SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Registration Statement /X/
Pre-Effective Amendment No._____
Post-Effective Amendment No. _____
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Registration Statement /X/
Amendment No. _____
(Check appropriate box or boxes)
PEREGRINE Associates Corporation
(Exact name of registrant as specified in charter)
99 Park Avenue
New York, New York 10016
(Address of principal executive offices)
Registrant's telephone number: (800) 910-5255
Copy to:
Frank E. Morgan, Esq Thaddeus Leszczynski, Esq.
Mayer, Brown & Platt Van Eck Associates
1675 Broadway 99 Park Avenue
New York, NY l0019 New York, NY 10016
(Name and address of agent for service)
Approximate date of proposed public offering January 1, 1996. It is
proposed that this filing will become effective (check appropriate box):
/ /Immediately upon filing pursuant to / /on (date) pursuant to paragraph (b)
paragraph (b)
/ /60 days after filing pursuant to / /on (date) pursuant to paragraph (a)(1)
paragraph (a)(1)
/ /75 days after filing pursuant to / /on (date pursuant to paragraph (a)(2)
paragraph (a)(2) of rule 485
Calculation of Registration Fee Under the Securities Act of 1933
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Title of Amount being Proposed Proposed Amount of
Securities registered maximum maximum registration
being offering aggregate fee
registered price offering
per unit price
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Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
elects to register an indefinite number of shares of beneficial interest.
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PEREGRINE FUNDS
Cross-Reference Sheet
Pursuant to Rule 501(b) of Regulation S-K
under the Securities Act of 1933
Form N-1A
Form N-1A Item No.
Part A Caption or Location in Prospectus
1. Cover Page Cover page
2. Synopsis Fund Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Investment Objectives, Policies
and Risks; Fund Details
5. Management of the Fund Management; Advertising
6. Capital Stock and Other Securities Dividends and Distributions;
Tax Information; Fund Details
7. Purchase of Securities Being Offered How to Buy Shares
8. Redemption or Repurchase How to Sell Shares
9. Pending Legal Proceedings Not Applicable
Caption or Location in
Statement of Additional
Part B Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information
13. Investment Objectives and Policies Investment Objectives and
Policies; Investment
Restrictions;
14. Management of the Fund Trustees and Officers
Caption or Location in
Statement of Additional
Part B Information
15. Control Persons and Principal Holder of Trustees and Officers
Securities
16. Investment Advisory and Other Services Investment Advisory Services;
17. Brokerage Allocation and Other Practices Portfolio Transactions and
Brokerage
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing
of Securities Being Offered
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculations of Performance Data Performance
23. Financial Statements Financial Statements*
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*To be supplied by Amendment
<PAGE>
Prospectus
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___, 1995
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Peregrine Funds/Asia Growth Fund
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99 Park Avenue, New York, New York 10016
Account Assistance: (800) 910-5255
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The Asia Growth Fund (the "Fund") seeks long-term capital appreciation by
investing in the securities of companies that are expected to benefit from the
development and growth of the economies of Asia. Peregrine Asset Management
(Hong Kong) Limited ("Peregrine") serves as investment adviser to the Fund.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, A BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
This Prospectus sets forth concisely information about the Fund that you should
know before investing. It should be read and retained for future reference.
A Statement of Additional Information ("SAI") dated ___ 1995, about the Fund has
been filed with the United States Securities and Exchange Commission ("SEC") and
is incorporated herein by reference. For a free copy of the SAI, write to the
above address or call the telephone number listed above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Table of Contents Page
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Shareholder Transaction Data ........................................
Fund Summary ........................................................
Fund Details ........................................................
Fund's Investment Objective, Policies and Risks .....................
Buying and Selling Fund Shares ......................................
Dividends and Distributions .........................................
Tax-Sheltered Retirement Plans ......................................
Facts About Your Account ............................................
Management ..........................................................
Advertising .........................................................
Taxes ...............................................................
Additional Information ..............................................
<PAGE>
SHAREHOLDER TRANSACTION DATA
The following table is intended to assist you in understanding the various
direct and indirect costs and expenses you will bear when you invest in the
Fund. All of the Annual Fund Operating Expenses are paid out of Fund assets. The
Fund's adviser, Peregrine, may, from time to time, waive fees and/or reimburse
certain operating expenses of the Fund.
Total Fund Operating Expenses are estimates of the first year's operating
expenses and assume $20 million in net assets.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge
Imposed on Purchases............................................. 0%
Redemption Charge (Imposed on redemptions
within 60 days of purchases)............. 2%
ANNUAL FUND OPERATING EXPENSES: (as a percent of average net assets)
Investment Advisory Fees........................................... 1.00%
Portfolio Administration Fees ..................................... .38%
Other Expenses..................................................... .80%
Transfer and Dividend Disbursing................................. .11%
Custodian Fees................................................... .18%
Other Expenses................................................... .51%
Total Fund Operating
Expenses....................................................... 2.18%
EXAMPLE: You would bear the 1 year 3 years
following expenses on a
$1,000 investment assuming
(1) 5% annual return and (2) $XX.XX $XX.XX
redemption at the end of
each time period:
The above example is meant to illustrate the effect of expenses on return and
should not be considered to represent past or future returns or expenses, which
may be greater or less than those shown. For more information see "Management."
<PAGE>
FUND SUMMARY
[WHO SHOULD CONSIDER INVESTING IN THE FUND]
Investors who wish to pursue their investment goals by investing in the
economies of Asia and are willing to assume the risks associated with these
investments should consider the Fund. Investing in these markets can afford
investors diversification as well as a way to participate in the growth
opportunities available in Asia.
The value of the Fund's investments will vary from day to day, and generally
reflect market, economic and political conditions, interest rates and company,
political or economic news. In the short-term, stocks prices can fluctuate
dramatically in response to these factors. Over time, however, stocks have shown
greater growth potential than other types of securities, such as bonds. Bonds
fluctuate in response to interest rates and the credit rating of the issuer,
generally declining in value when interest rates rise or the credit rating of
the issuer declines. See "Investment Objective, Policies and Risks."
[RISK PROFILE]
The value of the Fund's shares can be expected to fluctuate more and to be more
volatile than funds investing only in securities of large U.S. companies or more
developed countries or bond funds. The Fund is not meant to be a complete or
balanced investment and is intended for those investors who can assume greater
risk with respect to a portion of their investment portfolio.
These risks include share price and currency fluctuations, confiscatory
taxation, expropriation, nationalization, inefficient securities markets and
settlement practices and lack of developed legal systems. See "Investment
Objective, Policies and Risks - Risk Factors."
[INVESTMENT ADVISER AND As investment adviser, Peregrine manages the
DISTRIBUTOR] investments of the Fund and handles the other
business affairs of the Fund under supervision of the
Board of Trustees. Peregrine has been registered with
the SEC as an investment adviser since April 17,
1995. Peregrine was incorporated in Hong Kong in 1991
and is an indirect subsidiary of Peregrine Investment
Holdings Limited ("Peregrine Holdings"). Peregrine
Holdings and its affiliates comprise one of the
largest independent Asian based investment banks
located outside Japan and Korea. Established in 1988,
Peregrine Holdings and its affiliates have offices in
sixteen Asian and mid-Eastern countries as well as in
Europe and the United States. Peregrine acts as
sub-investment adviser to one other investment
company registered with the SEC, and as adviser to
five other offshore funds. As of November 30, 1995,
Peregrine managed assets totaling $140 million. See
"Management."
Van Eck Securities Corporation ("Distributor"), a
Delaware corporation, is a wholly-owned subsidiary of
Van Eck Associates Corporation, serves as the Fund's
distributor and markets the Fund's shares.
<PAGE>
FUND DETAILS
[ORGANIZATION The Fund is a separate series of Peregrine Funds, and
OF THE FUND] is an open-end, management investment company.
Peregrine Funds was organized as a Delaware business
trust on ______________,1995. The Fund is a
diversified fund as that term is used in the
Investment Company Act of 1940, as amended (the "1940
Act"). With respect to 75% of a diversified fund's
assets, no more than 5% of its assets may be invested
in the securities of any one issuer and not more than
10% of the outstanding voting securities of an issuer
may be owned.
[BOARD OF
TRUSTEES] The Fund is governed by a Board of Trustees, which is
responsible for protecting the interests of
shareholders. The Trustees are experienced executives
who meet throughout the year to oversee the Fund's
activities, review contractual arrangements with
companies that provide services to the Fund and
review performance. The majority of Trustees are not
otherwise affiliated with Peregrine.
[SHAREHOLDER
MEETINGS] The Fund may hold special shareholder meetings and
mail proxy materials. These meetings may be called to
elect or remove Trustees, change the fundamental
investment objective and policies, approve an
investment advisory contract or for other purposes.
You are entitled to one vote for each share you own.
If you cannot attend a shareholder meeting you may
vote by proxy.
[FUND'S
PORTFOLIO Peregrine may utilize its broker-dealer and other
TRANSACTIONS] affiliates and other firms that sell Fund shares to
purchase and sell the Fund's portfolio securities and
other assets, provided that their services and
commissions are comparable to those of other firms.
[PORTFOLIO The portfolio manager is responsible for the
MANAGEMENT] day-to-day management of the Fund. Gary Greenberg is
portfolio manager of the Fund.
Gary Greenberg, C.F.A., Manager of the Fund, has been
serving in such capacity since the Fund commenced
operations. Mr. Greenberg, Deputy Managing Director
of Peregrine, joined Peregrine in July, 1994 and is
responsible for Peregrine's investment strategy in
various regions of the world and is portfolio manager
for a fund which invests in smaller companies in
India. Prior to joining Peregrine, Mr. Greenberg
served as co-manager of the Acorn International Fund
from 1992 to 1994. During that time period he was
<PAGE>
principal and portfolio manager of an asset
management company which managed over U.S. $4
billion, including approximately U.S. $2 billion
invested in non-U.S. companies.
Other investment professionals at Peregrine who are
expected to have significant input in determining the
Fund's investments include:
Bruce Seton, Chief Investment Officer of Peregrine,
has been serving in such capacity since September,
1994. Mr. Seton serves as Chief Executive Officer of
Peregrine and is responsible for establishing
Peregrine's overall investment guidelines and
strategies. Prior to joining Peregrine in 1994, Mr.
Seton spent twenty-two years at Gartmore Investment
Limited managing funds emphasizing Asian emerging
market investments.
Aureole Foong, Director of Peregrine, joined
Peregrine in 1994 as a fund manager. His
responsibilities at Peregrine include managing funds
which invest in equities and derivatives in the Asia
region. Prior to joining Peregrine, Mr. Foong worked
from 1990 to 1994 at Unifund, a Geneva-based private
investment company, where he served as a Senior Vice
President.
Peregrine, its investment personnel and its affiliated companies may invest in
securities for their own accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain activities.
FUND'S INVESTMENT OBJECTIVE, POLICIES AND RISKS
[OBJECTIVE] The Fund's investment objective is long-term capital appreciation by
investing in the securities of companies that are expected to benefit from the
development and growth of the markets or economies in Asia.
The Fund considers Asia to include Australia, Bangladesh, Brunei, Cambodia, Hong
Kong, India, Indonesia, Korea, Laos, Malaysia, Myanmar (formerly, Burma), Nepal,
New Zealand, Pakistan, Papua New Guinea, the People's Republic of China
("China"), Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.
("Asia"). Other countries may be included in the future. The Fund will normally
invest in at least three Asian countries. The Fund does not expect to invest in
Japan.
[FUND'S BENEFITS AND RISKS] [BENEFITS] Peregrine believes Asia has potential for
dramatic economic growth. The Fund offers investors who believe that Asia offers
strong long-term growth potential the ability to concentrate an investment in
Asian securities. The Fund's performance is closely tied to economic and
political conditions within Asia. The Fund may not be suitable for all investors
and is intended for investors willing to assume greater risk and as a complement
to a broader investment plan. The Fund is not intended as a complete investment
program.
<PAGE>
When you sell your Fund shares they may be worth more or less than you paid for
them. Their value will depend upon the value of the Fund's investments, which
varies in response to many factors. Stock values fluctuate in response to the
activities of individual companies, and general market, economic and political
conditions. The securities of smaller, less well-known companies may be
particularly volatile. Bond values fluctuate based on changes in interest rates
and in the credit quality of the issuer. In addition, some of the Fund's
investments will be denominated in foreign currencies which fluctuate in
response to global economic, market and political factors. Peregrine will select
investments for the Fund that it believes offer the greatest opportunity for
long-term capital appreciation. There can be no assurance that Peregrine will be
successful.
Peregrine normally invests the Fund's assets according to its investment
objective and policies. Peregrine determines whether an issuer or its principal
business are located in Asia by looking at such factors as its country of
organization, the primary trading market for its securities, and the location of
its assets, personnel, sales, and earnings. When allocating the Fund's
investments among countries, Peregrine considers such factors as the potential
for economic growth, political developments, expected levels of inflation,
governmental policies and the outlook for currency relationships. There can be
no assurance that the Fund will achieve its investment objective.
[EMERGING MARKET RISKS]
Investors should expect volatility in the value of the Fund's shares as emerging
markets are characterized by wide fluctuations in securities' prices. Countries
in Asia are in various stages of economic development. Some are considered
emerging markets, which generally have low-to-middle-income economies. Each has
its own risks. Most countries in this region are heavily dependent on
international trade. Some have prosperous economies, but are sensitive to world
commodity prices. Others are especially vulnerable to recessions and economic
factors in other countries. Some countries in the region have experienced rapid
growth recently, and many suffer from obsolete financial systems, economic
problems, or less developed legal systems. Many are experiencing political and
social uncertainty. In addition, the return of Hong Kong to Chinese control may
affect the entire region known as "Greater China". The securities markets in
Asia may be subject to emergencies caused by governmental actions and political
and economic factors. In the event an emergency exists, the Fund may, with the
approval of the SEC, suspend your right to redeem your Fund shares during the
emergency.
[INTERNATIONAL INVESTING RISKS]
The Fund's policy of investing in non-U.S. markets and, in particular, emerging
markets, involves increased or additional economic and political risks from
those mentioned above as compared to investing in the U.S. or other developed
markets. The Fund's share price will be affected by events and factors in the
various world markets.
These foreign markets have generally less stringent investor protection rules
and enforcement, disclosure standards and governmental regulation. In addition,
some foreign companies are not subject to the same financial accounting,
auditing and reporting standards that are required of U.S. companies. Compared
to U.S. markets, foreign markets are less developed and less liquid, have fewer
<PAGE>
issuers, may be more subject to influence by large investors and more
susceptible to manipulation. Some have unstable governments. In addition to the
political and economic factors that can affect the value of foreign securities,
a governmental issuer may be unwilling to repay principal and interest when due
and may require that the conditions for payment be renegotiated. Investing in
countries with emerging economies or securities markets is subject to the
additional risks associated with political and economic structures undergoing
rapid change, economies heavily dependent upon international trade and extremely
sensitive to commodity prices and to economic factors in other countries, the
lack of developed securities markets and effective regulations, less developed
legal and economic sectors, restrictions on foreign ownership of securities, and
governments that in the past have failed to recognize private ownership, have
nationalized or expropriated private property, imposed currency exchange
controls, levied confiscatory taxes and limited the removal of funds or other
assets.
[OTHER RISKS]
In addition, because the Fund may invest in a wide variety of investments and
use various investment techniques, the Fund may be riskier and more volatile
than Funds whose investments and investment techniques are less varied. Some of
the more common risks associated with the investments and investment techniques
available to the Fund and not discussed here are summarized below in "Fund's
Investments and Techniques." See also "Risk Factors" in the SAI.
[INVESTMENT POLICIES] In pursuing its goals, the Fund will focus on equity
securities but it may also invest in other types of financial instruments,
including debt securities of any quality. The Fund may invest in the securities
of any issuer, including companies and other business organizations, as well as
governments and governmental and quasi-governmental agencies. The Fund, however,
will tend to focus on the equity securities of both large and small companies in
Asia. Peregrine will normally invest at least 65%, and at times nearly all, of
the Fund's total assets in these securities, except in unusual circumstances.
Peregrine expects that the Fund will normally invest in at least three Asian
countries.
Peregrine may use different investment techniques to attempt to achieve the
Fund's investment objective and to hedge the Fund's risks, but there is no
guarantee that these strategies will work as Peregrine intends. Also, as a
mutual fund, the Fund seeks to spread investment risks by diversifying its
holdings among many companies and industries. Of course, diversification does
not eliminate risk and when you sell your Fund shares, they may be worth more or
less than you paid for them.
The Fund may, in seeking to avoid foreign taxes or comply with foreign
investment restrictions, invest in certain countries in Asia through
wholly-owned entities organized in a foreign country.
The Fund's investments will normally be denominated in a foreign currency. To
attempt to protect against uncertainties in the markets or in anticipation of
the need for cash to meet redemption requests or settlement of portfolio
transactions, the Fund may invest in short-term debt securities and money market
instruments in excess of 35% of the Fund's total assets. There is no limit on
<PAGE>
the amount of foreign currencies or short-term instruments denominated in a
foreign currency the Fund may hold.
The Fund may invest in a variety of instruments that are or may become available
in the market, and Peregrine may use a number of investment techniques and
strategies to achieve the Fund's objective. There are a number of risks and
restrictions associated with these instrument types and investment practices
that should be considered by investors. The investment types and investment
practices that will be used most often are listed below under "Fund's
Investments and Techniques." (A complete listing of the Fund's policies and
limitations and more detailed information about the Fund's investments and
strategies is contained in the Fund's SAI.) Policies and limitations are
considered at the time of purchase; the sale of instruments is not required in
the event of a subsequent change in circumstances.
Peregrine may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the Fund
achieve its goals. Current holdings and recent investment strategies are
described in the Fund's financial reports which are sent to shareholders twice a
year. For a free SAI or annual or semi-annual report, call (800) 910-5255 or
write to the Fund at the address on the cover. The Fund commenced operations on
___________; the first semi-annual report for the period ended June 30, 1996
will be available on or about August 30, 1996.
[FUND'S INVESTMENTS AND TECHNIQUES]
EQUITY SECURITIES. Equity securities may include common stocks, preferred
stocks, direct equity interests in unincorporated entities or enterprises,
convertible securities, and warrants. Common stocks, the most familiar type of
equity security, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in value, their
prices fluctuate based on changes in a company's financial condition and on
overall market, economic and political conditions. Smaller companies are
especially sensitive to these factors. The Fund also considers equity swaps,
indexed securities and similar instruments whose values are tied to one or more
equity securities to be equity securities.
DIVERSIFICATION. Diversification of the Fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of total assets, the Fund may not invest more
than 5% of its total assets in securities (including debt securities) of any one
issuer. The Fund may not invest more than 25% of its total assets in any one
industry. These limitations do not apply to U.S. government securities or
securities issued by foreign governments and supranational organizations.
FOREIGN AND EMERGING MARKETS SECURITIES. The Fund will normally invest a
significant portion of its assets in securities of issuers located outside the
U.S. and traded outside the U.S. These securities will usually be non-U.S.
dollar denominated, but also may be dollar denominated (such as ADRs). Changes
<PAGE>
in the value of foreign currencies can significantly affect the value of the
Fund's investments and share price. Peregrine may use a variety of techniques to
either increase or decrease the Fund's exposure to any currency.
DEBT SECURITIES. Bond and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. In general, bond prices rise when interest
rates fall, and vice versa. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
fluctuations due to changes in the issuer's creditworthiness, or the reality
that the issuer may already be in default. The market prices of these securities
may fluctuate more than higher-quality securities and may decline significantly
in periods of general economic difficulty.
RESTRICTIONS: The Fund currently intends to limit its investments in debt
securities rated lower than Baa by Moody's Investor Services ("Moody's") to 25%
of its total assets. Purchase of a debt security is consistent with the Fund's
debt quality policy if is rated at or above the stated level by Moody's or rated
in the equivalent categories by Standard & Poor's Corporation ("S&P"), or is
unra11ted but judged to be of equivalent rating quality by Peregrine. The
ratings of Moody's and S&P represent their respective opinions as to the quality
of the obligations they undertake to rate. Ratings, however, are general and are
not absolute standards of quality.
The SAI provides an explanation of the ratings assigned to debt holdings (not
including money market instruments).
ADJUSTING INVESTMENT EXPOSURE. The Fund may use various techniques to increase
or decrease its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect security values.
These techniques may involve derivative transactions such as buying and selling
options, futures and forward contracts, entering into currency exchange
contracts, swap agreements, purchasing indexed securities, and selling
securities short.
Peregrine may use these practices to adjust the risk and return characteristics
of the Fund's portfolio of investments. If Peregrine judges market conditions
incorrectly or employs a strategy that does not correlate well with the Fund's
investments, these techniques could result in a loss to the Fund, regardless of
whether the intent was to reduce risk or increase return. These techniques may
increase the volatility of the Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. In addition, these techniques
could result in a loss to the Fund if the counterparty to the transaction does
not perform as promised.
<PAGE>
REPURCHASE AGREEMENTS. In a repurchase agreement , the Fund buys a security at
one price and simultaneously agrees to sell it back at a higher price. The
difference between the sale and repurchase prices represents interest earned by
the Fund. Delays or losses to the Fund could result if the other party to the
agreement defaults or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS. Repurchase agreements with foreign dealers may be
less well-secured than U.S. repurchase agreements, and may be denominated in
foreign currencies. They also may involve greater risk of loss or counterparty
default. Some counterparties in these transactions may be less creditworthy and
subject to less regulation than those in U.S. markets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
Peregrine, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
Securities subject to legal or contractual restrictions and repurchase
agreements maturing in more than seven days are considered illiquid. Difficulty
in selling these securities may result in a loss or may be costly to the Fund.
RESTRICTIONS: The Fund may not enter into a repurchase agreement maturing in
more than seven days if, as a result, more than 15% of the Fund's net assets
would be invested in these repurchase agreements and other illiquid securities.
SHORT SELLING. Short selling involves selling a security that the Fund does not
own and has borrowed from a broker. When the Fund purchases the security to
replace the borrowed security, if the value of the security declines as
anticipated, the Fund will profit to the extent of the difference between the
purchase price and the sale price. If the price of the security increases, the
Fund will suffer a loss.
RESTRICTIONS: The value of securities of any one issuer sold short will
constitute no more than 2% of the Fund's net assets or more than 2% of the
issuer's outstanding class of securities. Only liquid securities will be sold
short. The value of the securities sold short will constitute no more than 25%
of the Fund's net assets.
OTHER INSTRUMENTS. Other securities in which the Fund may invest include rights,
securities of investment companies, and real estate-related investments.
LEVERAGE. The Fund may use leverage by borrowing from banks or other financial
institutions or through reverse repurchase agreements, futures, options and
similar transactions. Leverage will subject the Fund's share price to greater
fluctuation.
RESTRICTIONS: The Fund may not borrow in an amount exceeding 331/3% of its total
assets.
LENDING OF PORTFOLIO SECURITIES. Securities may be lent to broker-dealers and
institutions, including affiliates of Peregrine. Lending is a means for the Fund
to earn income. This practice could result in a loss or a delay in recovering
the Fund's securities.
<PAGE>
RESTRICTIONS: Loans of the Fund's securities, in the aggregate, may not exceed
331/3% of the Fund's total assets.
FUNDAMENTAL POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, which are subject to change only with shareholder approval. All
policies stated throughout this Prospectus, other than those identified in this
section as fundamental can be changed without shareholder approval.
The Fund's investment objective is to seek capital appreciation by investing in
the securities of companies that are expected to benefit from the development
and growth of the economies of Asia. This objective can be changed only with
shareholder approval.
The Fund, with respect to 75% of total assets, may not invest more than 5% of
its total assets in the securities (including debt securities) of any one
issuer, and may not own more than 10% of the outstanding voting securities of a
single issuer, excluding entities of which it is the sole owner. The Fund may
not invest more than 25% of its total assets in any one industry. The Fund may
borrow in an amount not exceeding 331/3% of its total assets. Loans of the
Fund's securities, in the aggregate, may not exceed 331/3% of total assets.
BUYING AND SELLING FUND SHARES
The Fund is a "no-load" mutual fund. The Fund does not currently impose a
transaction or sales charge for investors purchasing shares directly from the
Fund. However, to reduce transaction costs to the Fund resulting from excessive
shareholder activity a redemption fee of 2% ("Redemption Fee") of the value of
the shares sold will be retained by the Fund if you sell your shares within 60
days of purchase. Shares will be purchased or redeemed at the next share price
calculated after the investment or request for redemption is received and
accepted. The share price is calculated at the close of trading on the New York
Stock Exchange ("NYSE"), currently 4:00 P.M., Eastern Time, on each day the NYSE
is open for business. Purchases and sales will be made in U.S. Dollars. The Fund
may, without notice, suspend the offering of shares or reject any purchase
order.
[HOW TO BUY SHARES]
[THROUGH A FINANCIAL INSTITUTION OR DST]
Fund shares may be purchased at their net asset value per share without payment
of a sales charge by (1) ordering the shares through a financial institution
(which may impose a transaction charge for its services), and forwarding a
completed Application or investment firm settlement instructions with payment;
or (2) completing an Application and mailing it with payment to the Fund's
Transfer Agent and Dividend Paying Agent, DST Systems, Inc., c/o Peregrine
Funds, P.O. Box 419558, Kansas City, Missouri, 64141-9558.
<PAGE>
The Fund will not issue share certificates. Fractional shares will be issued.
[BROKERS, BANKS AND FINANCIAL PROFESSIONALS]
You may purchase or sell your shares through a broker, a bank or investment
professional. These financial institutions may charge a fee for their services.
Your financial institution has the responsibility of submitting your orders
received by it prior to the close of trading on the NYSE to the Distributor not
later than 5:00 p.m., Eastern Time, or to DST through the facilities of the
National Securities Clearing Corporation by 7:00 p.m., Eastern Time, to receive
that day's price.
Certain financial institutions may enter into sales agreements with the
Distributor and may place confirmed purchase orders on behalf of their
customers, with payment to follow within three business days. If payment is not
received by the Fund, the financial institution will be held liable for any fees
or losses the Fund or Distributor may incur.
Some unaffiliated financial institutions have entered into agreements with the
Fund, Distributor and/or Peregrine to provide services to shareholders. If such
financial institutions provide assistance in marketing the Fund, the financial
institutions will be compensated by Peregrine from its own resources.
[PAYMENT] Payment for shares must be made in U.S. Dollars. Checks drawn on a
foreign bank will not be accepted unless provisions are made for payment in U.S.
Dollars through a U.S. bank. Double endorsed checks will not be accepted.
[MINIMUM PURCHASES] Initial purchases must be in the amount of $50,000 or more
per account. Subsequent purchases must be in the amount of $5,000 or more.
Purchases may be made through selected dealers or banks or investment
professionals or by forwarding payment to DST Systems, Inc. ("DST"). Either
minimum may be waived by the Fund in special circumstances deemed to be
appropriate by the Fund's Board of Trustees.
[HOW TO SELL SHARES]
You may sell your shares on any business day by writing to or calling DST or
your financial institution. If you purchased shares through an investment
professional you may be required to sell your shares through that investment
professional if your shares are held in "street name". The redemption price will
be the net asset value per share next determined after the receipt of a request
in proper form as described herein.
[IN WRITING]
To sell shares you may write to DST, c/o Peregrine Funds, P.O. Box 419558,
Kansas City, Missouri 64141-9558. Your redemption request must (1) be signed by
all owners exactly as their names appear on the account Application and
signature page, (2) specify the number of shares or amount of investment to be
redeemed if less than all shares in the account are to be sold, (3) contain a
<PAGE>
signature guarantee of each owner's signature by an eligible guarantor
institution (notarization by a notary public is not acceptable) for redemptions
of $50,000 or more, or if the redemption check is to be made payable to other
than the owners or is to be sent to an address other than the record address or
the record address has been changed within the past 30 days and (4) provide any
additional documents regarding accounts of estates, trusts, guardianships,
custodianships, partnerships and corporations (e.g., appointments as executor or
administrator, trust instruments or certificates of corporate authority)
requested by DST.
[BY TELEPHONE]
You may sell your shares by telephone by calling either (1) your financial
institution (which may charge a transaction fee) or (2) DST at 1-800-910-5255,
if the shares are not held in street name. Estates, trusts, guardianships,
custodianships, partnerships and corporations may not call DST to sell their
shares. Telephone calls to DST are recorded. Shares will be redeemed by
telephone if you provide the correct social security number, tax identification
number or account number. To protect against fraud or losses DST may require
additional information. The Fund reserves the right to refuse a request for the
telephone redemption privilege without prior notice, either before, during or
after the call.
Telephone instructions accepted after the close of business on the NYSE will not
be processed until the following business day. In the case of joint or multiple
owners, one owner's call may effect the telephone exchange or redemption.
Because of unusual market conditions it may be difficult and/or impossible to
contact DST or your broker, bank or investment professional to redeem your
shares. You should continue to try contacting them by telephone at their
telephone number or written instructions may be sent by post or courier.
You may request redemption by telephone of $50,000 or less per day if the
proceeds check is to be payable to you and sent to the address we have on our
records or the proceeds are to be wired to the bank account of record. To
protect you and the Fund from fraud, a telephone redemption request will not be
accepted if you changed the registered address within one month of the request.
[UNAUTHORIZED TELEPHONE REDEMPTIONS] Like most mutual funds, the Fund and DST
may only be liable for losses resulting from unauthorized transactions if they
do not follow reasonable procedures designed to verify the caller's identity.
Telephone calls may be recorded and account number and other information may be
requested. If you do not want the ability to redeem by telephone, check the
appropriate box on the Application or call DST for instructions.
[REDEMPTION FEE]
Shares redeemed within 60 days of purchase will incur a Redemption Fee of 2%
which will be deducted from the value of those shares. The Redemption Fee is
paid to the Fund, not to the Distributor, and is intended to cover the costs
incurred by the Fund resulting from short-term trading by investors. The
Redemption Fee does not apply to shares acquired through the reinvestment of
<PAGE>
distributions. Shares held the longest will be redeemed first for purposes of
calculating the fee.
[PAYMENT OF SALES PROCEEDS] Payment for shares sold will normally be made within
seven days after a proper redemption request is received, except for delays
which may be permitted under applicable law or rule. If Fund shares to be
redeemed were purchased by check, to protect the Fund from losses, the Fund will
pay the proceeds only after it is satisfied that your check has been cleared for
payment. This may take as long as 15 days. Payment will generally be made by
wire transfer to your designated account at a domestic commercial bank. A wire
transfer fee of $____ is charged on wire transfer redemptions of less than
$____. You may request in writing that redemption proceeds be paid by check. A
check redemption fee of $____ is imposed on each check redemption. The check
will be made payable to the record owners at the record address. The Fund may
waive the wire or check fee.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute its net investment income and capital gains annually,
generally in December. Dividends or distributions declared in December but paid
in the following January will be includible in your income as of the record date
(usually in December) of such dividends or distributions. The fiscal year of the
Fund ends on December 31.
DIVIDEND REINVESTMENT PLAN
[DIVIDEND REINVESTMENT]
Dividends and distributions will be automatically reinvested in Fund shares at
net asset value unless you or your financial institution notifies DST that
dividends and distributions are to be paid in cash. If you do not want your
dividends reinvested automatically please check "Cash" on the Application.
TAX-SHELTERED RETIREMENT PLANS
You may purchase Fund shares for tax-sheltered retirement plans. These plans
allow individuals to shelter investment income and capital gains from current
taxes. Contributions may be tax deductible. These accounts require separate
applications to open. Additional information about these plans may be found in
the SAI or may be requested from the Fund.
[IRAS] An Individual Retirement Account and Spousal Individual Retirement
Account (IRA/SPIRA) are available to anyone who has earned income. (Investments
may also be made for a spouse, if the spouse has earned income of less than
$250.)
[SEP] A Simplified Employee Pension Plan (SEP) is available to employers,
including self-employed individuals that want to provide retirement income to
their employees without all the administrative requirements of qualified plans.
<PAGE>
[QUALIFIED PENSION PLAN] A Qualified Pension Plan is available to self-employed
individuals, partnerships, corporations and their employees.
