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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. ___________
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. __________
THE KENWOOD FUNDS
77 West Washington Street
Chicago, Illinois 60602
312-368-1666
Agent for Service:
Sheldon Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of this Registration Statement.
____________________________________
Registrant hereby registers an indefinite number of its shares of
beneficial interest, pursuant to Rule 24f-2(a)(1) under the Investment Company
Act of 1940, as amended
Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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FORM N-1A
THE KENWOOD FUNDS
REGISTRATION STATEMENT NO.__________________ UNDER THE
SECURITIES ACT OF 1933
AND REGISTRATION STATEMENT NO. _______________ UNDER THE
INVESTMENT COMPANY ACT OF 1940
CROSS REFERENCE SHEET
N-1A
ITEM NO. Prospectus Caption or Placement
-------- -------------------------------
1 Front Cover
2 Fund Expenses
3 (Not Applicable)
4 Investment Objective and Policies; Organization of the Fund
5 Investment Objective and Policies; The Adviser;
Services Administrator, Custodian and Transfer Agent
6 Organization of the Fund; Major Shareholders; Summary;
Dividends and Distributions; Taxes
7 Buying Shares; Distribution of Shares; Net Asset Value
8 Redeeming Shares
9 (Not Applicable)
PART B CAPTION OR PLACEMENT
---------------------------
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Fundamental Investment Restrictions; Non-Fundamental
Investment Restrictions; Lending Portfolio Securities; See
also Prospectus -- Investment Objectives and Policies
14 Trustees and Officers
15 See Prospectus -- Major Shareholders
16 The Adviser; Custodian and Transfer Agent; Auditors
17 Portfolio Transactions and Brokerage
18 See Prospectus -- The Fund
19 Distribution Plan; See also Prospectus -- Calculation of
Net Asset Value
20 Federal Taxes; See also Prospectus -- Dividends and Taxes
21 (Not Applicable)
22 Performance Data
23 Financial Statements
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Subject to completion dated February __, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission but has not yet become
effective. These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any State.
THE KENWOOD FUNDS
Kenwood Growth & Income Fund
77 West Washington Street
Suite 1615
Chicago, Illinois 60602
1-800-_________
PROSPECTUS
______________, 1996
The Kenwood Growth & Income Fund (the "Fund") is a series of The
Kenwood Funds, which is organized as a Delaware business trust (the "Trust").
The Fund's objective is capital appreciation and current income. It invests
primarily in equity securities.
This Prospectus sets forth concisely information about the Fund that
you should know before investing. Please retain it for future reference. A
Statement of Additional Information dated ____________, 1996, has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference. You may obtain a copy of the Statement of Additional
Information free of charge by writing or calling the Fund at the address or
phone number on the cover of this Prospectus.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . 5
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MAJOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 8
SERVICES ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT . . . . . . . 8
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . 9
BUYING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
TELEPHONE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . 10
EXCHANGING SHARES . . . . . . . . . . . . . . . . . . . . . . . . 10
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . 11
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . 12
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 14
FUND PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . 14
ORGANIZATION OF THE FUND . . . . . . . . . . . . . . . . . . . . 14
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SUMMARY
THE FUND. The Fund is the only series of The Kenwood Funds, an
open-end management investment company (a mutual fund) organized in 1996 as a
Delaware business trust.
INVESTMENT OBJECTIVE. The Fund's objective is capital appreciation
and current income. The Fund invests primarily in equity securities. See
"Investment Objective and Policies."
PURCHASES AND REDEMPTIONS. Shares of the Fund are sold and redeemed
at net asset value without any sales or redemption charge. The minimum initial
investment is $2,000 and subsequent investments are $100 or more. These
minimum investment amounts may be waived or reduced for participants in certain
retirement plans. See "Buying Shares" for more information on how to invest.
Shares are redeemable by mail or by wire to a predesignated bank account. See
"Selling Shares" for details.
THE ADVISER. The Kenwood Group, Inc. serves as the Fund's investment
adviser (the "Adviser"), and receives fees for managing the Fund's investments
and performing certain administrative and management services for the Fund.
See "The Adviser."
THE DISTRIBUTOR. AmeriPrime Financial Securities, Inc. serves as the
Fund's principal underwriter and distributes the Fund's shares (the
"Distributor"). The Fund pays the Distributor Rule 12b-1 distribution fees.
See "Distribution of Shares."
INVESTMENT FACTORS TO CONSIDER. As with any mutual fund investment,
purchasing shares of the Fund involves risks. The securities in which the Fund
invests are subject to the risk of price fluctuations reflecting both market
evaluations of the businesses involved and general changes in the equity
markets. There is no assurance that the investment objective will be achieved.
The Fund's return and net asset value will fluctuate.
SHAREHOLDER INQUIRIES. Call (800) _________ from 8:00 a.m.-7:00
p.m. Central Time for prompt service on any questions about your account.
During unusual market conditions, the Fund may experience difficulty in
accepting telephone inquiries. In such circumstances, you should contact the
Fund directly at (312)368-1666 weekdays from 9:00 a.m.-5:00 p.m. Central Time
or by mail at 77 West Washington Street, Suite 1615, Chicago, IL 60602.
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FUND EXPENSES
The following tables are intended to help you understand the various
expenses that you as an investor will bear.
Shareholder transaction expenses:
Maximum Sales Load Imposed on Purchases None
Redemption Fee None*
Sales Load on Reinvested Dividends None
Exchange Fee None
Deferred Sales Load None
*For each wire redemption, the transfer agent will charge a fee which,
as of the date of this prospectus is $7.50.
Annual fund operating expenses after expense reimbursements (as a
percentage of average net assets):
Management Fees, after fee waive(1) 0.00%
12b-1 Fees(2) 0.25%
Other Expenses(1)(3) 0.67%
-----
Total Operating Expenses(3) 0.92%
(1)The Adviser has agreed to waive the management fee and to reimburse
certain other expenses for the Fund's first fiscal year. Without fee waiver,
the Management Fees would be .75%. Without the expense reimbursement, the
Other Expenses would be 2.42% and the Total Operating Expenses would be 3.42%.
(2)The effect of a Rule 12b-1 plan is that long-term shareholders may
pay more than the maximum front-end sales charge permitted under applicable
rules of the National Association of Securities Dealers, Inc.
(3)This information is based on estimated amounts for the Fund's
current fiscal year.
EXAMPLE:
We can illustrate these expenses with the examples below. You would
pay the following expenses on a $1,000 investment (assuming a 5% annual return
and redemption at the end of each period):
One Year $ 9.00
Three Years $ 29.00
THE 5% RATE USED IN THE EXAMPLE ABOVE IS ONLY FOR ILLUSTRATION AND IS NOT
INTENDED TO BE INDICATIVE OF THE FUTURE PERFORMANCE OF THE FUND, WHICH MAY BE
MORE OR LESS THAN THE ASSUMED RATE. FUTURE EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
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INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. The Fund's investment objective is capital
appreciation and current income. The Fund invests primarily in U.S. domestic
equity securities and, under normal market conditions, at least 85% of its
total assets will be invested in equity securities. Equity securities include
common stock, preferred stock, and securities convertible into common stock.
Common stock in which the Fund may invest may be either growth- or
income-oriented. The Fund normally may invest up to 15% of its total assets in
other securities, including debt securities. See "Debt Securities."
