include (i) any branch of Sumitomo, (ii) any branch of a "qualified U.S.
bank," as that term is defined in Rule 17f-5 under the Investment Company
Act of 1940 (the "1940 Act"), (iii) any "eligible foreign custodian," as
that term is defined in Rule 17f-5 under the 1940 Act, approved by the
Board of Trustees and having a contract with Sumitomo which contract has
been approved by the Board of Trustees, and (iv) any securities depository
or clearing agency, incorporated or organized under the laws of a country
other than the United States, which operates the central system for
handling of securities or equivalent book-entries, which securities
depository or clearing agency has been approved by the Board of Trustees;
provided, that Sumitomo or a Sub-Custodian has entered into a contract
with such securities depository or clearing agency. This contract shall
contain the provisions set forth in Rule 17f-5(a)(1)(iii) of the 1940 Act.
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, Sumitomo wishes to appoint
other Sub-Custodians to hold property of the Fund, it will so notify the
Trust and provide it with information reasonably necessary to determine
any such new
<PAGE>
Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act, including
a copy of the proposed contract with such Sub-Custodian. The Trust shall,
within 30 days after receipt of such notice and information, give a
written approval or disapproval of the proposed action.
(c) If Sumitomo intends to remove any Sub-Custodian previously
approved by the Board of Trustees, it shall so notify the Trust and move
the property of the Fund deposited with such Sub-Custodian to another Sub-
Custodian previously approved by the Board of Trustees. Sumitomo shall
take such steps as may be required to remove any Sub-Custodian that has
ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
(d) Sumitomo will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of property of the Fund. Sumitomo
shall be liable to the Fund for any loss which shall occur as the result
of the failure of Sumitomo or a Sub-Custodian (other than a foreign
securities depository or clearing agency) to exercise reasonable care with
respect to the safekeeping of such property. The determination of whether
Sumitomo or a Sub-Custodian has exercised reasonable care shall be made in
light of prevailing standards applicable to professional custodians in the
jurisdiction in which such custodial services are performed. In the event
of any loss to the Fund by reason of the failure of Sumitomo or a Sub-
Custodian (other than a foreign securities depository or clearing agency)
to exercise reasonable care, Sumitomo shall be liable to the Fund only to
the extent of the Fund's direct damages and expenses, which damages, for
purposes of property only, shall be determined based on the market value
of the property which is the subject of the loss at the date of discovery
of such loss and without reference to any special condition or
circumstances.
(e) Sumitomo will not be responsible for any act, omission or default,
or for the solvency of any foreign securities depository or clearing
agency which it actually appoints, unless such appointment is made or done
negligently or in bad faith. In the event such appointment is made or done
negligently or in bad faith, Sumitomo shall be liable to the Fund only for
direct damages and expenses (determined in the manner described in
paragraph (d) above) resulting from such appointment.
7. With respect to property of the Fund which is maintained by Sumitomo in
the physical custody of a Sub-Custodian pursuant to Section 6 of this Agreement:
(a) Sumitomo will identify on its books as belonging to the Fund any
property held by such Sub-Custodian.
(b) In the event that a Sub-Custodian permits any of the securities
placed in its care to be held in an eligible foreign securities
depository, such Sub-Custodian will be required by its contract with
Sumitomo to identify on its books such securities as being held for the
account of the custodian as a custodian for its customers.
(c) Any securities held by a Sub-Custodian will be subject only to the
instructions of Sumitomo or its agents, and any securities held in an
eligible foreign securities depository for the account of a Sub-Custodian
will be subject only to the instructions of such Sub-Custodian.
(d) Sumitomo will only deposit property of the Fund in an account with
a Sub-Custodian which includes exclusively the assets held by Sumitomo for
its customers, and will cause such account to be designated by such Sub-
Custodian as a special custody account for the exclusive benefit of
customers of Sumitomo.
8. Sumitomo is authorized to follow and rely upon all written instructions
given by authorized persons of the Fund by letter, telephone, facsimile
transmission, telegram, teletype, cablegram or electronic media if it in good
faith believes such instructions to be genuine. Sumitomo shall not be liable for
any action taken or omitted by it hereunder at such direction. Sumitomo shall be
entitled to rely, and may act upon the advice of counsel (who may be counsel for
the Fund) on all matters and shall be without liability for any action
reasonably taken or omitted in
<PAGE>
good faith and without negligence pursuant to such advice. With respect to its
performance or lack of performance hereunder other than at our instruction,
Sumitomo shall be liable only for losses resulting from its negligence or
willful misconduct. The Fund hereby agrees to indemnify Sumitomo and hold it
harmless against any and all claims, losses, liabilities, damages and expenses,
including reasonable charges, fees and disbursements of in-house and other
counsel, howsoever arising from or in connection with this Agreement or the
performance of its duties hereunder, provided that nothing contained herein
shall require that Sumitomo be indemnified for its negligence or willful
misconduct. The Fund further agrees that no legal action shall be instituted
against Sumitomo after one year from the date of the first confirmation or
statement hereof that reflects the error or omission which provides the basis
for such claim. Sumitomo shall be protected in executing instructions given by
an authorized person prior to receipt by Sumitomo of written notice of the
revocation of the written authority of the authorized person.
9. Sumitomo is not responsible for any failure or delay either in collecting
any monies which may have accrued in connection with any foreign securities (so
long as such failure or delay is not the result of its negligence or willful
misconduct), or for any failure in notifying the Fund of any rights exercisable
by the Fund in connection with or of any proceedings affecting such securities.
Unless otherwise instructed, all such monies, including income and the proceeds
of sales and redemptions, received in a foreign currency will be converted into
U.S. Dollars at the prevailing rate of exchange in New York as determined by
Sumitomo.
10. The Fund agrees to pay Sumitomo as compensation for its services a fee as
set forth on Exhibit A hereto, and Sumitomo is authorized to charge the Fund's
account the amount due it, when due. Sumitomo will provide the Fund with a
monthly statement in reasonable detail of assets in the account and any account
with a Sub-Custodian, confirmation of purchase and sale transactions and
statements of account showing all transactions in the account and any account
with a Sub-Custodian. The Fund agrees to examine each such confirmation and
statement promptly. Unless the Fund files with Sumitomo a written exception, or
claim of noncompliance with our instructions, within 120 days after the date of
such confirmation or the closing date of the period covered by the first such
statement that reflects an error or omission, it will be conclusively deemed to
have waived any such exception or claim. The Fund acknowledges that Sumitomo may
receive in relation to mutual fund investments made on behalf of the Fund a
service fee from the mutual fund's manager or servicer at the rate of one-
quarter of one percent of the value of the average daily net asset balance
maintained by the Fund in such fund.
11. The Fund hereby pledges to Sumitomo as security for the payment of any
present or future obligation or liability of any kind which it may have to
Sumitomo in connection with this Agreement all property of every kind which,
pursuant to this Agreement, (i) is held by Sumitomo for the Fund's account or
subject to the Fund's order or (ii) may now or hereafter be in transit to
Sumitomo and which belongs to the Fund (all of which are hereinafter referred to
as the "Collateral") and the Fund hereby grants to Sumitomo a lien, right of
set-off and security interest in the Collateral to the extent of any obligation
or liability owed by the Fund to Sumitomo hereunder.
12. It is understood and agreed that Sumitomo's duties are solely those set
forth herein and that Sumitomo shall have no duty to take any other action
unless specifically agreed to by Sumitomo in writing. Without limiting the
generality of the foregoing Sumitomo shall not be required to appear in or
defend any suit with respect to any Property unless requested by the Fund in
writing and indemnified to its satisfaction.
13. Either party may terminate this appointment at any time upon delivery of
sixty (60) days' prior written notice to the other. The provisions of Paragraph
8 hereof shall survive such termination.
14. This Agreement may be amended only by an instrument in writing duly
executed by both parties hereto.
15. The Fund represents that this Agreement has been duly authorized,
executed and delivered, and constitutes our legal, valid and binding obligation.
16. This Agreement shall be governed by and construed in accordance with the
law of the State of New York.
<PAGE>
Very truly yours,
FARRELL ALPHA STRATEGIES
By:
--------------------------------
Name: Shuichi Yamada
Title: President
Date:
Taxpayer Identification Number: Address of record:
--------------------------------
--------------------------------
----------------------
Accepted:
SUMITOMO BANK OF NEW YORK TRUST COMPANY
By:
------------------------------------
Name: Shinichi Ito
Title: President
EXHIBIT A
FEE SCHEDULE
------------
Schedule of Charges
- -------------------
1. Annual Fee
(a) The Fund shall pay to Sumitomo annually an amount equal to the
product of (i) three basis points and (ii) the "Market Value" of
the securities held in the portfolio of the Japan Alpha Fund (the
"Portfolio").
(b) Payment of the annual fee shall be made in two equal semi-annual
installments, with a minimum semi-annual charge of $5,000.
(c) For purposes of calculating the annual fee, the Market Value of the
Portfolio shall be the average of the month-end balances of the
Portfolio for each semi-annual period, as reflected on the books
and records of Sumitomo. Any non-dollar denominated securities,
other instruments or cash in the Portfolio shall be converted to a
dollar value as of each month-end period at the spot rate of
exchange for such currency or currencies denominated in such
Portfolio.
2. Charges on Shares
(a) Safekeeping Charge
0.15 per share
<PAGE>
There is a minimum charge of (Yen)10.000 for one account regard-
-----------
less of the number of shares.
(b) Issue Charge (Yen)2.000 per issues
----------
(c) Handling Charge
(Yen)2.000 for each deposit or withdrawal
----------
3. Charges on Securities other than Shares
(a) Safekeeping Charge
0.05% of the face value of the securities
There is a minimum charge of (Yen)10.000 for one account
-----------
regardless of the face value of such securities.
(b) Issue Charge (Yen)2.000 per issue
----------
(c) Handling Charge
(Yen)2.000 for each deposit or withdrawal
----------
4. Out-of-Pocket Expenses
All out-of-pocket costs and expenses of Sumitomo in respect of its
services, including, without limitation, cable charges, mail charges, agent
commissions payable to the transfer agent in connection with name, transfers and
registration, stamp duties, consumption taxes on various services, including our
custodial charges.
5. Notes
(a) Except as otherwise noted, all fees quoted above are for each six-
month period.
(b) The Safekeeping Charge shall be collected proportionately from
and including the month in which the account was opened to and
including the month in which the account is closed.
(c) The Safekeeping Charge shall be collected semi-annually at the
end of March and September of each year based on the average
outstanding balance of Shares, Stock and other Securities for the
preceding six months.
(d) The Safekeeping Charge applies to shares having a par value of 50
Yen per share. When shares with a par value of 500 Yen per share
are involved, the number of such shares is multiplied by ten times
to calculate the Safekeeping Charge.
(e) The Issue Charge is applied to each issue or series of the
Securities during each calculation term; it is not charged against
the balance or face value of the Securities.
(f) The Handling Charge shall be collected on the basis of the
frequency of deposit or withdrawal of the Securities during each
calculation term.
(g) Out-of-pocket Expenses shall be collected semi-annually at the end
of March and September of each year.
(h) Any fee quoted as a Ven amount shall be converted to a US-Dollar
equivalent at the spot rate of exchange.
<PAGE>
EXHIBIT B
Date:
From:
-------------------------------
-------------------------------
-------------------------------
To: Sumitomo Bank of New York
Trust Company
Custody Department
One World Trade Center
Suite 8505
New York, N.Y. 10048
Re: Authorized Signature List
Gentlemen:
We hereby certify that the (insert number) signatures appearing below are
authentic and that the persons named are those persons who are currently
empowered to act on behalf of our organization. You may rely on and follow any
instructions bearing these signatures.
Name Title Signature
- ---- ------ ---------
- ----------------- ------------------- ---------------------------------
- ----------------- ------------------- ---------------------------------
- ----------------- ------------------- ---------------------------------
----------------------------
----------------------------Name:
Title:
<PAGE>
SUB-CUSTODIAN AGREEMENT
FOR: Sumitomo Bank of New York Trust Company -
Farrell Alpha Strategies
on behalf of
The Japan Alpha Fund
-------------------------------------------------------------------------
<PAGE>
The Sumitomo Bank, Limited
3-2 Marunouchi 1-chome
Chiyoda-ku, Tokyo
Japan
Ladies and Gentlemen:
We hereby request The Sumitomo Bank, Limited ("Sumitomo") to open a sub-custody
account (the "Account") in the name of Sumitomo Bank of New York Trust Company
("SBNYT") for Farrell Alpha Strategies (the "Trust") on behalf of The Japan
Alpha Fund (the "Fund") upon the following terms and conditions.
1. Sumitomo is directed to:
(a) hold in this Account all funds, stocks, bonds and other securities
belonging to the Fund and deposited with Sumitomo after the date of this
Agreement; and
(b) dispose of cash income and principal received by Sumitomo with
respect to the Account by crediting all income and principal to the
Account, balances to be subject to the instructions of authorized
individuals.
2. Sumitomo is authorized to:
(a) surrender for payment maturing obligations and those called for
redemption;
(b) exchange securities when the exchange is purely ministerial;
(c) accept and open all mail directed to the Fund in care of Sumitomo;
and
(d) sign in SBNYT's name any declarations, affidavits or certifications
of ownership required for the collection of income or principal on SBNYT's
or the Fund's behalf.
3. SBNYT understands and agrees that stocks, bonds and other securities in
registered form that belong to the Fund and are held by Sumitomo as sub-
custodian hereunder are to be registered in the name of SBNYT, as custodian:
(a) SBNYT will indemnify and hold harmless Sumitomo from all loss,
liability and expense incurred as a direct result of serving as custodian
or hereunder;
(b) Sumitomo will forward all stockholders' reports to SBNYT;
(c) Sumitomo is not authorized to vote proxies on securities held for
the Account and will forward all proxies and proxy materials to SBNYT;
(d) Sumitomo is not authorized to disclose the Fund's name, address and
securities position to the issuers of such securities when requested to do
so by them;
(e) Sumitomo is authorized to charge to the Account all taxes and
expenses incidental to the transfer of securities on SBNYT's behalf
pursuant hereto; and
(f) in the event Sumitomo does not receive a dividend or interest
payment in respect of securities held in the Account on a scheduled
payment date therefor, Sumitomo shall promptly notify SBNYT of such
failure and shall contact the corporation or entity that was to have made
such payment in an effort to obtain
<PAGE>
such payment.