[403 (B) PLANS] A 403(b)(7) Program is available to employees of certain
tax-exempt organizations and schools.
FACTS ABOUT YOUR ACCOUNT
[YOUR ACCOUNT]
DST maintains Fund account records. However, brokers, banks and financial
institutions maintain accountrecords for shares that are held in street name for
their clients. If you purchased your shares from a financial institution you
must call or write to the institution if you have questions about your account
or want to sell shares you own. DST will have no record of your account.
[MINIMUM ACCOUNT SIZE] If, at any time, the number of shares in your account
falls below a specified amount, currently 500 shares, you will be notified and
will have 30 days to bring the number of shares you own up to the minimum
amount. If you are unable to comply with the account minimum within 30 days, the
Fund may redeem your Fund shares involuntarily and mail the proceeds to you.
Your shares will be redeemed at the net asset value on the day your account is
closed.
[FUND'S BUSINESS DAYS] You may transact business (buy and sell shares) in your
account on each day the NYSE is open. Shares are purchased and sold at the net
asset value per share (NAV) next calculated after your order is received and
accepted. The NAV is calculated at the close of business on the NYSE, currently
4:00 P.M., Eastern Time.
[FUND'S NAV] The Fund's NAV is the value of one share. It is computed by adding
the value of the Fund's investments, cash and other assets, subtracting the
Fund's liabilities and dividing the result by the number of shares outstanding
at the time.
[VALUATION OF FUND'S INVESTMENTS] The assets of the Fund are primarily valued on
the basis of market quotations. Foreign securities are valued on the basis of
quotations from the primary market in which they are traded, or if traded on
multiple markets, as of the most current price quotation accurately reflecting
the fair value. If market value is not ascertainable, investments are valued at
fair value as determined in good faith by the Board of Trustees. Foreign
investments will be valued in U.S. Dollars using the prevailing exchange rates
on that day. The Fund invests in securities, options or futures contracts listed
or traded on foreign exchanges which may trade on Saturdays or other customary
U.S. national business holidays (days on which the Fund is not open for
business). Consequently, the Fund's NAV may be affected on days when you may not
purchase or redeem shares.
[SPECIAL SERVICES] You may be charged a fee for special services you request,
such as providing historical account documents.
<PAGE>
[TRANSFER OF OWNERSHIP] To transfer ownership (re-register) all or a portion of
your shares you must provide a written request with any documents DST may
request to satisfy itself that the request is genuine. See "How to Sell Shares."
DST will require the same information and certifications, all in proper form,
necessary to open and close an account.
MANAGEMENT
[INVESTMENT ADVISER] Peregrine is the investment adviser and manages the Fund's
portfolio of investments pursuant to an Investment Advisory Agreement and is
paid an investment advisory fee ("Advisory Fee") by the Fund at an annual rate
of 1.00% of average daily net assets. Peregrine acts as sub-adviser to one other
mutual fund registered with the SEC under the 1940 Act and manages portfolios of
pension plans and others. Total aggregate assets under management by Peregrine
were approximately $140 million as of November 30, 1995.
[PORTFOLIO ADMINISTRATOR]
Van Eck Associates Corporation ("Van Eck") serves as the Fund's portfolio
administrator pursuant to a Portfolio Accounting and Administration Agreement.
Van Eck performs accounting and administrative services for the Fund and is paid
a fee ("Portfolio Administration Fee") at an annual rate of .25% of the Fund's
average daily net assets or $75,000, whichever is greater. Van Eck is
responsible for calculating the Fund's NAV, maintaining the Fund's records and
providing certain other accounting and administrative services.
The Advisory and Portfolio Administration Fees paid by the Fund are generally
more than those paid by other comparable mutual funds.
ADVERTISING
From time to time, the Fund may advertise its performance. Past performance is
not indicative of future performance.
[AVERAGE ANNUAL TOTAL RETURN] The Fund may advertise its performance in terms of
average annual total return, which is computed by finding the average annual
compounded rate of return over a period so that the initial amount invested
would equal the ending account value. The calculation assumes that all dividends
and distributions by the Fund are reinvested and includes all recurring fees
charged to all shareholder accounts. It is not the actual return in each year,
but an average. The actual return in any year may be more or less than the
average. Average annual total return for periods of less than a year is equal to
the actual return annualized and assumes that performance to date will continue
for the rest of the year.
[AGGREGATE TOTAL RETURN] The Fund may advertise aggregate total return for a
specified period of time, which is the percentage change in the net asset value
of Fund shares initially purchased assuming reinvestment of dividends and
capital gains distributions without giving consideration to the length of time
of the investment.
<PAGE>
Non-recurring expenses may be excluded from the calculation of rates of return
so that the rates may be higher than if these expenses were included. The SAI
describes the methods used to calculate the Fund's total return.
The Fund may quote performance results from recognized services and publications
which monitor the performance of mutual funds and the Fund may compare its
performance to various published historical indices. These include market,
economic and performance data and indices. For example, the Fund may quote the
market performance of the S&P 500; Europe Australia Far East (EAFE) Index; the
Morgan Stanley Capital International Index, Asia (Ex-Japan) Index or another
appropriate index; performance of various world economies or economic
indicators; or compilations of historical performance data from rating agencies.
The Fund is rated in the Asia/Pacific Basin Funds Category by performance rating
agencies. Micropal, Ltd., a worldwide mutual fund performance evaluation
service, is one rating agency; Lipper Analytical Services is another.
TAXES
[FUND'S TAX STATUS] The Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code and will not pay income or excise taxes
to the extent that it distributes its net taxable investment income and capital
gains.
[TAXATION OF DIVIDENDS YOU RECEIVE] Notice as to the tax status of dividends and
distributions will be mailed to you annually. Income from dividends and
distributions is normally taxable whether or not reinvested. Distributions from
net investment income and short-term capital gains will be taxed as ordinary
income. Distributions of long-term capital gains will be taxed at capital gain
rates. If the Fund fulfills certain requirements, shareholders of the Fund may
be able to claim a foreign tax credit or deduction for foreign taxes paid to
foreign governments by the Fund during the year. The Fund does not anticipate
that any portion of the Fund's dividends will be eligible for the 70% corporate
dividends received deduction.
[TAXATION ON SALE OF SHARES] When you redeem your shares you may incur a capital
gain or loss for tax purposes. The amount of the capital gain or loss, if any,
is the difference between what you paid for your shares and what you receive. Be
sure to keep your regular statements - they contain the information necessary to
calculate the capital gain or loss.
This discussion was a brief description of the tax consequences of an investment
in the Fund. You should consult your tax adviser for additional tax
consequences, including state and local taxation, of dividends, distributions
and sale of Fund shares.
[NON-RESIDENTS] Distributions of net investment income and short-term capital
gains, if any, made to non-resident aliens will be subject to 30% withholding or
lower tax treaty rates because such distributions are considered U.S. source
income. Currently, the Fund is not required to withhold tax from long-term
capital gains distributions paid to non-resident aliens.
<PAGE>
ADDITIONAL INFORMATION
[QUESTIONS ABOUT THE FUND] For further information about the Fund, please call
your financial advisor or the Fund toll free at (800) 544-4653 or write to the
Fund at the cover page address.
[CUSTODIAN] The custodian of the assets of the Trust is The Chase Manhattan
Bank, N.A., 4 Chase Metrotech Center, Brooklyn, New York 11245.
[INDEPENDENT ACCOUNTANTS] Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York 10036, are the Fund's independent auditors. The Fund's annual
financial statements are audited by Price Waterhouse.
[COUNSEL] Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019, serves
as outside counsel to the Trust.
[TRANSFER AND DIVIDEND DISBURSING AGENT] DST Systems, Inc., 1055 Broadway,
Kansas City, MO 64105, serves as the Fund's transfer, dividend disbursing and
shareholder servicing agent.
[INVESTMENT ADVISER] Peregrine Asset Management (Hong Kong) Limited, New World
Tower, Suite 1704, 16-18 Queens Road Central, Hong Kong, serves as the
investment adviser to the Fund.
[DISTRIBUTOR] Van Eck Securities Corporation, 99 Park Avenue, New York, New York
10016, serves as distributor for the Fund's shares.
[PORTFOLIO ADMINISTRATOR] Van Eck Associates Corporation, 99 Park Avenue, New
York, New York 10016, serves as portfolio administrator for the Fund.
<PAGE>
PEREGRINE FUNDS
(the "Trust")
99 Park Avenue, New York, N.Y. 10016
Shareholder Services: Toll Free (800) 910-5255
ASIA GROWTH FUND
Peregrine Funds is a Delaware business trust. Asia Growth Fund is a mutual fund
that is the only series of the Trust.
TABLE OF CONTENTS Page
General Information..............................................
Investment Objective and Policies of the Fund....................
Risk Factors - Foreign Securities................................
Emerging Market Securities.......................................
Foreign Currency Transactions....................................
Futures and Options Contracts and Complex Securities.............
Options, Futures and Forward Contracts...........................
Hedging and Other Investment Techniques..........................
Indexed Securities and Structured Notes..........................
Swap Agreements..................................................
Loans of Portfolio Securities....................................
Borrowing........................................................
Partly Paid Securities...........................................
Direct Investments...............................................
Repurchase Agreements............................................
Debt Securities..................................................
Rule 144A Securities and Section 4(2) Commercial Paper...........
Investment Restrictions..........................................
Investment Advisory Services.....................................
The Distributor..................................................
Portfolio Transactions and Brokerage.............................
Trustees and Officers............................................
Valuation of Shares..............................................
Tax-Sheltered Retirement Plans...................................
Investment Programs..............................................
Taxes............................................................
Redemptions in Kind..............................................
Performance......................................................
Additional Information...........................................
Financial Statements.............................................
Appendix.........................................................
Performance Charts...............................................
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Fund's current Prospectus, dated ___, 1995 (the
"Prospectus"), which is available at no charge upon written or telephone request
<PAGE>
to the Trust at the address or telephone number set forth at the top of this
page.
Shareholders are advised to read and retain this Statement of Additional
Information for future reference.
STATEMENT OF ADDITIONAL INFORMATION - ___, 1995
GENERAL INFORMATION
Peregrine Funds (the "Trust") is an open-end management investment company
organized as a "business trust" under the laws of the state of Delaware. The
Board of Trustees has authority to create additional series or funds, each of
which may issue a separate class of shares. There is currently one series of the
Trust: Asia Growth Fund ("Fund").
The Fund is classified as a diversified fund under the Investment Company Act of
1940 (the "1940 Act"). A diversified fund is a fund which meets the following
requirements: At least 75% of the value of its total assets is represented by
cash and cash items (including receivables), government securities, securities
of other investment companies and other securities for the purpose of this
calculation limited in respect of any one issuer to an amount not greater than
5% of the value of the Fund's total assets and to not more than 10% of the
outstanding voting securities of such issuer.
Peregrine Asset Management (Hong Kong) Limited (the "Adviser") serves as
investment adviser to the Fund.
OVERVIEW INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
The Fund's investment objective is long-term capital appreciation by investing
primarily in the securities of companies that are expected to benefit from the
development and growth of the economies of the Asia region.
The Fund may invest in a broad range of equity securities, warrants and equity
options of companies located in, or expected to benefit from the development and
growth of the economies of countries located in Asia. These countries include
Australia Bangladesh, Brunei, Cambodia, Hong Kong, India, Indonesia, Korea,
Laos, Malaysia, Myanmar (formerly, Burma), the People's Republic of China
("China"), Nepal, New Zealand, Pakistan, the Philippines, Papua New Guinea
Singapore, Sri Lanka, Taiwan, Thailand and Vietnam. Currently, the Fund does not
invest in Australia and Japan. Equity securities include common and preferred
stocks, structured notes, equity swaps, direct equity interests in trusts,
partnerships, joint ventures and other unincorporated entities or enterprises,
special classes of shares available only to foreign persons in those markets
that restrict ownership of certain classes of equity to nationals or residents
of that country, depository shares or receipts, convertible preferred stocks and
convertible debt instruments.
The Fund may buy and sell financial futures contracts and options on financial
futures contracts, forward currency contracts and put or call options on
securities, securities indices and foreign currencies, currency swaps,
structured and indexed notes and other instruments which may be or become
available that are consistent with the Fund's investment objective. The Fund may
also lend its portfolio securities and borrow money for investment purposes
(i.e., leverage its portfolio).
Depository shares or depository receipts, such as American Depository Receipts
and Shares, and Global Depository Receipts and Shares, are generally issued by
banks as evidence of ownership of the underlying foreign securities.
<PAGE>
Although the Fund will invest its assets in a manner consistent with its
investment objectives and policies there can be no assurance the Fund will be
able to achieve its objective.
The Fund expects that, under normal market conditions, at least 65%, and at
times, substantially all of its assets will be invested in equity securities,
structured and indexed notes, swaps and other instruments whose return is tied
to one or more issuers in the Asia region and other issuers that Fund may invest
in consist of companies that (a) are located in or whose securities are
principally traded in an Asian country, (b)(i) have at least 50% of their assets
in one or more countries located in Asia or (ii) derive at least 50% of their
gross sales, revenues or profits from providing goods or services to or from
within one or more countries located in Asia or (c) have manufacturing or other
operations in China that are significant to such companies. These investments
are typically listed on stock exchanges or traded in the over-the-counter
markets in Asian countries, but may be traded on exchanges or in markets outside
Asia. Similarly, the principal offices of these companies may be located outside
these countries. The Fund may commit 25% or more of its total assets to any one
country in Asia and will invest its assets in at least three countries.
The Fund may, for temporary defensive purposes and cash management purposes such
as maintaining sufficient cash to meet redemptions and for settlement of
securities transactions currency, invest more than 35% of its total assets in
high grade, liquid debt securities of foreign and United States companies which
are not in Asia, foreign governments and the U.S. Government, and their
respective agencies, instrumentalities, political subdivisions and authorities,
as well as in money market instruments cash and cash equivalents denominated in
U.S. dollars or a foreign currency. These instruments include, but are not
limited to, negotiable or short-term deposits with domestic or foreign banks
with total surplus and undivided profits of at least $50 million; high quality
commercial paper; and repurchase agreements maturing within seven days with
domestic or foreign dealers, banks and other financial institutions deemed to be
creditworthy under guidelines approved by the Board of Trustees of the Fund. The
commercial paper in which the Fund may invest will, at the time of purchase, be
rated P-1 or better by Moody's Investor Services Inc., ("Moody's") or A-1 or
better by Standard & Poor's Corporation ("S&P") or, Fitch-1 by Fitch or Duff-1
by Duff & Phelps or if unrated, will be of comparable high quality as determined
by the Adviser.
Some countries in the Asia region have favorable tax treaties with other
countries, the effect of which is that entities organized under the laws of the
tax-favored country pay a lower rate of tax on income or capital gains earnedon
investments in the taxing country. The Fund may invest when it is advantageous
for tax reasons, through wholly-owned entities in a tax favored country.
The Appendix to this Statement of Additional Information contains an explanation
of the rating categories of Moody's and S&P relating to the fixed-income
securities and preferred stocks in which the Fund may invest, including a
description of the risks associated with each category.
<PAGE>
INVESTMENT TECHNIQUES POLICIES AND RISK FACTORS
FOREIGN SECURITIES
Investors should recognize that investing in foreign securities involves certain
special considerations which are not typically associated with investing in
United States securities. Since investments in foreign companies will frequently
involve currencies of foreign countries, and since the Fund may hold securities
and funds denominated in foreign currencies, the Fund may be affected favorably
or unfavorably by changes in currency rates and in exchange control regulations,
if any, and may incur costs in connection with conversions between various
currencies. Most foreign stock markets, while growing in volume of trading
activity, have less volume than the New York Stock Exchange, and securities of
some foreign companies are less liquid and more volatile than securities of
comparable domestic companies. Similarly, volume and liquidity in most foreign
bond and equity markets are less than in the United States, and at times
volatility of price can be greater than in the United States. Fixed commissions
on foreign securities exchanges are generally higher than negotiated commissions
on United States exchanges. There is generally less government supervision and
regulation of securities exchanges, brokers and listed companies in foreign
countries than in the United States. In addition, with respect to certain
foreign countries, in particular, emerging market countries, there is the
possibility of exchange control restrictions, expropriation or confiscatory
taxation, political, economic or social instability, which could affect
investments in those countries. Foreign securities such as those purchased by
these Funds may be subject to foreign government taxes, higher custodian fees
and dividend collection fees which could reduce the yield on such securities.
EMERGING MARKET SECURITIES
Many countries in the Asia region are considered developing or emerging
countries. The Fund may have a substantial portion of its assets in these
countries or countries with developing securities markets. Although there is no
universally accepted definition, a developing or emerging country is generally
considered by the Adviser to be a country which is in the initial stages of
industrialization or economic development.
Shareholders should be aware that investing in the equity and fixed income
markets of those countries and emerging markets involves exposure to unstable
governments, economies based on only a few industries, and securities markets
which trade a small number of securities. Securities markets of these countries
tend to be more volatile than the markets of developed countries; however, such
markets have in the past provided the opportunity for higher rates of return to
investors. Some of these countries do not have securities markets or exchanges
or are in the initial stages of formation.
Political and economic structures in many emerging countries may be undergoing
significant evolution and rapid development, and therefore, such countries may
lack the social, political and economic stability characteristic of the United
States. Certain of these countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated the assets of
private companies or investors. An investment in the Fund presents a greater
risk of loss to investors than would an investment in a fund investing in a more
diversified portfolio of companies located in more stable countries. The
economies of countries with developing markets may be highly vulnerable to
changes in local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. Local securities markets may be unable
to respond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times. Securities
of issuers located in developing markets may have limited marketability and may
be subject to more abrupt or erratic price movements. However, such markets have
<PAGE>
in the past provided the opportunity for higher rates of return to investors.
There is no assurance that these markets will offer such opportunity in the
future.
Since the Fund normally invests at least 65% of its total assets in Asia region
investments, the investment performance will be especially affected by events
affecting companies in Asia. The value and liquidity of these investments may be
affected favorably or unfavorably by political, economic, fiscal, regulatory or
other developments in Asia or neighboring regions. The extent of economic
development, political stability and market depth of different countries in Asia
varies widely. Certain countries in Asia, including Bangladesh, Cambodia, China,
Laos, Indonesia, Malaysia, Nepal, the Philippines, Thailand, and Vietnam are
either comparatively underdeveloped or are in the process of becoming developed.
Investments typically involve greater potential for gain or loss than
investments in securities of issuers in developed countries. Given the Fund's
investments, the Fund will likely be particularly sensitive to changes in
China's economy as the result of a reversal of economic liberalization,
political unrest or changes in China's trading status. In additional, the Fund
will invest a significant portion of its assets in Hong Kong and will be
affected by the return of Hong Kong to China.
The securities markets in Asia are substantially smaller, less liquid and more
volatile than the major securities markets in the United States. A high
proportion of the shares of many issuers may be held by a limited number of
persons and financial institutions, which may limit the number of shares
available for investment by the portfolio. A limited number of issuers in Asian
securities markets may represent a disproportionately large percentage of market
capitalization and trading value. The limited liquidity of securities markets in
Asia may also affect the Fund's ability to acquire or dispose of securities at
the price and time it wishes to do so. Accordingly, during periods of rising
securities prices in the more illiquid Asian securities markets, the Fund's
ability to participate fully in such price increases may be limited by its
investment policy of investing not more than 15% of its net assets in illiquid
securities. Conversely, the Fund's inability to dispose fully and promptly of
positions in declining markets will cause the Fund's net asset value to decline
as the value of the unsold positions is marked to lower prices. In addition,
securities markets in Asia are susceptible to being influenced by large
investors trading significant blocks of securities.
Many of the emerging markets limit ownership by foreign investors of their
domestic issuers, including by requiring that such issuers issue two classes of
shares-"local" and "foreign" shares. Foreign shares may be held only by
investors that are not considered nationals or residents of that country and in
some markets may be convertible into local shares. Foreign shares may be subject
to restrictions on the right to receive dividends and other distributions, and
may have limited voting and other rights, to name a few. Local shares are
intended for ownership by nationals or residents of the country. The market for
foreign shares is generally less liquid than the market for local shares,
although in some cases foreign shares may be converted into local shares. In
addition, foreign shares often trade at a premium to local shares, while at
other times there is no premium. If the Fund were to purchase foreign shares at
a premium and sell when there is a lower or no premium, the Fund could realize a
loss on its investment. Ownership by foreign investors of local shares may be
illegal in some jurisdictions and, in others, foreign owners of local shares may
not be entitled, among other things, to participate in certain corporate actions
such as stock dividends, rights and warrant offerings (while foreign holders of
foreign shares would participate). If the Fund were to own local shares and
could not participate in a stock, warrant or other distribution, the Fund could
suffer material dilution of its interest in that issuer and the value of its
holdings could decline dramatically, over a very short period, causing a loss on
its investment. Generally, it is expected that the Fund will hold foreign
shares. However, because of their limited number, foreign shares may, at times,
not be available for purchase by the Funds or the premiums may be, in the
opinion of the Adviser unjustified or prohibitively high. In order to
participate in these markets, the Fund may deem it advisable to purchase local
shares which may expose the Fund to the additional risks described above. The
<PAGE>
Fund will only purchase local shares where foreign shares are not available for
purchase or premiums are excessive and, when in the opinion of the Adviser, the
potential for gain in these markets outweighs the risks that issuers will take
corporate actions which may result in dilution to the Fund. Where permitted by
local law, the Fund will attempt to convert local shares to foreign shares
promptly. There can be no assurance that the Adviser will be able to assess
these risks accurately or that the Fund will be able to convert their local
shares to foreign shares or that dilution will not result.
The stock markets in certain of these countries, particularly the Chinese
market, are undergoing a period of growth and change which may result in trading
volatility and difficulties in the settlement and recording of transactions, and
in interpreting and applying the relevant law and regulations. In particular,
the securities industry in China is not well developed. China has no securities
laws of nationwide applicability. The municipal securities regulations adopted
by Shanghai and Shenzhen municipalities are very new, as are their respective
securities exchanges and other self-regulatory organizations. In addition,
Chinese stockbrokers and other intermediaries may not perform as well as their
counterparts in the United States and other more developed securities markets.
The prices at which the Fund may acquire or dispose of investments may be
affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the Fund
in particular securities. The securities markets in Cambodia, Laos and Vietnam
are currently non-existent.
Economies of countries in the Asia region may differ favorably or unfavorably
from the United States economy in such respects as rate of growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. As export-driven economies,
the economies of countries in the Asia region are affected by developments in
the economies of their principal trading partners. Revocation by the United
States of China's "Most Favored Nation" trading status, which the United States
President and Congress reconsider annually, would adversely affect the trade and
economic development of China and Hong Kong. Hong Kong and Taiwan have limited
natural resources, resulting in dependence on foreign sources for certain raw
materials and economic vulnerability to global fluctuations of price and supply.
Chinese governmental actions can have a significant effect on the economic
conditions in the Asia region, which could adversely affect the value and
liquidity of the Fund's investments. Although the Chinese government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain countries in the region do not have comprehensive systems of
laws, although substantial changes have occurred in China in this regard in
recent years. The corporate form of organization has only recently been
permitted in China and national regulations governing corporations were
introduced only in May 1992. Prior to the introduction of such regulations
Shanghai had adopted a set of corporate regulations applicable to corporations
located or listed in Shanghai, and the relationship between the two sets of
regulations is not clear. Consequently, until a firmer legal basis is provided,
even such fundamental corporate law tenets as the limited liability status of
Chinese issuers and their authority to issue shares remain open to question.
Laws regarding fiduciary duties of officers and directors and the protection of
shareholders are not well developed. China's judiciary is relatively
inexperienced in enforcing the laws that exist, leading to a higher than usual
degree of uncertainty as to the outcome of litigation. Even where adequate law
exists in China, it may be impossible to obtain swift and equitable enforcement
of such law, or to obtain enforcement of the judgment by a court of another
jurisdiction. The bankruptcy laws pertaining to state enterprises have rarely
been used and are untried in regard to an enterprise with foreign shareholders,
and there can be no assurance that such shareholders, including the Fund would
be able to realize the value of the assets of the enterprise or receive payment
in convertible currency. As the changes to the Chinese legal system develop, the
<PAGE>
promulgation of new laws, existing laws and the preemption of local laws by
national laws may adversely affect foreign investors, including the Fund. The
uncertainties faced by foreign investors in China are exacerbated by the fact
that many laws, regulations and decrees of China are not publicly available, but
merely circulated internally. Similar risks exist in other Asia region
countries.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.
FOREIGN CURRENCY TRANSACTIONS
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the long-term investment decisions made for the
Fund with regard to overall diversification strategies. Although the Fund values
its assets daily in terms of U.S. Dollars, it does not intend physically to
convert holdings of foreign currencies into U.S. dollars on a daily basis. The
Fund will do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will use forward contracts, along with futures
contracts, foreign exchange swaps, structured notes and put and call options
(all types of derivatives), to "lock in" the U.S. Dollar price of a security
bought or sold and as part of their overall hedging strategy, for defensive
purposes and for cash management purposes. The Fund will conduct foreign
currency exchange transactions, either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through purchasing
put and call options on, or entering into futures contracts or forward contracts
to purchase or selling foreign currencies or using structured notes, swap
agreements or other instruments that may become available. See "Futures and
Options Transactions."
With respect to forward contracts entered in for hedging purposes. at the
maturity of the forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or may retain the security
and terminate its contractual obligation to deliver the foreign currency prior
to maturity by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. There can be no assurance, however, that the Fund will be able
to effect such a closing purchase transaction.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the forwardcurrency contract. Accordingly, the Fund may
decide to proceed with the purchase or sale as anticipated or may determine not
to proceed. In the first instance, the Fund may have to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security has fluctuated; or in the second, to enter into
an offsetting transaction.
<PAGE>
FUTURES AND OPTIONS CONTRACTS AND COMPLEX SECURITIES
The Fund may buy and sell forward, futures and options contracts, structured
notes, swap agreements and other complex securities which are or may become
available for hedging and investment purposes. These are commonly referred to as
"derivatives". Some derivatives are futures and forward contracts and include
financial futures and forward contracts which may include foreign currency
security, interest-rate, stock and bond index or forward futures and forward
contracts.
OPTIONS, FUTURES AND FORWARD CONTRACTS
A forward contract, like a futures contract, involves an obligation to purchase
or sell a specific asset at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. Unlike futures contracts which are standardized
exchange-traded contracts, forward contracts are usually traded in the
over-the-counter market conducted directly between financial institutions and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades. There is, however, an
interest rate factor reflected in the delivery prices. A security or
interest-rate futures or forward contract is an agreement to buy or sell a
specified security at a set price on a future date. An index contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A foreign currency contract is an agreement to buy or sell a specified
amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation they may have under the
contract. The Fund will not commit more than 5% of its total assets to initial
margin deposits on futures contracts and premiums on options except that margin
deposits for futures positions entered into for bona fide hedging purposes are
excluded from the 5% limitation.
In establishing a position in a futures or forward contract, which may be a long
or short position, for other than hedging purposes appropriate high grade,
liquid assets, such as U.S. Government securities or cash will be segregated
with the Fund's Custodian to ensure that the position is not leveraged above
applicable limits. See "Borrowing" below. This segregated account will be
marked-to-market daily to reflect changes in the value of the underlying futures
contract. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of a Fund's
commitments with respect to such contracts. Certain exchanges do not permit
trading in particular futures contracts at prices in excess of daily price
fluctuation limits set by the exchange. Trading in futures contracts traded on
foreign exchanges may be subject to the same or similar risks as trading in
foreign securities.
The Fund may invest in options on futures contracts. Compared to the purchase or
sale of futures contracts, the purchase and sale of options on futures contracts
involves less potential risk to the Fund because the maximum exposure is the
amount of the premiums paid for the options.
<PAGE>
The Fund may invest up to 5% of its total assets, taken at market value at the
time of investment, in premiums on call and put options on domestic and foreign
securities, foreign currencies, stock and bond indices and financial futures
contracts (entered into for other than bonafide hedging purposes). As the holder
of a call or put option, the Fund pays a premium and has the right (for
generally 3 to 9 months) to purchase (in the case of a call option) or sell (in
the case of a put option) the underlying asset at the exercise price at any time
during the option period ("American" option) or at expiration of the contract
("European" option). An option on a futures contract gives the purchaser the
right, but not the obligation, in return for the premium paid, to assume a
position in a specified underlying futures contract (which position may be a
long or short position) at a specified exercise price during the option exercise
period. If the call or put is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Fund will lose
its premium payment. The Fund may, with respect to options it has purchased,
sell them, exercise them or permit them to expire.
The Fund may write call or put options. As the writer of an option, the Fund
receives a premium. The Fund keeps the premium whether or not the option is
exercised. If the call or put option is exercised, the Fund must sell (in the
case of a written call option) or buy (in the case of written put option) the
underlying asset at the exercise price. The Fund may write only covered put and
call options. A covered call option, which is one where the Fund owns the
underlying asset, sold by the Fund exposes it during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying asset or to possible continued holding of an underlying instrument
which might otherwise have been sold to protect against depreciation in the
market price of the underlying instrument. A covered put option written by the
Fund exposes it during the term of the option to a decline in price of the
underlying instrument. A put option sold by the Fund is covered when, among
other things, cash or short-term liquid securities are placed in a segregated
account to fulfill the obligations undertaken. Covering a put option sold does
not reduce the risk of loss.
The Fund may invest in options which are either listed on a domestic securities
exchange, traded on a foreign exchange or over-the-counter.
In general, exchange traded options are third party contracts with standardized
prices and expiration dates. Over-the-counter options are two party contracts
with price and terms negotiated by the buyer and seller, are generally
considered illiquid, and will be aggregated with other illiquid positions for
purposes of the limitation on illiquid investments. With respect to
over-the-counter options, the Fund is exposed to the risk that the other party
will fail to perform under the contract, in such a case the Fund would incur a
loss equal to the then current "market" value of the option.
HEDGING AND OTHER DERIVATIVE INVESTMENT TECHNIQUES
The Fund may use options, forward and futures contracts, structured and indexed
notes, swaps and similar investments (commonly referred to as derivatives) as a
defensive technique to protect against declines the values of assets the Adviser
deems desirable to hold for tax or other considerations and to gain investment
exposure to certain securities, markets or assets. One defensive technique
involves selling a futures or forward contract, purchasing a put option or
structured or indexed note or entering into a swap agreement whose value is
expected to be inversely related to the asset being hedged. If the anticipated
decline in the value of the asset occurs, it would be offset, in whole or part,
by a gain on the instrument. The premium paid for the put option would reduce
any capital gain otherwise available for distribution when the asset is
eventually sold.
Hedging against a change in the value of an asset the Fund hold reduces or
precludes the opportunity for gain if the value of the hedged asset should
increase.
<PAGE>
The Fund may use futures contracts, options, structured and indexed notes,
forward contracts and swaps and other similar instruments for investment
purposes, such as creating non-speculative "synthetic" positions or implementing
"cross-hedging" strategies. A synthetic position is not deemed to be speculative
if the position is covered by segregation of short-term liquid assets. A
synthetic position permits the Fund to obtain investment exposure and is the
duplication of a cash market transaction when deemed advantageous by the Adviser
for cost, liquidity tax or transactional efficiency reasons. A cash market
transaction is the purchase or sale of a security or other asset for cash. For
example, from time to time, the Fund experiences large cash inflows which may be
redeemed from the Fund in a relatively short period. In this case, the Fund
currently can leave the amounts uninvested in anticipation of the redemption or
the Fund can invest in securities for a relatively short period, incurring
transaction costs on the purchase and subsequent sale. Alternatively, the Fund
may create a synthetic position by investing in a futures contract on an asset,
such as a securities index gaining investment exposure to the relevant market
while incurring lower overall transaction costs. By segregating cash, the Fund's
futures contract position would generally be no more leveraged or riskier than
if it had invested in the cash market-i.e., purchased the securities. In
addition, a structured note may permit the Fund to gain investment exposure that
might not otherwise be available. For example, some countries permit only
residents or nationals to invest in their markets. The Fund could enter into a
structured note whose principal value would be tied to the performance of that
country's market index.