The Fund will invest primarily in mid-cap stocks. Mid-cap stocks are
defined by the Adviser as securities of companies having a market
capitalization between $200 million and $6.5 billion. In the Adviser's
judgment, this market niche tends to be more liquid than the small-cap market,
and thus may represent lower risks, while offering comparable returns to the
small-cap market and potentially greater returns than the larger-cap market.
The Adviser attempts to select equity securities that will provide a
combination of capital appreciation and income which will result in a high
overall total return while attempting to assume relatively low risks. "Low
risks" means that in the Adviser's judgment the risks of investing in the
securities in the Fund's portfolio present no additional risks than those
inherent in the market. The Adviser makes ongoing portfolio selections, in
light of current and reasonably anticipated future financial conditions. As
these conditions change, the Adviser adjusts the portfolio in order to maintain
a reasonable balance over time between risk and potential return.
The Adviser takes a long-term position in the market and seeks to
identify securities of companies that are temporarily undervalued but which
have potential for growth and which may provide a good stream of dividend
income. The Adviser evaluates the long-term potential of the stocks it
purchases through examination of each company's strategic plans, corporate
history and industry dynamics.
DEBT SECURITIES. The Fund may invest in fixed income securities for
income or as a defensive strategy when the Adviser believes adverse economic or
market conditions exist. When appropriate, the Fund's assets may be invested
without limitation in cash, short-term obligations issued or guaranteed by the
U.S. Government, its agencies and/or instrumentalities ("U.S. Government
Securities") or high quality money market instruments such as notes,
certificates of deposit or bankers' acceptances. However, the Adviser does not
intend to invest more than 15% of the Fund's assets in securities other than
equities under normal market conditions.
The value of fixed income securities is sensitive to interest rate
changes as well as the financial strength of the issuer. When interest rates
go down, debt securities in the portfolio tend to appreciate in value.
Conversely, when interest rates go up, such securities tend to depreciate in
value. Generally, the debt securities in which the Fund may invest are
investment-grade securities. These are securities rated in the four highest
grades assigned by Moody's Investors Service, Inc. or Standard and Poor's
Corporation or that are unrated but deemed to be of comparable quality by the
Adviser. The lowest of these grades has speculative characteristics; changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments. The Fund will not
invest in securities below investment grade (so called "junk bonds"). In the
event of a downgrade of a debt security held by the Fund to below investment
grade, the Fund is not required to sell the issue, but the Adviser will
consider the downgrade in determining whether to hold the security. However,
if such a downgrade would cause more than 5% of net assets to be invested in
debt
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securities below investment grade, portfolio sales will be made as soon as
practicable to reduce the proportion of debt below investment grade to 5% of
net assets or less.
LENDING PORTFOLIO SECURITIES. For income purposes, the Fund may lend
its portfolio securities. However, the Fund does not currently intend to lend
portfolio securities if it would cause more than 5% of its net assets to be
subject to such loans.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements,
but normally will not enter into repurchase agreements maturing in more than
seven days. A repurchase agreement involves a sale of securities (usually U.S.
Government Securities) to the Fund with the concurrent agreement of the seller
(a member bank of the Federal Reserve System or securities dealer which the
Adviser determines to be financially sound at the time of the transaction) to
repurchase the securities at the same price plus an amount equal to accrued
interest at an agreed-upon interest rate, within a specified time, usually less
than one week, but occasionally, at a later time. The repurchase obligation of
the seller is, in effect, secured by the underlying securities. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the
Fund could experience both delays in liquidating the underlying securities and
losses, including possible declines in the value of the collateral during the
period while the Fund seeks to enforce its rights, possible loss of all or a
part of the income during such period and expenses of enforcing its rights.
BORROWING. The Fund may not borrow money except for temporary or
emergency purposes, and then only from banks in an amount not exceeding 33 1/3%
of the value of the Fund's total assets. The Fund will not purchase securities
when its borrowings, less amounts receivable on sales of portfolio securities,
exceed 5% of the value of the Fund's total assets.
PORTFOLIO TRANSACTIONS. In seeking the Fund's objective, the Fund may
trade to some degree in securities for the short term if the Adviser believes
that the growth potential of a security no longer exists, considers that other
securities have more growth potential, or otherwise believes that such trading
is advisable. The Fund's portfolio turnover rate will vary but the Adviser
does not expect it to exceed 100%. The higher the turnover rate, the more
brokerage commissions the Fund will pay. In placing portfolio transactions,
the Fund may take into account the sale of shares by the broker and research
services provided to the Adviser.
RESTRICTED AND ILLIQUID SECURITIES. The Fund will not purchase or
hold illiquid securities if more than 15% of the Fund's net assets would then
be illiquid. If at any time more than 15% of the Fund's net assets are
illiquid, sales will be made as soon as practicable to reduce the percentage of
illiquid assets to 15% or less. The Fund may purchase restricted securities
which are eligible for purchase and sale pursuant to Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities"). This Rule permits certain
qualified institutional buyers, such as the Fund, to trade in privately placed
securities. The Fund will not purchase Rule 144A securities that are illiquid.
In addition, the Fund will not purchase liquid Rule 144A Securities if such
purchase would cause more than 5% of the Fund's assets to be invested in such
securities.
DIVERSIFICATION AND INDUSTRY CONCENTRATION. As to 75% of its total
assets, the Fund will not (i) make any investment that would cause more than 5%
of its total assets to be invested in any one issuer; and (ii) purchase the
securities of any company if after such purchase the Fund would then own more
than 10% of such company's voting securities. The remaining 25% of the Fund's
total assets are not so limited which would allow the Adviser to invest up to
25% of the Fund's total assets in a single issuer. In the event that the
Adviser chooses to make such an investment, it may expose the Fund to greater
risk. However, as a matter of operating policy, the Adviser does not intend to
make an investment that would cause more than 15% of the Fund's total assets in
any one issuer. In addition, the Fund will not make any investment which would
cause 25% or more
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of its total assets to be invested in any one industry. U.S. Government
Securities are not subject to these limitations.
FUNDAMENTAL AND NON-FUNDAMENTAL POLICIES. The investment restrictions
set forth in the Statement of Additional Information as fundamental are
fundamental policies which cannot be changed without a vote of the
shareholders. The investment objective and all other investment policies of
the Fund are not fundamental and may be changed without shareholder approval.
In the event the Fund's investment objective should ever be changed, such
change may result in an objective different from the objective the shareholder
considered appropriate at the time of investment in the Fund. Except for the
limitations on borrowing and investments in illiquid securities, any percentage
restrictions set forth in the Prospectus or in the Statement of Additional
Information apply as of the time of investment without regard to later
increases or decreases in the value of securities or total or net assets.
THE ADVISER
The Kenwood Group, Inc., an Illinois corporation with offices at 77
West Washington Street, Chicago, Illinois 60602, serves as the Fund's
investment Adviser. The Adviser does not advise other mutual funds, but has,
since its inception in 1989, acted as investment adviser to individuals and
institutional investors. As of December 31, 1995, the Adviser had $1.7 million
in assets under management. Barbara L. Bowles is the controlling shareholder
of the Adviser.
The Adviser manages the investment and reinvestment of the assets of
the Fund. The Adviser furnishes continuous advice concerning the Fund's
investments. In addition, the Adviser provides office space for the Fund and
pays the salaries, fees and expenses for all Fund officers and directors who
are affiliated with the Adviser.