4. SBNYT understands and agrees that:
(a) when Sumitomo is instructed to receive securities against payment,
SBNYT will have funds on deposit with Sumitomo or have made funds
available to Sumitomo in advance for such purpose;
(b) when Sumitomo is instructed to deliver securities against payment,
delivery will actually be made before receipt of payment in accordance
with generally accepted market practice. SBNYT agrees that, as between it
and Sumitomo only, it will bear the risk that the recipient of the
securities may fail to make payment, return the securities or hold the
securities or the proceeds of their sale in trust for SBNYT or for
Sumitomo as SBNYT's agent; and
(c) Sumitomo may, at its sole discretion, accept orders from SBNYT for
the purchase or sale of securities and either execute such orders itself
or by means of an agent, such as a broker or other financial organization
of its choice, subject to the fees and commissions in effect from time to
time. Sumitomo shall not be responsible for any act or omission, or for
the solvency, of any broker or agent selected by Sumitomo to effect any
transaction for SBNYT's account unless such selection and use is made or
done negligently or in bad faith. In the event such a selection and use is
made or done negligently or in bad faith, Sumitomo shall be liable to
SBNYT only for direct damages and expenses (which damages for purposes of
property only, shall be determined based on the market value of the
property which is the subject of the loss at the date of discovery of such
loss and without reference to any special condition or circumstances)
resulting from such selection and use and, in the case of any loss due to
an act, omission or default of such agent or broker, only to the extent
that such loss occurs as a result of the failure of the agent or broker to
exercise reasonable care.
5. SBNYT authorizes Sumitomo to deposit any securities held in the
Account in a book-entry account maintained in domestic or foreign depositories
such as JASDEC, provided such depositories are approved by the Board of Trustees
of the Trust. Such securities may be held in the name of a nominee maintained by
Sumitomo or by any such depository and may not be commingled with securities
owned by Sumitomo.
6. A. Sumitomo represents to SBNYT that:
(i) SBNYT and the Fund will be adequately indemnified and
its assets adequately insured in the event of loss;
(ii) The Fund's assets entrusted to SBNYT and placed with
Sumitomo hereunder will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of Sumitomo or
its creditors except a claim of payment for their safe custody or
administration;
(iii) Beneficial ownership of the assets in the Account
will be freely transferable without the payment of money or value
other than for their safe custody or administration;
(iv) Adequate records will be maintained identifying the
assets as belonging to the Account;
(v) The Fund's independent accountants will be given
access to those records or confirmation of the contents of those
records; and
(vi) SBNYT will receive periodic reports with respect to
the safekeeping of the assets in the Account, including, but not
necessarily limited to, notification of any transfer to or from the
Account.
B. Sumitomo will use reasonable care with respect to its obli-
gations under this Agreement and the safekeeping of property of the
Fund. Sumitomo shall be liable to SBNYT for any loss
<PAGE>
which shall occur as the result of the failure of Sumitomo (other
than a foreign securities depository or clearing agency) to exercise
reasonable care with respect to the safekeeping of such property.
The determination of whether Sumitomo has exercised reasonable care
shall be made in light of prevailing standards applicable to
professional custodians in the jurisdiction in which such custodial
services are performed. In the event of any loss to the Account by
reason of the failure of Sumitomo (other than a foreign securities
depository or clearing agency) to exercise reasonable care, Sumitomo
shall be liable to SBNYT only to the extent of SBNYT's direct
damages and expenses, which damages, for purposes of property only,
shall be determined based on the market value of the property which
is the subject of the loss at the date of discovery of such loss and
without reference to any special condition or circumstances.
C. Sumitomo will not be responsible for any act, omission or
default, or for the solvency of any foreign securities depository or
clearing agency which it actually appoints in accordance with
Section 5 of this Agreement, unless such appointment is made or done
negligently or in bad faith. In the event such appointment is made
or done negligently or in bad faith, Sumitomo shall be liable to
SBNYT only for direct damages and expenses (determined in the manner
described in paragraph 6.B. above) resulting from such appointment.
7. With respect to property of the Fund which is maintained by
Sumitomo pursuant to Section 6 of this Agreement:
(a) Sumitomo will identify on its books as belonging to the
Fund any property held by it as Sub-Custodian.
(b) Sumitomo will identify on its books any securities as
being held for the account of SBNYT as a custodian for the
Fund.
(c) Any securities held in an eligible foreign securities
depository for the account of Sumitomo will be subject only to
the instructions of Sumitomo.
(d) Sumitomo will cause the account to be designated as a
special custody account for the exclusive benefit of customers
of Sumitomo.
8. Sumitomo is authorized to follow and rely upon all written
instruc-tions given by authorized persons of SBNYT by letter,
telephone, facsimile transmission, telegram, teletype, cablegram or
electronic media if it in good faith believes such instructions to
be genuine. Sumitomo shall not be liable for any action taken or
omitted by it hereunder at such direction. Sumitomo shall be
entitled to rely, and may act upon the advice of counsel (who may be
counsel for SBNYT or the Fund) on all matters and shall be without
liability for any action reasonably taken or omitted in good faith
and without negligence pursuant to such advice. With respect to its
performance or lack of performance hereunder other than at SBNYT's
instruction, Sumitomo shall be liable only for losses resulting from
its negligence or willful misconduct. SBNYT hereby agrees to
indemnify Sumitomo and hold it harmless against any and all claims,
losses, liabilities, damages and expenses, including reasonable
charges, fees and disbursements of in-house and other counsel,
howsoever arising from or in connection with this Agreement or the
performance of its duties hereunder, provided that nothing contained
herein shall require that Sumitomo be indemnified for its negligence
or willful misconduct. SBNYT further agrees that no legal action
shall be instituted against Sumitomo after one year from the date of
the first confirmation or statement hereof that reflects the error
or omission which provides the basis for such claim. Sumitomo shall
be protected in executing instructions given by an authorized person
prior to receipt by Sumitomo of written notice of the revocation of
the written authority of the authorized person.
9. Sumitomo is not responsible for any failure or delay either in
collecting any monies
<PAGE>
which may have accrued in connection with any foreign
securities, or for any failure in notifying SBNYT of any rights
exercisable by SBNYT or the Fund in connection with or of any
proceedings affecting such securities, so long as such failure
or delay is not the result of its negligence or willful
misconduct. Unless otherwise instructed, all such monies,
including income and the proceeds of sales and redemptions,
received in a foreign currency will be converted into U.S.
Dollars at the prevailing rate of exchange in Tokyo as
determined by Sumitomo.
10. SBNYT agrees to pay Sumitomo as compensation for its
services a fee as set forth on Exhibit A hereto, and Sumitomo is
authorized to charge the Account the amount due it, when due.
Sumitomo will provide SBNYT with a monthly statement in
reasonable detail of assets in the Account, confirmation of
purchase and sale transactions and statements of account showing
all transactions in the Account. SBNYT agrees to examine each
such confirmation and statement promptly. Unless SBNYT files
with Sumitomo a written exception, or claim of noncompliance
with SBNYT's instructions, within 120 days after the date of
such confirmation or the closing date of the period covered by
the first such statement that reflects an error or omission, it
will be conclusively deemed to have waived any such exception or
claim.
11. It is understood and agreed that Sumitomo's duties are
solely those set forth herein and that Sumitomo shall have no
duty to take any other action unless specifically agreed to by
Sumitomo in writing. Without limiting the generality of the
foregoing, Sumitomo shall not be required to appear in or defend
any suit with respect to any property unless requested by SBNYT
in writing and indemnified to its satisfaction.
12. Either party may terminate this appointment at any time upon
delivery of sixty (60) days' prior written notice to the other.
The provisions of Paragraph 8 hereof shall survive such
termination.
13. This Agreement may be amended only by an instrument in
writing duly executed by both parties hereto.
14. SBNYT represents that this Agreement has been duly
authorized, executed and delivered, and constitutes our legal,
valid and binding obligation.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
SUMITOMO BANK OF NEW YORK
TRUST COMPANY
By:
-------------------------
Name: Shinichi Ito
Title: President
<PAGE>
Date:
Address of record:
277 Park Avenue
New York, New York 10172
Accepted:
THE SUMITOMO BANK, LIMITED
By:
--------------------------------
Name: Tomoyuki Kato
Title: General Manager
Global Banking Department
<PAGE>
EXHIBIT A
FEE SCHEDULE
------------
Schedule of Charges
- -------------------
1. Charges on Shares
(a) Safekeeping Charge
(Yen)0.15 per share
---------
There is a minimum charge of (Yen)10.000 for one account
-----------
regardless of the number of shares.
(b) Issue Charge
(Yen)2.000 per issues
----------
(c) Handling Charge
(Yen)2.000 for each deposit or withdrawal
----------
2. Charges on 8ecurities other than 8h~res
(a) Safekeeping Charge
0.05% of the face value of the securities
There is a minimum charge of (Yen)10.000 for one account
-----------
regardless of the face value of such securities.
(b) Issue Charge
(Yen)2.000 per issue
-----------
(c) Handling Charge
(Yen)2.000 for each deposit or withdrawal
----------
3. Out-of-Pocket Expenaes
All out-of-pocket costs and expenses of Sumitomo in respect of its
services, including, without limitation, cable charges, mail charges, agent
commissions payable to the transfer agent in connection with name, transfers and
registration, stamp duties, consumption taxes on various services, including our
custodial charges.
4. Notes
(a) Except as otherwise noted, all fees quoted above are for each
six-month period.
(b) The Safekeeping Charge shall be collected proportionately from and
including the month in which the account was opened to and
including the month in which the account is closed.
(c) The Safekeeping Charge shall be collected semi-annually at the
end of March and September of each year based on the average
outstanding balance of Shares, Stock and other Securities for the
preceding six months.
<PAGE>
(d) The Safekeeping Charge applies to shares having a par value of 50
Yen per share. When shares with a par value of 500 Yen per share
are involved, the number of such shares is multiplied by ten
times to calculate the Safekeeping Charge.
(e) The Issue Charge is applied to each issue or series of the
Securities during each calculation term; it is not charged
against the balance or face value of the Securities.
(f) The Handling Charge shall be collected on the basis of the
frequency of deposit or withdrawal of the Securities during each
calculation term.
(g) Out-of-pocket Expenses shall be collected semi-annually at the
end of March and September of each year.
(h) Any fee quoted as a Ven amount shall be converted to a US-Dollar
equivalent at the spot rate of exchange.
<PAGE>
EXHIBIT B
Date:
To: The Sumitomo Bank, Limited
3-2 Marunouchi 1-chome
Chiyoda-ku, Tokyo
Japan
To: Sumitomo Bank of New York
Trust Company
Custody Department
277 Park Avenue
New York, N.Y. 10172
Re: Authorized Signature List
Gentlemen:
We hereby certify that the three signatures appearing below are authentic and
that any of the persons named are those persons who-are currently empowered to
act on behalf of the Fund and/or our organization. You may rely on and follow
any instructions bearing any of these signatures.
<TABLE>
<CAPTION>
Name Title Signature
- ----- ----- ---------
<S> <C> <C>
Shinichi Ito President
--------------------------
Vice President
John McFadden and Treasurer
--------------------------
Hiroyuki Toda Vice President
--------------------------
</TABLE>
SUMITOMO BANK OF NEW YORK TRUST COMPANY
Name:
------------------------------------
Shinichi Ito
Title: President
<PAGE>
TRANSFER AGENT SERVICES AGREEMENT Exhibit 99.B9(a)
This Agreement, dated as of the 28th day of June , 1995, made by and
------- --------
between Farrell Alpha Strategies, a Delaware business trust (the "Trust")
------------------------
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"), duly organized and
existing under the laws of the State of Delaware and Fund/Plan Services, Inc.
------------------------
("Fund/Plan"), a corporation duly organized and existing under the laws of the
State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "C" attached hereto and which
Schedule "C" may be amended from time to time by mutual agreement of the Trust
and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform share transfer
agency, redemption and dividend disbursing services as set forth in this
Transfer Agent Services Agreement (the "Agreement") and in Schedule "A" attached
hereto, and to perform certain other functions in connection with these duties;
and
WHEREAS, Fund/Plan is registered with the Securities and Exchange
Commission as a Transfer Agent as required under Section 17A(c) of the
Securities Exchange Act of 1934, as amended; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth below; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. The terms as defined in this Section wherever used in this
----------
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
Share Certificates shall mean the certificates representing shares of stock
------------------
of the Series.
Shareholders shall mean the registered owners of the shares of the Series
------------
in accordance with the share registry records maintained by Fund/Plan for the
Trust.
Shares shall mean the issued and outstanding shares of the Series.
------
Signature Guarantee shall mean the guarantee of signatures by an "eligible
-------------------
guarantor institution" as defined in rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended. Eligible guarantor institutions include banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. Broker-
dealers guaranteeing signatures must be members of a clearing corporation or
maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
Oral Instruction shall mean an authorization, instruction, approval, item
----------------
or set of data, or information of any kind transmitted to Fund/Plan in person or
by telephone, telegram, telecopy or other mechanical or documentary means
lacking original signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons so authorized by a resolution of the Board
of Trustees of the Trust.
Written Instruction shall mean an authorization, instruction, approval,
-------------------
item or set of data or information of any kind transmitted to Fund/Plan in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person or persons so authorized
by a resolution of the Board of Trustees of the Trust to give Written
Instructions to Fund/Plan.
TRANSFER AGENCY SERVICES
Section 2. Fund/Plan, as Transfer Agent, shall make original issues of
----------
Shares in accordance with Sections 9 and 10 below and with each Series'
Prospectus and Statement of Additional Information upon the written request of
the Trust, and upon being furnished with (i) a certified copy of a resolution or
resolutions of the Board of Trustees of the Trust authorizing such issue; (ii)
an opinion of counsel as to the validity of such Shares; and (iii) necessary
funds for the payment of any original issue tax applicable to such additional
Shares.
Section 3. Transfers of Shares shall be registered and new Shares issued
----------
by Fund/Plan upon redemption of outstanding Shares, (i) in the form deemed by
Fund/Plan to be properly endorsed for transfer, (ii) with all necessary
endorser's signatures guaranteed pursuant to Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, and accompanied by, (iii) such assurances as
Fund/Plan shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement, and (iv) satisfactory evidence of
compliance with all applicable laws relating to the payment or collection of
taxes.
Section 4. In registering transfers, Fund/Plan, as Transfer Agent, may
----------
rely upon the applicable commercial
<PAGE>
code or any other applicable law which, in the written opinion of counsel (a
copy of which shall previously have been furnished to the Trust), protect
Fund/Plan and the Trust in not requiring complete documentation, in registering
transfer without inquiry into adverse claims, in delaying registration for
purposes of such inquiry, or in refusing registration where in its judgment an
adverse claim requires such refusal.