Cross-hedging involves the use of one asset to hedge against the decline in
value of another asset. For example, the Fund could hedge against a decline in
the value of Taiwanese securities position by taking a position in the Hong Kong
market that is expected to perform inversely to the Taiwanese market.
The use of such instruments as described herein involves several risks. First,
there can be no assurance that the prices of such instruments and the hedged
asset or the cash market position will move as anticipated. If prices do not
move as anticipated the Fund may incur a loss on its investment, may not achieve
the hedging protection it anticipated and/or incur a loss greater than if it had
entered into a cash market position. Second, investments in such instruments may
reduce the gains which would otherwise be realized from the sale of the
underlying securities or assets which are hedged. Third, positions in such
instruments can be closed out only on an exchange that provides a market for
those instruments. There can be no assurance that such a market will exist for a
particular futures contract or option. If the Fund cannot close out an exchange
traded futures contract or option which it holds, it would have to perform its
contract obligation or exercise its option to realize any profit and would incur
transaction costs on the sale of the underlying assets. Further, if the other
party to a swap, structured or indexed note, forward contract or option were to
default on its obligation, the Fund would incur a loss. Finally, certain of
these derivative instruments may be illiquid, difficult to value accurately and
subject to extreme volatility.
The futures and options markets in the Asia region countries are not as
developed as similar markets of more developed countries, and the Fund may not
be able to hedge or employ the strategies described above. In addition swaps and
indexed or structured notes may not be available. It is the policy of the Fund
to meet the requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), in order to qualify as a regulated investment company to prevent
taxation of the Fund at the Fund level. One of these requirements is that less
than 30% of a Fund's gross income must be derived from gains from the sale or
other disposition of securities held for less than three months. The extent to
which the Fund may engage in the foregoing transactions may be materially
limited by this test.
INDEXED SECURITIES AND STRUCTURED NOTES
<PAGE>
The Fund may invest in securities whose value is linked to one or more
currencies, interest rates, or stocks, bonds, financial instruments or indices.
An indexed security or structured note enables the Fund to purchase a note whose
coupons and/or principal redemption are linked to the performance of an
underlying asset. Indexed securities may be positively or negatively indexed
(i.e., their value may increase or decrease if the underlying instrument
appreciates). Indexed securities may have return characteristics similar to
direct investments in the underlying instrument or to one or more options on the
underlying asset or other assets. Indexed securities may be more volatile than
the underlying instrument itself, and present many of the same risks as
investing in forwards, futures and options contracts. Indexed securities are
also subject to credit risks associated with the issuer of the security with
respect to both principal and interest. Indexed securities may be publicly
traded or may be two-party contracts (such two-party agreements are referred to
here collectively as structured notes). When the Fund purchases a structured
note, it will make a payment of principal to the counterparty. Some structured
notes have a guaranteed repayment of principal while others place a portion (or
all) of the principal at risk. These instruments may also be difficult to value
accurately.
The Adviser will monitor the liquidity of these instruments under the
supervision of the Board of Trustees and notes determined to be illiquid will be
aggregated with other illiquid securities and limited to 15% of the net assets
of the Fund and structured notes may give the Fund access to markets that it
might otherwise be precluded from investing in or increased liquidity.
SWAP AGREEMENTS
The Fund may enter into swap agreements. Swap agreements permit the Fund to swap
(trade) the performance of one asset for another. For example, the Fund may swap
the performance of the Hang Seng Index (Hong Kong) for the Bombay Sensitivity
Index (India). By entering into such a swap, the Fund could simultaneously hedge
a portion of its exposure to the Hong Kong market and gain exposure to the
Indian market. Rather than enter into a swap agreement the Fund could have sold
its Hong Kong holdings and purchased Indian securities, thereby incurring
transaction and other costs. Since swaps are individually negotiated, the Fund
may expect to achieve an acceptable degree of correlation between its portfolio
investments and its swap position. Currency swaps usually involve the delivery
of the entire principal value of one designated currency in exchange for the
other designated currency. Therefore, the entire principal value of a currency
swap is subject to the risk that the other party to the swap will default on its
contractual delivery obligations.
The use of swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
transactions. If the Adviser is incorrect in its forecasts of market values and
currency exchange rates, the investment performance of the Fund would be less
favorable than it would have been if this investment technique were not used.
Swaps are generally considered illiquid and will be aggregated with other
illiquid positions for purpose of the limitation on illiquid investments.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend to broker-dealers portfolio securities with an aggregate
market value of up to one-third of its total assets. Such loans must be secured
by collateral (consisting of any combination of cash, U.S. Government securities
or irrevocable letters of credit) in an amount at least equal (on a daily
mark-to-market basis) to the current market value of the securities loaned. The
Fund may terminate the loans at any time and obtain the return of the securities
loaned within one business day. The Fund will continue to receive any interest
or dividends paid on the loaned securities and will continue to have voting
rights with respect to the securities. The Fund might experience a loss if the
<PAGE>
broker-dealer with which it has engaged in a portfolio loan transaction breaches
its agreement.
BORROWING
The Fund may borrow up to 331/3 % of the value of its net assets to increase its
holdings of portfolio securities. Under the 1940 Act, the Fund is required to
maintain continuous asset coverage of 300% with respect to such borrowings and
to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% because of market fluctuations
or other factors, even if the sale would be disadvantageous from an investment
standpoint. Leveraging by means of borrowing will exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's net
asset values, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the investment return from the
securities purchased with borrowed funds. It is anticipated that such borrowings
would be pursuant to a negotiated loan agreement with a commercial bank or other
institutional lender.
PARTLY PAID SECURITIES
Partly paid securities are securities for which the purchaser pays on an
installment basis. A partly paid security trades net of outstanding installment
payments. For this reason, the obligation to make payment is usually transferred
upon sale of the security. Fluctuations in the market value do not affect the
obligation to make installment payments when due. Partly paid securities become
fully paid securities upon payment of the final installment. Until that time,
the issuer of a partly paid security typically may retain the right to restrict
the voting and dividend rights of the security and to impose restrictions and
penalties in the event of a purchaser's default.
DIRECT INVESTMENTS
The Fund may invest up to 10% of its total assets in direct investments. Direct
investments include (i) the private purchase from an enterprise of an equity
interest in the enterprise in the form of shares of common stock or equity
interests in trusts, partnerships, joint ventures or similar enterprises, and
(ii) the purchase of such an equity interest in an enterprise from a principal
investor in the enterprise. In each case the Fund will, at the time of making
the investment, enter into a shareholder or similar agreement with the
enterprise and one or more other holders of equity interests in the enterprise.
The Adviser anticipates that these agreements will, in appropriate
circumstances, provide the Fund with the ability to appoint a representative to
the board of directors or similar body of the enterprise and for eventual
disposition of the Fund's investment in the enterprise. Such a representative of
the Fund will be expected to provide the Fund with the ability to monitor its
investment and protect its rights in the investment and will not be appointed
for the purpose of exercising management or control of the enterprise.
Certain of the Fund's direct investments will include investments in smaller,
less seasoned companies, or companies that do not have securities traded on an
exchange. These companies may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group. The Fund does
not anticipate making direct investments in start-up operations, although it is
expected that in some cases the Funds' direct investments will fund new
operations for an enterprise which itself is engaged in similar operations or is
affiliated with an organization that is engaged in similar operations. Such
direct investments may be made in entities that are reasonably expected in the
foreseeable future to benefit from the growth and development in Asia either by
expanding current operations or establishing significant operations in Asia.
<PAGE>
Direct investments may involve a high degree of business and financial risk that
can result in substantial losses. Because of the absence of any public trading
market for these investments, a Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices on
these sales could be less than those originally paid by the Fund. Furthermore,
issuers whose securities are not publicly traded may not be subject to public
disclosure and other investor protection requirements applicable to publicly
traded securities. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration. In addition, in the event the
Fund sells unlisted foreign securities, any capital gains realized on such
transactions may be subject to higher rates of taxation than taxes payable on
the sale of listed securities. Direct investments are generally considered
illiquid and will be aggregated with other illiquid investments for purposes of
the limitation on illiquid investments. Direct investments can be difficult to
price and shall be valued at fair value as determined in good faith by the Board
of Trustees. The pricing of direct investments may reflect the price at which
these assets could be liquidated.
REPURCHASE AGREEMENTS
The Funds may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund acquires an underlying asset for a
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase, and the Fund to resell, the asset at an
agreed upon price and time, thereby determining the yield during the holding
period. The agreement results in a rate of return that is not subject to market
fluctuations during the holding period. Repurchase agreements could involve
certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying asset. The Adviser acting under the supervision of the Board of
Trustees, reviews the creditworthiness of those non-bank dealers with which the
Fund enters into repurchase agreements to evaluate these risks. Entering into
repurchase agreements with foreign dealers poses similar risks to investing in
foreign securities.
The Fund will not enter into a repurchase agreement with a maturity of more than
seven business days if, as a result, more than 15% of the value of the Fund's
net assets would then be invested in such repurchase agreements and other
illiquid securities. The Fund will only enter into a repurchase agreement where
(i) the underlying asset is of the type which the Fund's investment policies
would allow it to purchase directly, (ii) the market value of the underlying
security, including accrued interest, will be at all times equal to or exceed
the value of the repurchase agreement, and (iii) payment for the underlying
securities is made only upon physical delivery or evidence of book-entry
transfer to the account of the custodian or a bank acting as agent.
DEBT SECURITIES
The Fund may invest in debt securities. The market value of debt securities
generally varies in response to changes in interest rates and the financial
condition of each issuer. During periods of declining interest rates, the value
of debt securities generally increases. Conversely, during periods of rising
interest rates, the value of such securities generally declines. These changes
in market value will be reflected in the Fund's net asset value. Debt securities
with similar maturities may have different yields, depending upon several
factors, including the relative financial condition of the issuers. For example,
higher yields are generally available from securities in the lower rating
categories of S&P or Moody's. However, the values of lower-rated securities
generally fluctuate more than those of high grade securities. Many securities of
foreign issuers are not rated by these services. Therefore the selection of such
issuers depends to a large extent on the credit analysis performed by the
Adviser.
<PAGE>
RULE 144A SECURITIES AND
SECTION 4(2) COMMERCIAL PAPER
The Securities and Exchange Commission ("SEC") adopted Rule 144A which allows a
broader institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act of 1933 of
resales of certain securities to qualified institutional buyers.
In addition, commercial paper may be issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Such commercial paper is restricted as to disposition
under the federal securities laws and, therefore, any resale of such securities
must be effected in a transaction exempt from registration under the Securities
Act of 1933. Such commercial paper is normally resold to other investors through
or with the assistance of the issuer or investment dealers who make a market in
such securities, thus providing liquidity.
The Adviser will monitor the liquidity of restricted securities in the Fund's
holdings under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Adviser will consider, among other things, the following factors:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanisms of the transfer).
Securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 and commercial paper issued in reliance on the Section 4(2) exemption under
the Act may be determined to be liquid in accordance with guidelines established
by the Board of Trustees for purposes of complying with investment restrictions
applicable to investments by the Fund in illiquid securities.
INVESTMENT RESTRICTIONS
The following investment restrictions include those described in the Prospectus.
Policies that are identified as fundamental may be changed only with the
approval of the holders of a majority of the Fund's outstanding shares. Such
majority is defined as the vote of the lesser of (i) 66 2/3% or more of the
outstanding shares present at a meeting, if the holders of more than 50% of the
Fund's outstanding shares are present in person or by proxy, or (ii) more than
50% of the Fund's outstanding shares. The restrictions below apply only at the
time of investment, a later increase or decrease in percentage resulting from a
change in value of portfolio securities or amount of net assets will not be
considered a violation of the restriction. Restrictions 1, 4, 5, 9, 11, 12, 14
and 16 are not fundamental, unless otherwise provided for by applicable federal
or state law.
The Fund may not:
1. Invest in securities which are subject to legal or contractual restrictions
on resale ("restricted securities") or for which there is no readily
available market quotation or engage in a repurchase agreement maturing in
more than seven days with respect to any security if the result is that
more than 15% of the Fund's net assets would be invested in such
<PAGE>
securities, excluding securities which are deemed to be liquid under Rule
144A under the Securities Act of 1933.
2. Purchase or sell real estate, except the Fund may purchase securities of
companies which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are collateralized by
interests in real estate.
3. Purchase or sell commodities or commodity futures contracts, except that
financial futures contracts which may include stock and bond index futures
contracts, foreign currency futures contracts and similar contracts or
financial assets are not considered commodities or commodity contract. The
Fund may not commit more than 5% of its total assets to initial margin
deposits on futures contracts not used for hedging purposes.
4. The Fund may not purchase more than 3% of the total outstanding voting
stock of any investment company or invest more than 5% of its total assets
in securities of any investment company or invest more than 10% of its
total assets in investment companies in general. Such purchases may involve
only customary broker's commissions.
5. Lend to broker-dealers portfolio securities with an aggregate market value
in excess of 33 1/3% of its total assets.
6. As to 75% of the Fund's total assets purchase securities of any issuer, if
immediately thereafter (i) more than 5% of the Fund's total assets (taken
at market value) would be invested in the securities of such issuer, or
(ii) more than 10% of the outstanding voting securities such issuer would
be held by the Fund. This restriction does not apply to any company of
which the Fund is the sole beneficial owner or securities acquired as part
of a merger, acquisition of assets or other reorganization.
7. Underwrite any issue of securities (except to the extent that a Fund may be
deemed to be an underwriter within the meaning of the Securities Act of
1933 in the purchase of securities for investment or disposition of
restricted securities).
8. Borrow money, in excess of 33 1/3% of the value of its net assets to
increase holdings of portfolio securities.
9. Mortgage, pledge or otherwise encumber its assets except to secure
borrowing effected within the limitations set forth in restriction (8).
10. Issue senior securities except insofar as a Fund may be deemed to have
issued a senior security by reason of (i) borrowing money in accordance
with restrictions described above; (ii) entering into forward contracts
(iii) futures contracts purchased on margin (iv) issuing multiple classes
of securities and (v) entering into a swap agreement or purchasing
structured notes or similar instruments.
11. Make short sales of securities, except the Fund may engage in the
transactions permitted in these restrictions and under the Fund's
investment policies as set forth in its prospectus. without limitation.
12. Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions and, may
make initial or maintenance margin payments in connection with options and
<PAGE>
futures contracts and options on futures contracts and borrowing effected
within the limitations set forth in these restrictions.
13. Invest more than 25 percent of the value of a Fund's total assets in the
securities of issuers having their principal business activities in the
same industry except that this limitation does not apply to obligations
issued or guaranteed by the United States Government or a foreign
government its agencies or instrumentalities.
14. Participate on a joint or joint and several basis in any trading account in
securities, although transactions for the Fund and any other account under
common or affiliated management may be combined or allocated between the
Fund and such account.
15. Purchase participations or other interests (other than equity stock
interests) in oil, gas or other mineral, leases or exploration or
development programs.
16. Invest in real estate limited partnerships or in oil, gas or other mineral
leases.
In order to comply with certain securities laws of a state in which shares of
the Fund are currently sold, the Fund has undertaken with respect to investment
restriction number 1, not to invest more than 10% of its assets in restricted
securities" and not to invest more than 5% of its net assets in securities of
"unseasoned" issuers, i.e., companies which together with their predecessors
have a record of less than three years continuous operation. To the extent the
above restrictions have been adopted to comply with state securities laws, they
shall not apply to the Fund once such laws are no longer in effect.
INVESTMENT ADVISORY SERVICES
The Adviser manages the investments of the Fund. The Adviser compensates all
executive and clerical personnel and Trustees of the Trust if such persons are
employees or affiliates of the Adviser or its affiliates. The Advisor's fee is
computed daily and paid monthly at an annual rate of 1.00% of average daily net
assets.
Van Eck Associates Corporation, 99 Park Avenue, New York, New York ("Van Eck")
serves as portfolio administrator for the Fund pursuant to a Portfolio
Accounting and Administrative Services Agreement dated ___, 1995 and provides
accounting and administrative services. It is responsible for calculating the
Fund's NAV, providing certain accounting and administrative services and such
other services and assistance as the Fund may request.
The expenses borne by the Fund include: all the charges and expenses of the
transfer and dividend disbursing agent, the custodian fees and expenses, legal
counsel, auditors' and accounting fees and expenses, brokerage commissions for
portfolio transactions, taxes, if any, the advisory fee and portfolio accounting
, extraordinary expenses, expenses of shareholders' and Trustees' meetings, and
of preparing, printing and mailing proxy statements, reports and other
communications to shareholders, expenses of preparing and setting in type
prospectuses and periodic reports and expenses of mailing them to current
shareholders, legal and accounting expenses and expenses of registering and
qualifying shares for sale, fees and expenses of Trustees who are not
"interested persons" of the Adviser, membership dues of professional
associations, fidelity bond and errors and omissions insurance premiums, cost of
maintaining the books and records of the Fund, and any other charges and fees
not specifically enumerated as an obligation of the Distributor or Adviser or
Portfolio Administrator.
<PAGE>
The Advisory Agreement was approved at a meeting of the Board of Trustees held
on ___,1995. The Advisory Agreement provides that the Adviser shall reimburse
the Trust for expenses of the Trust in excess of certain expense limitations
required by state regulation unless the Trust has obtained an appropriate waiver
of such expense limitations or expense items from a particular state authority.
Under the Advisory Agreement, the maximum annual expenses which the Trust may be
required to bear, inclusive of the advisory fee but exclusive of interest,
taxes, brokerage fees, Rule 12b-1 Plan distribution payments (the Fund does not
currently have such a Plan) and extraordinary items may not exceed the lowest
expense limitation imposed by any state in which the Fund is registered.
Currently, only one state imposes such an expense limitation on the Fund. For
the purposes of the expense limitations imposed on the Fund by this state,
expenses may not exceed: (i) 2.5% of the first $30,000,000 of average net
assets, 2.0% of the next $70,000,000 of average net assets and 1.5% of the
remaining average net assets. The amount of the advisory fee to be paid to the
Adviser each month will be reduced by the amount, if any, by which the
annualized expenses of the Fund for that month exceeds the foregoing
limitations. At the end of the fiscal year, if the aggregate annual expenses of
the Fund exceed the amount permissible under the foregoing limitations, then the
Adviser will be required promptly to reimburse the Fund for the total amount by
which expenses exceed the amount of the limitations, not limited to the amount
of the fees paid. If aggregate annual expenses are within the limitations,
however, any excess amount previously withheld will be paid to the Adviser.
The Advisory Agreement provides that it shall continue in effect from year to
year as long as it is approved at least annually both (i) by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
Act) or by the Trustees of the Trust, and (ii) in either event by a vote of a
majority of the Trustees who are not parties to the 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 Advisory Agreement may be
terminated on 60 days written notice by either party and will terminate
automatically in the event of an assignment within the meaning of the Act.
THE DISTRIBUTOR
Shares of the Funds are offered on a continuous basis and are distributed
through Van Eck Securities Corporation (the "Distributor"), a wholly-owned
subsidiary of Van Eck Associates Corporation. The Trustees of the Trusts
approved a Distribution Agreement appointing the Distributor as distributor of
shares of the Fund on ___1995.
The Distribution Agreement provides that the Distributor will pay all fees and
expenses in connection with printing and distributing prospectuses and reports
for use in offering and selling shares of the Fund and preparing, printing and
distributing advertising or promotional materials. The Fund will pay all fees
and expenses in connection with registering and qualifying its shares under
federal and state securities laws.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities and other
investments for the Fund, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. In
transactions on stock and commodity exchanges in the United States, these
commissions are set by the free market whereas on foreign stock and commodity
exchanges these commissions are generally fixed and are generally higher than
brokerage commissions in the United States. In the case of securities traded on
the over-the-counter markets, there is generally no stated commission, but the
price usually includes an undisclosed commission or markup. In underwritten
offerings, the price includes a disclosed fixed commission or discount
<PAGE>
In purchasing and selling the Fund portfolio investments, it is the Adviser's
policy to obtain quality execution at the most favorable prices through
responsible broker-dealers. In selecting broker-dealers, the Adviser will
consider various relevant factors, including, but not limited to, the size and
type of the transaction; the nature and character of the markets for the
security or asset to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer, the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
commissions.
The Adviser may cause the Fund to pay a broker-dealer who furnishes brokerage
and/or research services a commission that is in excess of the commission
another broker-dealer would have received for executing the transaction if it is
determined that such commission is reasonable in relation to the value of the
brokerage and securities related research services as defined in Section 28(e)
of the Securities Exchange Act of 1934 which have been provided. Such research
services may include, among other things, analyses and reports concerning
issuers, industries, securities, economic factors and trends, and portfolio
strategy. Any such research and other information provided by brokers to the
Adviser are considered to be in addition to and not in lieu of services required
to be performed by the Adviser under the Advisory Agreement with the Trust. The
research services provided by broker-dealers can be useful to the Adviser in
serving its other clients or clients of the Adviser's affiliates.
In placing portfolio transactions on behalf of the Fund, the Adviser may utilize
the services of the Distributor and other affiliated persons as broker pursuant
to procedures adopted by the Board. The procedures are entered to ensure that
commissions paid are comparable to these charged by other firms.
The Trustees will periodically review the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund and review the commissions paid by the Fund over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Fund.
Investment decisions for the Fund are made independently from those of the other
investment accounts managed by the Adviser and affiliated companies. Occasions
may arise, however, when the same investment decision is made for more than one
client's account. It is the practice of the Adviser to allocate such purchases
or sales insofar as feasible among its several clients or the clients of its
affiliates in a manner it deems equitable. The principal factors which the
Adviser and considers in making such allocations are the relative investment
objectives of the clients, the relative size of the portfolio holdings of the
same or comparable securities and the then availability in the particular
account of funds for investment. Portfolio securities held by one client of the
Adviser may also be held by one or more of its other clients or by clients of
its affiliates. When two or more of its clients or clients of its affiliates are
engaged in the simultaneous sale or purchase of securities, transactions are
allocated as to amount in accordance with formulae deemed to be equitable as to
each client. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
When the Adviser places purchase and sale transactions on behalf of the Fund and
its own account or that of its affiliates, it will coordinate the trading in
such a manner that it is fair to the participants.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
<PAGE>
While it is the policy of the Fund generally not to engage in trading for
short-term gains, the Fund will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser such transactions are
advisable in light of a change in circumstances of a particular company, within
a particular industry or country, or in general market, economic or political
conditions. The Fund anticipates that its annual portfolio turnover rates will
not exceed 100%.
The Adviser and related persons, may from time to time, buy and sell for their
own accounts securities recommended to clients for purchase or sale. The Adviser
recognizes that this practice may result in conflicts of interest. However, to
minimize or eliminate such conflicts a Code of Ethics has been adopted by the
Adviser which requires that all trading in securities suitable for purchase by
client accounts must be approved in advance by a person familiar with purchase
and sell orders or recommendations. Approval will be granted if the security has
not been purchased or sold or recommended for purchase or sale on behalf of a
client account within seven days; or if the security has been purchased or sold
or recommended for purchase or sale by a client account, it is determined that
the trading activity will not have a negative or appreciable impact on the price
or market of the security or the activity is of such a nature that it does not
present the dangers or potential for abuses or likely to result in harm or
detriment to a client account. At the end of each calendar quarter, all related
personnel of the Adviser are required to file a report of all transactions
entered into during the quarter. These reports are reviewed by a senior officer
of the Adviser.
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust, their addresses, positions with the
Trust and principal occupations during the past five years are set forth below.
Trustees:
RODGER A. LAWSON - Trustee
99 Park Avenue New York, New York 10016; President and Trustee of investment
companies advised by Van Eck ; President and Chief Executive Officer of Van Eck
and Van Eck Securities Corporation; Former Managing Director and Head of Global
Private Banking and Mutual Funds, Bankers Trust Company (1992-1994); Former
Managing Director, Member of the Management Committee, and President/CEO of
Fidelity Investments Retail Group, FMR Corp. (1985-1991); Former Corporate
Officer, Member of the Management Committee, and Head of Retail and
Institutional Businesses, Dreyfus Corporation (1982-1985).
THADDEUS LESZCZYNSKI - Trustee and Vice President and Secretary. An officer of
Van Eck and investment companies advised by Van Eck.
BRUCE SMITH - Trustee and Treasurer. An officer of Van Eck and investment
companies by Van Eck.
As of ___, 1995, all officers and Trustees as a group owned less than 1% of the
outstanding shares of the Fund.
VALUATION OF SHARES
The net asset value per share of the Fund is computed by dividing the value of
all of the Fund's securities plus cash and other assets, less liabilities, by
the number of shares outstanding. The net asset value per share is computed as
<PAGE>
of the close of the New York Stock Exchange, Monday through Friday, exclusive of
national business holidays. The Fund will be closed on the following national
business holidays: New Years Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
The net asset values need not be computed on a day in which no orders to
purchase, sell or redeem shares of the Fund have been received.
The value of a financial futures or commodity futures contract equals the
unrealized gain or loss on the contract that is determined by marking it to the
current settlement price for a like contract acquired on the day on which the
commodity futures contract is being valued. A settlement price may not be used
if the market makes a limit move with respect to a contract. Securities or
futures contracts for which market quotations are readily available are valued
at market value, which is currently determined using the last reported sale
price. If no sales are reported as in the case of most securities traded
over-the-counter, securities are valued at the mean of their bid and asked
prices at the close of trading on the New York Stock Exchange (the "Exchange").
In cases where securities are traded on more than one exchange, the securities
are valued on the exchange offering the most current quotation. Short-term
investments having a maturity of 60 days or less are valued at amortized cost,
which approximates market. Options are valued at the last sales price unless the
last sales price does not fall within the bid and ask prices at the close of the
market, in which case the mean of the bid and ask prices is used. All other
securities are valued at their fair value as determined in good faith by the
Trustees. Foreign securities or futures contracts quoted in foreign currencies
are valued at appropriately translated foreign market closing prices or as the
Board of Trustees may prescribe.
Generally, trading in foreign securities and futures contracts, as well as
corporate bonds, United States government securities and money market
instruments is substantially completed each day at various times prior to the
close of the Exchange. The values of such securities used in determining the net
asset value of the shares of the Fund may be computed as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of foreign securities and
foreign exchange rates may occur between such times and the close of the
Exchange which will not be reflected in the computation of the Fund's net asset
values. If events materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair value as
determined in good faith by the Trustees.
TAX-SHELTERED RETIREMENT PLANS
The Trust does not offer a prototype tax-sheltered retirement plan. However,
banks, broker dealers and other financial intermediaries may offer such plans
through which shares of the Fund may be purchased. These plans are more fully
described below. Persons who wish to establish a tax-sheltered retirement plan
should consult their financial institutions as to availability of the such Plans
and their own tax advisers or attorneys regarding their eligibility to do so and
the laws applicable thereto, such as the fiduciary responsibility provisions and
diversification requirements and the reporting and disclosure obligations under
the Employee Retirement Income Security Act of 1974. The Trust is not
responsible for compliance with such laws. Further information regarding the
retirement plans, including applications and fee schedules, may be obtained upon
request to the Fund.
Individual Retirement Account and Spousal Individual Retirement Account. The IRA
is available to all individuals, including self-employed individuals, who
receive compensation for services rendered and wish to purchase shares of the
Fund. An IRA may also be established pursuant to a SEP. Spousal Individual
Retirement Accounts ("SPIRA") are available to individuals who are otherwise
eligible to establish an IRA for themselves and whose spouses are treated as
having no compensation of their own.
<PAGE>
In general, the maximum deductible contribution to an IRA which may be made for
any one year is $2,000 or 100% of annual compensation includible in gross
income, whichever is less. If an individual establishes a SPIRA, the maximum
deductible amount that the individual may contribute annually is the lesser of
$2,250 or 100% of such individual's compensation includible in his gross income
for such year; provided, however, that no more than $2,000 per year for either
individual may be contributed to either the IRA or SPIRA. Contributions to a SEP
(discussed below) are excluded from an employee's gross income and are subject
to different limitations.
All taxpayers, including those who are active participants in employer-sponsored
retirement plans, will be able to make fully deductible IRA contributions at the
same levels discussed above, if their adjusted gross income is less than the
following levels: $25,000 for single taxpayers and $40,000 for married taxpayers
who file joint returns.
Married taxpayers who file joint tax returns will generally be deemed to be
active participants if either spouse is an active participant under an
employer-sponsored retirement plan.) In the case of taxpayers who are active
participants in employer-sponsored retirement plans and who have adjusted gross
income which exceeds the specified levels, deductible IRA contributions will be
phased out on the basis of adjusted gross income between $25,000 and $35,000 for
single taxpayers, adjusted gross income of $10,000 and under for married
taxpayers who file separate returns, and combined adjusted gross income between
$40,000 and $50,000 for married taxpayers who file joint returns. The $2,000 IRA
deduction is reduced by $200 for each $1,000 of adjusted gross income in excess
of the following levels: $25,000 for single taxpayers, $40,000 for married
taxpayers who file joint returns, and $0 for married taxpayers who file separate
returns. In the case of a taxpayer who contributes to an IRA and a SPIRA, the
$2,250 IRA deduction is reduced by $225 for each $1,000 of adjusted gross income
in excess of $40,000.
Individuals who are ineligible to make fully deductible contributions may make
nondeductible contributions up to an aggregate of $2,000 in the case of
contributions (deductible and nondeductible) to an IRA and up to an aggregate of
$2,250 in the case of contributions (deductible and nondeductible) to an IRA and
SPIRA and the income upon all such contributions will accumulate tax free until
distribution.
In addition, a separate IRA may be established by a "rollover" contribution,
which may permit the tax-free transfer of assets from qualified retirement plans
under specified circumstances. A "rollover contribution" includes a lump sum
distribution received by an individual, because of severance of employment, from
a qualified plan and paid into an individual retirement account within 60 days
after receipt.
Dividends and capital gains earned on amounts invested in either an IRA or SPIRA
are automatically reinvested by the Trustee in shares of the Fund and accumulate
tax-free until distribution. Distributions from either an IRA or SPIRA prior to
age 59-1/2, unless made as a result of disability or death, may result in
adverse tax consequences and penalties. In addition, there is a penalty on
contributions in excess of the contribution limits and other penalties are
imposed on insufficient payouts after age 70-1/2.
Simplified Employee Pension Plan. A SEP may be utilized by employers to provide
retirement income to employees by making contributions to employee SEP IRAs.
Owners and partners may qualify as employees. The employee is always 100% vested
in contributions made under a SEP. The maximum contribution to a SEP-IRA (an IRA
established to receive SEP contributions) is the lesser of $30,000 or 15% of
compensation, excluding contributions made pursuant to a salary reduction
arrangement. Subject to certain limitations, an employer may also make
contributions to a SEP-IRA under a salary reduction arrangement by which the
employee elects contributions to a SEP-IRA in lieu of immediate cash
compensation. The maximum amount which may be contributed to a SEP-IRA (for
<PAGE>
1995) under a salary reduction agreement is the lesser of $30,000 (as adjusted
for cost of living increases) or 15% of compensation up to a current annual
compensation limit of $150,000.
Contributions by employers under a SEP arrangement up to the maximum permissible
amounts are deductible for federal income tax purposes. Contributions up to the
maximum permissible amounts are not includible in the gross income of the
employee. Dividends and capital gains on amounts invested in SEP-IRAs are
automatically reinvested in shares of the Fund and accumulate tax-free until
distribution. Contributions in excess of the maximum permissible amounts may be
withdrawn by the employee from the SEP-IRA no later than April 15 of the
calendar year following the year in which the contribution is made without tax
penalties. Such amounts will, however, be included in the employee's gross
income. Withdrawals of such amounts after April 15 of the year next following
the year in which the excess contributions is made and withdrawals of any other
amounts prior to age 59 1/2, unless made as a result of disability or death, may
result in adverse tax consequences.
Qualified Pension Plans. The Qualified Pension Plan can be utilized by
self-employed individuals, partnerships and corporations (for this purpose
called "Employers") and their employees who wish to purchase shares of a Fund
under a retirement program.
The maximum contribution which may be made to a Qualified Pension Plan in any
one year on behalf of a participant is, depending on the benefit formula
selected by the Employer, up to the lesser of $30,000 or 25 percent of
compensation (net earned income in the case of a self-employed individual).