For such services, the Fund pays the Adviser advisory fees monthly
based upon the Fund's average daily net assets at the following annual rate:
0.75% on the first $500 million of average net assets, 0.70% on the next $500
million of average daily net assets, and 0.65% on average daily net assets over
$1 billion. The fees paid to the Adviser are higher than the fees paid by many
investment companies but are not necessarily higher than that paid by funds
with a similar objective. The Adviser has agreed to waive the management fee
and to reimburse certain other expenses for the Fund's first fiscal year.
Barbara L. Bowles is the Fund's principal portfolio manager and has
served in such capacity since the Fund's inception. She has served as
President and Chief Investment Officer for the Kenwood Group since its
inception in 1989. She is also the President of the Fund.
HISTORICAL INVESTMENT RESULTS OF THE INVESTMENT ADVISER
Set forth below is certain performance data provided by the Adviser
relating to annual average investment results of a composite of all client
accounts whose portfolios were managed by the Adviser continuously over a
period of five years. These advisory accounts ("Advisory Accounts") had the
same investment objective as the Fund and were managed using substantially
similar, though not necessarily identical, investment strategies and techniques
as those contemplated by the Fund. Because of the similarities in investment
strategies and techniques, the Adviser believes that the Advisory Accounts are
sufficiently comparable to the Fund to make the performance data listed below
relevant to investors in the Fund. The results presented are not intended to
predict or suggest the returns that will be experienced by the Fund or the
return an investor will achieve by investing in the Fund. Different methods of
determining the performance
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from those described in the footnote to the chart below may result in different
performance figures. An investor should not rely on the following performance
figures as an indication of the future performance of either the Adviser's
separate Advisory Accounts or the Fund.
THE KENWOOD GROUP, INC.
HISTORICAL PERFORMANCE
OF THE
KENWOOD GROUP
COMPOSITE
PERIOD (year ended) BEFORE NET OF ADVISORY
ADVISORY FEES(%) FEES
1990 (7.33) (8.12)
1991 19.26 18.40
1992 18.49 17.68
1993 6.60 5.86
1994 7.40 6.66
1995 31.02 30.42
ANNUALIZED PERFORMANCE
PERIOD ENDED DECEMBER 31, 1995
BEFORE NET OF ADVISORY
ADVISORY FEES FEES
1 YEAR 31.02% 30.42%
3 YEARS 14.47% 13.83%
5 YEARS 16.23% 15.51%
Since inception (6 years) 11.91% 11.19%
NOTES: These numbers were prepared in accordance with the Performance
Presentation Standards developed by the Association for Investment Management
and Research ("AIMR"). Past performance is not necessarily indicative of
future results nor can it be assumed that any recommendations will be
profitable.
MAJOR SHAREHOLDERS
The following table sets forth as of _____________________________,
1996, the name and holdings of each person known by the Fund to be a record
holder of more than 5% of its outstanding shares. As of such date there was
one (1)share outstanding.
% of
Number of Outstanding
Name and Address Shares Owned Shares
---------------- ------------ ------
Barbara L. Bowles 1 100%
77 West Washington
Chicago, IL 60602
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SERVICES ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
Firstar Trust Company ("Firstar") 615 East Michigan Street, Milwaukee,
WI 53202, serves as the Fund's Administrator and, pursuant to an
Administration Services Agreement, receives fees monthly, for its services as
described below, based upon the Fund's average daily net assets at the
following annual rate: .05% on the first $100 million of average net assets,
.04% on the next $400 million of average daily net assets, and .03% on average
daily net assets over $500 million. The Administration Agreement provides for
payment to the Administrator of a minimum annual fee of $20,000. Firstar
generally provides for the administration of the Fund, including the
coordination and monitoring of any third parties furnishing services to the
Fund, the preparation and maintenance of financial and accounting records and
the provision of the necessary office space, equipment and personnel to perform
administrative and clerical functions.
Firstar also serves as the Fund's Custodian, Transfer Agent and Fund
Accountant. In its capacity as Transfer Agent, Firstar maintains the records
of each shareholder's account, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
other shareholder servicing functions.
DISTRIBUTION OF SHARES
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, serves as the principal underwriter to distribute the
Fund's shares. Pursuant to an Underwriting Agreement with the Fund, the
Distributor will be paid an annual fee of 0.5% of the average net assets of the
Fund with a minimum fee of $18,000 per year. Pursuant to the Distribution Plan
adopted by the Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Plan"), the Fund is authorized to expend up to 0.25% annually of the
Fund's average daily net assets to cover expenses incurred in connection with
the distribution of the Fund's shares. Rule 12b-1 regulates the manner in
which a mutual fund may assume the costs of distributing and promoting the sale
of its shares. Under the Plan, the Distributor is appointed the Fund's agent to
distribute shares and provides office space and equipment, personnel,
literature distribution and advertising to promote the sale of the Funds'
shares. Payments under the Plan are made to compensate the Distributor for its
services, to reimburse the Distributor for its expenses and for the fees it
pays to dealers and other firms for selling Fund shares, servicing shareholders
and maintaining shareholder accounts. The 12b-1 fee may also be used to
defray the costs of advertising, sales literature and sales meetings. In
addition, the Plan also provides that the Adviser, in its sole discretion, may
utilize its own resources, including any profits from its advisory fees for
distributing and promoting sales of Fund shares.
Shares of the Fund may also be sold through banks or bank-affiliated
brokers. Any determination that such banks or bank-affiliated brokers are
prohibited from selling shares of the Fund under the Glass-Steagall Act would
have no material adverse effects on the Fund. State securities laws may
require such firms to be licensed as securities dealers in order to sell shares
of the Fund.
BUYING SHARES
GENERAL. You can purchase shares of the Fund from any dealer or other
person having a sales agreement with the Distributor or you can purchase shares
directly from the Fund. No matter how you purchase your shares, you pay no
sales load. You buy shares at the net asset value computed after receipt of
your investment in proper form as described below. You are deemed to be a
shareholder as of the first business day following the day Firstar receives
payment for your shares. Shares purchased through a Qualified Dealer may be
subject to administrative charges or transaction fees imposed by the Dealer.
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The minimum initial investment is $2,000 and subsequent investments
are $100 or more. The minimum initial investment for retirement plans not
funded by a payroll deduction is $250. The Fund reserves the right to waive
the minimum investment requirement for retirement plans funded by payroll
deduction plans.
There are three ways to make an initial investment in the Fund. One
way is to fill out the Application Form included in this Prospectus and mail it
to Firstar at the address on the Form. You must enclose a check payable as
indicated on the Form.
Another way to make an initial investment is to have your dealer order
and pay for the shares. In this case, you must pay your dealer. The dealer
can order the shares from the Adviser by telephone or wire. Your dealer may
charge you a fee for this service.
The third way to purchase shares is by wire. Shares may be purchased
at any time by wiring federal funds directly to Firstar Trust Company. Prior
to an initial investment by wire, the shareholder should telephone Firstar to
advise them of the investment and to obtain an account number and instructions.