Section 5. With respect to confirmed trades received by Fund/Plan as
----------
Transfer Agent for the Series, Fund/Plan shall periodically notify the Trust of
the current status of outstanding confirmed trades. Fund/Plan is authorized to
cancel confirmed trades which have been outstanding for thirty (30) days. Upon
such cancellation, Fund/Plan shall instruct the accounting agent to adjust the
books of the Trust accordingly.
Section 6. Fund/Plan will maintain stock registry records in the usual
----------
form in which it will note the issuance, transfer and redemption of Shares.
Fund/Plan is responsible to provide reports of Share purchases, redemptions, and
total Shares outstanding on the next business day after each net asset
valuation. Fund/Plan is authorized to keep records, which will be part of the
stock transfer records, in which it will note the names and registered address
of Shareholders and the number of Shares and fractions thereof owned by them.
Section 7. In addition to the duties and functions above-mentioned,
----------
Fund/Plan, in its capacity as Transfer Agent, will perform the usual duties and
functions of a stock transfer agent for an investment company as listed in
Schedule "A" attached hereto. Fund/Plan may rely conclusively and act without
further investigation upon any list, instruction, certification, authorization
or other instrument or paper reasonably believed by it in good faith to be
genuine and unaltered, and to have been signed, countersigned, or executed by
duly authorized person or persons, or upon the instructions of any officer of
the Trust, or upon the advice of counsel for the Trust or for Fund/Plan.
Fund/Plan may record any transfer of Shares which is reasonably believed by it
to have been duly authorized or may refuse to record any transfer of Shares if
in good faith Fund/Plan in its capacity as Transfer Agent deems such refusal
necessary in order to avoid any liability either of the Trust or Fund/Plan. The
Trust agrees to indemnify and hold harmless Fund/Plan from and against any and
all losses, costs, claims, and liability which it may suffer or incur by reason
of so relying or acting or refusing to act. Fund/Plan shall maintain and
reconcile all operating bank accounts necessary to facilitate all transfer
agency processes; including, but not limited to, distribution disbursements,
redemptions and payment clearance accounts.
Section 8. In case of any request or demand for the inspection of the
----------
Share records of the Series, Fund/Plan as Transfer Agent shall endeavor to
notify the Trust and to secure instructions as to permitting or refusing such
inspection. Fund/Plan may, however, exhibit such records to any person in any
case where it is advised by its counsel that it may be held liable for failure
to do so.
ISSUANCE OF SHARES
Section 9. Prior to the daily determination of net asset value in
----------
accordance with the Series' Prospectus and Statement of Additional Information,
Fund/Plan shall process all purchase orders received since the last
determination of the Series' net asset value.
Fund/Plan shall calculate daily the amount available for investment in
Shares at the net asset value determined by the Series' pricing agent as of the
close of regular trading on the New York Stock Exchange, the number of Shares
and fractional Shares to be purchased and the net asset value to be deposited
with the Custodian. Fund/Plan as agent for the Shareholders shall place a
purchase order daily with the appropriate Series for the proper number of Shares
and fractional Shares to be purchased and confirm such number to the Trust, in
writing.
Section 10. Fund/Plan, having made the calculations provided for in
-----------
Section 9, shall thereupon pay over the net asset value of Shares purchased to
the Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder Registration Records.
The Shares and fractional Shares purchased for each Shareholder will be credited
by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to
each Shareholder a confirmation of each purchase, with copies to the Trust, if
requested. Such confirmations will show the prior Share balance, the new Share
balance, the amount invested and the price paid for the newly purchased Shares.
REDEMPTIONS
Section 11. Fund/Plan shall, prior to the daily determination of net asset
-----------
value in accordance with the Series' Prospectus and Statement of Additional
Information, process all requests from Shareholders to redeem Shares and
determine the number of Shares required to be redeemed to make monthly payments,
automatic
<PAGE>
payments or the like. Thereupon, Fund/Plan shall advise the Trust of the total
number of Shares available for redemption and the number of Shares and
fractional Shares requested to be redeemed. Fund/Plan as pricing agent shall
then determine the applicable net asset value, whereupon Fund/Plan shall furnish
the Trust with an appropriate confirmation of the redemption and process the
redemption by filing with the Custodian an appropriate statement and make the
proper distribution and application of the redemption proceeds in accordance
with each Series' Prospectus and Statement of Additional Information then in
effect. The stock registry books recording outstanding Shares, the shareholder
registration records and the individual account of the Shareholder shall be
properly debited.
Section 12. The proceeds of redemption shall be remitted by Fund/Plan in
-----------
accordance with the appropriate Series' Prospectus and Statement of Additional
Information, by check mailed to the Shareholder at the Shareholder's registered
address or wired to an authorized bank account.
For the purposes of redemption of Shares which have been purchased within
15 days of a redemption request, the Trust shall provide Fund/Plan, from time to
time, with Written Instructions concerning the time within which such requests
may be honored.
DIVIDENDS
Section 13. The Trust shall notify Fund/Plan of the date of each dividend
-----------
declaration or capital gains distribution. In addition, the Trust shall provide
to Fund/Plan five business days' prior written notice of the record date for
determining the Shareholders entitled to payment. The per-share payment amount
of any dividend or capital gain shall be determined by the Trust after receipt
of necessary information from and consultation with Fund/Plan.
Section 14. On or before each payment date, the Trust will notify
-----------
Fund/Plan in its capacity as dividend disbursing agent of the total amount of
the dividend or distribution currently payable. Fund/Plan will, on the
designated payment date, automatically reinvest all dividends in additional
Shares except in cases where Shareholders have elected to receive distribution
in cash, in which case Fund/Plan will mail distribution checks to the
Shareholders for the proper amounts payable to them from monies transferred by
the Custodian to Fund/Plan for that purpose.
FEES
Section 15. The Trust agrees to pay Fund/Plan compensation for its
-----------
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation will be comprised of two components,
payable on a monthly basis, as follows:
(i) an annual shareholder Account Maintenance Fee calculated by
multiplying the monthly average number of accounts for Class A Shares and
Class D Shares of the Trust by one twelfth (1/12th) the respective account
fee as stated in Schedule "B", subject to a minimum fee per class, which fees
are to be paid by the Trust within ten (10) calendar days of receipt of an
invoice from Fund/Plan after the end of each month; and
(ii) reimbursement of any reasonable out-of-pocket expenses paid by
Fund/Plan on behalf of the Trust, which out-of-pocket expenses will be billed to
the Trust within the first ten calendar days of the month following the month in
which such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of each
Series' net assets shall be computed at the times and in the manner specified in
each Series' Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
Section 16. Fund/Plan shall maintain records (which may be part of the
-----------
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestments, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each Shareholder. Fund/Plan agrees to
make available upon request and to preserve for the periods prescribed in Rule
31a-2 under the Act, any records relating to services provided under this
Agreement which are required to be maintained by Rule 31a-1 under the Act.
<PAGE>
Section 17. In addition to the services as Transfer Agent and dividend
-----------
disbursing agent set forth above, Fund/Plan will perform other services for the
Trust as agreed upon from time to time, including but not limited to,
preparation of and mailing Federal Tax Information Forms and mailing semi-annual
reports to shareholders of the Trust.
Section 18. Nothing contained in this Agreement is intended to or shall
-----------
require Fund/Plan in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange are closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next business day on which both the New York Stock Exchange and the
Custodian are open.
Section 19.
-----------
(a) Fund/Plan, its directors, officers, employees, shareholders and agents
shall only be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust, in connection with the performance of this Agreement that
result from willful misfeasance, bad faith, negligence or reckless disregard on
the part of Fund/Plan in the performance of its obligations and duties under
this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee, or agent of the Trust shall be deemed, when rendering services to such
entity or acting on any business of the Trust, (other than services or business
in connection with Fund/Plan's duties hereunder), to be rendering such services
to or acting solely for the Trust and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of Fund/Plan even
though that person is being paid salary by Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Trust shall
indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders or agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith hereunder; (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon any
certificate, instrument, order, or stock certificate or other document
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions or Written
Instructions of an authorized person of the Trust or upon the opinion of legal
counsel to the Trust, or its own counsel; or (iii) any action taken or omitted
to be taken by Fund/Plan in connection with its appointment under this
Agreement, which action or omission was taken in good faith in reliance upon any
law, act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed. Indemnification
under this subparagraph, however, shall not apply to actions or omissions of
Fund/Plan or its directors, officers, employees, shareholders, or agents in
cases of its or their willful misfeasance, bad faith, negligence or reckless
disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 8(d) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust shall have the sole right to control the defense of any action,
suit or proceeding in which Fund/Plan is involved and for which indemnity is
being provided by the Trust to Fund/Plan. The Trust shall have the sole right
to control the settlement of any action, suit or proceeding subject to
Fund/Plan's approval, which shall not be unreasonably withheld. Fund/Plan shall
have the right, but not the obligation, to participate in the defense or
settlement of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such participation
will be borne solely by Fund/Plan. Fund/Plan shall have the right to
participate in the defense of an action or proceeding and to retain its own
counsel, and the reasonable fees and expenses of such counsel shall be borne by
the Trust (which shall pay such fees, costs and expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel stating that the use of
counsel chosen by the Trust to represent Fund/Plan would present such counsel
with a conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Fund/Plan and the Trust, and legal counsel to Fund/Plan shall have
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust shall not have the right to direct the defense of such
<PAGE>
action on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ separate counsel
at the expense of the Trust. Notwithstanding anything to the contrary herein,
it is understood that the Trust shall not, in connection with any action, suit
or proceeding or related action, suit or proceeding, be liable under this
Agreement for the fees and expenses of more than one firm.
Section 20. Fund/Plan is authorized, upon receipt of Written Instructions
-----------
from the Trust, to make payment upon redemption of Shares without a signature
guarantee. The Trust hereby agrees to indemnify and hold Fund/Plan, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands, losses whatsoever arising out of
or in connection with a payment by Fund/Plan upon redemption of Shares pursuant
to Written Instructions and without a signature guarantee.
Section 21.
-----------
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party as set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed for
two (2) years commencing on the Effective Date of this Agreement.
(c) After the initial term of this Agreement, the Trust or Fund/Plan may
give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred twenty (120) days after the date of receipt of such
notice. Upon the effective termination date, the Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements reasonably
incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Fund/Plan in
connection with the termination of this Agreement, Fund/Plan shall promptly,
upon such termination and at the expense of the Trust, transfer all Required
Records and shall cooperate in the transfer of such duties and responsibilities.
Section 22. The Trust shall file with Fund/Plan a certified copy of each
-----------
resolution of its Board of Trustees authorizing the execution of Written
Instructions or the transmittal of Oral Instructions, as provided in Section 1
of this Agreement.
Section 23. This Agreement may be amended from time to time by a
-----------
supplemental agreement executed by the Trust and Fund/Plan.
Section 24. Except as otherwise provided in this Agreement, any notice or
-----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:
Farrell-Wako Global Investment Management, Inc. Fund/Plan Services, Inc.
780 Third Avenue, 38th Floor 2 West Elm Street
New York, NY 10017 Conshohocken, PA 19428
Attention: Attention:
James L. Farrell, Jr., Chairman Kenneth J. Kempf,President
Section 25. The Parties represent and warrant to each other that the
-----------
execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and, when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
Section 26. This Agreement may be executed in two or more counterparts,
-----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 27. This Agreement shall extend to and shall be binding upon the
-----------
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a
<PAGE>
resolution of their respective Boards of Directors or Trustees.
Section 28. This Agreement shall be governed by the laws of the State of
-----------
New York and the exclusive venue of any action arising under this Agreement
shall be Montgomery County, Commonwealth of Pennsylvania.
Section 29. No provision of this Agreement may be amended or modified, in
-----------
any manner except in writing, properly authorized and executed by Fund/Plan and
the Trust.
Section 30. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting in its entirety, of eleven typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as of the day
and year first above written.
Farrell Alpha Strategies Fund/Plan Services, Inc.
- ------------------------ ------------------------
____________________________________ ____________________________________
By: James L, Farrell, Jr., Chairman By: Kenneth J. Kempf, President
<PAGE>
Schedule "A"
Transfer Agent/Shareholder Services
for
Farrell Alpha Strategies
The following is a list of Transfer Agency Services to be provided under this
agreement:
. Opening new accounts and entering demographic data into shareholder base.
. Real-time Customer Information File (CIF) to link accounts within a Series
and across all Series. Facilitates account maintenance, household mailings
and combined statements.
. 100% Quality Control of new accounts opened on a same-day basis.
. Account maintenance
. Processing investments
. Processing tax ID certifications and Non-Resident Alien (NRA) and reporting
back-up withholding.
. Processing legal transfers of accounts.
. Recording and retaining on tape all shareholder calls.
. Researching and responding to shareholder calls and written inquiries.
. Responding to all tax related inquiries.
. Processing and payment/reinvestment of dividends.
. Processing sweep purchases and redemptions for brokerage, bank, or other
accounts via tape or transmission.*
. Generating account statements with copies to appropriate interested
parties. (Up to four statements.)
. Combined shareholder statements.*
. Redemption processing.
. Distribution options:
- federal wires*
- mailing checks
- ACH*
. Producing daily and monthly Blue Sky reports.
. Producing daily, monthly or periodic reports of shareholder activity.
. Commission processing.
<TABLE>
<CAPTION>
Daily Reports
-------------
Report Number Report Description
------------- ------------------
<S> <C>
(no report number) Daily Transaction Journal
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
</TABLE>
<PAGE>
<TABLE>
<S> <C>
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
501 New Account Report
</TABLE>
Monthly Reports
---------------
Report Description
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
. Producing shareholder lists, labels, ad hoc reports to management, etc. *
. Addressing, mailing, and tabulation of proxy cards, as necessary.*
. Preparation of federal tax information forms to include 1099-DIV's, 1099-
B's, 1042's, etc. to shareholders with tape to IRS.
. Microfilming and indexing in PC system of all application, correspondence
and other pertinent shareholder documents to provide automated location of
these records.
. Microfilming all checks presented for investment and check redemptions.
. System access by PC dial-up or by dedicated line. (If Applicable)*
. Retirement Plan processing.* (IRA, SEP, Omnibus Qualified Plans)
- Systematic tracking of current, prior year and rollover contributions
- 5498 tax reporting
- 1099R reporting on distributions
- Processing transfer of assets between custodians
- PC based recalculation of required minimum distributions for IRA SWP's
for shareholders over 59 1/2 years of age.