Contributions by Employers to Qualified Pension Plans up to the maximum
permissible amounts are deductible for Federal income tax purposes.
Contributions in excess of permissible amounts will result in adverse tax
consequences and penalties to the Employer. Dividends and capital gains earned
on amounts invested in Qualified Pension Plans are automatically reinvested in
shares of the Fund and accumulate tax-free until distribution. Withdrawals of
contributions prior to age 59-1/2, unless made as a result of disability, death
or early retirement, may result in adverse tax consequences and penalties.
403(b)(7) Program. The Tax-Deferred Annuity Program and Custodial Account
offered by the Fund (the "403(b)(7) Program") allows employees of certain tax
exempt organizations and schools to have a portion of their compensation set
aside for their retirement years in shares held in an investment company
custodial account.
In general, the maximum limit on annual contributions for each employee is the
lesser of $30,000 per year (as adjusted by the IRS for cost-of-living
increases), 25% of the employee's compensation or the employee's exclusion
allowance specified in Section 403(b) of the Code. However, an employee's salary
reduction contributions to a 403(b)(7) Program may not exceed $9,500 a year
(1995) (as adjusted for cost of living expenses and maybe further adjusted if
the employee participates in another plan). Contributions in excess of
permissible amounts may result in adverse tax consequences and penalties.
Dividends and capital gains on amounts invested in the 403(b)(7) Program are
automatically reinvested in shares of the Fund. It is intended that dividends
and capital gains on amounts invested in the 403(b)(7) Program will accumulate
tax-free until distribution.
Employees will receive distributions from their accounts under the 403(b)(7)
Program following termination of employment by retirement or at such other time
as the employer shall designate, but in no case later than an employee's
reaching age 65. Withdrawals of contributions prior to age 59-1/2, unless made
as a result of disability, death or early retirement, may result in adverse tax
consequences and penalties. Employees will also receive distributions from their
accounts under the 403(b)(7) Program in the event they become disabled.
INVESTMENT PROGRAMS
<PAGE>
Dividend Reinvestment Plan. Reinvestments of dividends of the Fund will occur on
a date selected by the Board of Trustees.
TAXES
Taxation of the Funds -- In General
The Fund intends to qualify and elect to be treated each taxable year as a
"regulated investment company" under Subchapter M of the Code. To so qualify,
the Fund must, among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of any of the following which was held less than three months (the
"30% test"): (i) short sales of securities; (ii) stock or securities; (iii)
options, futures or forward contracts (other than on foreign currencies) or (iv)
foreign currencies (or options, futures or forward contracts on foreign
currencies) but only if such currencies (or options, futures or forward
contracts) are not directly related to the Fund's principal business of
investing in stock or securities; and (c) satisfy certain diversification
requirements.
As a regulated investment company, the Fund will not be subject to federal
income tax on its net investment income and capital gain net income (capital
gains in excess of its capital losses) that it distributes to shareholders if at
least 90% of its net investment income and short-term capital gains for the
taxable year are distributed. However, if for any taxable year the Fund does not
satisfy the requirements of Subchapter M of the Code, all of its taxable income
will be subject to tax at regular corporate rates without any deduction for
distribution to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of the Fund's current or
accumulated earnings or profits.
The Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax, during each calendar year the Fund must
distribute (i) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (ii) at least 98% of its capital
gain net income for the twelve month period ending on October 31 (or December
31, if the Fund so elects), and (iii) any portion (not taxed to the Fund) of the
2% balance from the prior year. The Fund intends to make sufficient
distributions to avoid this 4% excise tax.
Taxation of the Fund's Investments
Original Issue Discount. For federal income tax purposes, debt securities
purchased by the Fund may be treated as having an original issue discount.
Original issue discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption price at
maturity of a debt obligation over the issue price. Original issue discount is
treated for federal income tax purposes as income earned by the Fund, whether or
not any income is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of original issue
discount included in the income of the Fund each year is determined on the basis
of a constant yield to maturity which takes into account the compounding of
accrued interest.
Debt securities may be purchased by the Fund at a discount which exceeds the
original issue discount remaining on the securities, if any, at the time the
Fund purchased the securities. This additional discount represents market
<PAGE>
discount for income tax purposes. In the case of any debt security issued after
July 18, 1984, having a fixed maturity date of more than one year from the date
of issue and having market discount, the gain realized on disposition will be
treated as interest to the extent it does not exceed the accrued market discount
on the security (unless the Fund elects to include such accrued market discount
in income in the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Fund may be required to capitalize,
rather than deduct currently, part or all of any direct interest expense
incurred or continued to purchase or carry any debt security having market
discount, unless the it makes the election to include market discount currently.
Because the Fund must include original issue discount in income, it will be more
difficult for the Fund to make the distributions required for it to maintain its
status as a regulated investment company under Subchapter M of the Code or to
avoid the 4% excise tax described above.
Options and Futures Transactions Certain of the Fund's investments may be
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Fund's income for purposes of the 90% test, the 30% test, the
excise tax and the distribution requirements applicable to regulated investment
companies, (ii) defer recognition of realized losses, and (iii) characterize
both realized and unrealized gain or loss as short-term or long-term gain or
loss. Such provisions generally apply to options and futures contracts. The
extent to which the Funds make such investments may be materially limited by
these provisions of the Code.
Foreign Currency Transactions Under section 988 of the Code, special rules are
provided for certain foreign currency transactions. Foreign currency gains or
losses from foreign currency contracts (whether or not traded in the interbank
market), from futures contracts that are not "regulated futures contracts," and
from unlisted options are treated as ordinary income or loss under section 988.
The Fund may elect to have foreign currency-related regulated futures contracts
and listed options subject to ordinary income or loss treatment under section
988. In addition, in certain circumstances, a Fund may elect capital gain or
loss for foreign currency transactions. The rules under section 988 may also
affect the timing of income recognized by a Fund.
Taxation of the Shareholders
Distributions of net investment income and the excess of net short-term capital
gain over net long-term capital loss are taxable as ordinary income to
shareholders. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Any loss realized upon a taxable
disposition of shares within six months from the date of their purchase will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received by shareholders during such period.
Distributions of net investment income and capital gain net income will be
taxable as described above whether received in cash or reinvested in additional
shares. When distributions are received in the form of shares issued by the
Fund, the amount of the distribution deemed to have been received by
participating shareholders is the fair market value of the shares received
rather than the amount of cash which would otherwise have been received. In such
case, participating shareholders will have a basis for federal income tax
purposes in each share received from the Fund equal to the fair market value of
such share on the payment date.
Distributions by the Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain as described above,
even though, from an investment standpoint, it may constitute a partial return
of capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
<PAGE>
Those investors purchasing shares just prior to a distribution will then receive
a return of their investment upon distribution which will nevertheless be
taxable to them.
Income received by the Fund may give rise to withholding and other taxes imposed
by foreign countries. If more than 50% of the value of the Fund's assets at the
close of a taxable year consists of securities of foreign corporations, the Fund
may make an election that will permit an investor to take a credit (or, if more
advantageous, a deduction) for foreign income taxes paid by the Fund, subject to
limitations contained in the Code. If the Fund satisfies this requirement, the
Fund will make such an election. As an investor, you would then include in gross
income both dividends paid to you and the foreign taxes paid by the Fund on its
foreign investments. The Fund cannot assure investors that they will be eligible
for the foreign tax credit. The Fund will advise shareholders annually of your
share of any creditable foreign taxes paid by the Fund.
The Fund may be required to withhold federal income tax at a rate of 31% from
dividends made to any shareholder who fails to furnish a certified taxpayer
identification number ("TIN") or who fails to certify that he or she is exempt
from such withholding or who the Internal Revenue Service notifies the Fund as
having provided the Fund with an incorrect TIN or failed to properly report for
federal income tax purposes. Any such withheld amount will be fully creditable
on each shareholder's individual federal income tax return.
The foregoing discussion is a general summary of certain of the current federal
income tax laws affecting the Fund and investors in the shares. The discussion
does not purport to deal with all of the federal income tax consequences
applicable to the Fund, or to all categories of investors, some of which may be
subject to special rules. Investors should consult their own advisors regarding
the tax consequences, including state and local tax consequences, to them of
investment in the Fund.
REDEMPTIONS IN KIND
The Fund has elected to have the ability to redeem its shares in kind,
committing itself to pay in cash all requests for redemption by any shareholder
of record limited in amount with respect to each shareholder of record during
any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of the net asset
value of such company at the beginning of such period.
PERFORMANCE
The Fund may advertise performance in terms of average annual total return for
1, 5 and 10 year periods, or for such lesser periods as the Funds has been in
existence. Average annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
- - --------------------------------------------------------------------------------
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the nning of the 1, 5, or 10 year periods at
the end of the year or period;
- - --------------------------------------------------------------------------------
The calculation assumes all dividends and distributions by the Fund are
reinvested at the price stated in the prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
Fund may also advertise performance in terms of aggregate total return.
Aggregate total return for a specified period of time is determined by
ascertaining the percentage change in the net asset value of shares of the Fund
initially acquired assuming reinvestment of dividends and distributions and
without giving effect to the length of time of the investment according to the
following formula:
===========================================================
[(B-A)/A](100)=ATR
Where: A = initial investment
B = value at end of period
ATR = aggregate total return
===========================================================
The calculation assumes all distributions by the Fund are reinvested at the
price stated in the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
Advertising Performance
As discussed in the Fund's Prospectus, the Fund may quote performance results
from recognized publications which monitor the performance of mutual funds, and
the Fund may compare its performance to various published historical indices.
These publications are listed in Part B of the Appendix. In addition, the Fund
may quote and compare their performance to the performance of various economic
and market indices and indicators, such as the S & P 500, Financial Times Index,
Morgan Stanley Capital International Europe, Australia, Far East Index, Morgan
Stanley Capital International World Index, Morgan Stanley Capital International
Combined Far East (ex-Japan) Free Index, Solomon Brothers World Bond Index,
Salomon Brothers World Government Bond Index, GNP and GDP data. Descriptions of
these indices are provided in Part B of the Appendix.
ADDITIONAL INFORMATION
Custodian. The Chase Manhattan Bank, N.A., is the custodian of the Trust's
portfolio securities, cash, coins and bullion. The Custodian is authorized, upon
the approval of the Trust, to establish credits or debits in dollars or foreign
currencies with, and to cause portfolio securities of the Fund to be held by its
overseas branches or subsidiaries, and foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the Securities and Exchange Commission.
APPENDIX
PART A.
<PAGE>
Corporate Bond Ratings
Description of Moody's Investors Service, Inc. corporate bond ratings:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high quality bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors given security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Description of Standard & Poor's Corporation corporate bond ratings;
AAA -- Bonds rated AAA have the highest rating assigned by S&P to a debt
obligations. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarding as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
<PAGE>
Preferred Stock Ratings
Moody's Investors Service, Inc. describes its preferred stock ratings as:
aaa - An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of convertible preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba - An issue which is rated ba is considered to have speculative elements,
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safe-guarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An Issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa - An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payment.
ca - An issue which is rated ca is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.
c - This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of every attaining any
real investment standing.
Standard & Poor's Corporation describes its preferred stock ratings as:
AAA - This is the highest rating that may be assigned by Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effect of
changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to play
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
<PAGE>
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB,B,CCC - Preferred stocks rated BB,B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Short-Term Debt Ratings
Description of Moody's short-term debt ratings:
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by may of the following characteristics: leading
market positions in well-established industries, higher rates of return of funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected be external conditions. Ample alternate liquidity is maintained.
Prime-3--Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime--Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Description of Standard & Poor's short-term debt ratings:
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1'.
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B--Issues rated B are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
<PAGE>
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
PART B
The publications and services from which the Funds will quote performance are:
Micropal, Ltd. (an international investment fund information service), Fortune,
Changing Times, Money, U.S. News & World Report, Money Fund Scorecard,
Morningstar, Inc., Business Week, Institutional Investor, The Wall Street
Journal, Wall Street Transcripts, New York Post, Investment Company Institute
publications, The New York Times, Barron's, Forbes magazine, Research magazine,
Donaghues Money Fund Report, Donaghue's Money Letter, The Economist, FACS, FACS
of the Week, Financial Planning, Investment Daily, Johnson's Charts, Mutual Fund
Profiles (S&P), Powell Monetary Analysis, Sales & Marketing Management Magazine,
Life magazine, Black Enterprise, Fund Action, Speculators Magazine, Time,
NewsWeek, U.S.A Today, Wiesenberger Investment Service, Mining Journal
Quarterly, Mining Journal Weekly, Northern Miner, Gold Gazette, George Cross
Newsletter, Engineering and Mining Journal, Weekly Stock Charts-Canadian
Resources, Jeweler's Circular Keystone, Financial Times, Journal of Commerce,
Mikuni's Credit Ratings, Money Market Directory of Pension Funds, Oil and Gas
Journal, Pension Funds and Their Advisers, Investment Company Data, Inc., Mutual
Funds Almanac, Callan Associates, Inc., Media General Financial Services,
Financial World, Pensions & Investment Age, Registered Investment Advisors, Aden
Analysis, Baxter Weekly, Congressional Yellow Book, Crain's New York Business,
Survey of Current Business, Treasury Bulletin, U.S. Industrial Outlook, Value
Line Survey, Bank Credit Analyst, S&P Corporation Records, Euromoney, Moody's,
Investment Dealer's Digest, Financial Mail, Financial Post, Futures, Grant's
Interest Rate Observer, Institutional Investor, International Currency Review,
International Bank Credit Analyst, Investor's Daily, German Business Weekly,
GATT Trade Annual Report, and Dimensional Fund Advisers, Inc.
INTERNATIONAL FINANCIAL STATISTICS
(Illustrative market indices from Asia region and compartive data from other
regions will be provided here at a later date.)
Market Index Descriptions
Morgan Stanley Capital International Europe, Australia, Far East Index (US$
terms): An arithmetic, market value-weighted average of the performance of over
1,079 companies listed on the stock exchanges of Europe, Australia, New Zealand
and the Far East. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
Morgan Stanley Capital International World Index (US$ terms): An arithmetic,
market value-weighted average of the performance of over 1,515 companies listed
on the stock exchanges of the following countries: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. The index is calculated
on a total return basis, which includes reinvestment of gross dividends before
deduction of withholding taxes. The combined market capitalization of these
countries represents approximately 60% of the aggregate market value of the
stock exchanges of the above 22 countries.
<PAGE>
Morgan Stanley Capital International Combined Far East ex-Japan Free Index: An
arithmetic, market value-weighted average of the performance of companies listed
on the stock exchanges of the following countries: Hong Kong, Indonesia, Korea
(Korea is included at 20% of its market capitalization in the Combined Free
Index), Malaysia, Philippines Free, Singapore Free and Thailand. The combined
market capitalization of these countries represents approximately 60% of the
aggregate market value of the stock exchanges of the above seven countries.
Salomon Brothers World Bond Index (US$ terms): Measures the total return
performance of high quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
Australian Dollars, Canadian Dollars, European Currency Units, French Francs,
Japanese Yen, Netherlands Guilder, Swiss Francs, UK pounds Sterling, US Dollars
and German Deutsche Marks. Only high-quality, straight issues are included. The
index is calculated on both a weighted basis and an unweighted basis. Generally,
index samples for each market are restricted to bonds with at least five years'
remaining life.
Salomon Brothers World Government Bond Index (US$ terms): The WGBI includes the
Government bonds markets of the United States, Japan, Germany, France, the
United Kingdom, Canada, Italy, Australia, Belgium, Denmark, the Netherlands,
Spain, Sweden and Austria. Country eligibility is determined based on market
capitalization and investability criteria. A market's eligible issues must total
at least US$20 billion, Y2.5 trillion and DM30 billion for three consecutive
months for the market to be considered eligible for inclusion. Once a market
satisfies this criteria, it will be added at the end of the following quarter.
Guidelines by which a market may be excluded from the index have also been
established. A market will be excluded if the market capitalization of eligible
issues falls below half of all of the entry levels for six consecutive months.
Once again, the market will be removed at the end of the following quarter. In
addition, market entry barriers are a reason for exclusion despite meeting the
size criteria (for example, if a market discourages foreign investor
participation).
Gross Domestic Product: The market value of all final goods and services
produced by labor and property supplied by residents of the United States in a
given period of time, usually one year. Gross Domestic Product comprises (1)
purchases of persons (2) purchases of governments (Federal, State & Local) (3)
gross private domestic investment (includes change in business inventories) and
(4) international trade balance from exports. Nominal GDP is expressed in 1993
dollars. Real GDP is adjusted for inflation and is currently expressed in 1987
dollars.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements*
b) Exhibits
(1) Form of Master Trust Agreement (Declaration of Trust)
(2) Form of By-Laws of the Registrant
(3) Not Applicable
(4) Not Applicable
(5) Form of Investment Advisory Agreement
(6) Form of Distribution Agreement
(7) Not Applicable
(8) Form of Global Custody Agreement
(9) (a) Form of Transfer Agency Agreement
(b) Form of Portfolio Accounting and
Administrative Services Agreement
(10) Opinion of Mayer, Brown & Platt*
(11) Consent of Auditors*
(12) Not Applicable
(13) Agreement re: providing initial capital*
(14) Not Applicable
(15) Not Applicable
(16) Computation of performance schedule*
- - ---------------------
* To be supplied by Amendment
<PAGE>
(17) To be supplied by Amendment
(18) Not Applicable
ITEM 25. Persons Controlled by or Under Common Control with Registrant
None
ITEM 26. Number of Holders of Securities
Set forth below are the number of record holders, as of _____________,
1995, of each class of securities of the Registrant:
Number of
Title of Class Record Holders
Shares of beneficial interest 0
ITEM 27. INDEMNIFICATION
Reference is made to Article VI of the Master Trust Agreement of the
Registrant filed as Exhibit (1) to this Registration Statement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the caption "Management" in the Prospectus and to
the captions "The Distributor" and "Trustees and Officers" in the Statement of
Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
The business and other connections of the principal underwriters are
listed in the Broker-Dealer Form of Peregrine Brokerage Inc. as currently on
file with the NASD -File number 027436 and the SEC - File No. 8-43112.
(c) Not applicable
<PAGE>
ITEM 30. Location of Accounts and Records
The following table sets forth information as to the location of
accounts, books and other documents required to be maintained pursuant to
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder (17 CFR 270.31a-1 to 31a-3).
<TABLE>
<CAPTION>
Accounts, books and documents listed by reference to
specific subsection of 17 CFR 270 31a-1 to 31a-3 Person in Possession
and Address
<S> <C>
31a-1(b)(1) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(i) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(ii) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(iii) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(iv) DST Systems Inc.
21 West Tenth Street
Kansas City, MO 64105
31a-1(b)(3) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(4) Thaddeus Leszcynski
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
<PAGE>
31a-1(b)(5) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-1(b)(6) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(7) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(8) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(9) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-1(b)(10) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-1(b)(11) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-1(c) Not Applicable
31a-1(d) Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-1(e) Not Applicable
<PAGE>
31a-1(f) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road,
Central Hong Kong
31a-2(a)(1) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
DST Systems, Inc.
21 West Tenth Street
Kansas City, MO 64105
Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-2(a)(2) Bruce J. Smith
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-2(a)(3) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
31a-2(b) Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-2(c) Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-2(d) Peregrine Asset Management (Hong Kong) Limited
1704 New World Tower
16-18 Queen's Road
Central Hong Kong
</TABLE>
<PAGE>
31a-2(e) Not Applicable
31a-3 Not Applicable
ITEM 31. MANAGEMENT SERVICES
All management related service contracts entered into by or for the
Fund are described in Parts A and B of this Registration Statement.
ITEM 32. UNDERTAKINGS
The Fund will file a post-effective amendment, using financial
statements which may not be certified, within four to six months following the
commencement of operation of the Fund.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York on the 10th day
of November, 1995.
PEREGRINE FUNDS
By: /s/ Rodger Lawson
-----------------
Rodger Lawson
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
/s/ Rodger Lawson Trustee and President November 13, 1995
- - -----------------
Rodger Lawson
/s/ Thaddeus Lesczynski Trustee November 13, 1995
- - -----------------------
Thaddeus Leszczynski
/s/ Bruce Smith Treasurer November 13, 1995
- - ---------------
Bruce Smith
<PAGE>
EXHIBITS INDEX
Exhibit No.
Exhibit 1 Master Trust Agreement
Exhibit 2 By-Laws
Exhibit 5 Form of Investment Advisory Agreement
Exhibit 6 Form of Distribution Agreement
Exhibit 8 Form of Global Custody Agreement
Exhibit 9 (a) Form of Transfer Agency Agreement
9 (b) Form of Portfolio Accounting and Administrative
Services Agreement
<PAGE>
PEREGRINE FUNDS
MASTER TRUST AGREEMENT
November ___, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - NAME AND DEFINITIONS ..............................................1
Section 1.1 Name and Principal Office.......................................1
Section 1.2 Definitions.....................................................1
(a) "Act"..........................................................1
(b) "By-Laws"......................................................1
(c) "Class"........................................................1
(d) "Commission"...................................................1
(e) "Declaration of Trust".........................................1
(f) "Majority of the Outstanding Voting Shares" ...................2
(g) "1940 Act".....................................................2
(h) "Person".......................................................2
(i) "Shareholder"..................................................2
(j) "Shares".......................................................2
(k) "Sub-Trust" or Series"........................................2
(l) "Trust"........................................................2
(m) "Trustees".....................................................2
ARTICLE II - PURPOSE OF TRUST..................................................2
ARTICLE III - THE TRUSTEES ....................................................2
Section 3.1 Number, Designation, Election, Term, etc. .....................2
(a) Trustees.......................................................2
(b) Number.........................................................2
(c) Election and Term..............................................2
(d) Resignation and Retirement.....................................3
(e) Removal........................................................3
(f) Vacancies......................................................3
(g) Effect of Death, Resignation, etc..............................3
(h) No Accounting..................................................3
Section 3.2 Powers of Trustees.............................................3
(a) Investments....................................................4
(b) Disposition of Assets..........................................5
(c) Ownership Powers...............................................5
(d) Subscription...................................................5
(e) Form of Holding................................................5
(f) Reorganization, etc............................................5
(g) Voting Trusts, etc.............................................5
(h) Compromise.....................................................5
(i) Partnerships, etc..............................................5
(j) Borrowing and Security.........................................5
(k) Guarantees, etc. 8.............................................5
(i) Insurance......................................................5
(m) Pensions, etc..................................................6
(n) Distribution Plans.............................................6
Section 3.3 Certain Contracts..............................................6
(a) Advisory.......................................................6
(b) Administration.................................................6
(c) Distribution...................................................6
(d) Custodian and
Depository.....................................................6
(e) Transfer and Dividend Disbursing Agency........................7
(f) Shareholder
Servicing......................................................7
(g) Accounting.....................................................7
Section 3.4 Payment of Trust Expenses and Compensation Trustees............7
Section 3.5 Ownership of Assets of the
Trust..........................................................8
Section 3 .6 Action by
Trustees.......................................................8
ARTICLE IV -
SHARES.........................................................................8
Section 4.1 Description of Shares...........................................8
Section 4.2 Establishment and Designation of Sub-Trusts and Classes ........9
(a) Assets Belonging to
Sub-Trusts......................................................9
(b) Liabilities Belonging to Sub-Trusts............................10
(c) Dividends......................................................10
(d) Liquidation....................................................11
(e) Voting.........................................................11
(f) Redemption by Shareholder......................................11
(g) Redemption by Trust............................................12
(h) Net Asset Value................................................12
(I) Transfer.......................................................12
(j) Equality.......................................................12
(k) Fractions......................................................13
(I) Conversion Rights..............................................13
(m) Class Differences..............................................13
Section 4.3 Ownership of Shares............................................13
Section 4.4 Investments in the Trust.......................................13
Section 4.5 No Pre-emptive Rights..........................................13
Section 4.6 Status of Shares and Limitation of Personal Liability .........13
Section 4.7 No Appraisal Rights............................................14
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS..........................14
Section 5.1 Voting Powers..................................................14
Section 5.2 Meetings.......................................................14
Section 5.3 Record Dates...................................................14
Section 5.4 Quorum and Required Vote.......................................15
Section 5.5 Action by Written Consent......................................15
Section 5.6 Inspection of Records..........................................15
Section 5.7 Additional Provisions..........................................15
ARTICLE VI- LIMITATION OF LIABILITY; INDEMNIFICATION..........................15
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice.....15
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety..16
Section 6.3 Indemnification of Shareholders................................16
Section 6.4 Indemnification of Trustees, Officers, etc.....................16
Section 6.5 Compromise Payment.............................................17
Section 6.6 Indemnification Not Exclusive, etc.............................17
Section 6.7 Liability of Third Persons Dealing with Trustees ..............18
Section 6.8 Discretion.....................................................18
ARTICLE VII - MISCELLANEOUS...................................................18
Section 7.1 Duration and Termination of Trust..............................18
Section 7.2 Reorganization.................................................18
Section 7.3 Amendments.....................................................19
Section 7.4 Filing of Copies; References; Headings ........................19
Section 7.5 Applicable Law.................................................19
Section 7.6 Registered Agent...............................................20
Section 7.7 Integration....................................................20
<PAGE>
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made as of this [___,]day of
November, 1995 by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided. This
Declaration of Trust shall be effective upon the filing of the Certificate of
Trust in the office of the Secretary of State of the State of Delaware.
WITNESSETH:
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust hereunder,
and to issue classes of Shares of any Sub-Trust or divide Shares of any
Sub-Trust into two or more classes, all in accordance with the provisions
hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Delaware business trust in accordance with the
provisions of the Delaware Business Trust Act (12 Del. C. 3801, Section et
seq.), as from time to time amended and including any successor statute of
similar import (the "Act"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust and the Sub-Trusts created
hereunder as hereinafter set forth.
ARTICLE I - NAME AND DEFINITIONS
Section 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as
"Peregrine Funds" and the Trustees shall conduct the business of the Trust under
that name or any other name or names as they may from time to time determine.
The principal office of the Trust shall be located at 99 Park Avenue New York,
New York 10016 or such location as the Trustees may from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Act" shall have the meaning given to it in the recitals of this
Declaration of Trust (b) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time;
(c) "Class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of Article
IV;
(d) "Commission" shall have the meaning given it in the 1940 Act;
(e) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
<PAGE>
(f) "Majority of the Outstanding Voting Shares" of the Trust or Sub-Trust
or of a class of a Sub-Trust shall mean the vote, at the annual or a special
meeting of Shareholders duly called, (A) of 67 per centum or more of the Shares
of the Trust or Sub-Trust present at such meeting, (or of a class of a
Sub-Trust, as the case may be) if holders of more than 50 per centum of the
outstanding Shares of the Trust or Sub-Trust (or of a class of a Sub-Trust, as
the case may be) are present or represented by proxy; or (B) of more than 50 per
centum of the outstanding voting Shares of the Trust or Sub-Trust or of a class
of a Sub-Trust, as the case may be, whichever is the less.
(g) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(h) "Person" means a natural person, corporation, limited liability
company, trust, association, partnership (whether general, limited or
otherwise), joint venture or any other entity;
(i) "Shareholder" means a beneficial owner of record of Shares;
(j) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust and each Sub-Trust of the Trust and/or any
class of any Sub-Trust (as the context may require) shall be divided from time
to time;
(k) "Sub-Trust" or "Series" refers to a series of Shares established and
designated under or in accordance with the provisions of Article IV;
(l) "Trust" refers to the Delaware business trust established by this
Declaration of Trust, inclusive of each and every Sub-Trust established
hereunder; and
(m) "Trustees" refers to the trustees of the Trust and of each Sub-Trust
hereunder named herein or elected in accordance with Article III.
ARTICLE II - PURPOSE OF TRUST
The purposes of the Trust are (i) to operate as an investment company
and to offer Shareholders of the Trust and each Sub-Trust of the Trust one or
more investment programs primarily in securities and debt instruments, and (ii)
to engage in such activities that are necessary, suitable, incidental or
convenient to the accomplishment of the foregoing.
ARTICLE III - THE TRUSTEES
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM. ETC.
(a) TRUSTEES. The initial Trustees hereof and of each Sub-Trust hereunder
shall be Rodger A. Lawson, Michael Doorley and Thaddeus Leszczynski.
(b) NUMBER. The Trustees serving as such, whether named above or hereafter
becoming Trustees, may increase or decrease the number of Trustees to a number
other than the number theretofore determined. No decrease in the number of
Trustees shall have the effect of removing any Trustee from office prior to the
expiration of such Trustee's term, but the number of Trustees may be decreased
in conjunction with the removal of a Trustee pursuant to subsection (e) of this
Section 3.1.
(c) ELECTION AND TERM. Trustees, in addition to those named above, may
become such by election by Shareholders or the Trustees in office pursuant to
<PAGE>
Section 3.1(f). Each Trustee, whether named above or hereafter becoming a
Trustee, shall serve as a Trustee of the Trust and of each Sub-Trust hereunder
during the lifetime of this Trust and until its termination as hereinafter
provided except as such Trustee sooner dies, resigns, retires or is removed.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect successors and
may, pursuant to Section 3. l(f) hereof, appoint Trustees to fill vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign or retire as a
trustee of the Trust, by written instrument signed by such Trustee and delivered
to the other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later date as is
specified in such instrument and shall be effective as to the Trust and each
Sub-Trust hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any time:
(i) by written instrument, signed by at least three-fourths of the number of
Trustees in office immediately prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of Shareholders
holding not less than two-thirds of the Shares then outstanding, cast in person
or by proxy at any meeting called for the purpose; or (iii) by a written
declaration signed by Shareholders holding not less than two-thirds of the
Shares then outstanding and filed with the minutes of the Trust. Any such
removal shall be effective as to the Trust and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement, removal
or incapacity of any of the Trustees, or resulting from an increase in the
number of Trustees by the other Trustees may (but so long as there are at least
two remaining Trustees, need not unless required by the 1940 Act) be filled by a
majority of the remaining Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine and such appointment
shall be effective upon the written acceptance of the person named therein to
serve as a trustee of the Trust and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of voluntary or mandatory
retirement, resignation or increase in number of Trustees to be effective at a
later date shall be deemed effective upon the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted such appointment and shall have agreed in writing
to be bound by this Declaration of Trust and the appointment is effective, the
Trust estate shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance.
(g) EFFECT OF DEATH, Resignation,. etc. The death, resignation, voluntary
or mandatory retirement, removal or incapacity of the Trustees, or any one of
them, shall cause a Trustee to cease to be a trustee of the Trust but shall not
operate to annul or terminate the Trust or any Sub-Trust hereunder or to revoke
or terminate any existing agency or contract created or entered into pursuant to
the terms of this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify removal for cause, no person ceasing to be a
trustee of the Trust as a result of death, resignation, voluntary or mandatory
retirement, removal or incapacity (nor the estate of any such person) shall be
required to make an accounting to the Shareholders or remaining Trustees upon
such cessation.
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees in all instances
<PAGE>
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 be bound or limited by present or future laws or
customs with regard to investment by trustees or fiduciaries, but shall have
full authority and absolute power and control over the assets of the Trust and
the business of the Trust to the same extent as if the Trustees were the sole
owners of the assets of the Trust and the business in their own right, including
such authority, power and control to do all acts and things as they, in their
sole discretion, shall deem proper to accomplish the purposes of this Trust.
Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent
with this Declaration of Trust providing for the conduct of the business and
affairs of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; they may from time to
time in accordance with the provisions of Section 4.1 hereof establish
Sub-Trusts, each such Sub-Trust to operate as a separate and distinct investment
medium and with separately defined investment objectives and policies and
distinct investment purposes; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish Series or establish classes of Shares
of any Series or Sub-Trust or divide the Shares of any Series or Sub-Trust into
classes; they may as they consider appropriate designate employees and agents
who may be denominated as officers with titles, including, but not limited to,
"president," "vice-president," "treasurer," "secretary," "assistant secretary,"
"assistant treasurer," "managing director," "chairman of the board" and "vice
chairman of the board" and who in such capacity may act for and on behalf of the
Trust, as and to the extent authorized by the Trustees, and appoint and
terminate agents and consultants and hire and terminate employees, any one or
more of the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing; they may appoint from their own number,
and terminate, any one or more committees consisting of two or more Trustees,
including without implied limitation an executive committee, which may, when the
Trustees are not in session and subject to the 1940 Act, exercise some or all of
the power and authority of the Trustees as the Trustees may determine; in
accordance with Section 3.3 they may employ one or more advisers,
administrators, depositories and custodians and may authorize any depository or
custodian to employ sub custodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt instruments, retain transfer, dividend, accounting or Shareholder servicing
agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more distributors, principal underwriters or otherwise, and
subject to Section 5.3, set record dates or times for the determination of
Shareholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation, the power and authority to act in the name of the
Trust and any Sub-Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other property, including,
without implied limitation, to invest any and all of the assets of the Trust in
the securities of one or more open-end management investment companies, 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;
<PAGE>
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or 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, debt instruments
or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, sub custodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION. etc. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) VOTING TRUSTS. etc. To join with other holders of any securities or
debt instruments in acting through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Sub-Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) PARTNERSHIPS, etc. To enter into joint ventures, general or limited
partnerships, limited liability companies and any other combinations or
associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) GUARANTEES. etc. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust property such
insurance and/or bonding as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment advisers,
<PAGE>
managers, administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust; and
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust or any Sub-Trust,
including with respect to any class thereof, a plan of distribution and related
agreements thereto pursuant to the terms of Rule 12b-1 of the 1940 Act and to
make payments from the assets of the Trust or the relevant Sub-Trust or
Sub-Trusts pursuant to said Rule 12b-1 Plan.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, limited liability companies, other type of organizations,
or individuals (a "Contracting Party"), to provide for the performance and
assumption of some or all of the following services, duties and responsibilities
to, for or on behalf of the Trust and/or any Sub-Trust, and/or the Trustees, and
to provide for the performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the Trustees may
determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of the
Trust (as that phrase is defined in subsection (a) of Section 4.2), to manage
such investments and assets, make investment decisions with respect thereto, and
to place purchase and sale orders for portfolio transactions relating to such
investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees and
in conformity with any policies of the Trustees with respect to the operations
of the Trust and each Sub-Trust (including each class thereof), to supervise all
or any part of the operations of the Trust and each Sub-Trust, and to provide
all or any part of the administrative and clerical personnel, office space and
office equipment and services appropriate for the efficient administration and
operations of the Trust and each Sub-Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust and each Sub-Trust
(including any classes thereof), to the principal underwriter of such Shares,
and/or to act as agent of the Trust and each Sub-Trust in the sale of Shares and
the acceptance or rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting records
in connection therewith;
<PAGE>
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the transfer
thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relating to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any Contracting Party,
or of or for any parent or affiliate of any Contracting Party or that the
Contracting Party or any parent or affiliate thereof is a Shareholder or has an
interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the rendering
of any similar services to one or more other corporations, trusts, associations,
partnerships, limited partnerships, limited liability companies or other
organizations, or have other business or interests, shall not affect the
validity of any contract for the performance and assumption of services, duties
and responsibilities to, for or of the Trust or any Sub-Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust, any Sub-Trust or its Shareholders, provided that in the case of any
relationship or interest referred to in the preceding clause (i) on the part of
any Trustee or officer of the Trust either (x) the material facts as to such
relationship or interest have been disclosed to or are known by the Trustees not
having any such relationship or interest and the contract involved is approved
in good faith by a majority of such Trustees not having any such relationship or
interest (even though such unrelated or disinterested Trustees are less than a
quorum of all of the Trustees), (y) the material facts as to such relationship
or interest and as to the contract have been disclosed to or are known by the
Shareholders entitled to vote thereon and the contract involved is specifically
approved in good faith by vote of the Shareholders, or (z) the specific contract
involved is fair to the Trust as of the time it is authorized, approved or
ratified by the Trustees or by the Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Sub-Trusts and/or one or more classes of Shares thereof that may be
established and designated pursuant to Article IV, as the Trustees deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
<PAGE>
connection with the Trust, any Sub-Trust and/or any class of Shares thereof, or
in connection with the management thereof, including, but not limited to, the
Trustees compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, Shareholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as trustees of the Trust and may fix the amount of such compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust and of each Sub-Trust shall at all times be considered as vested in
the Trust.
Section 3.6 ACTION BY TRUSTEES. Except as otherwise provided by the 1940
Act or other applicable law, this Declaration of Trust or the By-Laws, any
action to be taken by the Trustees on behalf of or with respect to the Trust or
any Sub-Trust or class thereof may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least one-half of
the Trustees then in office, being present), within or without Delaware,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law).
ARTICLE IV - SHARES
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all with $.001 par value, but the Trustees shall
have the authority from time to time to issue Shares in one or more Series (each
of which Series of Shares shall represent the beneficial interest in a separate
and distinct Sub-Trust of the Trust, including without limitation each Sub-Trust
specifically established and designated in Section 4.2), as they deem necessary
or desirable. For all purposes under this Declaration of Trust or otherwise,
including, without implied limitation, (i) with respect to the rights of
creditors and (ii) for purposes of interpreting the relevant rights of each
Sub-Trust and the Shareholders of each Sub-Trust, each Sub-Trust established
hereunder shall be deemed to be a separate trust. Notice of the limitation of
liabilities of a Sub-Trust shall be set forth in the certificate of trust of the
Trust, and debts, liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to a particular Sub-Trust shall be
enforceable against the assets of such Sub-Trust only, and not against the
assets of the Trust generally or any other Sub-Trust. The Trustees shall have
exclusive power without the requirement of Shareholder approval to establish and
designate such separate and distinct Sub-Trusts, and to fix and determine the
relative rights and preferences as between the shares of the separate Sub-Trusts
as to right of redemption and the price, terms and manner of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
sinking or purchase fund provisions, conversion rights, and conditions under
which the several Sub-Trusts shall have separate voting rights or no voting
rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-Trust
or divide the Shares of any Sub-Trust into classes, each class having such
different dividend, liquidation, voting and other rights as the Trustees may
determine in their sole discretion, and may establish and designate the specific
classes of Shares of each Sub-Trust. The fact that a Sub-Trust shall have
initially been established and designated without any specific establishment or
<PAGE>
designation of classes (i.e., that all Shares of such Sub-Trust are initially of
a single class), or that a Sub-Trust shall have more than one established and
designated class, shall not limit the authority of the Trustees to establish and
designate separate classes, or one or more further classes, of said Sub-Trust
without approval of the holders of the initial class thereof, or previously
established and designated class or classes thereof.
The number of authorized Shares and the number of Shares of each Sub-Trust
or class thereof that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust or class thereof for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Sub-Trust or class thereof into one or more Sub-Trusts or
classes thereof that may be established and designated from time to time. The
Trustees may hold as treasury Shares, reissue for such consideration and on such
terms as they may determine, or cancel, at their discretion from time to time,
any Shares of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation of
the relative rights and preferences of the Shares of such Sub-Trust or class,
(ii) upon the execution of an instrument in writing by an officer of the Trust
pursuant to the vote of a majority of the Trustees, or (iii) as otherwise
provided in either such instrument. At any time that there are no Shares
outstanding of any particular Sub-Trust or class previously established and
designated, the Trustees may by an instrument executed by a majority of their
number (or by an instrument executed by an officer of the Trust pursuant to the
vote of a majority of the Trustees) abolish that Sub-Trust or class and the
establishment and designation thereof. Each instrument establishing and
designating any Sub-Trust shall have the status of an amendment to this
Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Sub-Trust (including any classes thereof) of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Shares of any Sub-Trust (including any classes thereof) from any such person or
any such organization subject only to the general limitations, restrictions or
other provisions applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof) generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate one Sub-Trust: Asia Growth Fund which shall initially consist of a
single class of Shares. The Shares of such Sub-Trusts and any Shares of any
further Sub-Trust or class thereof that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Sub-Trust at the time of establishing and designating
the same) have the following relative rights and preferences:
<PAGE>
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received by the Trust
for the issue or sale of Shares of a particular Sub-Trust or any classes
<PAGE>
thereof, 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 by the Trustees in trust for the benefit of
the holders of Shares of that Sub-Trust or class thereof and shall irrevocably
belong to that Sub-Trust (and be allocable to any classes thereof) for all
purposes, and shall be so recorded upon the books of account of the Trust.
Separate and distinct records shall be maintained for each Sub-Trust and the
assets associated with a Sub-Trust shall be held and accounted for separately
from the other assets of the Trust, or any other Sub-Trust. Such consideration,
assets, 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, together with any General Items (as hereinafter defined) allocated
to that Sub-Trust as provided in the following sentence, are herein referred to
as "assets belonging to" that Sub-Trust (and allocable to any classes thereof).
In the event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular Sub-Trust (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Sub-Trusts
established and designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable; and any General Items
so allocated to a particular Sub-Trust shall belong to that Sub-Trust (and be
allocable to any classes thereof). Each such allocation by the Trustees shall be
conclusive and binding upon the holders of all Shares of all Sub-Trusts
(including any classes thereof) for all purposes.
(b) LIABILITIES BELONGING TO SUB-TRUSTS. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect of that
Sub-Trust and all expenses, costs, charges and reserves belonging to that
Sub-Trust, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Sub-Trust shall be allocated and charged by the Trustees to and among any one or
more of the Sub-Trusts established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion shall
determine. In addition, the liabilities in respect of a particular class of
Shares of a particular Sub-Trust and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities, expenses, costs,
charges or reserves of that particular Sub-Trust which are not readily
identifiable as belonging to any particular class of Shares of that Sub-Trust
shall be allocated and charged by the Trustees to and among any one or more of
the classes of Shares of that Sub-Trust established and designated from time to
time in such manner and on such basis as the Trustees in their sole discretion
shall determine. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Sub-Trust or class thereof are herein referred to
as "liabilities belonging to" that Sub-Trust or class thereof. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders, creditors and any other persons
dealing with the Trust or any Sub-Trust (including any classes thereof) for all
purposes. Any creditor of any Sub-Trust may look only to the assets of that
Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the Trustees
in their sole discretion may determine, which may be daily or otherwise pursuant
to a standing resolution or resolutions adopted only once or with such frequency
as the Trustees in their sole discretion may determine, to the holders of Shares
<PAGE>
of that Sub-Trust or class, from such of the income and capital gains, accrued
or realized, from the assets belonging to that Sub-Trust, or in the case of a
class, belonging to that Sub-Trust and allocable to that class, as the Trustees
in their sole discretion may determine, after providing for actual and accrued
liabilities belonging to that Sub-Trust or class. All dividends and
distributions on Shares of a particular Sub-Trust or class thereof shall be
distributed pro rata to the holders of Shares of that Sub-Trust or class in
proportion to the number of Shares of that Sub-Trust or class held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees in their sole discretion may
determine that no dividend or distribution shall be payable on Shares as to
which the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or procedure.
Such dividends and distributions may be made in cash or Shares of that Sub-Trust
or class or a combination thereof as determined by the Trustees in their sole
discretion or pursuant to any program that the Trustees may have in effect at
the time for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such dividend or distribution
paid in Shares will be paid at the net asset value thereof as determined in
accordance with subsection (h) of this Section 4.2.
The Trustees shall have full discretion to the extent not inconsistent with
the 1940 Act to determine which items shall be treated as income and which items
as capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust, subject to Section 7.1 hereof, the holders of Shares of each Sub-Trust or
any class thereof that has been established and designated shall be entitled to
receive, when and as declared by the Trustees, the excess of the assets
belonging to that Sub-Trust, or in the case of a class, belonging to that
Sub-Trust and allocable to that class, over the liabilities belonging to that
Sub-Trust or class. The assets so distributable to the holders of Shares of any
particular Sub-Trust or class thereof shall be distributed among such holders in
proportion to the number of Shares of that Sub-Trust or class thereof held by
them and recorded on the books of the Trust. The liquidation of any particular
Sub-Trust or class thereof may be authorized at any time by vote of a majority
of the Trustees then in office.
(e) VOTING. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each whole Share standing in
such Shareholder's name on the books of the Trust irrespective of the Series
thereof or class thereof and all Shares of all Series and classes thereof shall
vote together as a single class; provided, however, that as to any matter (i)
with respect to which a separate vote of one or more Series or classes thereof
is required by the 1940 Act or the provisions of the writing establishing and
designating the Sub-Trust or class, such requirements as to a separate vote by
such Series or class thereof shall Shares of all Series and classes thereof
voting together; and (ii) as to any matter which apply in lieu of all affects
the interests of one or more particular Series or classes thereof, only the
holders of Shares of the one or more affected Series or classes shall be
entitled to vote, and each such Series or class shall vote as a separate class.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of such
holder's Shares of that Sub-Trust or class thereof at a redemption price equal
to the net asset value per Share of that Sub-Trust or class thereof next
determined in accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption, subject to any contingent deferred
sales charge or redemption charge in effect at the time of redemption. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Sub-Trust of which the Shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value.
<PAGE>
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that
Sub-Trust during any period or at any time when and to the extent permissible
under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Share of each Sub-Trust or class thereof that
has been established and designated is subject to redemption by the Trust at the
redemption price which would be applicable if such Share was then being redeemed
by the Shareholder pursuant to subsection (f) of this Section 4.2: (i) at any
time, in the sole discretion of the Trustees, or (ii) upon such other conditions
as may from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust. Upon such redemption the holders of the Shares
so redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
(h) NET ASSET VALUE. The net asset value per Share of any Sub-Trust shall
be (i) in the case of a Sub-Trust whose Shares are not divided into classes, the
quotient obtained by dividing the value of the net assets of that Sub-Trust
(being the value of the assets belonging to that Sub-Trust less the liabilities
belonging to that Sub-Trust) by the total number of Shares of that Sub-Trust
outstanding, and (ii) in the case of a class of Shares of a Sub-Trust whose
Shares are divided into classes, the quotient obtained by dividing the value of
the net assets of that Sub-Trust allocable to such class (being the value of the
assets belonging to that Sub-Trust allocable to such class less the liabilities
belonging to such class) by the total number of Shares of such class
outstanding; all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may in their sole discretion determine to maintain the net
asset value per Share of any Sub-Trust at a designated constant dollar amount
and in connection therewith may adopt procedures not inconsistent with the 1940
Act for the continuing declarations of income attributable to that Sub-Trust as
dividends payable in additional Shares of that Sub-Trust at the designated
constant dollar amount and for the handling of any losses attributable to that
Sub-Trust. Such procedures may provide that in the event of any loss each
Shareholder shall be deemed to have contributed to the capital of the Trust
attributable to that Sub-Trust such Shareholder's pro rata portion of the total
number of Shares required to be cancelled in order to permit the net asset value
per Share of that Sub-Trust to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall be deemed
to have agreed, by making an investment in any Sub-Trust with respect to which
the Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(i) TRANSFER. All Shares of each particular Sub-Trust or class thereof
shall be transferable, but transfers of Shares of a particular Sub-Trust or
class thereof will be recorded on the Share transfer records of the Trust
applicable to that Sub-Trust or class only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of that Sub-Trust or class
and at such other times as may be permitted by the Trustees.
(j) EQUALITY. Except as provided herein or in the instrument designating
and establishing any class of Shares or any Sub-Trust, all Shares of each
particular Sub-Trust or class thereof shall represent an equal proportionate
interest in the assets belonging to that Sub-Trust, or in the case of a class,
belonging to that Sub-Trust and allocable to that class, subject to the
liabilities belonging to that Sub-Trust or class, and each Share of any
particular Sub-Trust or class shall be equal to each other Share of that
Sub-Trust or class; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of this Section 4.2 that may exist
<PAGE>
with respect to dividends and distributions on Shares of the same Sub-Trust or
class. The Trustees in their sole discretion may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a greater or lesser
number of Shares of that Sub-Trust or class without thereby changing the
proportionate beneficial interest in the assets belonging to that Sub-Trust or
class or in any way affecting the rights of Shares of any other Sub-Trust or
class.
(k) FRACTIONS. Any fractional Share of any Sub-Trust or class, if any such
fractional Share is outstanding, shall carry proportionately all the rights and
obligations of a whole Share of that Sub-Trust or class, including rights and
obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Sub-Trust or class thereof shall have the right to convert said
Shares into Shares of one or more other Sub-Trust or class thereof in accordance
with such requirements and procedures as may be established by the Trustees.
(m) CLASS DIFFERENCES. Subject to Section 4.1, the relative rights and
preferences of the classes of any Sub-Trust may differ in such other respects as
the Trustees may determine to be appropriate in their sole discretion, provided
that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees (or by an
instrument executed by an officer of the Trust pursuant to a vote of a majority
of the Trustees).
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees in
their sole discretion may otherwise determine from time to time. The Trustees
may make such rules as they consider appropriate for the issuance of Share
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders and as to the number of Shares of each Sub-Trust and class
thereof held from time to time by each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept or reject
investments in the Trust and each Sub-Trust from such persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize or determine. The Trustees may
authorize any distributor, principal underwriter, custodian, transfer agent or
other person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
Section 4.5 No PRE-EMPTIVE RIGHTS. Shareholders shall have no pre-emptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust or any Sub-Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
Declaration of Trust. Every Shareholder by virtue of acquiring Shares shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death, incapacity, dissolution, termination or
<PAGE>
bankruptcy of a Shareholder during the continuance of the Trust shall not
operate to dissolve or terminate the Trust or any Sub-Trust thereof nor entitle
the representative of such Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but only to the rights of
such Shareholder under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders partners. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust shall
have any power to bind personally any Shareholder, nor except as specifically
provided herein 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.
Section 4.7 NO APPRAISAL RIGHTS. Shareholders shall have no right to
demand payment for their shares or to any other rights of dissenting
shareholders in the event the Trust participates in any transaction which would
give rise to appraisal or dissenters' rights by a shareholder of a corporation
organized under the General Corporation Law of the State of Delaware, or
otherwise.
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust to the extent and as provided
in Sections 7.1 and 7.2, (iv) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Section 7.3, and (v) with respect to
such additional matters relating to the Trust as may be required by the 1940
Act, this Declaration of Trust, the By-Laws or any registration of the Trust
with the Commission (or any successor agency) or any state, or as the Trustees
may consider necessary or desirable. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. Proxies may be
given orally or in writing or pursuant to any computerized or mechanical data
gathering process specifically approved by the Trustees. A proxy with respect to
Shares held in the name of two or more persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by Shareholders.
Section 5.2 MEETINGS. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees in their sole discretion to be necessary or desirable.
Shareholder meetings may be held at such time and place within the continental
United States as may be fixed by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days and not more than 120 days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than 10% of
the Shares then outstanding. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of 30 days after written application
by Shareholders holding at least 10% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein or in the By-Laws, then Shareholders holding at least 10% of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
<PAGE>
Section 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 120 days prior to the date of any meeting of Shareholders or other action
as the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though such Shareholder has since that
date and time disposed of such Shareholder's Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 5.4 QUORUM AND REQUIRED VOTE. Except as otherwise provided by the
1940 Act or other applicable law, thirty percent of the Shares entitled to vote
shall be a quorum for the transaction of business at a Shareholders' meeting,
but any lesser number shall be sufficient for adjournments. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned for any
lawful purpose provided that no meeting shall be adjourned for more than six
months beyond the originally scheduled meeting date. 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. A majority of the
Shares voted at a meeting at which a quorum is present, shall decide any
questions and a plurality shall elect a Trustee, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the By-Laws.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders for any lawful purpose reasonably related to a
Shareholder's interest as a Shareholder. The Trustees may from time to time
establish reasonable standards, including standards governing what information
and documents are to be furnished, at what time and location and at whose
expense, with respect to Shareholders' inspection of Trust records.
Section 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI - LIMITATION OF LIABILITY: INDEMNIFICATION
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE: NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
<PAGE>
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been executed
or done only by or for the Trust (or the Sub-Trust) or the Trustees and not
personally. The Trustees and the Trust's officers, employees and agents shall
not be liable to the Trust or the Shareholders; provided however, that nothing
in this Declaration of Trust shall protect any Trustee or officer, employee or
agent against any liability to the Trust or the Shareholders to which such
Trustee or officer, employee or agent 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 or of such officer,
employee or agent.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that the
same was executed or made by or on behalf of the Trust or by them as Trustees or
Trustee or as Officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the Trust, or
the particular Sub-Trust in question, as the case may be, but the omission
thereof shall not operate to bind any Trustees or Trustee or officers or officer
or Shareholders or Shareholder individually or otherwise invalidate any such
note, bond, contract, instrument, certificate or undertaking.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable to the Trust and the
Shareholders for such Trustee's own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (a) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, adviser, administrator, distributor or
principal underwriter, custodian or transfer, dividend disbursing, Shareholder
servicing or accounting agent of the Trust, nor shall any Trustee be responsible
for the act or omission of any other Trustee; (b) the Trustees may take advice
of counsel or other experts with respect to the meaning and operation of this
Declaration of Trust and their duties as Trustees, and shall be under no
liability for any act or omission in accordance with such advice or for failing
to follow such advice; and (c) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of account of the
Trust and upon written reports made to the Trustees by any officer appointed by
them, any independent public accountant, and (with respect to the subject matter
of the contract involved) any officer, partner or responsible employee of a
Contracting Party appointed by the Trustees pursuant to Section 3.3. The
Trustees as such shall not be required to give any bond or surety or any other
security for the performance of their duties. To the extent that, at law or in
equity, a Trustee has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to a Shareholder, any such Trustee acting under
this Declaration of Trust shall not be liable to the Trust or to any such
Shareholder for the Trustee's good faith reliance on the provisions of this
Declaration of Trust. The provisions of this Declaration of Trust, to the extent
that they restrict the duties and liabilities of a Trustee otherwise existing at
law or in equity, are agreed by the Shareholders to replace such other duties
and liabilities of such Trustee.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
former Shareholder) of any Sub-Trust of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, the Trust on behalf of said Sub-Trust
(upon proper and timely request by the Shareholder) shall assume the defense
against such charge and satisfy any judgment thereon, and, to the fullest extent
permitted by law, the Shareholder or former Shareholder (or such Shareholder's
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
<PAGE>
shall be entitled out of the assets of said Sub-Trust estate to be held harmless
from and indemnified against all loss and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. To the fullest
extent permitted by law, the Trust shall indemnify (from the assets of the
Sub-Trust or Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a "Covered
Person]) against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, except with respect
to any Maker as to which it has been determined that such Covered Person had
acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(such conduct referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the proceeding
was brought that the person to be indemnified was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of the facts,
that the Covered Person was not liable by reason of Disabling Conduct by (a) a
vote of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time from funds attributable to
the Sub-Trust in question in advance of the final disposition of any such
action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-Trust in question if it is
ultimately determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not parties to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a) or
by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction to have been
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 such Covered Person's office.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, etc. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
<PAGE>
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators, an "interested Covered Person" is one against whom the
action, suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 6.8 DISCRETION. Whenever in this Declaration of Trust the Trustees
are permitted or required to make a decision (a) in their "sole discretion,"
"sole and absolute discretion," "full discretion" or "discretions" or under a
similar grant of authority or latitude, the Trustees shall be entitled to
consider only such interests and factors as they desire, whether reasonable or
unreasonable, and may consider their own interests, and shall have no duty or
obligation to give any consideration to any interests of or factors affecting
the Trust or the Shareholders, or (b) in their "good faith" or under another
express standard, the Trustees shall act under such express standard and shall
not be subject to any other or different standards imposed by this Declaration
of Trust or by law or any other agreement contemplated herein. Each Shareholder
and Trustee hereby agrees that any standard of care or duty imposed in this
Declaration of Trust or any other agreement contemplated herein or under the Act
or any other applicable law, rule or regulation shall be modified, waived or
limited in each case as required to permit the Trustees to act under this
Declaration of Trust or any other agreement contemplated herein and to make any
decision pursuant to the authority prescribed in this Declaration of Trust.
ARTICLE VII - MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or class thereof shall operate to
terminate the Trust. The Trust may be terminated at any time by a majority of
the Trustees then in office subject to a FAVORABLE VOTE OF A MAJORITY of the
Outstanding Voting Shares of the Trust.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trust, or any one or more Sub-Trusts, may,
either as the successor, survivor, or non-survivor, (1) consolidate or merge
with one or more other trusts, Sub-Trusts, partnerships, limited liability
companies, associations or corporations organized under the laws of the State of
Delaware or any other state of the United States, to form a consolidated or
merged trust, partnership, limited liability company, association or corporation
under the laws of which any one of the constituent entities is organized, with
<PAGE>
the Trust in the case of a merger to be the survivor or non-survivor of such
merger, or (2) transfer a substantial portion of its assets to one or more other
trusts, Sub-Trusts, partnerships, limited liability companies, associations or
corporations organized under the laws of the State of Delaware or any other
state of the United States, or have one or more such trusts, Sub-Trusts,
partnerships, limited liability companies, associations or corporations merged
into or transfer a substantial portion of its assets to it, any such
consolidation, merger or transfer to be upon such terms and conditions as are
specified in an agreement and plan of reorganization authorized and approved by
the Trustees and entered into by the Trust, or one or more Sub-Trusts as the
case may be, in connection therewith. Any such consolidation, merger or transfer
shall require the affirmative vote of the holders of a Majority of the
Outstanding Voting Shares of the Trust (or each Sub-Trust affected thereby, as
the case may be), except that (a) such affirmative vote of the holders of Shares
shall not be required if the Trust (or Sub-Trust affected thereby, as the case
may be) shall be the survivor of such consolidation or merger or transferee of
such assets; (b) the Trustees may, without shareholder approval, cause the Trust
or any series of the Trust to invest any or all of its assets in securities
issued by a registered investment company or series thereof, subject to the
provisions of the 1940 Act; and (c) the Trustees may, without shareholder
approval, cause the Trust, or any series of the Trust, to transfer all or
substantially all of its assets and liabilities to another registered investment
company having substantially identical investment objectives and policies in
exchange for shares of such other investment company if, but only if, the Trust
or series, as the case may be, retains the shares of such other investment
company as an investment.
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not materially adversely affect the rights of any Shareholder
with respect to which such amendment is or purports to be applicable and so long
as such amendment is not in contravention of applicable law, including the 1940
Act, by an instrument in writing signed by a majority of the then Trustees (or
by an officer of the Trust pursuant to the vote of a majority of such Trustees).
Any amendment to this Declaration of Trust that materially adversely affects the
rights of Shareholders may be adopted at any time by an instrument in writing
signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to a vote of a majority of such Trustees) when authorized to do so by
the vote in accordance with subsection (e) of Section 4.2 of Shareholders as
specified in Section 5.4 hereof. Subject to the foregoing, any such amendment
shall be effective as of any past or future time as provided in the instrument
containing the terms of such amendment or, if there is no provision therein with
respect to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by a Trustee or
officer of the Trust to the effect that such amendment has been duly adopted.
Section 7.4 FILING OF COPIES; REFERENCES: HEADINGS. The original or a copy
of this instrument and of each amendment 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 of the Trust as to whether or not
any such amendments have been made, as to the identities of the Trustees and
officers, 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 of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
<PAGE>
Section 7.5 Applicable Law. This Declaration of Trust is created under and is to
be governed by and construed and administered according to the laws of the State
of Delaware. The Trust shall be of the type referred to in Section 3801 of the
Act and of the type commonly called a business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Section 7.6 Registered Agent. [THE CORPORATION TRUST COMPANY OF 1209 ORANGE
STREET, CITY OF WILMINGTON, COUNTY OF NEW CASTLE, DELAWARE 19801- OR NAME AND
ADDRESS OF REGISTERED AGENT OTHER THAN THE CORPORATION TRUST COMPANY] is hereby
designated as the initial registered agent for service of process on the Trust
in Delaware.
Section 7.7 Integration. This Declaration of Trust constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
for themselves and their assigns, as of the day and year first above written.
----------------------------------------
[Name]
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[Name]
g:\ted
<PAGE>
BY-LAWS
OF
Peregrine Funds
(A Delaware Business Trust)
ARTICLE 1
AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Master Trust Agreement, as from time to time in effect (the "Declaration of
Trust"), Peregrine Fund, the Delaware business trust established by the
Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall
be located at 99 Park Avenue, New York, New York 10016
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places either within or without the State of
Delaware and at such times as the Trustees may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Board, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trust calling the meeting.
2.3 NOTICE. It shall be Sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2.4 QUORUM: ADJOURNMENT: VOTE REQUIRED FOR ACTION. At any meeting of
the Trustees a majority of the Trustees then in office shall constitute a
quorum. Any meeting may be adjourned from time to time by a majority of the
<PAGE>
votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice. At the adjourned
meeting, the Trustees may transact any business which might have been transacted
at the original meeting. Except in cases where the Declaration of Trust or these
By-Laws otherwise provide, the vote of a majority of the Trustees present at a
meeting at which a quorum is present shall be the act of the Trustees.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, Assistant Treasurers and Assistant
Secretaries, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The Chairman of the Board shall be a Trustee and
may but need not be a beneficial owner of the Trust (a "Shareholder"); and any
other officer may be but none need be a Trustee or Shareholder. Any two or more
officers may be held by the same person.
3.2 ELECTION. The Chairman of the Board, the President, the Treasurer, and
the Secretary shall be elected annually by the Trustees at a meeting held within
the first four months of the Trust's fiscal year. The meeting at which the
officers are elected shall be known as the annual meeting of Trustees. Other
officers, if any, may be elected or appointed by the Trustees at said meeting or
at any other time. Vacancies in any office may be filled at any time.
3.3 TENURE. The Chairman of the Board, the President, the Treasurer, and
the Secretary shall hold office until the next annual meeting of the Trustees
and until their respective successors are chosen and qualified, or in each case
until he or she sooner dies, resigns, is removed or becomes disqualified. Each
other officer shall hold office and each agent shall retain authority at the
pleasure of the Trustees.
3.4 POWERS Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Delaware
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Board, or, if there is none, or in the absence of the Chairman,
the President shall preside at all meetings of the shareholders and of the
Trustees.
3.6 VICE PRESIDENT. The Vice President, or if there be more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his or her inability or refusal
to act, perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. The
Vice Presidents shall perform such other duties and have such other powers as
the Trustees may from time to time prescribe.
<PAGE>
3.7 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.8 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be more
than one, the Assistant Treasurers in the order determined by the Trustees (or
if there be no such determination, then in the order of their election), shall,
in the absence of the Treasurer or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
3.9 SECRETARY. The Secretary shall record all proceedings of the
Shareholders and the Trustees in books to be kept there for, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the Shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Trustees (or if
there be no determination, then in the order of their election), shall, in the
absence of the Secretary or in the event of his or her inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Trustees
may from time to time prescribe.
3.11 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. The Trustees may remove any officer elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee or officer resigning and no officer removed shall have any right to
any compensation for any period following his or her resignation or removal, or
any right to damages on account of such removal.
ARTICLE 4
COMMITTEES
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its action to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
<PAGE>
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
ARTICLE 7
SEAL
7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die with
the word "Delaware", together with the name of the Trust and the year of its
organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares of the
Trust, the Trustees or the transfer agent may either issue receipts therefor or
may keep accounts upon the books of the Trust for the record holders of such
shares, who shall in either case be deemed, for all purposes hereunder, to be
the holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all Shareholders. In that event, a Shareholder may
receive a certificate stating the number of shares owned by him or her, in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a Vice President and by the Treasurer or
Assistant Treasurer. Such signatures may be facsimiles if the certificate is
<PAGE>
signed by a transfer agent, or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be such officer
before such certificate is issued, it may be issued by the Trust with the same
effect as if he or she were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe. The Trust may
require the owner of the lost, destroyed or mutilated share certificate, or his
or her legal representative, to give the Trust a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
destruction or mutilation of any such certificate or the issuance of such new
certificate.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares transferred
as collateral security shall be entitled to a new certificate if the instrument
of transfer substantially describes the debt or duty that is intended to be
secured thereby. Such new certificate shall express on its face that it is held
as collateral security, and the name of the pledgor shall be stated thereon, who
alone shall be liable as a Shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each Shareholder, require the surrender of shares certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
DEALINGS WITH TRUSTEES AND OFFICERS
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of shares of the Trust to the same extent as if he or she were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
AMENDMENTS TO THE BY-LAWS
11.1 General. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
Adopted: [Date of Adoption]
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the _____ day of __________, 1995 between Peregrine Asset
Management (Hong Kong) Limited, a corporation organized under the laws of Hong
Kong and having its principal place of business in Hong Kong (the "Advisor") and
Peregrine Funds a Delaware business trust having its principal place of business
in New York, New York (the "Trust").