A completed Application Form should be mailed to Firstar after the initial wire
purchase. To assure proper credit, the wire instructions should be made as
follows:
Firstar Bank
Milwaukee, WI 53201
Federal Routing Number 075000022
Firstar Trust MFS A/C Number 112-952-137
THE KENWOOD FUNDS
KENWOOD GROWTH & INCOME FUND
Shareholder Name,
Shareholder Account Number
After your initial investment, you can make additional investments of
at least $100. Simply mail a check payable to "Firstar Trust Company," c/o The
Kenwood Funds, P.O. Box 701, Milwaukee, WI 53201. You can also send a check
via overnight courier to Firstar Trust Company, 615 E. Michigan Street,
Milwaukee, WI 53202. The check should be accompanied by a form which Firstar
will provide after each purchase. If you do not have a form, you should tell
Firstar that you want to invest the check in shares of the Fund. If you know
your account number, you should also give it to Firstar.
The Fund does not issue certificates for shares in the Fund. Instead,
shares purchased are automatically credited to an account maintained for you on
the books of the Fund by Firstar. You receive a statement showing the details
of the transaction and any other transactions you had during the current year
each time you add to or withdraw from your account.
TELEPHONE TRANSACTIONS
If you have telephone transaction privileges, you may redeem or
exchange shares by telephone. You automatically have telephone privileges
unless you elect otherwise. The Fund, the transfer agent and their affiliates
are not liable for acting in good faith on telephone instructions relating to
your account, so long as they follow reasonable procedures to determine that
the telephone instructions are genuine. Such procedures may include a request
for personal identification (account or social security number) and tape
recording of the instructions. Please note that exchanges by phone may be made
by any person, not just the shareholder of record. You should verify the
accuracy of telephone transactions immediately upon receipt of your
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confirmation statement. The Fund reserves the right to terminate, suspend or
modify telephone transaction privileges. During unusual conditions, the Fund
may have difficulty in accepting telephone transactions, in which case you
should mail your instructions to the Fund c/o Firstar Trust Company at 615 E.
Michigan Street, Milwaukee, WI 53202.
EXCHANGING SHARES
As a service to our shareholders, the Kenwood Funds have established a
program whereby our shareholders can exchange their shares for shares of the
Portico Money Market Funds. These funds are no-load money market funds managed
by Firstar which offer check-writing privileges. The Portico Funds are
unrelated to the Kenwood Funds.
You may exchange your shares in the Fund for shares of the Portico
Money Market Funds at no additional charge. The Portico Funds consist of the
Money Market Fund (which is a general money market fund), U.S. Treasury Money
Market Fund, U.S. Government Money Market Fund, and Tax-Exempt Money Market
Fund. This exchange privilege is a convenient way to buy shares in a money
market fund in order to respond to changes in your goals or in market
conditions. Before exchanging into any of the Portico Funds, read the
applicable prospectus. To obtain a prospectus for the Portico Funds, call
1-800-______. You will be charged $5.00 for each exchange transaction. Firstar
will charge $5.00 for each exchange transaction that is executed over the phone.
There is no charge for exchange transactions which are requested by mail. See
"Other Information About Exchanging Shares" below for information on the limits
imposed on exchanges.
BY MAIL. To exchange your shares of the Fund into any of the Portico
Funds, complete and sign an application and mail it to:
Firstar Trust Company,
P.O. Box 701
Milwaukee, WI 53201
You may also send the application via overnight courier to Firstar
Trust Company at 615 E. Michigan Street, Milwaukee, WI 53202.
BY TELEPHONE. If you have authorized telephone transaction privileges
in your application, you may also make exchanges by calling 1-800-________.
Exchanges made over the phone may be made by any person, not just the
shareholder of record. Certain other limitations and conditions apply to all
telephone transactions. See "Telephone Transactions."
OTHER INFORMATION ABOUT EXCHANGING SHARES. All accounts opened as a
result of using the exchange privilege must be registered in the same name and
taxpayer identification number as your existing account with the Fund. Because
of the time needed to transfer money between the Fund and the Portico Money
Market Funds, you may not exchange into and out of the same fund on the same or
successive days; there must be at least one day between exchange transactions.
You may exchange your shares of the Fund only for shares that have been
registered for sale in your state. Remember that each exchange represents the
sale of shares of one fund and the purchase of shares of another. Therefore,
you could realize a taxable gain or loss on the transaction. If your account is
subject to backup withholding, you may not open another account using the
exchange privilege. Because excessive trading can hurt the Fund's performance
and shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes excessive use of the
exchange privilege (e.g. more than five exchanges per calendar year). Your
exchanges may be restricted or refused if the Fund receives or anticipates
simultaneous orders affecting significant
11
<PAGE> 14
portions of the Fund's assets. In particular, a pattern of exchanges with a
"market timing" strategy may be disruptive to the Fund. The Fund reserves the
right to terminate or modify the exchange privilege upon at least 60 days'
written notice to shareholders. A signature guarantee is not required except
in cases where shares are also redeemed for cash at the same time. See
"Redeeming Shares -- Signature Guarantees" for more information.
REDEEMING SHARES
You may redeem your shares through your securities dealer (who may
charge you a fee for this service) or directly by using one of the methods
described below. The price you will receive for any shares you redeem will be
the next net asset value of the shares redeemed computed after we have received
your order to redeem in proper form. See "Net Asset Value" for more
information. Normally, payment by check is made within seven days after the
redemption request is received with all required documents in proper form.
However, if any of the shares redeemed were recently purchased (i.e. within 15
days) and payment was made by personal check, payment to you for those shares
may be delayed until your purchase check has cleared. These restrictions are
not applicable to shares purchased with a certified or cashier's check or by
bank wire or federal funds.
BY MAIL. You may redeem shares by sending your written request to
redeem your shares to our Transfer Agent at Firstar Trust Company, P.O. Box
701, Milwaukee, WI 53201. You may also send the request via overnight courier
to Firstar Trust Company at 615 E. Michigan Street, Milwaukee, WI 53202. This
written request must: 1) be signed by all account owners exactly as the account
is registered (both parties must sign in the case of joint accounts), 2) state
the dollar amount or number of shares to be redeemed and 3) specify your
account number. Please remember that you cannot place any conditions on your
request.
BY TELEPHONE. You may redeem shares by calling us at _______________.
We will then send the proceeds to you by mail. However, please keep in mind
the following: the check can only be issued for up to $___________; the check
can only be issued to the registered owner (who must be an individual); the
check can only be sent to the address of record; and your current address of
record must have been on file for 60 days. See "Telephone Transactions."
BY WIRE. You can redeem your shares by wire if you have selected this
option in your application and have named a commercial bank or savings
institution with a Federal Reserve Bank routing number. Once you have applied
for the wire redemption privilege, you or any other person can redeem shares in
your account by calling _________________ and providing your account number.
You may also use your wire privilege by mailing a signed request to the Fund
that includes your account number and amount you wish to have wired. The
proceeds will be sent only to the financial institution you have designated on
your application. You may terminate the wire redemption privilege by notifying
us in writing. Changes in your bank account ownership or bank account number
(including the name of the financial institution) may be made by written notice
to us with your signature and those of any new owner guaranteed. See
"Signature Guarantees" below. Additional documents may be required when shares
are held by a corporation, partnership, executor, administrator, trustee or
guardian. You will be charged a fee for this service.
REDEMPTIONS BY THE FUND. The Fund reserves the right to redeem any
single shareholder account that falls below $2,000 due to shareholder
exemptions. Before your account is redeemed, you will be notified in writing
and we will allow you 60 days to make additional share purchases to bring your
account value up to the minimum level.