. Institutional Servicing -
Institutional customers are assigned a specific representative within the
unit providing daily availability and settlement information, and
coordinating sweep activity. In addition, this representative interacts
with the Retail Operations area to endure proper handling and coding of
accounts.
* Separate fees will apply for these services.
<PAGE>
Schedule "B"
Shareholder Services and Transfer Agent Fee Schedule
for
Farrell Alpha Strategies
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. A) Base Fee
--------
$25.00 per Account per Year Annual Maintenance Fee subject to:
Minimum monthly fee of $2,000 for Class A Shares and $1,000 for
Class D Shares.
B) IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
--------------------------------------------------------
(Normally charged to shareholder)
$12.00 per Account per Year Maintenance Fee(charged once annually).
II. Out of Pocket Expenses:
----------------------
Farrell Alpha Strategies will reimburse Fund/Plan Services monthly for all
reasonable out-of-pocket expenses, including postage, stationery
(statements), telecommunications (telephone, fax, dedicated 800 line, on-
line access), special reports, transmissions, records retention, tapes,
couriers and any pre-approved travel expenses.
III. Other Services Not Covered By This Agreement
--------------------------------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies are not included
herein, and will be quoted separately. To the extent Farrell Alpha
Strategies should decide to issue additional separate classes of shares,
additional fees will apply. Any enhanced services, programming requests or
reports will be quoted upon request.
<PAGE>
Schedule "C"
Identification of Series
------------------------
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"Farrell Alpha Strategies"
1. The Japan Alpha Fund - Class A Shares
2. The Japan Alpha Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
ADMINISTRATION AGREEMENT Exhibit 99.B9(b)
This Agreement, dated as of the 28th day of June ,
--------------- ---------------
1995, made by and between Farrell Alpha Strategies, a Delaware business trust
------------------------
(the "Trust") operating as a registered investment company under the Investment
Company Act of 1940, as amended (the "Act"), duly organized and existing under
the laws of the State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a
------------------------
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified on Schedule "C" attached hereto, and
which Schedule "C" may be amended from time to time by mutual agreement of the
Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby Fund/Plan
will provide certain administration services to the Trust on the terms and
conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust will provide all necessary information to Fund/Plan
concerning the Series so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as
---------- -----------
administrator and Fund/Plan hereby accepts such appointment. Also, the Trust
agrees to appoint Fund/Plan as administrator to any additional Series which,
from time to time, may be added to the Trust.
Section 2. Duties and Obligations of Fund/Plan
---------- -----------------------------------
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Board of Trustees of the Trust, Fund/Plan
shall provide to each of the Series all administrative services set forth in
Schedule "A" attached hereto, which Schedule is incorporated by reference in its
entirety into this Agreement. In addition to the obligations set forth in
Schedule "A", Fund/Plan shall (i) provide its own office space, facilities,
equipment and personnel for the performance of its duties under this Agreement;
and (ii) take all actions it deems necessary to properly execute the
administrative responsibilities of the Trust.
(b) So that Fund/Plan may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with Fund/Plan and to provide such
information, documents and advice relating to the Trust as is within the
possession or knowledge of such persons provided that no such person need
provide any information to Fund/Plan if to do so would, in the reasoned opinion
of counsel to the Trust, result in the loss of any privilege or confidential
treatment with respect to such information. In connection with its duties,
Fund/Plan shall be entitled to rely, and shall be held harmless by the Trust
when acting in reasonable reliance upon the instruction, advice or any documents
provided by the Trust to Fund/Plan by any of the aforementioned persons. All
fees charged by any such persons shall be deemed an expense of the Trust.
(c) Any activities performed by Fund/Plan under this Agreement shall
conform to the requirements of:
(1) the provisions of the Investment Company Act of 1940, as
amended (the "Act") and the Securities Act of 1933, as amended, and of any rules
or regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Trust Instrument of the Trust, as
amended from time to time;
(4) any policies and determinations of the Board of Trustees of
the Trust; and
(5) the fundamental policies of the Trust as reflected in its
registration statement filed pursuant to the Act.
Fund/Plan acknowledges that all records that it maintains for the Trust are
the property of the Trust and will be surrendered promptly to the Trust upon
written request. Fund/Plan will preserve, for the periods prescribed under Rule
31a-2 under the Act, all such records required to be maintained under Rule 31a-1
of the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any officer
thereof from acting as administrator for any other person, firm or corporation.
While the administrative services supplied to the Trust may be different than
those supplied to other persons, firms or corporations, Fund/Plan shall provide
the Trust equitable
<PAGE>
treatment in supplying services. The Trust recognizes that it will not receive
preferential treatment from Fund/Plan as compared with the treatment provided to
other Fund/Plan clients. Fund/Plan agrees to maintain the records and all other
information of the Trust in a confidential manner and shall not use such
information for any purpose other than the performance of Fund/Plan's duties
under this Agreement.
Section 3. Allocation of Expenses All costs and expenses of the Trust
---------- ----------------------
shall be paid by the Trust including, but not limited to:
(a) fees paid to an investment adviser (the "Adviser");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are not
affiliated persons of the Adviser;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder servicing
agent, fees and expenses;
(h) fees and expenses incident to the registration of the shares
of the Trust under Federal or state securities laws;
(i) expenses related to preparing, setting in type, printing and
mailing prospectuses, statements of additional information,
reports and notices and proxy material to shareholders of
the Trust;
(j) all expenses incidental to holding meetings of shareholders
and Trustees of the Trust;
(k) such extraordinary expenses as may arise, including
litigation, affecting the Trust and the legal obligations
which the Trust may have regarding indemnification of its
officers and directors; and
(l) fees and out-of-pocket expenses paid on behalf of the Trust
by Fund/Plan.
Section 4. Compensation of Fund/Plan The Trust agrees to pay Fund/Plan
---------- -------------------------
compensation for its services and to reimburse it for expenses incurred and paid
by Fund/Plan on behalf of the Trust, at the rates and amounts as set forth in
Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation be comprised of two components,
payable on a monthly basis, as follows:
(i) a combined asset-based fee that is calculated using the average
monthly total net assets of the Trust at month end. Such fee is to be paid by
the Trust within ten calendar days of receipt of an invoice from Fund/Plan after
the end of each month; and
(ii) reimbursement of any out-of-pocket expenses paid by Fund/Plan on
behalf of the Trust, which out-of-pocket expenses will be billed to the Trust
within the first ten calendar days of the month following the month in which
such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of the
Trust's net assets shall be computed at the times and in the manner specified in
the Trust's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
Section 5. Duration
---------- --------
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years commencing on the Effective Date of this Agreement.
(c) After the initial term of this Agreement, the Trust or Fund/Plan
may give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred twenty (120) days after the date of receipt of such
notice. Upon the effective termination date, the Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements reasonably
incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated
<PAGE>
by the Trust by written notice to Fund/Plan in connection with the termination
of this Agreement, Fund/Plan shall promptly upon such termination and at the
expense of the Trust, transfer all required records and shall cooperate in the
transfer of such duties and responsibilities.
Section 6. Amendment No provision of this Agreement may be amended or
---------- ---------
modified, in any manner except by a written agreement properly authorized and
executed by Fund/Plan and the Trust.
Section 7. Applicable Law This Agreement shall be governed by the laws
---------- --------------
of the State of New York and the exclusive venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 8. Limitation of Liability
---------- -----------------------
(a) The Parties represent and warrant to each other that the execution
and delivery of this Agreement by the undersigned officer of each Party has been
duly and validly authorized; and, when duly executed, this Agreement will
constitute a valid and legally binding enforceable obligation of each Party. The
obligations under this Agreement shall be binding upon the assets and property
of the Trust and shall not be binding upon any officer or shareholder of the
Series individually.
(b) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(c) Any person, even though a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, director, employee or
agent of the Trust, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or under the control or direction of
Fund/Plan even though such person may receive compensation from Fund/Plan.
(d) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and signed, countersigned or executed by any duly
authorized person, upon the oral or written instruction of an authorized person
of the Trust or upon the opinion of legal counsel to the Trust; or (iii) any
action taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or interpretation
of the same even though the same may thereafter have been altered, changed,
amended or repealed. Indemnification under this subparagraph shall not apply,
however, to actions or omissions of Fund/Plan or its directors, officers,
employees, shareholders or agents in cases of its or their willful misfeasance,
bad faith, negligence or reckless disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 8(d) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust shall have the sole right to control the defense of any action,
suit or proceeding in which Fund/Plan is involved and for which indemnity is
being provided by the Trust to Fund/Plan. The Trust shall have the sole right
to control the settlement of any action, suit or proceeding subject to
Fund/Plan's approval, which shall not be unreasonably withheld. Fund/Plan shall
have the right, but not the obligation, to participate in the defense or
settlement of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such participation
will be borne solely by Fund/Plan. Fund/Plan shall have the right to
participate in the defense of an action or proceeding and to retain its own
counsel, and the reasonable fees and expenses of such counsel shall be borne by
the Trust (which shall pay such fees, costs and expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel stating
that the use of counsel chosen by the Trust to represent Fund/Plan would present
such counsel with a conflict of interest;
<PAGE>
(ii) the defendants in, or targets of, any such action or
proceeding include both Fund/Plan and the Trust, and legal counsel to Fund/Plan
shall have reasonably concluded that there are legal defenses available to it
which are different from or additional to those available to the Trust or which
may be adverse to or inconsistent with defenses available to the Trust (in which
case the Trust shall not have the right to direct the defense of such action on
behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ separate
counsel at the expense of the Trust. Notwithstanding anything to the contrary
herein, it is understood that the Trust shall not, in connection with any
action, suit or proceeding or related action, suit or proceeding, be liable
under this Agreement for the fees and expenses of more than one firm.
(e) The terms of this Section 8 shall survive the termination of this
Agreement.
Section 9. Notices Except as otherwise provided in this Agreement, any
---------- -------
notice or other communication required by or permitted to be given in connection
with this Agreement shall be in writing, and shall be delivered in person or
sent by first class mail, postage prepaid to the respective parties as follows:
If to Farrell Alpha Strategies: If to Fund/Plan:
- ------------------------------- ----------------
Farrell-Wako Global Investment Management, Inc. Fund/Plan Services, Inc.
780 Third Avenue, 38th Floor 2 West Elm Street
New York, NY 10017 Conshohocken, PA 19428
Attention: James L. Farrell, Jr., Chairman Attention: Kenneth J. Kempf,
President
Section 10. Severability If any part, term or provision of this
----------- ------------
Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be considered
severable and not affected, and the rights and obligations of the parties shall
be construed and enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
Section 11. Section Headings Section and paragraph headings are for
----------- ----------------
convenience only and shall not be construed as part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eight typewritten pages, together with Schedules "A", "B" and "C,"
to be signed by their duly authorized officers as of the day and year first
above written.
Farrell Alpha Strategies Fund/Plan Services, Inc.
- ------------------------ ------------------------
____________________________________ ____________________________________
By: James L. Farrell, Jr., Chairman By: Kenneth J. Kempf, President
<PAGE>
Schedule "A"
Fund Administration Services
for
Farrell Alpha Strategies
------------------------
I. Regulatory Compliance
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and present for renewal
a. Investment advisory contracts
b. Fidelity bond
c. Underwriting contract
d. Distribution (12b-1) plan
e. Administration contract
f. Accounting contract
g. Custody contract
h. Transfer agent and shareholder services contract
2. Filings
a. N-SAR (semi-annual report)
b. One Annual post-effective amendment on Form N-1A
----------
c. Notice pursuant to Rule 24f-2 (registration of indefinite
number of shares)
d. Filing fidelity bond under Rule 17g-1
e. Filing shareholder reports under Rule 30b2-1
3. Annual updates of biographical information and questionnaires for
Trustees and Officers.
B. Compliance - State "Blue Sky"
1. Blue Sky (state registration)
a. Registration of shares
b. Registration of issuer/dealer/agent (no loads)
c. Monitor sale of shares
d. Report shares sold
e. Filing of federal prospectus and contracts
f. Filing annual and semi-annual reports with states
C. Compliance - Prospectus
1. Analyze and review portfolio reports from investment advisor
regarding:
a. compliance with investment objectives
b. maximum investment by company/industry size
D. Compliance - Other
1. Applicable stock exchange rules
2. Applicable state tax laws
II. Corporate Business and Shareholder/Public Information
-----------------------------------------------------
A. Trustees/Management
1. Preparation of Board meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. draft meeting minutes
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
<PAGE>
4. Insurance
5. Underwriters
C. Maintain Corporate Calendars and Files
1. General
2. Blue sky
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. performance information
4. Respond to:
a. financial press, as authorized
b. miscellaneous shareholder inquiries
c. industry questionnaires
5. Prepare, maintain and update monthly information manual
E. Communications to Shareholders
1. Coordinate printing and distribution of annual and semi-annual
reports and prospectus
F. Shareholder Meetings (Additional Fee Applies)
1. Preparation of proxy
2. Solicitation of proxies
3. Conduct meeting
4. Preparation of minutes and record ballot results
III. Financial and Management Reporting
----------------------------------
A. Income and Expenses
1. Expense figures calculated and accrual levels set
2. Monitoring of expenses and expense caps (monthly)
3. Approve and coordinate payment of expenses
4. Projection of income and expenses (with regards to B(2)) - ex-
date will determine if projection will apply
5. Checking account reconciliation (monthly) and establish Trust's
operating expense checking account
6. Calculation of advisory fee, 12b-1 fee and reimbursements to fund
(if applicable)
7. Authorize the recording and amortization of organizational costs
and prepaid expenses (supplied by Adviser)
B. Distributions to Shareholders
1. Projections of distribution amounts
2. Calculations of dividends and capital gain distributions (in
conjunction with the Trust and its auditors)
a. compliance with income tax provisions
b. compliance with exise tax provisions
c. compliance with Investment Company Act of 1940
C. Financial Reporting
1. Liaison between Trust management, independent auditors and
printers for shareholder reports
2. Preparation of semi-annual and annual reports to shareholders
3. 60-day delivery to SEC and shareholders
4. Preparation of semi-annual and annual NSAR's (financial data)
<PAGE>
5. Preparation of financial statements for SEC Post-Effective
Amendment (if applicable, for first year of operation)
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
3. Income qualification test
E. Other Financial Analyses
1. Upon request from Trust management, other budgeting and analyses
can be constructed to meet the Trust's specific needs (additional
fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on return of capital
presentation, excise tax calculation
4. Performance (total return) calculation (monthly)
5. 1099 Miscellaneous - prepared for Trustees (annual)
6. Analysis of interest derived from various Government obligations
(annual)(if interest income was distributed in a calendar year)
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure proper
update
2. Perform various reviews to ensure accuracy of transfer agency
subscription/liquidation schedules, accounting (the monthly
expense analysis) and custody (review of daily bank statements to
ensure accurate money expense payment movement)
3. Review accruals and expenditures where applicable
G. Preparation and distribution of monthly operational reports to
management by 10th Business Day
1. Management Statistics (Recap)
- portfolio
- book gains/losses/per share
- net income, book income per share
- capital stock activity
- distributions
2. Performance Analysis
- total return
- monthly, quarterly, year to date, average annual
3. Expense Analysis
- schedule
- summary of due to/from Adviser
- expenses paid
- expense cap
- accrual monitoring
- advisory fee
4. Short-Short Analysis
- short-short income
- gross income (components)
5. Portfolio Turnover
- cost of purchases
- net proceeds of sales
- average market value
6. Asset Diversification Test
- gross assets
- non-qualifying assets
7. Activity Summary
- shares sold, redeemed and reinvested
- change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
<PAGE>
I. Standard schedules for Board Package (quarterly)
1. Activity Summary
2. Broker commissions
3. Expense analysis
4. Other schedules can be provided (additional fees may apply)
IV. Special Issues Related to Foreign Investments
---------------------------------------------
A. Financial Reporting
1. Work with custodian to monitor and review tax reclaims
chronologically, by country and type; report on same to Trust
management
2. Review and provide reports on the treatment of currency
gain/loss and capital gain/loss in conjunction with the Trust's
independent auditors
a. Section 988 transactions
b. Section 1256 contracts
c. Section 1092 deferrals
3. Tax Reporting (Depending on the level of assistance required by
the Trust's independent auditors, additional fees may apply.)