WHEREAS, the Trust is engaged in business as an open-end investment company and
is so registered under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Advisor is engaged principally in the business of rendering
investment management services and is registered under the Investment Advisers
Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in one
or more separate series with each series representing an interest in a separate
portfolio of securities and other assets;
WHEREAS, the Trust intends to offer its shares in one such series, namely, Asia
Growth Fund (the "Fund") and invest the proceeds in securities. The Trust
desires to retain the Advisor to render investment advisory services hereunder
and with respect to which the Advisor is willing so to do;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF ADVISOR.
The Trust hereby appoints the Advisor to act as investment advisor to
the Fund for the period and on the terms herein set forth. The Advisor
accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
2. DUTIES OF ADVISOR.
The Advisor, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) INVESTMENT PROGRAM. The Advisor will (i) furnish continuously an
investment program for the Fund (ii) determine (subject to the overall
supervision and review of the Board of Trustees of the Trust) which
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held uninvested,
and (iii) make changes on behalf of the Trust in the investments. The
Advisor also will manage, supervise and conduct such other affairs and
business of the Trust and matters incidental thereto, as the Advisor
and the Trust agree, subject always to the control of the Board of
Trustees of the Trust and to the provisions of the Master Trust
Agreement of the Trust, the Trust's By-Laws and the 1940 Act.
<PAGE>
(b) OFFICE SPACE AND FACILITIES. The Advisor will arrange to furnish
the Trust office space in the offices of the Advisor, or in such other
place or places as may be agreed upon from time to time, and all
necessary office facilities, simple business equipment, supplies,
utilities, and telephone service required for managing the investments
of the Trust.
(c) PERSONNEL. The Advisor shall provide executive and clerical
personnel for managing the investments of the Trust, and shall
compensate officers and Trustees of the Trust if such persons are also
employees of the Advisor or its affiliates, except as otherwise
provided herein.
(d) PORTFOLIO TRANSACTIONS. The Advisor shall place all orders for the
purchase and sale of portfolio securities for the account of the Trust
with brokers or dealers selected by the Advisor, although the Trust
will pay the actual brokerage commissions on portfolio transactions in
accordance with Paragraph 3(d). In executing portfolio transactions and
selecting brokers or dealers, the Advisor will use its best efforts to
seek on behalf of the Trust the best overall terms available. In
assessing the best overall terms available for any transaction, the
Advisor shall consider all factors it deems relevant, including,
without limitation, the breadth of the market in the security, the
price of the security, the financial condition and execution capability
of the broker or dealer, and the reasonableness of the commission, if
any (for the specific transaction and on a continuing basis). In
evaluating the best overall terms available, and in selecting the
broker or dealer to execute a particular transaction, the Advisor may
also consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Trust and/or the other accounts over which the Advisor
or an affiliate of the Advisor exercises investment discretion. The
Advisor is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if
the Advisor determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of that
particular transaction or in terms of all of the accounts over which
investment discretion is so exercised by the Advisor or its affiliates.
Nothing in this Agreement shall preclude the combining of orders for
the sale or purchase of securities or other investments with other
accounts managed by the Advisor or its affiliates provided that the
Advisor does not favor any account over any other account and provided
that any purchase or sale orders executed contemporaneously shall be
allocated in a manner the Advisor deems equitable among the accounts
involved.
<PAGE>
3. EXPENSES OF THE TRUST
The Advisor shall not bear the responsibility for or expenses
associated with operational, accounting or administrative services on
behalf of the Trust not directly related to providing an investment
program for the Trust. The expenses to be borne by the Trust include,
without limitation:
(a) charges and expenses of any registrar, stock,
transfer or dividend disbursing agent, custodian,
depository or other agent appointed by the Trust for
the safekeeping of its cash, portfolio securities and
other property;
(b) general operational, administrative and accounting
costs, such as the costs of calculating the Trust's
net asset value, the preparation of the Trust's tax
filings with relevant authorities and of compliance
with any and all regulatory authorities;
(c) charges and expenses of auditors and outside
accountants;
(d) brokerage commissions for transactions in the
portfolio securities of the Trust;
(e) all taxes, including issuance and transfer taxes, and
corporate fees payable by the Trust to Federal, state
or other U.S. or foreign governmental agencies;
(f) the cost of stock certificates representing shares of
the Trust;
(g) expenses involved in registering and maintaining
registrations of the Trust and of its shares with the
Securities and Exchange Commission and various states
and other jurisdictions, if applicable;
(h) all expenses of shareholders' and Trustees' meetings,
including meetings of committees, and of preparing,
setting in type, printing and mailing proxy
statements, quarterly reports, semi-annual reports,
annual reports and other communications to
shareholders;
(I) all expenses of preparing and setting in type
offering documents, and expenses of printing and
mailing the same to shareholders (but not expenses of
printing and mailing of offering documents and
literature used for any promotional purposes);
<PAGE>
(j) compensation and travel expenses of Trustees who are
not "interested persons" of the Advisor within the
meaning of the 1940 Act;
(k) the expense of furnishing, or causing to be
furnished, to each shareholder statements of account;
(l) charges and expenses of legal counsel in connection
with matters relating to the Trust, including,
without limitation, legal services rendered in
connection with the Trust's corporate and financial
structure, day to day legal affairs of the Trust and
relations with its shareholders, issuance of Trust
shares, and registration and qualification of
securities under Federal, state and other laws;
(m) the expenses of attendance at professional meetings
of organizations such as the Investment Company
Institute by officers and Trustees of the Trust, and
the membership or association dues of such
organizations;
(n) the cost and expense of maintaining the books and
records of the Trust;
(o) the expense of obtaining and maintaining a fidelity
bond as required by Section 17(g) of the 1940 Act and
the expense of obtaining and maintaining an errors
and omissions policy;
(p) interest payable on Trust borrowing;
(q) postage; and
(r) any other costs and expenses incurred by the Advisor
for Trust operations and activities, including but
not limited to the organizational costs of the Trust
if initially paid by the Advisor.
4. ADVISORY FEE.
For the services and facilities to be provided to the Trust by the
Advisor as provided in Paragraph 2 hereof, the Trust shall pay the
Advisor a fee, payable monthly, at the annual rate of ____% of 1% of
the Trust's average daily net assets, as determined by the Trust or its
third party administrator in accordance with procedures established
from time to time by or under the direction of the Board of Trustees of
the Trust.
<PAGE>
5. TRUST TRANSACTIONS.
The Advisor agrees that neither it nor any of its officers, directors,
employees or agents will take any long- or short-term position in the
shares of the Trust; provided, however, that such prohibition shall not
prevent the purchase of shares of the Trust by any of the persons above
described for their account and for investment at the price (net asset
value) at which such shares are available to the public at the time of
purchase or as part of the initial capital of the Trust.
6. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and
By-Laws of the Trust and the Articles of Incorporation and By-Laws of
the Advisor, respectively, it is understood (i) that Trustees,
officers, agents and shareholders of the Trust are or may be interested
in the Advisor (or any successor thereof) as directors, officers, or
otherwise; (ii) that directors, officers, agents and shareholders of
the Advisor are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise; and (iii) that the Advisor (or any
such successor) is or may be interested in the Trust as a shareholder
or otherwise and that the effect of any such adverse interests shall be
governed by said Master Trust Agreement and By-Laws.
7. LIABILITY OF ADVISOR AND OFFICERS AND TRUSTEES OF THE
TRUST.
Neither the Advisor nor its officers, directors, employees, agents or
controlling persons or assigns shall be liable for any error of
judgment or law, or for any loss suffered by the Trust or its
shareholders in connection with the matters to which this Agreement
relates, except that no provision of this Agreement shall be deemed to
protect the Advisor or such persons against any liability to the Trust
or its shareholders to which the Advisor might otherwise be subject by
reason of any willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its obligations
and duties under this Agreement.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) DURATION. This Agreement shall become effective on
the date hereof. Unless -------- terminated as herein
provided, this Agreement shall remain in full force
and effect until _______________, 199_ and shall
continue in full force and effect for periods of one
year thereafter so long as such continuance is
approved at least annually (i) by either the Trustees
of the Trust or by vote of a majority of the
outstanding voting shares (as defined in the 1940
Act) of the Trust, and (ii) in either event by the
vote of a majority of the Trustees of the Trust who
are not parties to this Agreement or "interested
<PAGE>
persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the
purpose of voting on such approval.
(b) Termination. This Agreement may be terminated at any
time, without payment of any penalty, by vote of the
Trustees of the Trust or by vote of a majority of the
outstanding shares (as defined in the 1940 Act ), or
by the Advisor, on sixty (60) days written notice to
the other party.
(c) Automatic Termination. This Agreement shall
automatically and immediately terminate in the event
of its assignment.
9. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties.
10. SERVICES NOT EXCLUSIVE.
The services of the Advisor to the Trust hereunder are not to be deemed
exclusive, and the Advisor shall be free to render similar services to
others and to engage in other activities.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(b) If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not
be affected thereby.
12. NAME OF TRUST
It is understood that the name "Peregrine" is the valuable property of
the Adviser and/or its affiliates, and that the Trust has the right to
include "Peregrine" as a part of its name only so long as this
Agreement shall continue. Upon termination of this Agreement the Trust
shall forthwith cease to use the "Peregrine" name and shall submit to
its shareholders an amendment to its Declaration of Trust to change the
Trust's name.
<PAGE>
13. LIMITATION OF LIABILITY.
The term Peregrine Funds means and refers to the Trustees from time to
time serving under the Master Trust Agreement of the Trust dated
November __, 1995 as the same may subsequently thereto have been, or
subsequently hereto be amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any
Trustees, shareholders, nominees, officers, agents or employees of the
Trust, personally, but bond only the assets and property of the Trust,
as provided in the Master Trust Agreement of the Trust. The execution
and delivery of this Agreement have been authorized by the Trustees and
the Trust, acting as such, and neither such authorization by such
officer shall be deemed to
have been made by any of them personally, but shall bind only the
assets and property of the Trust as provided in its Master Trust
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
PEREGRINE FUNDS
By
----------------------------
Attest: President
PEREGRINE ASSET MANAGEMENT
(HONG KONG) LIMITED
----------------------------
Attest: Manager, Director
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT made as of the _____ day of ________, 199_ by and between
PEREGRINE FUNDS (the "Trust"), a business trust established and existing under
the laws of ___________________________ and (the "Distributor"), a corporation
organized and existing under the laws of the State of Delaware.
WHEREAS, the Trust proposes to offer shares of beneficial interest in the
Asia Growth Fund of the Trust and from time to time hereafter establish
additional different series representing interests in different portfolios of
assets (each series being referred to herein as a "Fund" or collectively as the
"Funds").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree as follows:
Section 1. APPOINTMENT OF THE DISTRIBUTOR.
The Trust hereby appoints the Distributor as its exclusive agent to sell
and distribute shares of each Fund of the Trust then in existence (the "Shares")
for the account and risk of the Trust during the continuous offering of such
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder. It is
understood that purchases of Shares of any Fund may be made through other
broker-dealers who are members in good standing of the National Association of
Securities Dealers, Inc. in connection with the offering and sale of the Shares,
in which case the Distributor shall enter into Selling Group Agreements
("Selling Group Agreements") in substantially the form attached hereto or amend
existing Selling Group Agreements with such broker-dealers to conform therewith
and directly through the Trust's Transfer Agent in the manner set forth in an
fund's Prospectus.
Section 2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
(a) The Distributor agrees to arrange to sell, as exclusive agent for the
Trust, from time to time during the term of this Agreement, Shares of any Fund
upon the terms described in a Fund's Prospectus. As used in this Agreement, the
term "Prospectus" shall mean a prospectus and the term "Statement of Additional
Information" shall mean the statement of additional information included in the
Trust's Registration Statement and the term "Registration Statement" shall mean
the Registration Statement, including exhibits and financial statements, most
recently filed by the Trust with the Securities and Exchange Commission and
effective under the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), as such
Registration Statement is amended by any amendments thereto at the time in
effect.
<PAGE>
(b) Upon commencement of the continuous public offering of Shares of any
Fund of the Trust, the Distributor will hold itself available to receive orders,
satisfactory to the Distributor, for the purchase of Shares of that Fund and
will accept such orders on behalf of the Trust as of the time of receipt of such
orders and will transmit such orders as are so accepted to the Trust's Transfer
Agent as promptly as practicable. Purchase orders shall be deemed effective at
the time and in the manner set forth in a Fund's Prospectus.
(c) The Distributor, as agent for the Trust and in its discretion, may
enter into Selling Group Agreements (or amend existing Selling Group Agreements
to conform therewith) with such registered and qualified retail broker-dealers
as it may select pursuant to which such broker-dealers may also
arrange for the sale or sell Shares of any Fund.
(d) The offering price of the Shares of a Fund shall be the net asset value
(as describe in the Master Trust Agreement of the Trust, as amended from time to
time and determined as set forth in the Prospectus of such Fund and the
Statement of Additional Information) per Share for that Fund next determined
following receipt of an order plus the maximum sales charge, if any, calculated
in the manner set forth in the Fund's Prospectus. The Distributor shall receive
the entire amount of the sales charge, if any, as compensation for its services
under this Agreement; however, the Distributor may reallow all or any portion of
such sales charge to broker-dealers entering into Selling Group Agreements (or
amending existing Selling Group Agreements) with the Distributor to sell shares
of such Fund. Shares of a Fund may be sold at prices that reflect scheduled
variations in, or elimination of, the sales charge to particular classes of
investors or transactions in accordance with a Fund's Prospectus and the
Statement of Additional Information. The Trust shall furnish the Distributor,
with all possible promptness, advice of each computation of the net asset value
of a Fund. The Distributor shall also be entitled, subject to the terms and
conditions of the Trust's Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 to amounts payable by a Fund thereunder.
(e) The Distributor shall use its best efforts and shall not be obligated
to arrange for sales of any certain number of Shares of a Fund and the services
of the Distributor to the Trust hereunder shall not be deemed to be exclusive,
and the Distributor shall be free to (i) render similar services to, and act as
underwriter or distributor in connection with the distribution of shares of
other investment companies, and (ii) engage in any other businesses and
activities from time to time.
(f) The Distributor is authorized on behalf of the Trust to repurchase
Shares of a Fund presented to it by dealers at the price determined in
accordance with, and in the manner set forth in, the Prospectus of such Fund.
<PAGE>
Section 3. DUTIES OF THE TRUST.
(a) The Trust agrees to sell Shares of its Funds so long as it has Shares
available for sale and to cause its Transfer Agent to issue, if requested by the
purchaser, certificates for Shares of its Funds, registered in such names and
amounts as promptly as practicable after receipt by the Trust of the net asset
value thereof.
(b) The Trust shall keep the Distributor fully informed with regard to its
affairs and shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares of the Funds. This
shall include, without limitation, one certified copy of all financial
statements of the Funds prepared by independent accountants and such reasonable
number of copies of a Fund's most current Prospectus, the Statement of
Additional Information and annual and interim reports as the Distributor may
request. The Trust shall cooperate fully in the efforts of the Distributor to
arrange for the sale of Shares of the Funds and in the performance of the
Distributor under this Agreement.
(c) The Trust shall take, from time to time, all necessary action to
register the Shares of the Funds under the 1933 Act, including payments of the
related filing fees, so that there will be available for sale such number of
Shares of the Funds as the Distributor may be expected sell. The Trust agrees to
file from time to time such amendments, reports and other documents as may be
necessary in order that there may be no untrue statement of a material fact in
the Registration Statement or Prospectus of a Fund, or necessary in order that
there may be no omission to state a material fact in the Registration Statement
or Prospectus of a Fund which omission would make the statements therein, in
light of the circumstances under which they were made, misleading.
(d) The Trust shall use its best efforts to qualify and maintain the
registration and qualification of an appropriate number of Shares of the Funds
and the Trust for sale under the securities laws of such states as the
Distributor shall designate, and, if necessary or appropriate in connection
therewith, to qualify and maintain the qualification of the Trust as a
broker-dealer in such states. The Distributor shall furnish such information and
other material relating to its affairs and activities as may be requested by the
Trust in connection with such qualifications.
Section 4. EXPENSES.
(a) The Trust shall bear all costs and expenses of the continuous offering
of Shares of the Funds in connection with: (i) fees and disbursements of its
counsel and auditors, (ii) the preparation, filing and printing of any
registration statements and/or Prospectuses and Statements of Additional
Information required by and under federal and state securities laws, (iii) the
preparation and mailing of annual and interim reports and proxy materials, if
any, to shareholders and (iv) the qualification of the Shares of the Funds for
sale and of the Trust as a broker-dealer under the securities laws of such
<PAGE>
states or other jurisdictions as shall be selected by the Distributor pursuant
to Section 3(d) hereof and the cost and expenses payable to each such state for
continuing qualification therein.
(b) The Distributor shall bear (I) the costs and expenses of preparing,
printing and distributing any materials not prepared by the Trust and other
materials used by the Distributor in connection with its offering of Shares of
the Funds for sale to the public (including the additional cost of printing
copies of the Prospectus and of annual and interim reports) to shareholders
other than copies thereof required for distribution to the existing shareholders
or for filing with any federal and state securities authorities, (ii) any
expenses of advertising incurred by the Distributor in connection with such
offering and (iii) the expenses of registration or qualification of the
Distributor as a broker-dealer under federal or state laws, if necessary, and
the expenses of continuing such registration or qualification. It is understood
and agreed that so long as the Trust's Plan of Distribution as to a Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940 continues in
effect, any expenses incurred by the Distributor hereunder may be paid from
amounts received by it from a Fund under such Plan.
Section 5. INDEMNIFICATION.
The Trust agrees to indemnify, defend and hold the Distributor, its
officers, directors, employees and agents and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act or Section 20 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), free and
harmless from and against any and all losses, claims, damages, liabilities and
expenses (including the cost of investigating or defending such claims, damages
or liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors, employees and agents or any such
controlling person may incur under the 1933 Act, the 1934 Act, or under common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, a
Prospectus, or this Statement of Additional Information or arising out of or
based upon the omission or any alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such claims, damages, liabilities or expenses
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished in writing y the Distributor to the Trust for use in the
Registration Statement, a Prospectus or the Statement of Additional Information.
The Distributor agrees to promptly notify the Trust of any event giving rise to
rights of indemnification hereunder, including any action brought against the
Distributor, it officers, directors, employees and agents or any such
controlling person, such notification to be given by letter or telegram
addressed to the Trust at its principal business office, but the Distributor's
failure so to notify the Trust shall not relieve the Trust from any obligation
it may have to indemnify the Distributor hereunder or otherwise.
<PAGE>
The Distributor agrees to indemnify, defend and hold the Trust, its
Trustees and officers and any person who controls the Trust, if any, within the
meaning of Section 15 of the 1933 Act of Section 20 of the 1934 Act, free and
harmless from and against any and all losses, claims, damages, liabilities and
expenses (including the cost of investigating or defending such claims, damages
or liabilities and any counsel fees incurred in connection therewith) which the
Trust, its Trustees or officers or any such controlling person may incur under
the 1933 Act, the 1934 Act, or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Trust its Trustees or
officers or such controlling person arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Trust for use in the
Registration Statement, a Prospectus or the Statement of Additional Information.
The Trust agrees to promptly notify the Distributor of any event giving rise to
rights of indemnification hereunder, including any action brought against the
Trust, its Trustees or officers or any such controlling person, such
notification being given to the Distributor at its principal business office,
but the Trust's failure so to notify the Distributor shall not relieve the
Distributor from any obligation it may have to indemnify the Trust hereunder or
otherwise.
Section 6. CONTRIBUTION.
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in the first paragraph of Section 5 is
for any reason held to be unavailable from the Trust, the Trust and the
Distributor shall contribute to the aggregate losses, claims, damages,
liabilities or expenses (including the reasonable costs of investigating or
defending such claims, damages or liabilities but after deducting any
contribution received by the Trust from persons other than Distributor who may
also be liable or contribution, such as persons who control the Trust within the
meaning of the 1933 Act, officers of the Trust who signed the Registration
Statement and Trustees) to which the Trust and the Distributor may be subject in
such proportion so that the Distributor is responsible for that portion
represented by the percentage that the Sales Charge appearing in the Prospectus
of the Fund bears to the public offering price appearing therein and the Trust
is responsible for the balance; provided, however, that (I) in no case shall the
Distributor be responsible for any amount in excess of the portion of the Sales
Charge received and retained by it in respect of the Shares of a Fund purchased
through it hereunder and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as the
Distributor. Each party who may seek contribution under this Section 6 shall,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 6, give written
notice of the commencement of such action, suit or proceeding to the party or
parties from whom such contribution may be sought, but the omission so to notify
<PAGE>
such contributing party or parties shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
otherwise than on account of this Section 6.
Section 7. COMPLIANCE WITH SECURITIES LAWS.
The Trust represents that it is registered as a diversified, open-end
management investment company under the 1940 Act, and agrees that it will comply
with all of the provisions of the 1940 Act and of the rules and regulations
thereunder. The Trust and the Distributor each agree to comply with all of the
applicable terms and provisions of the 1940 Act, the 1933 Act and, subject to
the provisions of Section 3(d), all applicable state "Blue Sky" laws. The
Distributor agrees to comply with all of the applicable terms and provisions of
the 1934 Act.
Section 8. TERM OF CONTACT.
This Agreement shall go into effect on the date hereof and shall continue
in effect until _____________________________, and thereafter for successive
periods of one year each if such continuance is approved at least annually
thereafter (I) either by an affirmative vote of a majority of the outstanding
shares of the Trust or by the Board of Trustees of the Trust, and (ii) in either
case by a majority of the Trustees of the Trust who are not interested persons
of the Distributor or (otherwise than as Trustees) of the Trust, cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
may be terminated at any time by one party hereto to the other on sixty (60)
days' written notice to the other party.
Section 9. ASSIGNMENT.
This Agreement may not be assigned by the Distributor and shall
automatically terminate in the event of an attempted assignment by the
Distributor; provided, however, that the Distributor may employ or enter into
agreements with such other person, persons, corporation, or corporations, as it
shall determine in order to assist it in carrying out this Agreement.
Section 10. AMENDMENT.
This Agreement may be amended at any time by mutual agreement in writing o
the parties hereto, provided that any such amendment is approved by a majority
of the Trustees of the Trust who are not interested persons of the Distributor
or by the holders of a majority of the outstanding shares of the Trust.
Section 11. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
<PAGE>
Section 12. NON-LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES,
REPRESENTATIVES AND AGENTS.
Copies of the Master Trust Agreement, as amended, establishing the
Trust are on file with the Secretary of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed on behalf of the Trust by
officers of the Trust as officers and not individually and that the obligations
of or arising out of this Agreement are not binding upon any of the Trustees,
officers, shareholders, employees or agents of the Trust individually but are
binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PEREGRINE FUNDS
By_____________________________
<PAGE>
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective __________, 199_, and is between THE CHASE MANHATTAN
BANK, N.A. (the "Bank") and _________________________________ (the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
<PAGE>
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the
Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
<PAGE>
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are returned by
the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
<PAGE>
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advises or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty (60) days of receipt, the Customer shall be deemed to
have approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
a. Corporate Actions. Whenever the Bank receives information concerning the
Securities which requires discretionary action by the beneficial owner of the
Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions), the Bank
will give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, but if Instructions are not received in time
for the Bank to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Bank is authorized to sell such
rights entitlement or fractional interest and to credit the Deposit Account with
the proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. The Bank will deliver proxies to the Customer or its
designated agent pursuant to special arrangements which may have been agreed to
in writing. Such proxies shall be executed in the appropriate nominee name
relating to Securities in the Custody Account registered in the name of such
nominee but without indicating the manner in which such proxies are to be voted;
and where bearer Securities are involved, proxies will be delivered in
accordance with Instructions. Proxy voting services may be provided by the Bank
or, in whole or in part, by one or more third parties appointed by the Bank
(which may be affiliates of the Bank); provided that the Bank shall be liable
for the performance of any such third party to the same extent as the Bank would
have been if it performed such services itself.
c. TAX RECLAIMS. (i) Subject to the provisions hereof, the Bank will apply
for a reduction of withholding tax and any refund of any tax paid or tax credits
<PAGE>
which apply in each applicable market in respect of income payments on
Securities for the benefit of the Customer which the Bank believes may be
available to such Customer.
(ii) The provision of tax reclaim services by the Bank is conditional upon
the Bank receiving from the beneficial owner of Securities (A) a declaration of
its identity and place of residence and (B) certain other documentation (pro
forma copies of which are available from the Bank). The Customer acknowledges
that, if the Bank does not receive such declarations, documentation and
information, additional United Kingdom taxation with be deducted from all income
received in respect of Securities issued outside the United Kingdom and that
U.S. non-resident alien tax or U.S. backup withholding tax will be deducted from
U.S. source income. The Customer shall provide to the Bank such documentation
and information as it may require in connection with taxation, and warrants
that, when given, this information shall be true and correct in every respect,
not misleading in any way, and contain all material information. The Customer
undertakes to notify the Bank immediately if any such information requires
updating or amendment.
(iii) The Bank shall not be liable to the Customer or any third party for
any tax,, fines or penalties payable by the Bank or the Customer, and shall be
indemnified accordingly, whether these result from the inaccurate completion of
documents by the Customer or any third party, or as a result of the provision to
the Bank or any third party of inaccurate or misleading information or the
withholding of material information by the Customer or any other third party, or
as a result of any delay of any revenue authority or any other matter beyond the
control of the Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from any
cash received or credited to the Cash Account any taxes or levies required by
any revenue or governmental authority for whatever reason in respect of the
Securities or Cash Accounts.
(v) The Bank shall perform talc reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at its
absolute discretion, supplement or amend the markets in which the tax reclaim
services are offered. Other than as expressly provided in this sub-clause, the
Bank shall have no responsibility with regard to the Customer's tax position or
status in any jurisdiction.
(vi) The Customer confirms that the Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to the Customer or the Securities and/or Cash held for the Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or in
part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
<PAGE>
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWO, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, ALL Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly thereafter be
confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but the Customer will hold the Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement as follows:
(i) The Bank will use reasonable care with respect to its obligations under
this Agreement and the safekeeping of Assets. The Bank shall be liable to
the Customer for any loss which shall occur as the result of the failure of
a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event of
any loss to the Customer by reason of the failure of the Bank or its
Subcustodian to utilize reasonable care, the Bank shall be liable to the
Customer only to the extent of the Customer's direct damages, to 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 conditions or circumstances. The Bank will not be responsible
for the insolvency of any Subcustodian which is not a branch or affiliate
of Bank.
<PAGE>
(ii) The Bank will not be responsible for any act, omission, default or the
solvency of any broker or agent which it or a Subcustodian appoints unless
such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its
obligations under this Agreement, the Bank may rely on the genuineness of
any document which it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes
or other governmental charges, and any related expenses with respect to
income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing
or holding Assets in a particular country including, but not limited to,
losses resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which
prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or the
retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided
in Section S(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person regarding
the financial condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this Agreement;
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
<PAGE>
Instructions shall bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTION. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement shall apply to such transaction.
(b) CERTIFICATION OF RESIDENCY. etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) ACCESS TO RECORDS. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) GOVERNING LAW: SUCCESSORS AND ASSIGNS. This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the
Assets deposited in the Accounts are (Check one):
<PAGE>
_ Employee Benefit Plan or other assets subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
_ Mutual Fund assets subject to certain Securities and Exchange Commission
("SEC") rules and regulations;
_ Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A, Exhibits I - and the following Rider(s) [Check applicable
rider(s)]:
_ ERISA
_ MUTUAL FUND
_ SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) SEVERABILITY. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(g) WAIVER. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this Agreement,
or waiver of any breach or default, is effective unless in writing and signed by
the party against whom the waiver is to be enforced.
(h) NOTICES. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:_______________________
Customer: __________________________
or telex:_______________________
<PAGE>
(i) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty (60) days written notice to the other, provided that such
notice to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty (60) days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty (60)
days following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By:
THE CHASE MANHATTAN BANK, N.A.
By:
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this_____ day of , 19__, before me personally came___________, to me known,
who being by me duly sworn, did depose and say that he/she resides in _____ at
_________
that he/she is ________________________ of____________________________, the
entity described in and which executed the foregoing instrument; that he/she
knows the seal of said entity, that the seal affixed to said instrument is such
seal, that it was so affixed by order of said entity, and that he/she signed
his/her name thereto by like order.
Sworn to before me this day of , 19_.
Notary
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ________ day of ____________ ,19__, before me personally came
____________, to me known, who being by me duly sworn, did depose and say that
he/she resides in___________at ______________________; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the corporation
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of Directors of
said corporation, and that he/she signed his/her name thereto by like order.
Sworn to before me this day of , 19_.
Notary
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
-----------------------------
____________________, effective __________
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof) (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank; or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transitional system for the central handling of securities or equivalent
book-entries.
<PAGE>
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through of Schedule A, and further represents that its Board has
determined that the use of each Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the Fund(s) and its (their)
shareholders. The Bank will supply the Customer with any amendment to Schedule A
for approval. The Customer has supplied or will supply the Bank with certified
copies of its Board of Directors resolution(s) with respect to the foregoing
prior to placing Assets with any Subcustodian so approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is to be
made and Customer shall be solely responsible to assure that Instructions are in
accord with any limitations or restrictions applicable to the Customer by law or
as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank,
its Subcustodian or the Customer's transfer agent, such shares to be
purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of
such shares to be so redeemed;
<PAGE>
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only
upon payment to the Bank of monies for the premium due and a receipt for
the Securities which are to be held in escrow. Upon exercise of the option,
or at expiration, the Bank will receive from brokers the Securities
previously deposited. The Bank will act strictly in accordance with
Instructions in the delivery of Securities to be held in escrow and will
have no responsibility or liability for any such Securities which are not
returned promptly when due other than to make proper request for such
return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose
for which the delivery or payment is to be made, the amount of the payment
or specific Securities to be delivered, the name of the person or persons
to whom delivery or payment is to be made, and a certification that the
purpose is a proper purpose under the instruments governing the Customer;
and
(o) Upon the termination of this Agreement as set forth in Section 14(i).
Section 12. STANDARD OF CARE: LIABILITIES.
Add the folllowing subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and
each eligible foreign securities depository holding the Customer's
Securities pursuant to this Agreement afford protection for such Securities
at least equal to that afforded by the Bank's established procedures with
respect to similar securities held by the Bank and its securities
depositories in New York.
Section 14. ACCESS TO RECORDS.
ADD THE FOLLOWING LANGUAGE TO THE END OF SECTION 14(C):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
GLOBAL CUSTODY AGREEMENT
WITH
DATE
SPECIAL TERMS AND CONDITIONS RIDER
GLOBAL CUSTODY AGREEMENT
WITH
DATE
AGENCY AGREEMENT
THIS AGREEMENT made the_____________day of_______________, 19 , by and
between PEREGRINE FUNDS, a Delaware business trust having its principal place of
business at c/o Van Eck Associates Corp., 99 Park Avenue, 8th Floor, New York,
New York 10016 ("Fund"), and DST SYSTEMS, INC., a corporation existing under the
laws of the State of Delaware, having its principal place of business at 1055
Broadway, Kansas City, Missouri 64105 ("DST"):
WITNESSETH:
WHEREAS, Fund desires to appoint DST as Transfer Agent and Dividend Disbursing
Agent, and DST desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. DOCUMENTS TO BE FILED WITH APPOINTMENT.