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<PAGE> 15
OTHER LIMITATIONS. The Fund may suspend the right of redemption or
delay payment (a) during any period when the New York Stock Exchange is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets that a Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that the disposal of
any of a Fund's investments or the determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit for protection of a Fund's
shareholders. In case of suspension of the right of redemption, you may either
withdraw your request for redemption or, if your request is not withdrawn,
receive payment based on the next net asset value computed after termination of
the suspension.
SIGNATURE GUARANTEES. For our mutual protection, we may require a
signature guarantee on certain transaction requests. A signature guarantee
verifies the authenticity of your signature, and may be obtained from any bank,
trust company, savings and loan association, credit union, broker-dealer firm
or member of a domestic stock exchange. A signature guarantee cannot be
provided by a notary public. If redemption proceeds or amounts exchanged are
$25,000 or less and are to be paid or credited to an individual shareholder of
record at the address of record, a signature guarantee is not required (unless
there has been an address change within 60 days). All other redemption or
exchange requests must have signatures guaranteed. Certain shareholders, such
as corporations, trusts and estates, may be required to submit additional
documents.
NET ASSET VALUE
The net asset value per share is computed by dividing the total value
of the assets of the Fund, minus its liabilities, by the total number of its
shares outstanding. The net asset value is determined on each day the New York
Stock Exchange is open, at the earlier of the close of the Exchange or 4:00
p.m. New York time. The price per share for purchases or redemptions made
directly through the Transfer Agent is such value next computed after the
Transfer Agent receives the purchase order or redemption request. Note that in
the case of redemptions and repurchases of shares owned by corporations, trusts
or estate, the Transfer Agent may require additional documents to effect the
redemption and the applicable price will be that next determined following the
receipt of the required documentation.
The Fund values its security holdings on the basis of market value.
Certain fixed-income securities may be valued based on market prices provided
by a pricing service. Fixed-income securities maturing within 60 days are
normally valued on the basis of amortized cost. If no market value is readily
available, such securities will be valued at a fair value determined by the
Board of Directors.
DIVIDENDS AND DISTRIBUTIONS
The Fund pays any income and capital gains distributions at least
annually. Distributions from the Fund will automatically be reinvested for you
on the payment date as additional shares of the Fund, unless you request
payment by check on your Application Form or make such a request later by
writing to the Fund. Your request will be effective for the current dividend
or distribution if it is received before the record date. Requests received
after that time will be effective beginning with the next dividend or
distribution.
As a protection, if two of your dividend checks are returned as
undeliverable, those undelivered dividends will be invested in additional
shares at the then current net asset value, and the account will be
redesignated as a dividend reinvestment account.
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<PAGE> 16
TAXES
This section is not intended to be a full discussion of all the
aspects of tax law and its effects on the Fund and its shareholders.
Shareholders may be subject to state and local taxes on distributions. Each
investor should consult a tax advisor regarding the effect of federal, state
and local taxes on an investment in the Fund.
The Fund intends to qualify and remain qualified as a "regulated
investment company" under the Internal Revenue Code (the "Code"). The Fund
will distribute all of its taxable net income and net realized capital gains to
shareholders so that it will not itself have to pay any income taxes.
During its initial operations, the Fund may be a personal holding
company ("PHC") under the Code due to substantial ownership of the Fund's
shares by a few shareholders. In that event, the Fund intends to distribute
all its PHC income so that there is no PHC tax imposed on the Fund.
Distributions of net investment income from the Fund are taxable to
shareholders as ordinary income. A portion of the income dividends received by
the Fund from U.S. corporations may qualify for the "dividends received"
deduction available to corporate shareholders. Distributions from net
long-term capital gains are taxable as long-term capital gains regardless of
how long Fund shares are owned. Distributions from net short-term capital
gains are taxable as ordinary income. Shareholders are informed annually of
the amount and nature of any income or gain. Distributions are taxable whether
received in cash or reinvested in additional shares. If the Fund distributes
less than the amount it is required to distribute during any year, a 4% excise
tax will be imposed on the undistributed amount. The Fund intends to declare
and distribute dividends during each year sufficient to prevent imposition of
the excise tax.
A dividend received shortly after the purchase of shares reduces the
net asset value of the shares by the amount of the dividend, and although in
effect a return of capital, such dividend will be taxable to the shareholder.
If a shareholder realizes a loss on the sale or exchange of any shares held for
six months or less and if the shareholder received a capital gain distribution
during such six-month period, then the loss is treated as a long-term capital
loss to the extent of the capital gain distribution.
If for any reason you don't provide the Fund with your correct Social
Security or Tax I.D. number (or certify that you are not subject to backup
withholding), the Fund is required by the Code to withhold 31% of taxable
dividends and proceeds of certain exchanges and redemptions.
RETIREMENT PLANS
The Fund offers prototype retirement plans including IRAs, Simplified
Employee Pension ("SEP") Plan and model 403(b) plans for charitable,
educational and governmental entities. The Fund's Custodian, Firstar, acts as
the custodian under the IRA, SEP and 403(b) plans and may act as trustee or
custodian under the other plans. For information on fees and necessary forms,
please call _____________ or write to the Fund. Please do not use the
application included with this prospectus to open your retirement plan account.
Instead call ______________ for a retirement plan account application. Please
consult your tax advisor to determine the effect of any of the plans on your
financial situation.
FUND PERFORMANCE
In reports or other communications to shareholders and in advertising
material, the Fund may compare its performance to recognized unmanaged indexes
or stock market averages such as the Standard & Poor's 500 Index, Dow Jones
Industrial Average and New York Stock Exchange Composite Index. Also, the Fund
may compare its performance with that of other mutual funds of comparable size
and objectives as listed in the
14
<PAGE> 17
rankings prepared by Lipper Analytical Services, Inc., or similar independent
services which monitor the performance of mutual funds or other industry or
financial publications. The Fund may also include evaluations published by
nationally recognized ranking services and by financial publications such as
Business Week, Forbes, Kiplinger's, Institutional Investor and Money Magazine.
The Fund's past performance should not be considered representative of future
performance of the Fund.
The Fund's average annual total return is computed by determining the
average annual compounded rate of return for a specified period that, if
applied to a hypothetical $1,000 initial investment, would produce the
redeemable value of the investment at the end of the period, assuming
reinvestment of all dividends and distributions and with recognition of all
recurring charges. The Fund may also utilize a total return for differing
periods computed in the same manner but without annualizing the total return.
The Fund's performance is a function of conditions in the securities
markets, portfolio management and operating expenses, and past results are not
necessarily indicative of future results. Performance information supplied by
the Fund may not provide a basis for comparison with other investments using
differing reinvestment assumptions or time periods.
ORGANIZATION OF THE FUND
The Kenwood Funds (the "Trust") is a Delaware business trust organized
pursuant to a Trust Instrument dated January 9, 1996. The Trust is registered
as a diversified, open-end management investment company. The Trust currently
issues one series of shares, the Kenwood Growth & Income Fund. Shares of the
Trust are fully paid, non-assessable, and freely transferable when issued, have
equal noncumulative voting rights and equal rights with respect to dividends,
assets and liquidation. The Board of Trustees may in the future create
additional series of shares, each of which would represent an interest in a
separate portfolio with its own investment objective and policies.