a. Analyze tax treatment of foreign investments based on
the Trust's elections and their impact on:
1. Subchapter M tests -- e.g. diversification,
qualified income, short-short (30% tests)
2. Taxable income and capital gains
3. Prepare excise tax worksheets
b. Calculate distributions to shareholders
1. Monitor character and impact of realized currency
gain/loss on distribution amount
4. Assist the Advisor and work with the Independent Auditors in
identification of PFIC's (by providing a list of potential PFIC's
that the Trust may be holding).
<PAGE>
Schedule "B"
Administration Services Fee Schedule
for
Farrell Alpha Strategies
------------------------
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. Base Fee (calculated using average monthly total net assets of the Trust at
--------
month end and payable monthly)
.0015 On the First $ 75 Million of Total Average Net Assets
.0010 On the Next $ 75 Million of Total Average Net Assets; and
.0005 Over $150 Million of Total Average Net Assets
The above asset based fee is calculated using the total average net assets
of the Trust. Minimum fees are $95,000 per year for the initial separate
series of shares of the Trust and $12,000 for each additional separate
series of shares or class within such series.
II. Out-of-Pocket Expenses:
----------------------
The Trust will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including postage, telecommunications (telephone and fax),
special reports, cost of Edgar filings, Board Meeting materials, record
retention approved, transportation costs as incurred and copying and
sending materials to independent accountants for off-site audits.
III. Additional Services
-------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be quoted separately. To the extent the Trust should
decide to issue additional multiple/separate classes of shares, additional
fees will apply. Any additional/enhanced services or reports will be quoted
upon request.
IV. Blue Sky Administration
-----------------------
Offered at no additional charge. Note, however, that the sponsor (in this
case, Farrell-Wako Global Investment Management, Inc.) will be responsible
for funding registration and filing fees charged by each state.
<PAGE>
Schedule "C"
Identification of Series
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Farrell Alpha Strategies"
1. The Japan Alpha Fund - Class A Shares
2. The Japan Alpha Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
ACCOUNTING SERVICES AGREEMENT Exhibit 99.B9(c)
This Agreement, dated as of the 28th day of June , 1995 made by and
-------- -------
between Farrell Alpha Strategies, a Delaware business trust (the "Trust")
------------------------
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), duly
organized and existing under the laws of the State of Delaware and Fund/Plan
---------
Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under
- --------------
the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue separate
series of shares representing interests in separate investment portfolios (the
"Series"), which Series are identified together with any classes of shares of
such Series, on Schedule "C" attached hereto and which Schedule "C" may be
amended from time to time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Trust (the
"Accounts and Records") and to perform certain other functions in connection
with such Accounts and Records pursuant to the terms and conditions set forth in
this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
functions pursuant to the terms and conditions set forth in this Agreement; and
WHEREAS, the Trust will provide all necessary information concerning the
Series to Fund/Plan so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as Accounting
---------- -----------
Services Agent and Fund/Plan hereby accepts such appointment. Also, the Trust
agrees to appoint Fund/Plan as Accounting Services Agent for any additional
Series which, from time to time, may be added to the Trust.
Section 2. Definitions. For purposes of this Agreement:
---------- ------------
Oral Instructions shall mean an authorization, instruction, approval, item
-----------------
or set of data, or information of any kind transmitted to Fund/Plan in person or
by telephone, telegram, telecopy, or other mechanical or documentary means
lacking an original signature, by a person or persons reasonably identified to
Fund/Plan to be a person or persons authorized by a resolution of the Board of
Trustees of the Trust, to give such Oral Instructions on behalf of the Trust.
Written Instructions shall mean an authorization, instruction, approval,
--------------------
item or set of data or information of any kind transmitted to Fund/Plan in
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person authorized by a
resolution of the Board of Trustees of the Trust to give written instructions on
behalf of the Trust.
The Trust shall file with Fund/Plan a certified copy of each resolution of
its Board of Directors authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 3. To the extent Fund/Plan receives the necessary information from
----------
the Trust or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records and any other
records required to be kept pursuant to Rule 31a-1 of the Investment Company Act
relating to the business of the Trust in such form as may be mutually agreed
upon between the Trust and Fund/Plan:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
<PAGE>
(m) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of the net asset value of the Trust as provided below, is to be
furnished by Written or Oral Instructions to Fund/Plan daily (in accordance with
the time frame identified below) prior to the close of regular trading on the
New York Stock Exchange.
Section 4. Fund/Plan shall perform the ministerial calculations necessary
----------
to calculate each of the Series' net asset value each day that the New York
Stock Exchange is open for business, in accordance with (i) each Series' current
Prospectus and Statement of Additional Information and (ii) procedures with
respect thereto approved by the Board of Trustees of the Trust and supplied in
writing to Fund/Plan. Portfolio items for which market quotations are available
by Fund/Plan's use of an automated financial information service (the "Service")
shall be based on the closing prices of such Service except where the Trust has
given or caused to be given specific Written or Oral Instructions to utilize a
different value subject to the appropriate provisions in the Trust's prospectus
and statement of additional information then in effect. All of the portfolio
securities shall be given such values as the Trust provides by Written or Oral
Instructions including all restricted securities and other securities requiring
valuation not readily ascertainable solely by such Service subject to the
appropriate provisions in the Trust's prospectus and statement of additional
information then in effect. Fund/Plan shall have no responsibility or liability
for the accuracy of prices quoted by such Service; for the accuracy of the
information supplied by the Trust; or for any loss, liability, damage, or cost
arising out of any inaccuracy of such data. Fund/Plan shall have no
responsibility or duty to include information or valuations to be provided by
the Trust in any computation unless and until it is timely supplied to Fund/Plan
in usable form. Fund/Plan shall record corporate action information as received
from the custodian of the Trust's assets (the "Custodian"), the Service or the
Trust. Fund/Plan shall have no duty to gather or record corporate action
information not supplied by these sources.
Fund/Plan will assume no liability for price changes caused by: the
investment adviser(s), custodian, suppliers of security prices and corporate
action and dividend information, or any party other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price change of
an amount greater than or equal to one half of one percent of the correct net
asset value ("NAV"), consideration must be given to the effect of the price
change as described below. Notwithstanding the provisions of Section 12, the
following provisions govern Fund/Plan's liability for errors in calculating the
NAV of the Series:
If the NAV should have been higher for a date or dates in the past, the
error would have the effect of having given more shares to subscribers and less
money to redeemers to which they were entitled. Conversely, if the NAV should
have been lower, the error would have the effect of having given less shares to
subscribers and overpaying redeemers.
If the error affects the prior business day's NAV only, and if Fund/Plan
can rerun the prior day's work before shareholder statements and checks are
mailed, the Trust hereby accepts this manner of correcting the error.
If the error spans five (5) business days or less, Fund/Plan shall
reprocess shareholder purchases and redemptions where redeeming shareholders
have been underpaid. Fund/Plan shall assume liability to the Trust for
overpayments to shareholders who have fully redeemed.
If the error spans more than five (5) business days, Fund/Plan would bear
the liability to the Trust for, 1) paying for the excess shares given to
shareholders if the NAV should have been higher, or, 2) funding overpayments to
shareholders who have redeemed if the NAV should have been lower. The cost of
any reprocessing required for shareholders who have been credited with fewer
shares than appropriate, or for redeeming shareholders who are due additional
amounts of money will also be borne by Fund/Plan.
Section 5. For all purposes under this Agreement, Fund/Plan is authorized
----------
to act upon receipt of the first of any Written or Oral Instruction it receives
from the Trust or its agents on behalf of the Trust. In cases where the first
instruction is an Oral Instruction that is not in the form of a document or
written record, a confirmatory Written Instruction or Oral Instruction in the
form of a document or written record shall be delivered, and in cases where
Fund/Plan receives an Instruction, whether Written or Oral, to enter a portfolio
transaction on the records, the Trust shall cause the broker/dealer executing
such transaction to send a written confirmation to the Custodian. Fund/Plan
shall be entitled to rely on the first Instruction received, and for any act or
omission undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Trust, provided however, that in
<PAGE>
the event a Written or Oral Instruction received by Fund/Plan is countermanded
by a timely received subsequent Written or Oral Instruction prior to acting upon
such countermanded Instruction, Fund/Plan shall act upon such subsequent Written
or Oral Instruction. The sole obligation of Fund/Plan with respect to any
follow-up or confirmatory Written Instruction, Oral Instruction in documentary
or written form, shall be to make reasonable efforts to detect any such
discrepancy between the original Instruction and such confirmation and to report
such discrepancy to the Trust. The Trust shall be responsible, at the Trust's
expense, for taking any action, including any reprocessing, necessary to correct
any discrepancy or error. To the extent such action requires Fund/Plan to act,
the Trust shall give Fund/Plan specific Written Instruction as to the action
required.
Section 6. The Trust shall cause the Custodian to forward to Fund/Plan a
----------
daily statement of cash and portfolio transactions. At the end of each month,
the Trust shall cause the Custodian to forward to Fund/Plan a monthly statement
of portfolio positions, which will be reconciled with the Trust's Accounts and
Records maintained by Fund/Plan. Fund/Plan will report any discrepancies to the
Custodian, and report any unreconciled items to the Trust.
Section 7. Fund/Plan shall promptly supply daily and periodic reports to
----------
the Trust as requested by the Trust and agreed upon by Fund/Plan.
Section 8. The Trust shall provide and shall require each of its agents
----------
(including the Custodian) to provide Fund/Plan as of the close of each business
day, or on such other schedule as the Trust determines is necessary, with
Written or Oral Instructions (to be delivered to Fund/Plan by 11:00 a.m.,
Eastern time, the next following business day) containing all data and
information necessary for Fund/Plan to maintain the Trust's Accounts and Records
and Fund/Plan may conclusively assume that the information it receives by
Written or Oral Instructions is complete and accurate. Fund/Plan, as Transfer
Agent, accepts responsibility for providing reports of share purchases,
redemptions, and total shares outstanding, on the next business day after each
net asset valuation.
Section 9. The Accounts and Records, in the agreed-upon format, maintained
----------
by Fund/Plan shall be the property of the Trust and shall be made available to
the Trust promptly upon request and shall be maintained for the periods
prescribed in Rules 31a-1 and 31a-2 under the Investment Company Act. Fund/Plan
shall assist the Trust's independent auditors, or upon approval of the Trust, or
upon demand, any regulatory body, in any requested review of the Trust's
Accounts and Records but shall be reimbursed for all expenses and employee time
invested in any such review outside of routine and normal periodic review and
audits. Upon receipt from the Trust of the necessary information, Fund/Plan
shall supply the necessary data for the Trust or an independent auditor's
completion of any necessary tax returns, questionnaires, periodic reports to
Shareholders and such other reports and information requests as the Trust and
Fund/Plan shall agree upon from time to time.
Section 10. In case of any request or demand for the inspection of the
-----------
records of the Trust, Fund/Plan shall endeavor to notify the Trust and to secure
instructions as to permitting or refusing such inspection. Fund/Plan may
however, exhibit such records to any person in any case where it is advised in
writing by its counsel that it may be held liable for failure to do so.
Section 11. Fund/Plan and the Trust may from time to time adopt such
-----------
procedures as agreed upon in writing, and Fund/Plan may conclusively assume that
any procedure approved by the Trust or directed by the Trust, does not conflict
with or violate any requirements of the Trust's Prospectus, Statement of
Additional Information, Trust Instrument or any rule or regulation of any
regulatory body or governmental agency. The Trust shall be responsible for
notifying Fund/Plan of any changes in regulations or rules which might
necessitate changes in Fund/Plan's procedures, and for working out with
Fund/Plan such changes.
Section 12.
-----------
(a) Fund/Plan, its directors, officers, employees, shareholders, and
agents shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement, except losses resulting from willful misfeasance, bad faith,
negligence or reckless disregard on the part of Fund/Plan in the performance of
its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer, trustee,
employee or agent of the Trust shall be deemed, when rendering services to the
Trust or acting on any business of the Trust (other than services or business in
connection with Fund/Plan's duties hereunder), to be rendering such services to
or acting solely for the Trust, and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of Fund/Plan even
though receiving a salary from Fund/Plan.