In connection with the appointment of DST as Transfer Agent and
Dividend Disbursing Agent for Fund, there will be filed with DST the
following documents:
A. A certified copy of the resolutions of the Board of
Trustees of Fund appointing DST as Transfer Agent and Dividend
Disbursing Agent, approving the form of this Agreement, and
designating certain persons to sign stock certificates, if
any, and give written instructions and requests on behalf of
Fund;
B. A certified copy of the Articles of Incorporation of Fund
and all amendments thereto;
C. A certified copy of the Bylaws of Fund;
D. Copies of Registration Statements and amendments thereto,
filed with the Securities and Exchange Commission.
E. Specimens of all forms of outstanding stock certificates,
in the forms approved by the Board of Directors of Fund, with
a certificate of the Secretary of Fund, as to such approval;
<PAGE>
F. Specimens of the signatures of the officers of the Fund
authorized to sign stock certificates and individuals
authorized to sign written instructions and requests;
G. An opinion of counsel for Fund with respect to:
(1) Fund's organization and existence under the laws of its state
of organization,
(2) The status of all shares of stock of Fund covered by the
appointment under the Securities Act of 1933, as amended, and
any other applicable federal or state statute, and
(3) That all issued shares are, and all unissued shares will be,
when issued, validly issued, fully paid and nonassessable.
2. CERTAIN REPRESENTATIONS AND WARRANTIES OF DST.
DST represents and warrants to Fund that:
A. It is a corporation duly organized and existing and in good
standing under the laws of Delaware.
B. It is duly qualified to carry on its business in the State
of Missouri.
C. It is empowered under applicable laws and by its Articles
of Incorporation and bylaws to enter into and perform the
services contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required
under the Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
F. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
3 CERTAIN REPRESENTATIONS AND WARRANTIES OF FUND.
Fund represents and warrants to DST that:
A. It is a business trust duly organized and existing and in
good standing under the laws of the State of Delaware.
<PAGE>
B. It is an open-end diversified management investment company
registered under the Investment Company Act of 1940, as
amended.
C. A registration statement under the Securities Act of 1933
has been filed and will be effective with respect to all
shares of Fund being offered for sale.
D. All requisite steps have been and will continue to be taken
to register Fund's shares for sale in all applicable states
and such registration will be effective at all times shares
are offered for sale in such state.
E. Fund is empowered under applicable laws and by its charter
and bylaws to enter into and perform this Agreement.
4. SCOPE OF APPOINTMENT.
A. Subject to the conditions set forth in this Agreement, Fund
hereby appoints DST as Transfer Agent and Dividend Disbursing
Agent.
B. DST hereby accepts such appointment and agrees that it will
act as Fund's Transfer Agent and Dividend Disbursing Agent.
DST agrees that it will also act as agent in connection with
Fund's periodic withdrawal payment accounts and other open
accounts or similar plans for shareholders, if any.
C. Fund agrees to use its best efforts to deliver to DST in
Kansas City, Missouri, as soon as they are available, all of
its shareholder account records.
D. DST, utilizing TA2000(TM), DST's computerized data
processing system for securityholder accounting (the
"TA2000(TM) System"), will perform the following services as
transfer, dividend disbursing and shareholders' servicing
agent for the Fund, and as agent of the Fund for shareholder
accounts thereof, in a timely manner: issuing (including
countersigning), transferring and canceling share
certificates; maintaining all shareholder accounts; providing
transaction journals; preparing shareholder meeting lists,
mailing proxies and proxy materials, receiving and tabulating
proxies, certifying the shareholder votes in the Fund; mailing
shareholder reports and prospectuses; withholding, as required
by Federal law, taxes on shareholder accounts, disbursing
income dividends and capital gains distributions to
shareholders, preparing, filing and mailing U.S. Treasury
<PAGE>
Department Forms 1099, 1042, and 1042S and performing and
paying backup withholding as required for all shareholders;
preparing and mailing confirmation forms to shareholders and
dealers, as instructed, for all purchases and liquidations of
shares of the Fund and other confirmable transactions in
shareholders' accounts; recording reinvestment of dividends
and distributions in shares of the Fund; providing or making
available on-line daily and monthly reports as provided by the
TA2000(TM)System and as requested by the Fund or its
management company; maintaining those records necessary to
carry out DST's duties hereunder, including all information
reasonably required by the Fund to account for all
transactions in Fund shares, calculating the appropriate sales
charge with respect to each purchase of Fund shares as set
forth in the prospectus for the Fund, determining the portion
of each sales charge payable to the dealer participating in a
sale in accordance with schedules delivered to DST by the
Fund's principal underwriter or distributor (hereinafter
"principal underwriter") from time to time, disbursing dealer
commissions collected to such dealers, determining the portion
of each sales charge payable to such principal underwriter and
disbursing such commissions to the principal underwriter;
receiving correspondence pertaining to any former, existing or
new shareholder account, processing such correspondence for
proper recordkeeping, and responding promptly to shareholder
correspondence; mailing to dealers confirmations of wire order
trades; mailing copies of shareholder statements to
shareholders and registered representatives of dealers in
accordance with the Fund's instructions; and processing,
generally on the date of receipt, purchases or redemptions or
instructions to settle any mail or wire order purchases or
redemptions received in proper order as set forth in the
prospectus, rejecting promptly any requests not received in
proper order (as defined by the Fund or its agents), and
causing exchanges of shares to be executed in accordance with
the Fund's instructions and prospectus and the general
exchange privilege application.
F. Fund shall have the right to add new series to the
TA2000(TM) System upon at least thirty (30) days' prior
written notice to DST provided that the requirements of the
new series are generally consistent with services then being
provided by DST under this Agreement. Rates or charges for
additional series shall be as set forth in Exhibit B, as
hereinafter defined, for the remainder of the contract term
except as such series use functions, features or
characteristics for which DST has imposed an additional charge
as part of its standard pricing schedule. In the latter event,
rates and charges shall be in accordance with DST's
then-standard pricing schedule.
G. DST shall use reasonable efforts to provide, reasonably
promptly under the circumstances, the same services with
respect to any new, additional functions or features or any
changes or improvements to existing functions or features as
provided for in Fund's instructions, prospectus or application
<PAGE>
as amended from time to time, for the Fund provided (i) DST is
advised in advance by the Fund of any changes therein and (ii)
the TA2000(TM) System and the mode of operations utilized by
DST as then constituted supports such additional functions and
features. If any addition to, improvement of or change in the
features and functions currently provided by the TA2000(TM)
System or the operations as requested by the Fund requires an
enhancement or modification to the TA2000(TM) System or to
operations as presently conducted by DST, DST shall not be
liable therefore until such modification or enhancement is
installed on the TA2000(TM) System or new mode of operation is
instituted. If any new, additional function or feature or
change or improvement to existing functions or features or new
service or mode of operation measurably increases DST's cost
of performing the services required hereunder at the current
level of service, DST shall advise the Fund of the amount of
such increase and if the Fund elects to utilize such function,
feature or service, DST shall be entitled to increase its fees
by the amount of the increase in costs. In no event shall DST
be responsible for or liable to provide any additional
function, feature, improvement or change in method of
operation until it has consented thereto in writing.
5 LIMIT OF AUTHORITY.
Unless otherwise expressly limited by the resolution of appointment or
by subsequent action by the Fund, the appointment of DST as Transfer
Agent will be construed to cover the full amount of authorized stock of
the class or classes for which DST is appointed as the same will, from
time to time, be constituted, and any subsequent increases in such
authorized amount.
In case of such increase Fund will file with DST:
A. If the appointment of DST was theretofore expressly
limited, a certified copy of a resolution of the Board of
Trustees of Fund increasing the authority of DST;
B. A certified copy of the amendment to the Articles of
Incorporation of Fund authorizing the increase of stock;
C. A certified copy of the order or consent of each
governmental or regulatory authority required by law to
consent to the issuance of the increased stock, and an opinion
of counsel that the order or consent of no other governmental
or regulatory authority is required;
D. Opinion of counsel for Fund stating:
<PAGE>
(1) The status of the additional shares of stock of Fund under the
Securities Act of 1933, as amended, and any other applicable
federal or state statute; and
(2) That the additional shares are, or when issued will be,
validly issued, fully paid and nonassessable.
6. COMPENSATION AND EXPENSES.
A. In consideration for its services hereunder as Transfer
Agent and Dividend Disbursing Agent, Fund will pay to DST from
time to time a reasonable compensation for all services
rendered as Agent, and also, all its reasonable out-of-pocket
expenses, charges, counsel fees, and other disbursements
(Compensation and Expenses) incurred in connection with the
agency. Such compensation is set forth in a separate schedule
to be agreed to by Fund and DST, a copy of which is attached
hereto as Exhibit A. If the Fund has not paid such
Compensation and Expenses to DST within a reasonable time, DST
may charge against any monies held under this Agreement, the
amount of any Compensation and/or Expenses for which it shall
be entitled to reimbursement under this Agreement.
B. The Fund also agrees promptly to reimburse DST for all
reasonable out-of-pocket expenses or disbursements incurred by
DST in connection with the performance of services under this
Agreement including, but not limited to, expenses for postage,
express delivery services, freight charges, envelopes, checks,
drafts, forms (continuous or otherwise), specially requested
reports and statements, telephone calls, telegraphs,
stationery supplies, counsel fees, outside printing and
mailing firms (including Output Technology, Inc. and Support
Resources, Inc.), magnetic tapes, reels or cartridges (if sent
to a Fund or to third party at the Fund's request) and
magnetic tape handling charges, off-site record storage, media
for storage of records (e.g., microfilm, microfiche, optical
platters, computer tapes), computer equipment installed at the
Fund's request at the Fund's or a third party's premises,
telecommunications equipment, telephone/telecommunication
lines between Fund and its agents, on one hand, and DST on the
other, proxy soliciting, processing and/or tabulating costs,
second-site backup computer facility, transmission of
statement data for remote printing or processing, and NSCC
transaction fees to the extent any of the foregoing are paid
by DST. The Fund agrees to pay postage expenses at least one
day in advance if so requested. In addition, any other
expenses incurred by DST at the request or with the consent of
the Fund will be promptly reimbursed by the Fund.
C. Amounts due hereunder shall be due and paid on or before
the thirtieth (30th) business day after receipt of the
<PAGE>
statement therefor by the Fund (the "Due Date"). The Fund is
aware that its failure to pay all amounts in a timely fashion
so that they will be received by DST on or before the Due Date
will give rise to costs to DST not contemplated by this
Agreement, including but not limited to carrying, processing
and accounting charges. Accordingly, subject to Section 6.D.
hereof, in the event that any amounts due hereunder are not
received by DST by the Due Date, the Fund shall pay a late
charge equal to the lesser of the maximum amount permitted by
applicable law or the product of that rate announced from time
to time by State Street Bank and Trust Company as its "Prime
Rate" plus three (3) percentage points times the amount
overdue, times the number of days from the Due Date up to and
including the day on which payment is received by DST divided
by 365. The parties hereby agree that such late charge
represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not
properly due. Acceptance of such late charge shall in no event
constitute a waiver of the Fund's or DST's default or prevent
the non-defaulting party from exercising any other rights and
remedies available to it.
D. In the event that any charges are disputed, the Fund shall,
on or before the Due Date, pay all undisputed amounts due
hereunder and notify DST in writing of any disputed charges
for out-of-pocket expenses which it is disputing in good
faith. Payment for such disputed charges shall be due on or
before the close of the fifth (5th) business day after the day
on which DST provides to the Fund documentation which an
objective observer would agree reasonably supports the
disputed charges (the "Revised Due Date"). Late charges shall
not begin to accrue as to charges disputed in good faith until
the first day after the Revised Due Date.
E. The fees and charges set forth on Exhibit A shall increase
or may be increased as follows:
(1) On the first day of each new term, in accordance with the "Fee
Increases" provision in Exhibit A.
(2) DST may increase the fees and charges set forth on Exhibit A
upon at least ninety (90) days prior written notice, if
changes in existing laws, rules or regulations: (i) require
substantial system modifications or (ii) materially increase
cost of performance hereunder.
(3) DST may charge for additional features of TA2000(TM) used by
the Fund which features are not consistent with the Fund's
current processing requirements.
<PAGE>
If DST notifies Fund of an increase in fees or charges pursuant to subparagraph
(2) of this Section 6.E., the parties shall confer, diligently and in good faith
and agree upon a new fee to cover the amount necessary, but not more than such
amount, to reimburse DST for the Fund's aliquot portion of the cost of
developing the new software to comply with regulatory charges and for the
increased cost of operation. If DST notifies Fund of an increase in fees or
charges under subparagraph (3) of this Section 6.E., the parties shall confer,
diligently and in good faith, and agree upon a new fee to cover such new fund
feature.
7. OPERATION OF DST SYSTEM.
In connection with the performance of its services under this
Agreement, DST is responsible for such items as:
A. That entries in DST's records and in the Fund's records on
the TA2000(TM) System created by DST reflect the orders,
instructions, and other information received by DST from
broker-dealers, shareholders, the Fund, the Fund's principal
underwriter or Fund's investment adviser;
B. That shareholder lists, shareholder account verifications,
confirmations and other shareholder account information to be
produced from its records or data be available and accurately
reflect the data in the Fund's records on the TA2000(TM)
System;
C. The accurate and timely issuance of dividend and
distribution checks in accordance with instructions received
from the Fund and the data in the Fund's records on the
TA2000(TM) System;
D. That redemption transactions and payments be effected
timely, under normal circumstances on the day of receipt, and
accurately in accordance with redemption instructions received
by DST from dealers, shareholders, the Fund or the Fund's
principal underwriter and the data in the Fund's records on
the TA2000(TM) System;
E. The deposit daily in the Fund's appropriate special bank
account of all checks and payments received by DST from NSCC,
broker-dealers or shareholders for investment in shares;
F. Notwithstanding anything herein to the contrary, with
respect to "as of" adjustments, DST will not assume one
hundred percent (100%) responsibility for losses resulting
from "as of's" due to clerical errors or misinterpretations of
shareholder instructions, but DST will discuss with the Fund
<PAGE>
DST's accepting liability for an "as of" on a case-by-case
basis and may accept financial responsibility for a particular
situation resulting in a financial loss to the Fund where DST
in its discretion deems that to be appropriate;
G. The requiring of proper forms of instructions, signatures
and signature guarantees and any necessary documents
supporting the opening of shareholder accounts transfers,
redemptions and other shareholder account transactions, all in
conformance with DST's present procedures as set forth in its
Legal Manual, Third Party Check Procedures, Checkwriting Draft
Procedures, and Signature Guarantee Procedures with such
changes or deviations therefrom as may be from time to time
required or approved by the Fund, its investment adviser or
principal underwriter, or their or DST's counsel (the
"Procedures") and the rejection of orders or instructions not
in good order in accordance with the applicable prospectus or
the Procedures;
H. The maintenance of customary records in connection with its
agency, and particularly those records required to be
maintained pursuant to subparagraph (2) (iv) of paragraph (b)
of Rule 31a-1 under the Investment Company Act of 1940, if
any; and
I. The maintenance of a current, duplicate set of the Fund's
essential records at a secure separate location, in a form
available and usable forthwith in the event of any breakdown
or disaster disrupting its main operation.
8. INDEMNIFICATION.
A. DST shall at all times use reasonable care, due diligence
and act in good faith in performing its duties under this
Agreement. DST shall provide its services as transfer agent in
accordance with Section 17A of the Exchange Act, and the rules
and regulations thereunder. In the absence of bad faith,
willful misconduct, knowing violations of applicable law
pertaining to the manner in which transfer agency services are
to be performed by DST (excluding any violations arising
directly or indirectly out of the actions of DSTunaffiliated
third parties), reckless disregard of the performance of its
duties, or negligence on its part, DST shall not be liable for
any action taken, suffered, or omitted by it or for any error
of judgment made by it in the performance of its duties under
this Agreement. For those activities or actions delineated in
the Procedures, DST shall be presumed to have used reasonable
care, due diligence and acted in good faith if it has acted in
accordance with the Procedures, copies of which have been
provided to the Fund and reviewed and approved by Fund
counsel, as amended from time to time with approval of
counsel, or for any deviation therefrom approved by Fund or
<PAGE>
DST counsel. DST shall not be responsible for, and the Fund
shall indemnify and hold DST harmless from and against, any
and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability which may be asserted against
DST or for which DST may be held to be liable, arising out of
or attributable to:
(1) All actions of DST required to be taken by DST pursuant to
this Agreement, provided that DST has acted in good faith and
with due diligence and reasonable care;
(2) The Fund's refusal or failure to comply with the terms of this
Agreement, the Fund's negligence or willful misconduct, or the
breach of any representation or warranty of the Fund
hereunder;
(3) The good faith reliance on, or the carrying out of, any
written or oral instructions or requests of persons designated
by the Fund in writing (see Exhibit B) from time to time as
authorized to give instructions on its behalf or
representatives of the Fund's investment advisor, sponsor or
principal underwriter or DST's good faith reliance on, or use
of, information, data, records and documents received from, or
which have been prepared and/or maintained by the Fund, its
investment advisor, its sponsor or its principal underwriter;
(4) Defaults by dealers or shareowners with respect to payment for
share orders previously entered;
(5) The offer or sale of the Fund's shares in violation of any
requirement under federal securities laws or regulations or
the securities laws or regulations of any state or in
violation of any stop order or other determination or ruling
by any federal agency or state with respect to the offer or
sale of such shares in such state (unless such violation
results from DST's failure to comply with written instructions
of the Fund or of any officer of the Fund that no offers or
sales be input into the Funds securityholder records in or to
residents of such state);
(6) The Fund's errors and mistakes in the use of the TA2000(TM)
System, the data center, computer and related equipment used
to access the TA2000(TM) System (the "DST Facilities"), and
control procedures relating thereto in the verification of
output and in the remote input of data;
(7) Errors, inaccuracies, and omissions in, or errors,
inaccuracies or omissions of DST arising out of or resulting
<PAGE>
from such errors, inaccuracies and omissions in, the Fund's
records, shareholder and other records, delivered to DST
hereunder by the Fund or its prior agent(s); and
(8) Actions or omissions to act by the Fund or agents designated
by the Fund with respect to duties assumed thereby as provided
for in Section 21 hereof.
B. Except where DST is entitled to indemnification under
Section 8.A. hereof and with respect to "as ofs" set forth in
Section 7.F., DST shall indemnify and hold the Fund harmless
from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of
DST's failure to comply with the terms of this Agreement or
arising out of or attributable to DST's negligence or willful
misconduct or breach of any representation or warranty of DST
hereunder.
C. EXCEPT FOR VIOLATIONS OF SECTIONS 23, IN NO EVENT AND UNDER
NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE
LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER
PARTY, FOR CONSEQUENTIAL DAMAGES FOR ANY ACT OR FAILURE TO ACT
UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE
POSSIBILITY THEREOF.
D. Promptly after receipt by an indemnified person of notice
of the commencement of any action, such indemnified person
will, if a claim in respect thereto is to be made against an
indemnifying party hereunder, notify the indemnifying party in
writing of the commencement thereof; but the failure so to
notify the indemnifying party will not relieve an indemnifying
party from any liability that it may have to any indemnified
person for contribution or otherwise under the indemnity
agreement contained herein except to the extent it is
prejudiced as a proximate result of such failure to timely
notify. In case any such action is brought against any
indemnified person and such indemnified person seeks or
intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to
the extent that it may wish, assume the defense thereof (in
its own name or in the name and on behalf of any indemnified
party or both with counsel reasonably satisfactory to such
indemnified person); provided, however, if the defendants in
any such action include both the indemnified person and an
indemnifying party and the indemnified person shall have
reasonably concluded that there may be a conflict between the
positions of the indemnified person and an indemnifying party
in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified
persons which are inconsistent with those available to an
<PAGE>
indemnifying party, the indemnified person or indemnified
persons shall have the right to select one separate counsel
(in addition to local counsel) to assume such legal defense
and to otherwise participate in the defense of such action on
behalf of such indemnified person or indemnified persons at
such indemnified party's sole expense. Upon receipt of notice
from an indemnifying party to such indemnified person of its
election so to assume the defense of such action and approval
by the indemnified person of counsel, which approval shall not
be unreasonably withheld (and any disapproval shall be
accompanied by a written statement of the reasons therefor),
the indemnifying party will not be liable to such indemnified
person hereunder for any legal or other expenses subsequently
incurred by such indemnified person in connection with the
defense thereof. An indemnifying party will not settle or
compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified
persons are actual or potential parties to such claim, action,
suit or proceeding) unless such settlement, compromise or
consent includes an unconditional release of each indemnified
person from all liability arising out of such claim, action,
suit or proceeding. An indemnified party will not, without the
prior written consent of the indemnifying party settle or
compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution
may be sought hereunder. If it does so, it waives its right to
indemnification therefor.
9. CERTAIN COVENANTS OF DST AND FUND.
A. All requisite steps will be taken by Fund from time to time
when and as necessary to register the Fund's shares for sale
in all states in which Fund's shares shall at the time be
offered for sale and require registration. If at any time Fund
will receive notice of any stop order or other proceeding in
any such state affecting such registration or the sale of
Fund's shares, or of any stop order or other proceeding under
the federal securities laws affecting the sale of Fund's
shares, Fund will give prompt notice thereof to DST.
B. DST hereby agrees to perform such transfer agency functions
as are set forth in section 4.E. above and establish and
maintain facilities and procedures reasonably acceptable to
Fund for safekeeping of stock certificates, check forms, and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices, and to carry such insurance
as it considers adequate and reasonably available.
<PAGE>
C. To the extent required by Section 31 of the Investment
Company Act of 1940 as amended and Rules thereunder, DST
agrees that all records maintained by DST relating to the
services to be performed by DST under this Agreement are the
property of Fund and will be preserved and will be surrendered
promptly to Fund on request.
D. DST agrees to furnish Fund annual reports of its parent's
financial condition, consisting of a balance sheet, earnings
statement and any other financial information reasonably
requested by Fund. The annual financial statements will be
certified by DST's certified public accountants.
E. DST represents and agrees that it will use its best efforts
to keep current on the trends of the investment company
industry relating to shareholder services and will use its
best efforts to continue to modernize and improve.
F. DST will permit Fund and its authorized representatives to
make periodic inspections of its operations as such would
involve the Fund at reasonable times during business hours.
G. DST agrees to use its best efforts to provide in Kansas
City at the Fund's expense two (2) man weeks of training for
the Fund's personnel in connection with use and operation of
the TA2000(TM) System. All travel and reimbursable expenses
incurred by the Fund's personnel in connection with and during
training at DST's Facility shall be borne by the Fund. At the
Fund's option and expense, DST also agrees to use its best
efforts to provide an additional two (2) man weeks of training
at the Fund's facility for the Fund's personnel in connection
with the conversion to the TA2000(TM) System. Reasonable
travel, per diem and reimbursable expenses incurred by DST
personnel in connection with and during training at the Fund's
facility or in connection with the conversion shall be borne
by the Fund.
10. RECAPITALIZATION OR READJUSTMENT.
In case of any recapitalization, readjustment or other change in the
capital structure of Fund requiring a change in the form of stock
certificates, DST will issue or register certificates in the new form
in exchange for, or in transfer of, the outstanding certificates in the
old form, upon receiving:
A. Written instructions from an officer of Fund;
B. Certified copy of the amendment to the Articles of
Incorporation or other document effecting the change;
<PAGE>
C. Certified copy of the order or consent of each governmental
or regulatory authority, required by law to the issuance of
the stock in the new form, and an opinion of counsel that the
order or consent of no other government or regulatory
authority is required;
D. Specimens of the new certificates in the form approved by
the Board of Directors of Fund, with a certificate of the
Secretary of Fund as to such approval;
E. Opinion of counsel for Fund stating:
(1) The status of the shares of stock of Fundin the new form under
the Securities Act of 1933, as amended and any other
applicable federal or state statute; and
(2) That the issued shares in the new form are, and all unissued
shares will be, when issued, validly issued, fully paid and
nonassessable.
11. STOCK CERTIFICATES.
[STRIKE IF THE FUND WILL NOT ISSUE STOCK CERTIFICATES] Fund will
furnish DST with a sufficient supply of blank stock certificates and
from time to time will renew such supply upon the request of DST. Such
certificates will be signed manually or by facsimile signatures of the
officers of Fund authorized by law and by bylaws to sign stock
certificates, and if required, will bear the corporate seal or
facsimile thereof.
12. DEATH, RESIGNATION OR REMOVAL OF SIQNINQ OFFICER.
Fund will file promptly with DST written notice of any change in the
officers authorized to sign stock certificates, written instructions or
requests, together with two signature cards bearing the specimen
signature of each newly authorized officer. In case any officer of Fund
who will have signed manually or whose facsimile signature will have
been affixed to blank stock certificates will die, resign, or be
removed prior to the issuance of such certificates, DST may issue or
register such stock certificates as the stock certificates of Fund
notwithstanding such death, resignation, or removal, until specifically
directed to the contrary by Fund in writing. In the absence of such
direction, Fund will file promptly with DST such approval, adoption, or
ratification as may be required by law.
13. FUTURE AMENDMENTS OF CHARTER AND BY-LAWS.
Fund will promptly file with DST copies of all material amendments to
its Articles of Incorporation or bylaws made after the date of this
Agreement.
<PAGE>
14. INSTRUCTIONS, OPINION OF COUNSEL AND SIGNATURES.
At any time DST may apply to any person authorized by the Fund to give
instructions to DST, and may with the approval of a Fund officer
consult with legal counsel for Fund or its own legal counsel at the
expense of Fund, with respect to any matter arising in connection with
the agency and it will not be liable for any action taken or omitted by
it in good faith in reliance upon such instructions or upon the opinion
of such counsel. DST will be protected in acting upon any paper or
document reasonably believed by it to be genuine and to have been
signed by the proper person or persons and will not be held to have
notice of any change of authority of any person, until receipt of
written notice thereof from Fund. It will also be protected in
recognizing stock certificates which it reasonably believes to bear the
proper manual or facsimile signatures of the officers of Fund, and the
proper countersignature of any former Transfer Agent or Registrar, or
of a co-Transfer Agent or co-Registrar.
15. FORCE MAJEURE AND DISASTER RECOVERY PLANS.
A. DST shall not be responsible or liable for its failure or
delay in performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including,
without limitation: any interruption, loss or malfunction or
any utility, transportation, computer (hardware or software)
or communication service; inability to obtain labor, material,
equipment or transportation, or a delay in mails; governmental
or exchange action, statute, ordinance, rulings, regulations
or direction; war, strike, riot, emergency, civil disturbance,
terrorism, vandalism, explosions, labor disputes, freezes,
floods, fires, tornadoes, acts of God or public enemy,
revolutions, or insurrection; or any other cause, contingency,
circumstance or delay not subject to DST's reasonable control
which prevents or hinders DST's performance hereunder.
B. DST currently maintains an agreement with a third party
whereby DST is to be permitted to use on a "shared use" basis
a "hot site" (the Recovery Facility") maintained by such party
in event of a disaster rendering the DST Facilities
inoperable. DST has developed and is continually revising a
Business Contingency Plan detailing which, how, when, and by
whom data maintained by DST at the DST Facilities will be
installed and operated at the Recovery Facility. Provided Fund
is paying its pro rata portion of the charge therefor, DST
would, in event of a disaster rendering the DST Facilities
inoperable, convert the TA2000(TM) System containing the
designated Fund data to the computers at the Recovery Facility
in accordance with the then current Business Contingency Plan.
<PAGE>
C. DST also currently maintains, separate from the area in
which the operations which provides the services to the Fund
hereunder are located, a Crisis Management Center consisting
of phones, computers and the other equipment necessary to
operate a full service transfer agency business in the event
one of its operations areas is rendered inoperable. The
transfer of operations to other operating areas or to the
Crisis Management Center is also covered in DST' s Business
Contingency Plan.
16. CERTIFICATION OF DOCUMENTS.
The required copy of the Articles of Incorporation of Fund and copies
of all amendments thereto will be certified by the Secretary of State
(or other appropriate official) of the State of Incorporation, and if
such Articles of Incorporation and amendments are required by law to be
also filed with a county, city or other officer of official body, a
certificate of such filing will appear on the certified copy submitted
to DST. A copy of the order or consent of each governmental or
regulatory authority required by law to the issuance of the stock will
be certified by the Secretary or Clerk of such governmental or
regulatory authority, under proper seal of such authority. The copy of
the Bylaws and copies of all amendments thereto, and copies of
resolutions of the Board of Directors of Fund, will be certified by the
Secretary or an Assistant Secretary of Fund under the Fund's seal.
17. RECORDS.
DST will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained
pursuant to subparagraph (2) (iv) of paragraph (b) of Rule 31a-l under
the Investment Company Act of 1940, if any.
18. DISPOSITION OF BOOKS, RECORDS AND CANCELED CERTIFICATES.
DST may send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Fund, all books, documents, and
all records no longer deemed needed for current purposes and stock
certificates which have been canceled in transfer or in exchange, upon
the understanding that such books, documents, records, and stock
certificates will be maintained by the Fund under and in accordance
with the requirements of Section 17Ad7 adopted under the Securities
Exchange Act of 1934. Such materials will not be destroyed by Fund
without the consent of DST (which consent will not be unreasonably
withheld), but will be safely stored for possible future reference.
19. PROVISIONS RELATING TO DST AS TRANSFER AGENT.
<PAGE>
A. DST will make original issues of stock certificates upon
written request of an officer of Fund and upon being furnished
with a certified copy of a resolution of the Board of
Directors authorizing such original issue, an opinion of
counsel as outlined in paragraphs l.D. and G. of this
Agreement, any documents required by paragraphs 5. or 10. of
this Agreement, and necessary funds for the payment of any
original issue tax.
B. Before making any original issue of certificates Fund will
furnish DST with sufficient funds to pay all required taxes on
the original issue of the stock, if any. Fund will furnish DST
such evidence as may be required by DST to show the actual
value of the stock. If no taxes are payable DST will be
furnished with an opinion of outside counsel to that effect.
C. Shares of stock will be transferred and new certificates
issued in transfer, or shares of stock accepted for redemption
and funds remitted therefor, or book entry transfer be
effected, upon surrender of the old certificates in form or
receipt by DST of instructions deemed by DST properly endorsed
for transfer or redemption accompanied by such documents as
DST may deem necessary to evidence the authority of the person
making the transfer or redemption. DST reserves the right to
refuse to transfer or redeem shares until it is satisfied that
the endorsement or signature on the certificate or any other
document is valid and genuine, and for that purpose it may
require a guaranty of signature in accordance with the
Signature Guarantee Procedures. DST also reserves the right to
refuse to transfer or redeem shares until it is satisfied that
the requested transfer or redemption is legally authorized,
and it will incur no liability for the refusal in good faith
to make transfers or redemptions which, in its judgment, are
improper or unauthorized. DST may, in effecting transfers or
redemptions, rely upon Simplification Acts or other statutes
which protect it and Fund in not requiring complete fiduciary
documentation. In cases in which DST is not directed or
otherwise required to maintain the consolidated records of
shareholder's accounts, DST will not be liable for any loss
which may arise by reason of not having such records.
D. When mail is used for delivery of stock certificates, DST
will forward stock certificates in "nonnegotiable" form by
first class or registered mail and stock certificates in
"negotiable" form by registered mail, all such mail deliveries
to be covered while in transit to the addressee by insurance
arranged for by DST.
E. DST will issue and mail subscription warrants, certificates
representing stock dividends, exchanges or split ups, or act
as Conversion Agent upon receiving written instructions from
any officer of Fund and such other documents as DST deems
necessary.
<PAGE>
F. DST will issue, transfer, and split up certificates and
will issue certificates of stock representing full shares upon
surrender of scrip certificates aggregating one full share or
more when presented to DST for that purpose upon receiving
written instructions from an officer of Fund and such other
documents as DST may deem necessary.
G. DST may issue new certificates in place of certificates
represented to have been lost, destroyed, stolen or otherwise
wrongfully taken upon receiving instructions from Fund and
indemnity satisfactory to DST and Fund, and may issue new
certificates in exchange for, and upon surrender of, mutilated
certificates. Such instructions from Fund will be in such form
as will be approved by the Board of Directors of Fund and will
be in accordance with the provisions of law and the bylaws of
Fund governing such matter.