The Trust does not hold annual shareholder meetings, but does hold
special shareholder meetings when the Board of Trustees believes it is
necessary or when required by law. The Trust will hold a special meeting when
requested in writing by the holders of at least 10% of the shares eligible to
vote at a meeting. In addition, subject to certain conditions, shareholders of
the Fund may apply to the Fund to communicate with other shareholders to
request a shareholders' meeting to vote upon the removal of a Trustee or
Trustees.
CERTAIN PROVISIONS OF THE TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund are not personally liable for the obligations of the
Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of corporations.
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<PAGE> 18
THE KENWOOD FUNDS
77 West Washington Street
Suite 1615
Chicago, Illinois 60602
1-800-________
STATEMENT OF ADDITIONAL INFORMATION
___________, 1996
This Statement provides information concerning the Growth & Income
Fund (the "Fund") which is a series of the Kenwood Funds. This Statement is not
a Prospectus and should be read in conjunction with the Fund's Prospectus dated
_________________, 1996, which may be obtained from the Fund. This Statement
is accompanied by the Fund's audited balance sheet as of __________, 1996 which
is incorporated herein by reference.
<PAGE> 19
TABLE OF CONTENTS
TOPIC PAGE
FUNDAMENTAL INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . 3
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . 4
LENDING PORTFOLIO SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 5
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . 8
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . 9
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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<PAGE> 20
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment restrictions enumerated below are fundamental and may
not be changed without the approval of the holders of the lesser of (i) 67% of
the eligible votes, if the holders of more than 50% of the eligible votes are
present in person or by proxy or (ii) more than 50% of the eligible votes.
(1) COMMODITIES. The Fund may not purchase or sell commodities or
commodity contracts except in respect to financial futures or
currencies.
(2) REAL ESTATE. The Fund may not purchase real estate.
(3) DIVERSIFICATION OF FUND INVESTMENTS.
(a) Fund Assets. With respect to 75% of the value of its
total assets, the Fund may not buy the securities of any
issuer if more than 5% of the value of the Fund's total assets
would then be invested in that issuer. Securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements involving such
securities ("U.S. Government Securities"), are not subject to
this limitation.
(b) Securities of Issuers. With respect to 75% of the
value of its total assets, the Fund may not purchase the
securities of any issuer if after such purchase the Fund would
then own more than 10% of such issuer's voting securities.
U.S. Government Securities are not subject to this limitation.
(4) INDUSTRY CONCENTRATION. The Fund may not purchase the
securities of companies in any one industry if 25% or more of
the value of the Fund's total assets would then be invested in
companies having their principal business activity in the same
industry. U.S. Government Securities are not subject to this
limitation.
(5) SENIOR SECURITIES; BORROWING. The Fund may not issue senior
securities except as permitted under the Act. The Fund may
not pledge or hypothecate any of its assets, except in
connection with permitted borrowing. Transfers of assets in
connection with currency transactions are not subject to these
limitations if appropriately covered.
(6) UNDERWRITING. The Fund does not engage in the underwriting of
securities. (This does not preclude it from selling
restricted securities in its portfolio.)
(7) LENDING MONEY OR SECURITIES. The Fund may not lend money,
except that it may buy debt securities publicly distributed or
traded or privately placed and may enter into repurchase
agreements. The Fund may lend its portfolio securities
subject to having 100% collateral in cash or U.S. Government
Securities. The Fund will not lend securities if such a loan
would cause more than 20% of the value of its total assets to
then be subject to such loans.
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<PAGE> 21
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
In addition to the Fund's investment objective set forth in the
Prospectus, the Fund has adopted the following non-fundamental policies which
may be changed by the Board of Directors without shareholder approval.
(1) BORROWING. The Fund may not purchase securities when money
borrowed exceeds 5% of its total assets.
(2) ILLIQUID AND RESTRICTED SECURITIES.
(a) The Fund may not purchase or hold illiquid securities if,
as a result, more than 15% of its net assets would be invested
in such securities.
(b) The Fund may not purchase restricted securities which
are not eligible for resale under Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities"). In addition,
the Fund may not purchase illiquid Rule 144A Securities and
may not purchase liquid Rule 144A Securities if such purchase
would cause more than 5% of the Fund's total assets to be
invested in restricted securities.
(3) INVESTMENT COMPANIES. The Fund may not purchase securities of
open-end or closed-end investment companies except in
compliance with the Investment Company Act of 1940 and then
only if no more than 5% of the Fund's net assets would be so
invested.
(4) LENDING PORTFOLIO SECURITIES. The Fund will not lend
portfolio securities if it causes more than 5% of its net
assets to be subject to such loans.
(5) MARGIN. The Fund may not purchase securities on margin,
except for use of short-term credit necessary for clearance of
purchases of portfolio securities.
(6) MORTGAGING. The Fund may not mortgage, pledge, hypothecate
or, in any manner, transfer any security owned by the Fund as
security for indebtedness except as may be necessary in
connection with permissible borrowings and other permissible
investments or investments for currency transactions and then
such mortgaging, pledging or hypothecating may not exceed 33
1/3% of the Fund's total assets at the time of borrowing or
investment.
(7) OIL AND GAS PROGRAMS. The Fund may not purchase
participations or other direct investments or enter into
leases with respect to oil, gas, or other mineral exploration
or development programs.
(8) OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND DIRECTORS.
The Fund may not purchase or retain the securities of any
issuer if, to the knowledge of the Fund's management, those
officers and directors of the Fund, and of the Adviser, who
each own beneficially more than 0.5% of the outstanding
securities of such issuer, together own beneficially more than
5% of such securities.
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<PAGE> 22
(9) SHORT SALES. The Fund may not effect short sales of
securities unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities
sold short. This restriction does not apply to financial
futures or currency transactions.
(10) UNSEASONED ISSUERS. The Fund may not purchase the securities
(other than U.S. Government Securities) of any issuers which
at the time of purchase had been in operation for less than
three years (for this purpose, the period of operation of any
issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer).
(11) WARRANTS. The Fund may not invest in warrants if, as a result
thereof, more than 2% of the value of the total assets of the
Fund would be invested in warrants which are not listed on the
New York Stock Exchange, the American Stock Exchange, or a
recognized foreign exchange, or more than 5% of the value of
the total assets of the Fund would be invested in warrants
whether or not so listed. For purposes of these percentages
limitations, the warrants will be valued at the lower of cost
or market and warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.
(12) OPTIONS AND FUTURES CONTRACTS. The Fund may not engage in
transactions in futures or options except that this does not
prohibit the Fund from engaging in transactions in warrants as
described above.
Except for limitations on borrowing and investment in illiquid
securities, any percentage restrictions contained in any fundamental or
nonfundamental restrictions, apply as of the time of investment without regard
to later increases or decreases in the values of securities or total or net
assets.
LENDING PORTFOLIO SECURITIES
Securities of the Fund may be lent to member firms of the New York
Stock Exchange and commercial banks with assets. Any such loans must be
secured continuously in the form of cash or cash equivalents, such as U.S.
Treasury bills. The amount of the collateral must, on a current basis, equal
or exceed the market value of the loaned securities and must be terminable upon
notice, at any time. The Fund will exercise its right to terminate a
securities loan in order to preserve its right to vote upon matters of
importance affecting holders of the securities. The fundamental investment
restrictions state that the Fund may not loan securities if the value of the
securities loaned from the Fund exceed 20% of the value of the Fund's total
assets. However, as a matter of non-fundamental policy, the Fund may not loan
portfolio securities if it would cause more than 5% of the Fund's net assets to
be subject to such loans.