<PAGE>
(c) Notwithstanding any other provision of this Agreement, the Trust shall
indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Fund/Plan except
matters resulting from willful misfeasance, bad faith, negligence or reckless
disregard on the part of Fund/Plan in the performance of its obligations and
duties under this Agreement; or
(ii) in reliance upon any certificate, instrument, order or stock
certificate or other document reasonably believed by it to be genuine and to be
signed, countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Trust or
upon the written opinion of legal counsel for the Trust or Fund/Plan; or
(iii) any action taken or omitted to be taken in good faith by
Fund/Plan in connection with its appointment, in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended, or repealed. Indemnification under this
subparagraph shall not apply, however, to actions or omissions of Fund/Plan or
its directors, officers, employees, shareholders, or agents in cases of its or
their own negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 12(c) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust shall have the sole right to control the defense of any action,
suit or proceeding in which Fund/Plan is involved and for which indemnity is
being provided by the Trust to Fund/Plan. The Trust shall have the sole right
to control the settlement of any action, suit or proceeding subject to
Fund/Plan's approval, which shall not be unreasonably withheld. Fund/Plan shall
have the right, but not the obligation, to participate in the defense or
settlement of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such participation
will be borne solely by Fund/Plan. Fund/Plan shall have the right to
participate in the defense of an action or proceeding and to retain its own
counsel, and the reasonable fees and expenses of such counsel shall be borne by
the Trust (which shall pay such fees, costs and expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel stating that the
use of counsel chosen by the Trust to represent Fund/Plan would present such
counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Fund/Plan and the Trust, and legal counsel to Fund/Plan shall have
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust shall not have the right to direct the defense of such action on
behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ separate counsel
at the expense of the Trust. Notwithstanding anything to the contrary herein, it
is understood that the Trust shall not, in connection with any action, suit or
proceeding or related action, suit or proceeding, be liable under this Agreement
for the fees and expenses of more than one firm.
Section 13. All financial data provided to, processed by, and reported by
-----------
Fund/Plan under this Agreement shall be stated in United States dollars.
Fund/Plan's obligation to convert, equate or deal in foreign currencies or
values extends only to the accurate transposition of information received from
the various pricing and informational services into Fund/Plan's Investment
Accounting System.
Section 14. The Trust agrees to pay Fund/Plan compensation for its
-----------
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation be comprised of two components and
payable on a monthly basis as follows:
(i) a combined asset based fee, subject to a minimum fee, and an
additional fixed fee for subsequent classes of shares for each Series of the
Trust, which fees are to be paid by the Trust within ten calendar
<PAGE>
days of receipt of an invoice from Fund/Plan after the end of each month. Such
asset based fee is calculated by using that month's combined average daily net
assets of the Trust; and
(ii) reimbursement of any reasonable out-of-pocket expenses paid by
Fund/Plan on behalf of the Trust, which out-of-pocket expenses will be billed to
the Trust within the first ten calendar days of the month following the month in
which such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of the
Series' net assets shall be computed at the times and in the manner specified in
each Series' Prospectuses and Statement of Additional Information then in
effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
Section 15. Nothing contained in this Agreement is intended to or shall
-----------
require Fund/Plan, in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be
performed on such days shall be performed on, and as of, the next succeeding
business day on which the New York Stock Exchange is open. Notwithstanding the
foregoing, Fund/Plan shall compute the net asset value of each Series on each
day required pursuant to (i) Rule 22c-1 promulgated under the Investment Company
Act of 1940, as amended, and (ii) the Trust's Prospectus and Statement of
Additional Information then in effect.
Section 16.
-----------
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party as set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed for
(2) years commencing on the Effective Date of this Agreement and shall continue
thereafter subject to its review, adjustment or termination as set forth in
section (c) below.
(c) After the initial term of this Agreement, the Trust or Fund/Plan may
give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred twenty (120) days after the date of receipt of such
notice. Upon the effective termination date, the Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements reasonably
incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Fund/Plan in
connection with the termination of this Agreement, Fund/Plan shall promptly upon
such termination and at the expense of the Trust, transfer all Accounts and
Required Records and shall cooperate in the transfer of such duties and
responsibilities.
Section 17. Except as otherwise provided in this Agreement, any notice or
-----------
other communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid to the respective parties as follows:
If to the Trust, Inc.: If to Fund/Plan:
- ---------------------- ----------------
Farrell-Wako Global Investment Management, Inc. Fund/Plan Services, Inc.
780 Third Avenue, 38th Floor 2 West Elm Street
New York, NY 10017 Conshohocken, PA 19428
Attention: James L. Farrell, Jr., Chairman Attention: Kenneth J. Kempf,
President
Section 18. This Agreement may be amended from time to time by
-----------
supplemental agreement executed by the Trust and Fund/Plan and the compensation
stated in Schedule "B" attached hereto may be adjusted accordingly as mutually
agreed upon.
Section 19. The Parties represent and warrant to each other that the
-----------
execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and, when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
<PAGE>
Section 20. This Agreement may be executed in two or more counterparts,
-----------
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 21. This Agreement shall extend to and shall be binding upon the
-----------
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Trust without the written
consent of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of its respective Boards of Directors and
Trustees.
Section 22. This Agreement shall be governed by the laws of the State of
-----------
New York and the exclusive venue of any action arising under this Agreement
shall be Montgomery County, Commonwealth of Pennsylvania.
Section 23. No provision of this Agreement may be amended or modified, in
-----------
any manner except by a written agreement properly authorized and executed by
Fund/Plan and the Trust.
Section 24. If any part, term or provision of this Agreement is held by
-----------
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eleven typewritten pages, together with Schedules "A", "B" and
"C", to be signed by their duly authorized officers as of the day and year first
above written.
<TABLE>
<CAPTION>
<S> <C>
Farrell Alpha Strategies Fund/Plan Services, Inc.
- ------------------------ ------------------------
____________________________________ ____________________________________
By: James L. Farrell, Jr., Chairman By: Kenneth J. Kempf, President
</TABLE>
<PAGE>
Schedule "A"
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
TO BE PERFORMED ON BEHALF OF
FARRELL ALPHA STRATEGIES
Daily Accounting Services
-------------------------
1) Calculate Net Asset Value ("NAV") and Offering Price Per Share:
--------------------------------------------------------------
Series Level
. Update the daily market value of securities held by each Series using
Fund/Plan's standard agents for pricing domestic equity, bond and
foreign securities. The domestic equity pricing services are
Quotron/Reuters, Inc. and Interactive Data Corporation (IDC). Muller
Data Corporation/Extel Financial and IDC are used for bond and foreign
prices/exchange rates.
. If necessary, enter limited number of manual prices supplied by
Farrell-Wako.
. Prepare NAV proof sheet. Review components of change in NAV for
reasonableness.
. Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by Farrell-
Wako. Verify US dollar security prices exceeding variance levels by
notifying Farrell-Wako and pricing sources of noted variances.
. Complete daily variance analysis on foreign exchange rates and local
foreign prices. Notify Farrell-Wako of changes exceeding established
levels for Farrell-Wako's verification. (The client should establish
tolerance levels for Japanese/currency so that local price changes and
foreign exchange rate changes exceeding this tolerance are identified
and NAV problems minimized.)
. Review for ex-dividend items indicated by pricing sources; trace to
general ledger for agreement.
Series and Each Class
. Allocate daily unrealized appreciation/depreciation, unrealized
currency gains/losses, and unrealized gains/losses on futures and
forwards to classes based upon value of outstanding class shares.
. Prepare NAV proof sheets. Review components of change in NAV for
reasonableness. Complete series and class control proofs.
. Communicate required pricing information (NAV) to Farrell-Wako, and
electronically to NASDAQ.
2) Determine and Report Cash Availability to Series by approximately 9:30 AM
-------------------------------------------------------------------------
Eastern Time:
------------
Series Level
. Receive daily cash and transaction statements from the custodian by
8:30 AM Eastern time.
. Receive previous day shareholder activity reports from the Trust's
transfer agent by 8:30 AM Eastern time. Class level shareholder
activity will be accumulated into the Series available cash balances.
. Fax hard copy cash availability calculations with all details to
Farrell-Wako.
. Supply the Trust with 5-day cash projection report.
. Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the custodian and
Farrell-Wako.
3) Reconcile and Record All Daily Expense Accruals:
-----------------------------------------------
Series Level
. Accrue expenses based on budget supplied by Farrell-Wako either as
percentage of net assets or specific dollar amounts.
. If applicable, monitor expense limitations established by Farrell-
Wako.
. Accrue daily amortization of organizational expense.
Series and Each Class
. Class specific accruals completed such as daily accrual of 12b-1
expenses.
. Allocate series expenses to classes based upon value of outstanding
class shares.
4) Verify and Record All Daily Income Accruals for Debt Issues:
-----------------------------------------------------------
Series Level
. Review and verify all system generated interest and amortization
reports.
<PAGE>
. Establish unique security codes for bond issues to permit segregated
trial balance income reporting.
Series and Each Class
. Allocate income to classes based upon value of outstanding class
shares.
5) Monitor Domestic Securities held for cash dividends, corporate actions and
---------------------------
capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
Series Level
. Monitor electronically received information from Muller Data
Corporation for all domestic securities.
. Review current daily security trades for dividend activity.
. Interface with custodian to monitor timely collection and postings of
corporate actions, dividends and interest.
. Process international dividend and capital change information received
from the custodian and Farrell-Wako. Back-up information on foreign
dividends and corporate actions may also be obtained from Muller Data
Corporation/Extel Financial or IDC (as pricing agents for the Trust).
. Provide mark-to-market analysis for currency exchange rate
fluctuations on unsettled dividends and interest.
Series and Each Class
. Allocate Series dividend income and unrealized currency gains/losses
on dividends/interest to classes based upon value of outstanding class
shares.
6) Enter All Security Trades on Investment Accounting System (IAS) based on
---------------------------------------------------------------
written instructions from Farrell-Wako.
Series Level
. Review system verification of trade and interest calculations.
. Verify settlement through the statements supplied by the custodian
statements.
. Maintain security ledger transaction reporting.
. Maintain tax lot holdings.
. Determine realized gains or losses on security trades.
. Provide complete broker commission reporting.
Series and Each Class
. Provide the Series foreign currency exchange rate realized and
unrealized gains/losses detail.
. Allocate all Series level realized and unrealized capital and
currency gains/losses to classes based upon value of class
outstanding shares.
7) Enter All Series Share Transactions on IAS:
------------------------------------------
Each Class
. Process activity identified on reports supplied by the transfer agent.
. Verify settlement through the statements supplied by the custodian.
. Reconcile to transfer agent's report balances.
. Roll each classes' capital share values into the Series and determine
allocation percentages based upon the value of each classes'
outstanding shares to the Series total.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing
----------------------------------------------------------------
all assets, liability, equity, income and expense accounts.)
Series Level
. Post manual entries to the general ledger.
. Post custodian bank activity.
. Post shareholder and security transactions.
. Post and verify system generated activity, i.e., income and expense
accruals.
. Segregate foreign tax expense.
. Prepare daily market-to-market analysis for all unrealized foreign
currency exchange rate gains/losses by asset/liability category.
<PAGE>
Series and Each Class
. Prepare Series general ledger net cash proof used in NAV
calculation.
. Post class specific shareholder activity and roll values into the
Series.
. Allocate all Series level net cash accounts on the Series Trial
Balance to each specific class based upon value of class outstanding
shares.
. Maintain allocated Trial Balance accounts.
. Maintain class-specific expense accounts for each specific class.
. Prepare class-specific proofread to ensure accuracy of allocations.
9) Review and Reconcile With Custodian Statements:
-----------------------------------------------
Series Level
. Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to
and resolved by the custodian.)
. Post all cash settlement activity to the Trial Balance.
. Reconcile to ending cash balance accounts.
. Clear IAS subsidiary reports with settled amounts
. Track status of past due items and failed trades handled by the
custodian.
10) Submission of Daily Accounting Reports to Farrell-Wako: (Additional
-------------------------------------------------------
reports readily available.)
Series Level
. Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security.)
. Cash availability and 5-day cash projection report
Series and Each Class
. Trial Balance and Class Allocation Report
. NAV calculation report
Monthly Accounting Services
---------------------------
1) For each Series, full Financial Statement Preparation (automated Statements
-----------------------------------------------------
of Assets and Liabilities, of Operations and of Changes in Net Assets) and
submission to Farrell-Wako by 10th business day.
. Class specific capital share activity and expenses will also be
disclosed.
2) Submission of Monthly Automated IAS Reports to Farrell-Wako:
-----------------------------------------------------------
Series Level
. Security Purchase/Sales Journal
. Interest and Maturity Report
. Brokers Ledger (Commission Report)
. Security Ledger Transaction Report with Realized Gains/Losses
. Security Ledger Tax Lot Holdings Report
. Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
-------------------------------------------------------------
Series Level
. Report any security balance discrepancies to the custodian and
Farrell-Wako.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
-----------------------------------------------------------------------
Accounts, such as:
Series Level
. Security cost and realized gains/losses
. Interest/dividend receivable and income
. Payable/receivable for securities purchased and sold
. Unrealized and realized currency gains/losses
Series and Each Class
. Payable/receivable for Series' shares; issued and redeemed
. Expense payments and accruals analysis
5) If Appropriate, Prepare and Submit to Farrell-Wako:
--------------------------------------------------
<PAGE>
Series Level
. Income by state reporting.
. Standard Industry Code Valuation Report.
. Alternative Minimum Tax Income segregation schedule.
Annual (and Semi-Annual) Accounting Services
--------------------------------------------
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. for the Trust
and each class during the year in accordance with standard audit
assistance requirements.
2) Provide NSAR Reporting (Accounting Questions):
---------------------------------------------
If applicable for the Trust and Classes, answer the following items: 2,
12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B,
71, 72, 73, 74, 75, and 76.
<PAGE>
ACCOUNTING SERVICES BASIC ASSUMPTIONS
The Accounting Fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or requirements
change, fee revisions may be necessary.
Basic Assumptions:
- -----------------
1) Compliance reporting (Sub-Chapter "M") shall be maintained by
Fund/Plan Services as Fund Administrator.
2) It is assumed that the Trust's asset composition will be primarily
equity securities of Japan. Trading activity is expected to be
moderate with an annual turnover rate which would generally not
exceed 100%.
3) The Trust has a tax year-end which coincides with its fiscal year-
end. No additional accounting requirements are necessary to
identify or maintain book-tax differences. Fund/Plan Services,
Inc.'s Accounting Services Unit ("ASU") does not provide security
tax accounting which differs from its book accounting.
ASU will supply segregated Trial Balance account details to assist
the Trust's administrator in proper identification by category of
all appropriate realized and unrealized currency gains/losses.
4) The Trust foresees no difficulty in using ASU's standard current
pricing agents for domestic equity, bond, ADR and foreign
securities. ASU currently uses Quotron/Reuters, Inc. or
Interactive Data Corporation (IDC) for domestic equities and
listed ADR's. Muller Data Corporation/Extel Financial, Telerate
Systems, Inc. and IDC are used for bonds, money markets and
foreign issues.