H. DST will supply a shareholder's list to Fund for its annual
meeting upon receiving a request from an officer of Fund. It
will also, at the expense of the Fund, supply lists at such
other times as may be requested by an officer of Fund.
I. Upon receipt of written instructions of an officer of Fund,
DST will, at the expense of the Fund, address and mail notices
to shareholders.
J. In case of any request or demand for the inspection of the
stock books of Fund or any other books in the possession of
DST, DST will endeavor to notify Fund and to secure
instructions as to permitting or refusing such inspection. DST
reserves the right, however, to exhibit the stock books or
other books to any person in case it is advised by its counsel
that it may be held responsible for the failure to exhibit the
stock books or other books to such person.
20. PROVISIONS RELATING TO DIVIDEND DISBURSING AGENCY.
A. DST will, at the expense of Fund, provide a special form of
check containing the imprint of any device or other matter
desired by Fund. Said checks must, however, be of a form and
size convenient for use by DST.
B. If Fund desires to include additional printed matter,
financial statements, etc., with the dividend checks, the same
will be furnished DST within a reasonable time prior to the
date of mailing of the dividend checks, at the expense of
Fund.
C. If Fund desires its distributions mailed in any special
form of envelopes, sufficient supply of the same will be
furnished to DST but the size and form of said envelopes will
be subject to the approval of DST. If stamped envelopes are
<PAGE>
used, they must be furnished by Fund; or if postage stamps are
to be affixed to the envelopes, the stamps or the cash
necessary for such stamps must be furnished by Fund.
D. DST shall establish and maintain on behalf of the Fund one
or more deposit accounts as Agent for Fund, into which DST
shall deposit the funds DST receives for payment of dividends,
distributions, redemptions or other disbursements provided for
hereunder and to draw checks against such accounts.
E. DST is authorized and directed to stop payment of checks
theretofore issued hereunder, but not presented for payment,
when the payees thereof allege either that they have not
received the checks or that such checks have been mislaid,
lost, stolen, destroyed or through no fault of theirs, are
otherwise beyond their control, and cannot be produced by them
for presentation and collection, and, to issue and deliver
duplicate checks in replacement thereof.
21. ASSUMPTION OF DUTIES BY THE FUND OR AGENTS DESIGNATED BY THE FUND.
A. The Fund or its designated agents other than DST may assume
certain duties and responsibilities of DST or those services
of Transfer Agent and Dividend Disbursement Agent as those
terms are referred to in Section 4.E. of this Agreement
including but not limited to answering and responding to
telephone inquiries from shareholders and brokers, accepting
shareholder and broker instructions (either or both oral and
written) and transmitting orders based on such instructions to
DST, preparing and mailing confirmations, obtaining certified
TIN numbers, classifying the status of shareholders and
shareholder accounts under applicable tax law, establishing
shareholder accounts on the TA2000(TM) System and assigning
social codes and Taxpayer Identification Number codes thereof,
and disbursing monies of the Fund, said assumption to be
embodied in writing to be signed by both parties.
B. To the extent the Fund or its agent or affiliate assumes
such duties and responsibilities, DST shall be relieved from
all responsibility and liability therefor and is hereby
indemnified and held harmless against any liability therefrom
and in the same manner and degree as provided for in Section 8
hereof.
C. Initially the Fund or its designees shall be responsible
for the following: [LIST RESPONSIBILITIES OR DELETE AS
APPROPRIATE.] (i) answer and respond to phone calls from
shareholders and broker-dealers, and (ii) scan items into
DST's AWD(TM) System as such calls or items are received by
the Fund, and (iii) enter and confirm wire order trades.
<PAGE>
22. TERMINATION OF AGREEMENT.
A. This Agreement shall be in effect for an initial period of
______ years and thereafter may be terminated by either party
upon receipt of one (l) year's written notice from the other
party, provided, however, that the effective date of any
termination shall not occur during the period from December 15
through March 30 of any year to avoid adversely impacting year
end.
B. Each party, in addition to any other rights and remedies,
shall have the right to terminate this Agreement forthwith
upon the occurrence at any time of any of the following events
with respect to the other party:
(l) Any interruption or cessation of operations by the other party
or its assigns which materially interferes with the business
operation of the first party;
(2) The bankruptcy of the other party or its assigns or the
appointment of a receiver for the other party or its assigns;
(3) Any merger, consolidation or sale of substantially all the
assets of the other party or its assigns; or
(4) Failure by the other party or its assigns to perform its
duties in accordance with the Agreement, which failure
materially adversely affects the business operations of the
first party and which failure continues for thirty (30) days
after receipt of written notice from the first party.
C. In the event of termination, Fund will promptly pay DST all
amounts due to DST hereunder. In addition, if this Agreement
is terminated by the Fund for any reason other than those set
forth in Sections 22.B. or 22.C. hereof, then the Fund shall
pay to DST a termination fee equal to the lesser of (i) the
aggregate of the fees charged to the Fund during the previous
six (6) calendar months preceding receipt of the notice or
(ii) the average monthly fee over the preceding six (6) months
times the number of months remaining in the then current term
after termination. If the Fund shall not have been billed for
six (6) months before termination, the average monthly fee
shall be calculated by dividing the aggregate fees charged to
the Fund during whatever period it was billed by the number of
months in that period and that average monthly fee shall be
multiplied by six (6) in order to determine the aggregate fees
<PAGE>
in subparagraph 22.C.(i). In any event, the effective date of
any deconversion as a result of termination hereof shall not
occur during the period from December 15th through March 30th
of any year to avoid adversely impacting year end.
D. In the event of termination, DST will use its best efforts
to transfer the records of the Fund to the designated
successor transfer agent, to provide reasonable assistance to
the Fund and its designated successor transfer agent, and to
provide other information relating to its service provided
hereunder (subject to the recompense of DST for such
assistance at its standard rates and fees for personnel then
in effect at that time); provided, however, as used herein
"reasonable assistance" and "other information shall not
include assisting any new service or system provider to
modify, alter, enhance, or improve its system or to improve,
enhance, or alter its current, or to provide any new,
functionality or to require DST to disclose any DST
Confidential Information or any information which is otherwise
confidential to DST.
23. CONFIDENTIALITY.
A. DST agrees that, except as provided in the last sentence of
Section l9.J hereof, or as otherwise required by law, DST will
keep confidential all records of and information in its
possession relating to Fund or its shareholders or shareholder
accounts and will not disclose the same to any person except
at the request or with the consent of Fund.
B. Fund agrees to keep confidential all financial statements
and other financial records (other than statements and records
relating solely to Fund's business dealings with DST) and all
manuals, systems and other technical information and data, not
publicly disclosed, relating to DST's operations and programs
furnished to it by DST pursuant to this Agreement and will not
disclose the same to any person except at the request or with
the consent of DST.
C. (l) The Fund acknowledges that DST has proprietary rights
in and to the TA2000(TM) System used to perform services
hereunder including, but not limited to the maintenance of
shareholder accounts and records, processing of related
information and generation of output, including, without
limitation any changes or modifications of the TA2000(TM)
System and any other DST programs, data bases, supporting
documentation, or procedures (collectively DST Confidential
Information") which the Fund's access to the TA2000(TM) System
or computer hardware or software may permit the Fund or its
employees or agents to become aware of or to access and that
the DST Confidential Information constitutes confidential
<PAGE>
material and trade secrets of DST. The Fund agrees to maintain
the confidentiality of the DST Confidential Information.
(2) The Fund acknowledges that any unauthorized use, misuse,
disclosure or taking of DST Confidential Information which is
confidential as provided by law, or which is a trade secret,
residing or existing internal or external to a computer,
computer system, or computer network, or the knowing and
unauthorized accessing or causing to be accessed of any
computer, computer system, or computer network, may be subject
to civil liabilities and criminal penalties under applicable
state law. The Fund will advise all of its employees and
agents who have access to any DST Confidential Information or
to any computer equipment capable of accessing DST or DST
hardware or software of the foregoing. DST is intended to be,
and shall be, a third party beneficiary of the Fund's
obligations and undertakings contained in this Section.
(3) Fund acknowledges that disclosure of the DST Confidential
Information may give rise to an irreparable injury to DST
inadequately compensable in damages. Accordingly, DST may seek
(without the posting of any bond or other security) injunctive
relief against the breach of the foregoing undertaking of
confidentiality and nondisclosure, in addition to any other
legal remedies which may be available, and Fund consents to
the obtaining of such injunctive relief. All of the
undertakings and obligations relating to confidentiality and
nondisclosure, whether contained in this Section or elsewhere
in this Agreement shall survive the termination or expiration
of this Agreement for a period of ten (10) years.
24. CHANGES AND MODIFICATIONS.
A. During the term of this Agreement DST will use on behalf of
the Fund without additional cost all modifications,
enhancements, or changes which DST may make to the TA2000(TM)
System in the normal course of its business and which are
applicable to functions and features offered by the Fund,
unless substantially all DST clients are charged separately
for such modifications, enhancements or changes, including,
without limitation, substantial system revisions or
modifications necessitated by changes in existing laws, rules
or regulations. The Fund agrees to pay DST promptly for
modifications and improvements which are charged for
separately at the rate provided for in DST's standard pricing
schedule which shall be identical for substantially all
clients, if a standard pricing schedule shall exist. If there
is no standard pricing schedule, the parties shall mutually
agree upon the rates to be charged.
<PAGE>
B. DST shall have the right, at any time and from time to
time, to alter and modify any systems, programs, procedures or
facilities used or employed in performing its duties and
obligations hereunder; provided that the Fund will be notified
as promptly as possible prior to implementation of such
alterations and modifications and that no such alteration or
modification or deletion shall materially adversely change or
affect the operations and procedures of the Fund in using or
employing the TA2000~ System or DST Facilities hereunder or
the reports to be generated by such system and facilities
hereunder, unless the Fund is given thirty (30) days prior
notice to allow the Fund to change its procedures and DST
provides the Fund with revised operating procedures and
controls.
C. All enhancements, improvements, changes, modifications or
new features added to the TA2000(TM) System however developed
or paid for shall be, and shall remain, the confidential and
exclusive property of, and proprietary to, DST.
25. SUBCONTRACTORS.
Nothing herein shall impose any duty upon DST in connection with or
make DST liable for the actions or omissions to act of unaffiliated
third parties such as, by way of example and not limitation, Airborne
Services, the U.S. mails and telecommunication companies, provided, if
DST selected such company, DST shall have exercised due care in
selecting the same.
26. LIMITATIONS ON LIABILITY.
A. If Fund is comprised of more than one Portfolio, each
Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the
context otherwise requires, with respect to every transaction
covered by this Agreement, every reference herein to the Fund
shall be deemed to relate solely to the particular Portfolio
to which such transaction relates. Under no circumstances
shall the rights, obligations or remedies with respect to a
particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single
document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only
and shall not constitute any basis for joining the Portfolios
for any reason. [DELETE IF NOT APPLICABLE]
B. Notice is hereby given that a copy of Fund's Trust
Agreement and all amendments thereto is on file with the
Secretary of State of the state of its organization; that this
Agreement has been executed on behalf of Fund by the
undersigned duly authorized representative of Fund in his/her
capacity as such and not individually; and that the
obligations of this Agreement shall only be binding upon the
<PAGE>
assets and property of Fund and shall not be binding upon any
trustee, officer or shareholder of Fund individually. [DELETE
IF NOT APPLICABLE]
27. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the
rights and liabilities of the parties hereto shall be governed
by, the laws of the State of Missouri, excluding that body of
law applicable to choice of law.
B. All terms and provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
C. The representations and warranties, and the indemnification
extended hereunder, if any, are intended to and shall continue
after and survive the expiration, termination or cancellation
of this Agreement.
D. No provisions of the Agreement may be amended or modified
in any manner except by a written agreement properly
authorized and executed each party hereto.
E. The captions in the Agreement are included for convenience
of reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
F. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the
courts held 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.
H. This Agreement may not be assigned by the Fund or DST
without prior written consent of the other.
I. Neither the execution nor performance of this Agreement
shall be deemed to create a partnership or joint venture by
and between Fund and DST. It is understood and agreed that all
services performed hereunder by DST shall be as an independent
contractor and not as an employee of the Fund. This Agreement
<PAGE>
is between DST and the Fund and neither this Agreement nor the
performance of services under it shall create any rights in
any third parties. There are no third party beneficiaries
hereto.
J. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by any
party hereunder shall not affect any rights or obligations of
any other party hereunder.
K. The failure of either party to insist upon the performance
of any terms or conditions of this Agreement or to enforce any
rights resulting from any breach of any of the terms or
conditions of this Agreement, including the payment of
damages, shall not be construed as a continuing or permanent
waiver of any such terms, conditions, rights or privileges,
but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred.
L. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement, draft or
agreement or proposal with respect to the subject matter
hereof, whether oral or written, and this Agreement may not be
modified except by written instrument executed by both
parties.
M. All notices to be given hereunder shall be deemed properly
given if delivered in person or if sent by U.S. mail, first
class, postage prepaid, or if sent by facsimile and thereafter
confirmed by mail as follows:
If to DST:
DST Systems, Inc.
1055 Broadway, 7th Fl.
Kansas City, Missouri 64105
Attn: Senior Vice President-Full Service
Facsimile No.: 816-435-3455
With a copy of non-operational notices to:
DST Systems, Inc.
1055 Broadway, 9th Fl.
Kansas City, Missouri 64105
Attn: Legal Department
Facsimile No.: 816-435-8630
If to Fund:
<PAGE>
Peregrine Funds
c/o Van Eck Associates Corp.
99 Park Ave., 8th Floor
New York, New York 10018
Attn:_____________________
Facsimile No.: _____________
or to such other address as shall have been specified in
writing by the party to whom such notice is to be given.
N. The representations and warranties contained herein shall survive the
execution of this Agreement. The representations and warranties
contained herein and the provisions of Section 8 hereof shall survive
the termination of the Agreement and the performance of services
hereunder until any statute of limitations applicable to the matter at
issues shall have expired.
WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers, to be effective as of the day and
year first above written.
DST SYSTEMS, INC.
By:_________________________________
Title:_______________________________
PEREGRINE FUNDS
By:_________________________________
Title:_______________________________
<PAGE>
EXHIBIT A, p. 1
REMOTE SERVICE
FEE SCHEDULE
FEE INCREASES
The fees and charges set forth in this Exhibit B shall increase annually upon
each anniversary of this Agreement over the fees and charges during the prior 12
months in an amount equal to the annual percentage of change in the Consumer
Price Index in the Kansas City, Missouri-Kansas Standard Metropolitan
Statistical Area, All Items, Base 1982-1984=100, as last reported by the U.S.
Bureau of Labor Statistics for the 12 calendar months immediately preceding such
anniversary. In the event that this Agreement was not signed as of the first day
of the month, the fees and charges increase shall be effective as of the first
day of the month immediately following the month during which the anniversary
occurred.
OPEN AND CLOSED ACCOUNTS FEES
The monthly fee for an open account shall be charged in the month during which
an account is opened through the month in which such account is closed. The
monthly fee for a closed account shall be charged in the month following the
month during which such account is closed and shall cease to be charged in the
month following the Purge Date, as hereinafter defined. The "Purge Date" for any
year shall be any day after June 1st of that year, as selected by Fund, provided
that written notification is presented to DST at least forty-five (45) days
prior to the Purge Date.
REIMBURSABLE EXPENSES
Forms
Postage (to be paid in advance if so requested)
Outside Mailing Services
Computer Hardware
Telecommunications Equipment
Magnetic Tapes, Reels or Cartridges
Magnetic Tape Handling Charges
Microfiche/Microfilm
Freight Charges
REIMBURSABLE EXPENSES (CONT.)
Proxy Processing - per proxy mailed
not including postage
Includes: Proxy Card
Printing
Outgoing Envelope
Return Envelope
Tabulation
T.I.N. Certification (W-8 & W-9)
Postage associated with the return
envelope is included)
N.S.C.C. Communications ChargeCurrently $1,200.00
(Fund/Serv and Networking)per Fund per Year
Off-site Record Storage
SunGard Second Site Disaster Currently between $.06
Backup Fee (per account) and $.08 guaranteed not to exceed $.11
through 12/31/94)
Transmission of Statement Data for Currently 035/per
Remote Processing record
Travel, Per Diem and other Out-of-Pockets Incurred by DST personnel traveling
to, at and from Fund at the request of Fund
<PAGE>
EXHIBIT B
AUTHORIZED PERSONNEL
Pursuant to Section 8.A. of the Agency Agreement between Peregrine Funds (the
Fund") and DST (the "Agreement"), the Fund authorizes the following Fund
personnel to provide instructions to DST, and receive inquiries from DST in
connection with the Agreement:
Name Title
- - ----------------------------------- -----------------------------------
- - ----------------------------------- -----------------------------------
- - ----------------------------------- -----------------------------------
- - ----------------------------------- -----------------------------------
- - ----------------------------------- -----------------------------------
- - ----------------------------------- -----------------------------------
This Exhibit may be revised by the Fund by providing DST with a substitute
Exhibit B. Any such substitute Exhibit B shall become effective twenty-four (24)
hours after DST's receipt of the document and shall be incorporated into the
Agreement.
ACKNOWLEDGMENT OF RECEIPT:
DST SYSTEMS, INC. PEREGRINE FUNDS
By: _____________________________ By:___________________________
Title: __________________________ Title:_________________________
Date: ___________________________ Date:__________________________
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PORTFOLIO ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made as of the ___day ___of by and between PEREGRINE
FUNDS, a Delaware business trust having its principal place of business in New
York, New York (the "Trust") and VAN ECK ASSOCIATES CORPORATION ("the
Administrator"), a Delaware corporation having its principal place of business
in New York, New York.
W I T N E S S E T H :
WHEREAS, the Trust is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust wishes to retain the Administrator to provide certain
accounting and administrative services to a series thereof, namely Asia Growth
Fund and any other Series as may, from time to time, be included in Exhibit A
hereto, ("Series"), and the Administrator is willing to furnish such services;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Trust hereby appoints the Administrator to provide certain accounting and
administrative services to the Series with respect to its investment portfolio
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees to furnish the services herein set forth.
The Administrator agrees to comply with all relevant provisions of the 1940 Act
and applicable rules and regulations thereunder. The Trust may from time to time
issue separate series or classes or classify and reclassify shares of such
series or class. The Administrator shall identify to each such series or class
of shares property belonging to such series or class and shall prepare such
reports, confirmations and notices to the Trust called for under this Agreement
and shall identify the series or class of shares to which such report,
confirmation or notice pertains in the event it is engaged by the Trust to
perform the services herein contained respecting such series or class of shares.
2. DELIVERY OF DOCUMENTS.
The Trust will furnish the Administrator with properly certified or
authenticated copies of such documents, resolutions and agreements and any
amendments or supplements thereto, as the Administrator may, from time to time,
request.
3. SERVICES ON A CONTINUING BASIS.
(a) The Administrator will perform the following accounting functions on an
ongoing basis:
(i) Journalize the Series' investment, capital share and income
and expense activities;
(ii) Maintain individual ledgers for investment securities;
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(iii) Reconcile cash and investment balances of the Series with the
Trust's custodian, and provide the Series with the beginning
cash balance available for investment purposes;
(iv) Post to and prepare the Trust's Statement of Assets and
Liabilities and the Statement of Operations;
(v) Calculate various contractual expenses (e.g., transfer agency
fees of the Series);
(vi) Control all disbursements from the Series and authorize
such disbursements upon written instructions from authorized
Series officers and agents;
(vii) Calculate the Series' capital gains and losses;
(viii) Determine the Series' net income;
(ix) Compute the net asset value on each business day of the
Series utilizing security market quotes, obtained at the
Series' expense and risk from commercially available pricing
services or, if such quotes are unavailable, obtain such
prices from the Series' investment advisor or from brokers or
market-makers in such securities;
(x) Deliver a copy of the daily portfolio valuation to the Series;
(xi) Compute the Series' yields, total return, expense ratios and
portfolio turnover rate;
(xii) Monitor the expense accruals and notify the Series of any
proposed adjustments; and
(xiii) Prepare periodic unaudited financial statements.
(b) In addition to the accounting services described in the foregoing
Paragraph 3(a), the Administrator will provide, assist third-parties in
providing or arrange for the following services:
(i) Preparation of periodic audited financial statements;
(ii) Supplying various statistical data as requested by
the Board of Trustees of the Trust on an ongoing basis;
(iii) Preparation for execution and filing of the Series' Federal
and state tax returns;
(iv) Preparation and filing the Series' Semi-Annual Reports
with the Securities and Exchange Commission ("SEC") on Form
N-SAR;
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(v) Preparation and filing with the SEC the Trust's annual,
semi-annual, and quarterly shareholder reports;
(vi) Filing registration statements on Form N-1A and other filings
relating to the registration of Shares;
(vii) Monitoring the Series' status as a regulated investment
company under Sub-Chapter M of the Internal Revenue Code of
1986, as amended;
(viii) Reviewing periodically the Series' fidelity bond as
required by the 1940 Act;
(ix) Preparation of materials for and recording the proceedings of,
in conjunction with the officers of the Trust, the meetings
of the Trust's Board of Trustees and the Trust's shareholders;
(x) Maintaining the Trust's existence and good standing under
state law;
(xi) Review and negotiate on behalf of the Series normal course
of business contracts and agreements;
(xii) Assist the Trust in developing and maintaining a compliance
program; and
(xiii) Coordinate purchase and redemption orders with the Series'
transfer agent.
(xiv) To the extent not provided by the investment advisor to the
Series, furnishing the office space in the offices of the
Administrator, or in such other place or places as may be
agreed upon from time to time, and all necessary office
facilities, simple business equipment, supplies, utilities,
and telephone service for administering the affairs and
investments of the Trust. These services are exclusive of the
necessary services and records of any dividend disbursing
agent, transfer agent, registrar or custodian, and accounting
and bookkeeping services which may be provided by the
custodian;
(xv) Providing executive and clerical personnel for administering
the affairs of the Trust, and compensating officers and
Trustees of the Trust if such persons are also employees of
the Administrator or its affiliates, except as provided in
Paragraph 3(a); and
(xvi) Preparation of any other regulatory reports to and for any
federal, local, state or foreign governmental agency or
regulatory body as may be required.
(c) The Administrator shall provide such other services and assistance
relating to the affairs of the Series as the Trust or the Series'
investment advisor may, from time to time, reasonably request.
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(d) In carrying out its duties hereunder, as well as any other activities
undertaken on behalf of the Series pursuant to this Agreement, the
Administrator shall at all times be subject to the control and
direction of the Board of Trustees of the Trust.
4. EXPENSES OF THE ADMINISTRATOR AND THE TRUST.
(a) EXPENSES OF THE ADMINISTRATOR.
The Administrator shall bear the ordinary and usual expenses of
providing the services set forth in Paragraph 3(a) of this Agreement
(except such expenses which are expressly excluded) and in Paragraph
3(b) (iv) - (xi) (which shall include the salary costs and related
expenses of the Administrator's employees, but shall exclude all
reasonable out-of-pocket expenses incurred by or on behalf of the
Administrator for the benefit of the fund). All costs and expenses not
expressly assumed by the Administrator and all extraordinary expenses
associated with the services hereunder shall be borne by the Trust or
the Series.
(b) EXPENSES OF THE TRUST.
The Administrator shall be responsible for providing or arranging for a
third party to provide the services set forth herein. Unless expressly
set forth in this Agreement the Administrator shall not bear the
responsibility for, or expenses associated with, operational,
accounting or administrative services on behalf of the Trust, which
expenses are to be borne by the Trust such expenses include, without
limitation:
(i) The charges and expenses of any registrar, stock, transfer or
dividend disbursing agent, custodian, depository or other
agent appointed by the Series for the safekeeping of its cash,
portfolio securities and other property;
(ii) Except as provided in Section 4(a) hereof, general
operational, administrative and accounting costs, such as the
costs incident in calculating the Series' net asset value, the
preparation of the Series' tax filings with relevant
authorities and of compliance with any and all regulatory
authorities;
(iii) The charges and expenses of auditors and outside accountants;
(iv) Brokerage commissions for transactions in the portfolio
securities of the Series;
(v) All taxes, including issuance and transfer taxes, and
corporate fees payable by the Trust to
federal, state or other U.S. or foreign governmental agencies;
(vi) The cost of the Series'stock certificates representing shares;
(vii) Expenses involved in registering and maintaining registrations
of the Trust and of its shares with the SEC and various states
and other jurisdictions, if applicable;
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(viii) All expenses of shareholders' and Trustees' meetings,
including meetings of committees, and of preparing, setting in
type, printing and mailing proxy statements, quarterly
reports, semi-annual reports, annual reports and other
communications to shareholders;
(ix) All expenses of preparing and setting in type offering
documents, and expenses of printing and mailing the same
to shareholders;
(x) Compensation and travel expenses of Trustees who are not
"interested persons" of the Administrator within the meaning
of the 1940 Act and travel expenses of Trustees who are
"interested persons" of the Administrator and officers and
employees of the Adviser when traveling on Trust business,
such as attending shareholders' or Trustees' meetings, beyond
one hundred miles from such persons principal place of
business;
(xi) The expense of furnishing, or causing to be furnished, to
each shareholder, statements of account;
(xii) Charges and expenses of legal counsel in connection with
matters relating to the Trust, including, without limitation,
legal services rendered in connection with the Trust's
corporate and financial structure, day-to-day legal affairs of
the Trust and relations with its shareholders, issuance of
Trust shares, and registration and qualification of securities
under federal, state and other laws;
(xiii) The expenses of attendance at meetings of professional and
trade organizations, such as the Investment Company Institute
and regulatory agencies by officers and Trustees of the Trust,
and the membership or association dues of such organizations;
(ixv) The cost and expense of maintaining the books and records of
the Trust; Except those costs and expenses expressly assumed
by the Administrator under this Agreement,
(xv) The expense of obtaining and maintaining a fidelity bond as
required by Section 17(g) of the 1940 Act, the expense of
obtaining and maintaining an errors and omissions policy and
other insurance as may be appropriate;
(xvi) Interest payable on Trust borrowing;
(xvii) Postage; and
(xviii) Any other reasonable costs and expenses incurred by the
Administrator for Trust operations and activities.
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5. RECORDS.
The books and records pertaining to the Series which are in the possession of
the Administrator shall be the property of the Trust. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Trust, or the Trust's
authorized representatives, shall have access to such books and records at all
times during the Administrator's normal business hours. Upon the reasonable
request of the Trust, copies of any such books and records shall be provided by
the Administrator to the Trust or its authorized representative at the Trust's
expense.
6. LIAISON WITH ACCOUNTANTS.
The Administrator shall act as liaison with the Trust's independent public
accountants and shall provide account analyses, fiscal year summaries, and other
audit related schedules. The Administrator shall take all reasonable action in
the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their opinion, as such may be required by the Trust from time to time.
7. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF SERIES. If the Administrator shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive,
from the Series directions or advice.
(b) ADVICE OF COUNSEL. If the Administrator or the Series shall be in doubt
as to any question of law involved in any action to be taken or omitted
by the Administrator, it may request advice at the Series' cost from
counsel of its own choosing (who may be counsel for the Administrator
or the Series, at the option of the Administrator).
(c) PROTECTION OF THE ADMINISTRATOR. The Administrator shall be protected
in any action or inaction which it takes in reliance on any directions
or advice received pursuant to subsections (a) or (b) of this paragraph
which the Administrator, after receipt of any such directions or
advice, in good faith believes to be consistent with such directions or
advice as the case may be. However, nothing in this paragraph shall be
construed as imposing upon the Administrator any obligation (i) to seek
such directions, or advice or (ii) to act in accordance with such
directions or advice when received. Nothing in this subsection shall
excuse the Administrator when an action or omission on the part of the
Administrator constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by the Administrator of its duties
under this Agreement.
8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Series assumes
full responsibility for insuring that it complies with all applicable
requirements of the Securities Act of 1933 ( the "1933 Act"), the
Securities Exchange Act of 1934 (" the 1934 Act"), the 1940 Act, and
any applicable laws, rules and regulations of governmental authorities
having jurisdiction.
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9. COMPENSATION.
As compensation for the services rendered by the Administrator during the term
of this Agreement, the Series will pay to the Administrator an annual fee
calculated and payable monthly, at the annual rate of .25 of 1% of the average
daily net assets of the Series, or at a fixed annual rate of $75,000.00, which
ever is greater. In addition, with respect to the initial Series, the
Administrator shall be entitled to a fee of $50,000,00 for services provided in
organizing and registering the Trust.
10. INDEMNIFICATION.
The Trust agrees to indemnify and hold harmless the Administrator and its
employees, agents and nominees from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, liabilities arising under
the 1933 Act, the 1934 Act, the 1940 Act, and any state and foreign securities
and blue sky laws, all as or to be amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or thing which the Administrator takes or
does or omits to take or do (i) at the request or on the direction of or in
reliance on the advice of the Series or the Trust, (ii) upon oral or written
instruction, or (III) otherwise in connection with this Agreement, provided,
that neither the Administrator nor any of its nominees shall be indemnified
against any liability to the Series or to its shareholders (or any expenses
incident to such liability) arising out of the Administrator's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement.
11. RESPONSIBILITY OF THE ADMINISTRATOR.
The Administrator shall be under no duty to take any action on behalf of the
Series except as specifically set forth herein or as may be specifically agreed
to by the Administrator in writing. In the performance of its duties hereunder,
the Administrator shall be obligated to exercise care and diligence and to act
in good faith and to use its best efforts within reasonable limits in performing
services provided for under this Agreement, but the Administrator shall not be
liable for any act or omission which does not constitute willful misfeasance,
bad faith or gross negligence on the part of the Administrator or reckless
disregard by the Administrator of its duties under this Agreement. Without
limiting the generality of the foregoing or of any other provision of this
Agreement, the Administrator in connection with its duties under this Agreement
shall not be under any duty or obligation to inquire into and shall not be
liable for or in respect of (a) the validity or invalidity or authority or lack
thereof of any oral or written instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which the
Administrator reasonably believes to be genuine; (b) delays or errors or loss of
data occurring by reason of circumstances beyond the Administrator's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply. In the event of equipment failures beyond the Administrator's
control, the Administrator shall, at no additional expense to the Series or the
Trust, take reasonable steps to minimize service interruptions but shall have no
liability with respect thereto.
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12. DURATION AND TERMINATION.
This Agreement shall continue until termination by either party on 180 days
written notice to the other.
13. FURTHER ACTION.
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
14. AMENDMENTS.
This Agreement or any part hereof may be changed or waived only by an instrument
in writing signed by the party against which enforcement of such change or
waiver is sought.
15. MISCELLANEOUS.
This Agreement embodies the entire agreement and understanding between the
parties thereto, and supersedes all prior agreements and understandings,
relating to the subject matter hereof, provided that the parties hereto may
embody in one or more separate documents their agreement, if any, with respect
to delegation and/or oral instructions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in New York and governed by New
York law. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall inure
to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
[SEAL] PEREGRINE FUNDS
Attest: By:
------------------------------
President
[SEAL] VAN ECK ASSOCIATES CORPORATION
Attest: By:
------------------------------
President
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DOMESTIC
SPECIAL TERMS AND CONDITIONS RIDER
DOMESTIC CORPORATE ACTIONS AND PROXIES
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions Will apply rather than the provisions of Section
8 of the Agreement:
The Bank will send to the Customer or the Authorized Person for a
Custody Account, such proxies (signed in blank, if issued in the name
of the Bank's nominee or the nominee of a central depository) and
communications with respect to Securities in the Custody Account as
call for voting or relate to legal proceedings within a reasonable time
after sufficient copies are received by the Bank for forwarding to its
customers. In addition, the Bank will follow coupon payments,
redemptions, exchanges or similar matters with respect to Securities in
the Custody Account and advise the Customer or the Authorized Person
for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of
which the Bank has received notice from the issuer of the Securities,
or as to which notice is published in publications routinely utilized
by the Bank for this purpose.
FEES
The fees referenced in Section 13 of this Agreement cover only domestic and
euro-dollar holdings. There will be no Schedule A to this Agreement, as there
are no foreign assets in the Accounts.
(viii) Neither party shall be liable to the other for any loss due to forces
beyond their control including, but not limited to government action, strikes or
work stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
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