The advantage of such loans would be that the Fund continues to
receive the equivalent of the interest earned or dividends paid by the issuer
on the loaned securities while at the same time earning interest on the cash or
equivalent collateral.
Securities loans would be made to broker dealers and other financial
institutions to facilitate their deliveries of such securities. As with any
extension of credit there may be risks of delay in recovery and possibly loss
of rights in the loaned securities should the borrower of the loaned securities
fail financially. However, loans will be made only to those firms that the
Adviser deems creditworthy and only on such terms as the Adviser believes
should compensate for such risk. On termination of the loan the borrower is
obligated
5
<PAGE> 23
to return the securities to the Fund; any gain or loss in the market value of
the security during the loan period will inure to the Fund. Custodial fees may
be paid in connection with the loan.
NET ASSET VALUE
Net asset value per share is determined by calculating the total value
of the Fund's assets, deducting total liabilities, and dividing the result by
the number of shares outstanding. The Fund does not price its shares or accept
orders for purchases or redemptions on days when the New York Stock Exchange
(the "Exchange") is closed. Such days are the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. On each day the New York Stock Exchange
(the "Exchange") is open for trading, the net asset value is determined as of
the earlier of 4:00 p.m. New York time or the close of the Exchange.
Portfolio securities traded on a securities exchange (including
options on indexes so traded) or securities listed on the NASDAQ National
Market are valued at the last sale price on the exchange or market where
primarily traded or listed or, if there is no recent sale price available, at
the last current bid quotation. Securities not so traded or listed are valued
at the last current bid quotation if market quotations are available. Money
market instruments maturing in 60 days or less are normally valued at amortized
cost. Money market securities having maturities over 60 days or for which
amortized cost is not deemed to reflect fair value, may be priced by
independent pricing services that use prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. Other securities, including
restricted securities, and other assets are valued at fair value as determined
in good faith by the Board of Trustees.
TRUSTEES AND OFFICERS
Information about the trustees and officers, including age as of
February 1, 1996 and principal occupations during the past 5 years, is shown
below.
*BARBARA L. BOWLES, Trustee and President of the Fund. Ms. Bowles is
the President and founder of The Kenwood Group, the Adviser to the Fund. Her
address is 77 West Washington Street, Chicago, Illinois 60602.
PATTY LITTON DELONY, CFA, 47 - Trustee. Ms. Delony is a Principal of
Delony Associates Inc., a business consulting firm established in 1988,
specializing in research, analysis and writing. Formerly, she was a vice
president of Sara Lee Corporation. Her address is 20 E. Cedar Street, Chicago,
Illinois 60611.
LESTER J. DUGAS, JR., 71 - Trustee. Mr. Dugas is presently a Senior
Consultant to Summit Consulting Group, consultants in health care, finance and
education. He is a consultant to MORLES Enterprises, Ltd., marketers of
generating equipment, and a Senior Direct Distributor for NSA, Inc.,
manufacturers of water purification equipment, air filters and juicer products.
He is also on the Board of Directors of several charities. His address is 5000
S. Woodlawn Avenue, Chicago, Illinois 60615.
*REYNALDO P. GLOVER, __ - Trustee. Mr. Glover is the Executive Vice
President-General Counsel of TLC Beatrice International Holding Company and of
counsel to the law firm, Rudnick & Wolfe. He also acts as general counsel for
the Adviser. From 1991 until 1994, Mr. Glover was a partner with the law firm
of Miller, Shakman, Hamilton, Kurtzon & Schlifke. From 1987 until 1991,
Mr. Glover was a partner
6
<PAGE> 24
with the law firm of Jenner & Block. From August, 1988 until September 1991,
Mr. Glover also served as Chairman of the Board of Trustees of the City
Colleges of Chicago. In addition, he is active in many civic, professional and
social organizations. His address is 203 N. LaSalle Street, Chicago, Illinois
60601.
CHALLIS M. LOWE, 50 - Trustee. Ms. Lowe is Executive Vice President,
responsible for Human Resources and Communications for Heller International
Corporation, a financial services company. She has been with Heller since
1993. Formerly, she was a Senior Vice President-Chief Administrative Officer
for Sanwa Business Credit Corporation. Her address is 500 W. Monroe Street,
Chicago, Illinois 60661.
SHARON MORROW, 41 - Vice President and Secretary. Ms. Morrow is the
Vice President of Marketing/Client Services for The Kenwood Group. Prior to
joining The Kenwood Group in 1995, Ms. Morrow was Vice President of Marketing
from Pierce & Company L.P./M.O.S.A.I.C. Investment Advisers. Formerly, Ms.
Morrow was the Director of the District of Columbia Department of Finance and
Revenue. Her address is 77 West Washington Street, Chicago, Illinois 60602.
CYNTHIA HARDY, 29 - Assistant Secretary. Ms. Hardy has been the
Director of Administration at The Kenwood Group since 1991. Prior to joining
The Kenwood Group, she was an accounting intern at Carr & Associates, a public
accounting and management consulting firm. Ms. Hardy has passed the Series 6
and 63 examinations. Her address is 77 West Washington Street, Chicago,
Illinois 60602.
SHELDON R. STEIN, 67 - Assistant Secretary. Mr. Stein is a partner at
the firm of D'Ancona & Pflaum, legal counsel to the Fund.
____________________________________
*The asterisk following the names of Barbara Bowles and Reynaldo Glover
indicates that each of them is considered to be an "interested person" of the
Fund, as defined in the Investment Company Act of 1940.
The Fund does not pay any direct remuneration to any officer or
trustee who is an "interested person." Trustees of the Fund who are not
"interested persons" are paid a fee of $750 per meeting attended and a fee of
$250 for each telephone conference meeting, plus expenses.
THE ADVISER
The Kenwood Group Inc., an Illinois corporation located at 77 West
Washington Street, Chicago, Illinois 60602, serves as the Fund's Adviser.
Barbara L. Bowles is the controlling shareholder of the Adviser. The Adviser
receives advisory fees monthly based upon the Fund's average daily net assets
at the following annual rate: 0.75% on the first $500 million of average net
assets, 0.70% on the next $500 million of average daily net assets, and 0.65%
on average daily net assets over $1 billion.
In addition to the services described in the Fund's prospectus, the
Adviser will compensate all personnel, officers and trustees of the Fund if
such persons are employees of the Adviser.
The Fund pays all other Fund expenses including its organizational
expenses. If the total expenses of the Fund (as determined under applicable
statutes or regulations) exceed any applicable expense limitation prescribed by
any statute or regulatory authority of a jurisdiction in which the Fund's
shares are qualified for offer and sale, the Adviser will reimburse the Fund in
the amount of such excess to the extent required by such securities law or
regulation. California and South Dakota are currently the only states which
have such limitations. California's limitation is 2.5% of the first $30
million of average net assets, 2.0% of the next $70 million of average net
assets and 1.5% of the remaining average net assets. South Dakota's limitation
is 2.5%
7
<PAGE> 25
of average net assets. The Adviser has agreed to waive the management fee and
to reimburse certain other expenses for the Fund's first fiscal year.
Under the Advisory Agreement between the Fund and the Adviser, in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties, the Adviser will not be liable for any act or omission
in the cause or, or connected with, rendering service under the Advisory
Agreement or for any losses that may be sustained in the purchase, holding or
sale of any security.