It is assumed that Muller Data/Extel would be the Trust's primary
foreign security pricing vendor. Muller Data/Extel will supply ASU
with daily (spot) foreign exchange rates to be used in market
value calculations of non-US dollar denominated securities and
currency mark-to-market requirements. To the extent Muller
Data/Extel or IDC are unable to supply certain foreign security
prices, they will be provided by the Trust's investment advisor or
a Farrell-Wako recommended pricing source. If appropriate,
Telerate Systems, Inc. is available for daily forward currency
contract prices. ASU will be able to supply Farrell-Wako with
information on Muller's or IDC's sources of exchange rates and
ADR/foreign security prices.
It is assumed that ASU will work closely with Farrell-Wako to
ensure the accuracy of the Trust's NAV and to obtain the most
satisfactory pricing sources and specific methodologies prior to
the actual effective date. We would propose the Trust establish
clear cut security variance procedures to minimize NAV
miscalculations.
5) To the extent the Trust requires daily security prices (limited in
number) from specific brokers for domestic or foreign securities,
these manual prices will be obtained by the Trust's investment
advisor and faxed to ASU by approximately 4:00 P.M. Eastern time
for inclusion in the NAV calculations. Farrell-Wako will supply
ASU with the appropriate pricing contacts for these manual quotes.
6) ASU will supply daily Portfolio Valuation Reports to the Trust's
investment advisor identifying current security positons,
original/amortized cost, security market values and changes in
unrealized appreciation/depreciation.
It will be the responsibility of the Trust's investment advisor to
review these reports and to promptly notify ASU of any possible
problems, trade discrepancies, incorrect security prices,
corporate action/capital change information or exchange rate
discrepancies that could result in a misstated Trust NAV.
<PAGE>
7) The Trust does not currently expect to invest in Futures, Swaps,
Derivatives, Foreign Currency Options and Futures, Hedges, Forward
Currency Contracts, or precious metals. Spot contracts that are
directly related to security trades and interest/dividend payments
are included in our fees and should not be considered an
additional expense. To the extent these investment strategies
should change, additional fees will apply after the appropriate
procedural discussions have taken place between ASU and Trust
management. (Two weeks advance notice is required should the Trust
commence trading in the above investments).
8) All foreign currency will be held within the custodian and sub-
custodian network. Time deposits and interest bearing currency
accounts will all be reflected on the Trust's custodian asset
listings. The Trust or custodian will supply ASU with appropriate
(timely) information for any trades/changes in the currency
accounts, as well as interest rates to ensure income accrual
accuracy for the debt issues, time deposits and currency accounts.
Income accrual adjustments (expected to be immaterial) will be
completed when the interest is actually collected and posted on
the custodian's statements.
9) It is assumed for all debt issues that the investment advisor will
supply the ASU with critical income information such as accrual
methods, interest payment frequency details, coupon payment dates,
floating rate reset dates, and complete security descriptions with
issue types and Sedol/cusip numbers. If applicable, for proper
income accrual accounting, ASU will look to the Trust's investment
advisor to supply the yield to maturity and related cash flow
models for any mortgage/asset-backed securities held in the Trust.
10) The Trust shall direct the custodian to provide ASU with daily
custodian statements (or on-line access to the custody system)
reflecting all prior day cash activity by 8:30 A.M. Eastern time.
Complete descriptions of any postings, inclusive of Sedol/cusip
numbers, interest/dividend payment dates, capital stock details,
expense authorizations, beginning/ending cash balances, etc. will
be provided by the custodian's reports or system.
11) The Trust shall direct the custodian to supply the foreign
dividend, capital change information and interest rate changes to
ASU in a timely manner. The investment advisor will supplement and
support as appropriate. If selected by Farrell-Wako and found to
be appropriate, ASU can receive supplemental capital change and
dividend information on foreign positions from Muller Data/Extel
or IDC as the pricing vendors for the Trust's foreign securities.
12) The Trust shall direct the custodian to handle and report on all
settlement problems, failed trades and resolve unsettled
dividends/interest/paydowns and capital changes. The custodian
will process all applicable capital change and foreign reclaim
paperwork based upon advice from the investment advisor. ASU
agrees to supply segregated Trial Balance reporting and
supplemental reports to assist in this process.
13) With respect to Mortgage/Asset-Backed securities including GNMA's,
FHLMC's, FNMA's, CMO's, ARM's, the Trust shall direct the
custodian, or a Farrell-Wako supplied source, to provide ASU with
current principal repayment factors on a timely basis in
accordance with the appropriate securities' schedule. Income
accrual adjustments (to the extent necessary) based upon initial
estimates will be completed by ASU when actual principal/income
payments are collected by the custodian and reported to ASU.
14) To the extent applicable, ASU will maintain on a daily basis US
dollar denominated qualified covered call options and index
options reporting on the daily Trial Balance and value the
respective options and underlying positions. This agreement does
not provide for tax classifications if they are required.
If the Trust commences investment in domestic options or
designated hedges, two weeks advance notice is required to clarify
operational procedures between ASU and the investment advisor.
15) To the extent the Trust should establish a Line of Credit in
segregated accounts with the custodian for temporary
administrative purposes, and/or leveraging/hedging the portfolio,
it is not the responsibility under this agreement for ASU to
complete the appropriate paperwork/monitoring for segregation of
assets and adequacy of collateral. The Trust shall direct the
investment advisor
<PAGE>
to execute such responsibilities. ASU will, however, reflect
appropriate Trial Balance account entries and interest expense
accrual charges on the daily Trial Balance adjusting as necessary
at month-end.
16) If the Trust commences participation in Security Lending,
Leveraging, RIC's or Short Sales within its portfolio, additional
fees will apply. (Two weeks advance notice to ASU is required
should the Trust desire to participate in the above.)
17) The Trust shall direct the investment advisor or the Trust's
administrator to supply ASU with portfolio specific expense
accrual procedures and monitor the expense accrual balances for
adequacy based on outstanding liabilities monthly. The
administrator will promptly communicate to ASU any adjustments
needed.
18) Specific deadlines and complete information shall be supplied by
the Trust in order to minimize any settlement problems, NAV
miscalculations or income accrual adjustments.
The Trust shall direct the investment advisor to provide to ASU
Trade Authorization Forms, with the appropriate officer's
signature on all security trades placed by the Trust no later than
12:30 P.M. Eastern time on settlement /value date for money market
and currency issues (assuming that trade date equals settlement
date); and by 11:00 A.M. Eastern time on trade date plus one for
non-money market securities. Receipt by ASU of trade information
within these identified deadlines may be via telex, fax or on-line
system access. The investment advisor will also communicate all
trade information directly to the Trust's custodian.
The Trust shall direct the investment advisor to include all
information required by ASU; including CUSIP numbers and/or ticker
symbols for all US dollar denominated trades and Sedol numbers for
all foreign trades on the Trade Authorization, telex or on-line
support. ASU will supply the investment advisor with recommended
trade ticket documents to minimize receipt of incomplete
information. ASU will not be responsible for NAV changes or
distribution rate adjustments that result from incomplete trade
information.
19) To the extent the Trust utilizes Purchases In-Kind (U.S. dollar
denominated securities only) as a method for shareholder
subscriptions, ASU will provide the Trust with procedures to
properly handle and process securities in-kind. Should the Trust
prefer procedures other than those provided by ASU, additional
fees may apply. Discussions should take place in advance between
ASU and the Trust to clarify the appropriate In-Kind operational
procedures to be followed.
20) It is assumed that the Trust's investment advisor or administrator
will complete the applicable performance and rate of return
calculations as required by the SEC for the Trust.
21) It is assumed that mutually agreed upon amortization procedures
and accretion requirements for debt issues held by the Trust will
be established prior to commencement of operations.
It is extremely important that the Trust's requirements and proper
amortization procedures be clarified prior to start-up.
-----
Adjustments for financial statements regarding any issues with
Original Issue Discount (OID) are not included under this
Agreement. The Trust shall direct its independent auditors to
complete the necessary OID adjustments for financial statements
and/or tax reporting.
22) It is assumed that Fund/Plan Services, Inc. will be appointed
under a separate agreement as Transfer Agent to the Trust.
<PAGE>
Schedule "B"
FUND ACCOUNTING ANF PORTFOLIO VALUATION SERVICES FEE SCHEDULE
FOR
FARRELL ALPHA STRATEGIES
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
The Accounting Fees as set forth below are stated and offered subject to the
"Basic Assumptions" as set forth in Schedule "A." To the extent that those
assumptions are inaccurate or requirements change, fee revisions may be
necessary.
I. Annual Global Fee Schedule (1/12th payable monthly):
---------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
$45,000 Minimum to $ 10 Million of Combined Class A and D Average
Net Assets
.0004 On the Next $ 40 Million of Combined Class A and D Average
Net Assets
.0003 On the Next $ 50 Million of Combined Class A and D Average
Net Assets
.0001 Over $100 Million of Combined Class A and D Average
Net Assets
</TABLE>
The above asset based fee is calculated using the total average net assets
of the Trust.
Second Class (Class D)
----------------------
$20,000 per year
Additional Classes and separate series of shares shall be quoted upon
request.
II. Pricing Services Quotation Fee (based on individual CUSIP or security
------------------------------
identification number.) Specific costs will be identified based upon options
selected by Farrell-Wako and will be billed monthly.
A) Muller Data Corporation (if applicable)
*Based on current vendor costs, subject to change.
Government/Mortgage Backed/Corporate
Short & Long Term Quotes $ .50 per Quote per Issue
Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue
CMOs/ARMs/ABS $1.00 per Quote per Issue
Foreign Security Quotes $ .50 per Quote per Issue
Foreign Security Supplemental
Corporation Actions, Dividends
& Capital Changes $2.00 per Issue per Month
Mortgage Backed Factors $1.00 per Issue per Month
Minimum Weekly File Transmission is Assumed
There are currently no charges for the domestic dividend and capital
--
change information transmitted daily to Fund/Plan Services from Muller Data
Corporation.
B) Futures and Forward Currency Contracts $2.00 per Issue per Day
C) Quotron/Reuters, Inc.*
*Based on current vendor costs, subject to change.
Fund/Plan does not currently pass along the charges for the domestic
security prices supplied by Quotron/Reuters, Inc.
D) Telerate Systems, Inc.*
*Based on current vendor costs, subject to change.
<PAGE>
E) Interactive Data Corp.* (if applicable)
*Based on current vendor costs, subject to change.
Domestic Equities and Options $ .15 per Quote per Issue
Corporate/Government/Agency Bonds
including Mortgage-Backed
Securities (evaluated, seasoned,
and/or closing) $ .50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $ .80 per Quote per Issue
International Equities and Bonds $ .50 per Quote per Issue
Domestic Dividends and Capitalization
Changes $3.50 per Month per Holding
International Dividends and Capital $4.00 per Month per Holding
Changes
Interactive Data also charges monthly transmission costs and disk
storage charges.
F) Kenny S&P
*Based on current vendor costs, subject to change.
High Yield Corporate Bonds $1.00 per Quote per Issue
($35/day minimum)
U.S. Municipal Bonds $ .50 per Quote per Issue
($25/day minimum)
Corporate/Government Bonds $ .50 per Quote per Issue
($35/day minimum)
CMO, ARM and ABS/Convertible $1.00 per Quote per Issue
Corporate Bonds ($35/day minimum)
Set Up Fees $ .25 per item
($1.00 if no cusip)
All Added Items $ .25 per item
($1.00 if no cusip)
*All prices listed in this Section are based on current vendor costs
and are subject to change.
Specific costs will be identified based upon options selected by
Farrell-Wako.
IV. Out-of-Pocket Expenses
----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, Edgar filings,
telecommunications, special reports, record retention, special
transportation costs as incurred and copying and sending materials to
independent auditors.
V. Additional Services
-------------------
To the extent the Trust commences using investment techniques such as
Futures, Security Lending, Swaps, Short Sales, Derivatives, Leveraging,
Precious Metals or non-US dollar denominated futures and options, additional
fees will apply. Activities of a non-recurring nature such as shareholder
in-kinds, fund consolidations, mergers or reorganizations will be subject to
negotiation. Any additional/enhanced services or reports will be quoted upon
request.
This Schedule may be amended to reflect the addition of other reports and/or
services.
<PAGE>
Schedule "C"
Identification of Series
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Farrell Alpha Strategies"
1. The Japan Alpha Fund - Class A Shares
2. The Japan Alpha Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
Exhibit 99.B11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to the Registration Statement (File No. 33-92540) under the Securities Act
of 1933 on Form N-1A of our report dated April 26, 1996 accompanying the
financial statements and financial highlights of FarrellAlpha Strategies - The
Japan Alpha Fund. We consent to the reference to our Firm under the caption
"Financial Highlights" in the Prospectus and under the captions "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
Coopers & Lybrand L.L.P.
2400 Eleven Peen Center
Philadelphia, Pennsylvania
July 29, 1996
<PAGE>
Exhibit 99.B15
DISTRIBUTION AND SERVICES PLAN
PURSUANT TO RULE 12b-1
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") by
Farrell Alpha Strategies (the "Trust") on behalf of the Class A Shares of The
Japan Alpha Fund (the "Fund"), for the use of Class A Shares of the Fund. The
Plan has been approved by a majority of the Trust's Board of Trustees, including
a majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan (the
"non-interested trustees"), cast in person at a meeting called for the purpose
of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that adoption of the
Plan would be prudent and in the best interests of the Fund and its
shareholders. Such approval included a determination, in the exercise of their
reasonable business judgement and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has also been approved by a vote of the sole initial shareholder of
Class A Shares of the Fund.
Section 1. Subject to Section 11 of this Plan, the Fund shall pay Fund/Plan
- --------- ---------
Broker Services, Inc. (the "Distributor") a fee in an amount not to exceed, on
- ---------------------
an annual basis, 0.25% of the average daily net assets of the Fund (the "Fee"),
to compensate the Distributor for the following: (i) payments the Distributor
makes to itself, other institutions and industry professionals, broker-dealers,
including the Adviser, and the affiliates or subsidiaries of each (collectively
referred to as "Participating Organizations"), pursuant to an agreement
regarding the provision of administrative support services to the holders of a
Fund's shares; (ii) payments to financial institutions and industry
professionals (such as insurance companies, investment counselors, accountants
and estate planning firms (but not including banks and savings and loan
associations), broker-dealers, the Distributor and the Distributor's affiliates
and subsidiaries in consideration for distribution services provided and
expenses assumed in connection with distribution assistance, including, but not
limited to, printing and distributing prospectuses to persons other than current
shareholders of the Fund, printing and distributing advertising and sales
literature and reports to shareholders in connection with the sale of the Fund's
shares, and personnel and communication equipment used in servicing shareholder
accounts and prospective shareholder inquiries; or (iii) payments to the
Distributor pursuant to the Underwriting Agreement between the Trust and the
Distributor.
Section 2. The Fee shall be accrued daily and payable monthly, and shall be
- ---------
paid by the Fund to the Distributor to compensate the Distributor for payments
made pursuant to Section 1, irrespective of whether such fee exceeds the amounts
paid (or payable) by the Distributor.
Section 3. The Plan shall not take effect with respect to the Fund until it has
- ---------
been approved by a vote of at least a majority of the outstanding voting
securities of the Fund.
Section 4. The Plan shall not take effect until it, together with any related
- ---------
agreements, has been approved, together with any related agreements, by votes of
a majority of both (a) the Board of Trustees of the Trust and (b) the
"Disinterested Trustees" (as defined below) cast in person at a meeting called
for the purpose of voting on the Plan or such agreement.
Section 5. This Plan shall become effective as to the Fund on the date that a
- ---------
majority of the outstanding voting securities (as defined below) of the Fund
approve the Plan, and shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually in
--------
the manner provided for approval of the Plan in Section 4, unless earlier
terminated in accordance with the terms hereof.
Section 6. The Distributor shall provide to the Trustees of the Trust, and the
- ---------
Trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to Section 1 and the purposes for which such expenditures were
made.
Section 7. The Plan may be terminated with respect to the Fund, without payment
- ---------
of any penalty, at any time by vote of a majority of the disinterested trustees
or by vote of a majority of the outstanding voting securities of the Fund.
Section 8. Payments by the Distributor to a Participating Organization shall be
- ---------
subject to compliance by the Participating Organization with the terms of an
agreement with the Distributor. All agreements with any person relating to
implementation of the Plan shall be in writing, and any agreement related to the
Plan shall provide:
<PAGE>
A. That such agreement may be terminated with respect to the Fund at any
time, without payment of any penalty, by vote of a majority of the Disinterested
Trustees, or by vote of a majority of the outstanding voting securities of the
Fund, on not more than 60-days' written notice; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 9. The Plan may not be amended to increase materially the amount of
- ---------
distribution expenses permitted pursuant to Section 1 hereof with respect to the
Fund without approval in the manner provided in Sections 3 and 4 hereof, and all
material amendments to the Plan shall be approved in the manner provided for
approval of the Plan in Section 4.
Section 10. Any person authorized to direct the disposition of monies paid or
- ----------
payable by the Trust pursuant to this Agreement shall provide to the Distributor
and the Board of Trustees of the Trust or its designees, and the Board will
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made. In addition, each Participating
Organization shall furnish the Trust or its designees with such information as
may be reasonably requested (including, without limitation, periodic
certifications confirming the provision to Customers of the services described
herein) and will otherwise cooperate with the Trust or its designees (including,
without limitation, any auditors designated by the Trust or the Distributor), in
connection with the preparation of reports to the Board of Trustees concerning
this Agreement and the monies paid or payable by the Trust pursuant hereto, as
well as any other reports or filing that may be required by law.
Section 11.
- ----------
(a) The monthly payments to the Distributor under this Plan shall be made
in accordance with, and subject to, the following conditions:
(i) that payments made out of or charged against the assets of the
Fund must be in payment for services rendered on behalf of the Fund; and
(ii) that payments of the Fee by the Fund pursuant to this Plan will be
reduced to the extent necessary to ensure that the amount of the Fee and
any other operating expenses that are accrued on any day with respect to
the Fund will not exceed the gross income accrued with respect to the Fund
on that day (with written notice at the time of payment to a Participating
Organization).
(b) For the purposes of determining the amounts payable under this Plan,
the value of the Fund's net assets shall be computed in the manner specified in
the Fund's current Prospectus as then in effect.
Section 12. As used herein, (a) the term "Disinterested Trustees" shall mean
- ----------
those Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it and (b) the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
Section 13. Pursuant to Section 2.10 of the Trust Instrument dated April 6,
- ----------
1995 and as filed with the Secretary of State of the State of Delaware, the
obligations of the Trust stated under this Plan are limited to the assets of the
Trust or Fund, as the case may be, and each Shareholder of the Trust and of each
Series shall not be personally liable for any debts, liabilities, obligations
and expenses arising hereunder.
<PAGE>
<TABLE>
<S> <C>
Farrell Alpha Strategies Fund/Plan Broker Services, Inc.
- ------------------------ -------------------------------
____________________________________ ____________________________________
By: James L. Farrell, Jr. President By: Kenneth J. Kempf, President
____________________________________ ____________________________________
Attest: Monte E. Wetzler, Secretary Attest: Mary P. Efstration, Secretary
(SEAL) (SEAL)
</TABLE>
<PAGE>
Exhibit 99.B16
--------------
TOTAL RETURN FORMULA
--------------------
ERV = P(1 + T)/N/
WHERE:
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
T = AVERAGE ANNUAL TOTAL RETURN
N = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE OF AT THE END OF THE PERIOD OF A
HYPOTHETICAL $1,000 PAYMENT ("P") MADE AT THE BEGINNING OF THAT
PERIOD OR FRACTIONAL PORTION THEREOF.
The Japan Alpha Fund
- ---------------------
CLASS A Shares
Since inception 04/18/95 to 03/31/96
- -------------------------------------
ERV = $931.26
T = (7.20%)
N = .9534 years
CLASS D Shares
Since inception 04/18/95 to 03/31/96
- -------------------------------------
ERV = $934.10
T = (6.90%)
N = 0.9534 years
<PAGE>
FARRELL ALPHA STRATEGIES Exhibit 99.B18
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted by a majority of the
Board of Trustees, including a majority of the independent trustees, of Farrell
Alpha Strategies (the "Trust"), an open-end diversified investment company which
currently consists of a separate investment fund called the Japan Alpha Fund
(the "Fund"). The Board has determined that the Plan is in the best interests
of each Class and the Fund as a whole. The Plan sets forth the provisions
relating to the establishment of multiple classes of shares for the Trust.
1. The Trust may offer two classes of shares, The Japan Alpha Fund - Class
A Shares ("Class A Shares") and The Japan Alpha Fund - Class D Shares ("Class D
Shares").
2. Class A Shares are sold subject to a front-end sales charge that is a
variable percentage of the offering price, depending upon the amount of the
sale. The initial minimum investment is $1,000 with subsequent investments in
amounts of $100 or more. Until the assets of the Fund reach $10 million, Class
A Shares shall be sold with a maximum front-end sales charge of 2.75% for an
investment of $1,000, but less than $50,000; 2.25% for an investment of $50,000
or more, but less than $100,000; 1.75% for an investment of $100,000 or more,
but less than $250,000; 1.00% for an investment of $250,000 or more, but less
than $500,000; and 0.75% for an investment of $500,000 or more but less than
$1,000,000. There is no sales charge for an investment in an amount of
$1,000,000 or over.
When the assets of the Fund reach $10 million or more, Class A Shares shall be
sold with a maximum front-end sales charge of 4.75% for an investment of $1,000,
but less than $50,000; 4.00% for an investment of $50,000 or more, but less than
$100,000; 3.50% for an investment of $100,000 or more, but less than $250,000;
2.50% for an investment of $250,000 or more, but less than $500,000; and 1.75%
for an investment of $500,000 or more but less than $1,000,000. There is no
sales charge for an investment in an amount of $1,000,000 or over.
3. Class A Shares are subject to Rule 12b-1 distribution charges with a
maximum fee of 0.25% per annum of the average daily net assets of the Class A
Shares. The Rule 12b-1 charges associated with the Class A Shares shall be paid
to Fund/Plan Broker Services, Inc. (the "Distributor") for (i) expenses incurred
pursuant to an agreement regarding the provision of administrative support
services to the holders of Class A Shares; (ii) distribution services provided
and expenses assumed in connection with distribution assistance, including, but
not limited to, printing and distributing prospectuses to persons other than
current shareholders of the Fund, printing and distributing advertising and
sales literature and reports to shareholders in connection with the sale of the
Fund's shares, and personnel and communication equipment used in servicing
shareholder accounts and prospective shareholder inquiries; or (iii) payments to
the Distributor pursuant to the Underwriting Agreement between the Trust and the
Distributor. The Distributor may reallow a portion or all of the 12b-1 fees
received to broker-dealers or others who have executed a selling agreement with
the Distributor on behalf of the Class A Shares of the Trust.
4. Class D Shares are offered for sale at net asset value per share
without a sales charge or Rule 12b-1 distribution charges. Class D Shares are
sold subject to a minimum initial investment of $5,000 and subsequent
investments of $100 or more.
5. The Trust's Rule 12b-1 Plan relating to the Class A Shares shall
operate in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., Article III, Section 26(d).
6. The only difference in expenses as between the Class A Shares and the
Class D Shares shall relate to differences in the Rule 12b-1 plan expenses of
the Class A Shares as described in that Class' Rule 12b-1 Plan.
7. There shall be no conversion features associated with the Class A
Shares or the Class D Shares.
8. Class A Shareholders shall vote separately and exclusively with respect
to any matter related to the Rule 12b-1 Plan related to that Class.
<PAGE>
9. Each Class shall vote separately with respect to any matter that
relates solely to that Class.
10. On an ongoing basis, the trustees pursuant to their fiduciary
responsibilities under the Investment Company Act of 1940, as amended, (the
"Act"), and otherwise, will monitor the Trust for the existence of any material
conflicts between the interests of the classes of shares. The trustees,
including a majority of the independent trustees, shall take such action as is
reasonably necessary to eliminate any such conflict that may develop. Farrell-
Wako Global Investment Management, Inc. (the "Advisor") and the Distributor
shall be responsible for alerting the Board to any material conflicts that
arise.
11. All material amendments to this Plan must be approved by a majority of
the trustees of the Trust, including a majority of the trustees who are not
"interested persons" of the Trust, as defined in the Act.
<PAGE>
Exhibit 99.B24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq. and Joseph
M. O'Donnell, Esq. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute any amendment to the
registration statement of Farrell Alpha Strategies (the "Trust"), file for
exemptive orders or to qualify or register all or part of the securities of the
Trust for sale in various states, to perform on behalf of the Trust any and all
such acts as such attorneys-in-fact may deem necessary or advisable in order to
comply with the applicable laws of any such state, and in connection therewith
to execute and file all requisite papers and documents, including but not
limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of November, 1995.
_______________________
Shuichi Yamada
Treasurer & Trustee
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
November, 1995, by Shuichi Yamada, Treasurer and Trustee of Farrell Alpha
Strategies.
________________________
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq. and Joseph
M. O'Donnell, Esq. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute any amendment to the
registration statement of Farrell Alpha Strategies (the "Trust"), file for
exemptive orders or to qualify or register all or part of the securities of the
Trust for sale in various states, to perform on behalf of the Trust any and all
such acts as such attorneys-in-fact may deem necessary or advisable in order to
comply with the applicable laws of any such state, and in connection therewith
to execute and file all requisite papers and documents, including but not
limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of November, 1995.
___________________________
Monte E. Wetzler, Esquire
Secretary
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
November, 1995, by Monte E. Wetzler, Esquire, Secretary of Farrell Alpha
Strategies.
_________________________
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq. and Joseph
M. O'Donnell, Esq. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute any amendment to the
registration statement of Farrell Alpha Strategies (the "Trust"), file for
exemptive orders or to qualify or register all or part of the securities of the
Trust for sale in various states, to perform on behalf of the Trust any and all
such acts as such attorneys-in-fact may deem necessary or advisable in order to
comply with the applicable laws of any such state, and in connection therewith
to execute and file all requisite papers and documents, including but not
limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of November, 1995.
----------------------------------
James L. Farrell, Jr.
President & Chairman of the Board
ACKNOWLEDGEMENT
---------------
State of Pennsylvania )
) ss:
County of Philadelphia )
The foregoing instrument was acknowledged before me this ___________ day of
November, 1995, by James L. Farrell, Jr., President and Chairman of the Board of
Trustees of Farrell Alpha Strategies.
- -------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq. and Joseph
M. O'Donnell, Esq. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute any amendment to the
registration statement of Farrell Alpha Strategies (the "Trust"), file for
exemptive orders or to qualify or register all or part of the securities of the
Trust for sale in various states, to perform on behalf of the Trust any and all
such acts as such attorneys-in-fact may deem necessary or advisable in order to
comply with the applicable laws of any such state, and in connection therewith
to execute and file all requisite papers and documents, including but not
limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of November, 1995.
----------------------------
Herbert Passin
Trustee
ACKNOWLEDGEMENT
---------------
State of _____________ )
) ss:
County of ____________ )
The foregoing instrument was acknowledged before me this ___________ day of
November, 1995, by Herbert Passin, Trustee of Farrell Alpha Strategies.
- ------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq. and Joseph
M. O'Donnell, Esq. and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute any amendment to the
registration statement of Farrell Alpha Strategies (the "Trust"), file for
exemptive orders or to qualify or register all or part of the securities of the
Trust for sale in various states, to perform on behalf of the Trust any and all
such acts as such attorneys-in-fact may deem necessary or advisable in order to
comply with the applicable laws of any such state, and in connection therewith
to execute and file all requisite papers and documents, including but not
limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and confirming
all that such attorneys-in-fact and agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the ___________ day of November, 1995.
--------------------------------
Arthur Williams III
Trustee
ACKNOWLEDGEMENT
---------------
State of _______________ )
) ss:
County of ______________ )
The foregoing instrument was acknowledged before me this ___________ day of
November, 1995, by Arthur Williams III, Trustee of Farrell Alpha Strategies.
- ------------------------
Notary Public
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000945523
<NAME> FARRELL ALPHA STRATEGIES
<SERIES>
<NUMBER> 1
<NAME> JAPAN ALPHA FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-18-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 4,767,276
<INVESTMENTS-AT-VALUE> 4,586,365
<RECEIVABLES> 90,869
<ASSETS-OTHER> 108,020
<OTHER-ITEMS-ASSETS> 77,493
<TOTAL-ASSETS> 4,862,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43,239
<TOTAL-LIABILITIES> 43,239
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,027,114
<SHARES-COMMON-STOCK> 502,998
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (220,121)
<OVERDISTRIBUTION-NII> 0
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<NAME> FARRELL ALPHA STRATEGIES
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<NAME> JAPAN ALPHA FUND CLASS D
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