The Adviser has adopted a Code of Ethics which regulates the personal
securities transactions of the Adviser's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment personnel to
disclose personal securities holdings upon commencement of employment and all
subsequent trading activity to the Adviser's Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions,
including the purchase of securities in a private offering, without the prior
consent of the Compliance Officer. Additionally, such personnel are prohibited
from purchasing securities in an initial public offering and are prohibited
from trading in any securities (i) for which the Fund has a pending buy or sell
order, (ii) which the Fund is considering buying or selling, or (iii) which the
Fund purchased or sold within seven calendar days.
FEDERAL TAXES
Dividends and distributions of any realized short-term capital gains
are included in the income of shareholders as ordinary income and distributions
of net long-term capital gains are included in the income of shareholders as
long- term capital gains irrespective of the length of time they have held
their shares in the Fund. The dividends-received deduction for corporate
shareholders of the Fund may be applicable to a portion of the Fund's
distributions of net ordinary income. The amount of distributions eligible for
the dividends received deduction is limited to the amount of dividends received
by the Fund during the fiscal year from United States corporations. A
corporation's dividends- received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of the Fund is financed with indebtedness. Capital gains
distributions by the Fund are not eligible for this deduction.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING AGENT
Firstar Trust Company ("Firstar"), 615 East Michigan Street,
Milwaukee, WI 53202, serves as the Fund's custodian, transfer, fund
accounting, shareholder servicing and dividend-paying agent. The custodian has
custody of all securities and cash of the Fund. The custodian attends to the
collection of principal and income and the payment for, and the collection of
proceeds of, securities bought and sold by the Fund. Firstar also acts as the
Fund's Administrator pursuant to an Administration Agreement with the Fund as
described in the prospectus.
AUDITORS
The Fund's auditors are Coopers & Lybrand L.L.P., The 411 E. Wisconsin
Building , Milwaukee, WI 53202. The services of the auditors include an audit
of annual financial statements included in the annual reports to shareholders,
a review of amendments to the registration statement filed with the Securities
and Exchange Commission, consultation on financial accounting and reporting
matters, and meeting with the Audit
8
<PAGE> 26
Committee of the Board of Trustees. In addition, the auditors may provide
assistance in preparation of the federal and state income tax returns and
related forms.
DISTRIBUTION PLAN
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite
200, Southlake, Texas 76092, serves as the principal underwriter to distribute
the Fund's shares. Pursuant to the Distribution Plan adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund is
authorized to expend up to 0.25% annually of the Fund's average daily net
assets to pay distribution fees and to cover certain expenses incurred in
connection with the distribution of the Fund's shares. Rule 12b-1 permits an
investment company to finance, directly or indirectly, any activity which is
primarily intended to result in the sale of its shares only if it does so in
accordance with the provisions of the Rule. The Board of Trustees has
determined that there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Fund's securities trading and brokerage policies and procedures
are reviewed by and subject to the supervision of the Board of Trustees. The
Fund's policy is to seek to place portfolio transactions with those brokers or
dealers who will execute transactions as efficiently as possible and at
favorable prices. Many of these transactions involve the payment of brokerage
commissions by the Fund. In some cases, transactions are with firms that act
as principal for their own account. In effecting transactions in
over-the-counter securities, the Fund deals with market makers unless it
appears that better prices and execution are available elsewhere.
Subject to the policy of seeking favorable price and execution for the
transaction size and risk involved, in selecting brokers or dealers or
negotiating the commissions to be paid, the Adviser considers the firm's
financial responsibility and reputation, range and quality of services made
available to the Fund, and the professional services provided, including
execution, clearance procedures, wire service quotations, and ability to
provide supplemental performance, statistical and other research information
for consideration, analysis and evaluation by the staff of the Adviser. In
accordance with this policy, the Fund does not execute brokerage transactions
solely on the basis of the lowest commission rate available for a particular
transaction. Subject to the requirements of favorable price and efficient
execution, placement of orders by securities firms for the purchase of shares
of the Fund may be taken into account as a factor in the allocation of
portfolio transactions.
In addition, there may be times when an investment decision may be
made to purchase or sell the same security for the Fund and one or more clients
of the Adviser. If the Fund and the Adviser on behalf of other clients
simultaneously engage in the purchase or sale of the same security, the
transactions will be allocated as to amount and price in a manner considered
equitable to each. In some instances, this procedure could adversely affect
the Fund but the Fund deems that any disadvantage in the procedure would be
outweighed by the increased selection and the increased opportunity to engage
in volume transactions.
Research services furnished by brokers used by the Fund for portfolio
transactions may be utilized by the Adviser in connection with its investment
services for other accounts and, likewise, research services provided by
brokers used for transactions of other accounts may be utilized by the Adviser
in performing its services for the Fund. The Adviser determines the
reasonableness of the commissions paid in relation to its view of the value of
the brokerage and research services provided, considered in terms of the
particular transaction and its overall responsibilities with respect to all
accounts as to which it exercises investment
9
<PAGE> 27
discretion. As any particular research obtained by the Adviser may be useful
to the Fund, the Board of Trustees, in considering the reasonableness of the
commissions paid by the Fund, will not attempt to allocate, or require the
Adviser to allocate, the relative costs or benefits of research.
SHAREHOLDER MEETINGS
The Fund does not hold annual shareholder meetings, but does hold
special shareholder meetings when the Board of Trustees believes it is
necessary or when required by law. The Fund will hold a special meeting when
requested in writing by the holders of at least 10% of the shares eligible to
vote at a meeting.
Trustees may be removed from office by a vote of the holders of a
majority of the outstanding shares at a meeting called for that purpose, which
meeting shall be held upon the written request of the holders of not less than
10% of the outstanding shares. Upon the written request of ten or more
shareholders who have been such for at least six months and who hold shares
constituting the lesser of $25,000 or 1% of the outstanding shares of the Fund
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a trustee, the Fund has undertaken to disseminate
appropriate materials at the expense of the requesting shareholders.
PERFORMANCE DATA
Average annual total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in the Fund's investment portfolio.
The Fund's average annual total return figures are computed in accordance with
the standardized method prescribed by the Securities and Exchange Commission by
determining the average annual compounded rates of return over the periods
indicated, 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 at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as
described in the Prospectus, and (ii) deducts all recurring fees, such as
advisory fees, charged as expenses to all shareholder accounts.
Total return is the cumulative rate of investment growth which assumes
that income dividends and capital gains are reinvested. It is determined by
assuming a hypothetical investment at the net asset value at the beginning of
the period, adding in the reinvestment of all income dividends and capital
gains, calculating the ending value of the investment at the net asset value as
of the end of the specified time period, subtracting
10
<PAGE> 28
the amount of the original investment, and dividing this amount by the amount
of the original investment. This calculated amount is then expressed as a
percentage by multiplying by 100.
11
<PAGE> 29
FINANCIAL STATEMENTS
[To be provided in pre-effective amendment]
12
<PAGE> 30
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
*Included in Part B:
Statement of Assets and Liabilities.
Notes to Financial Statements.
Report of Coopers & Lybrand, L.L.P.,
Independent Auditors.
(b) Exhibits:
1. Declaration of Trust.
2. By-Laws.
3. Not Applicable.
4. Not Applicable.
5. Investment Advisory Agreement.
6. Form of Distribution Agreement.
7. Not Applicable.
8a. Custodian Agreement.
8b. Transfer Agency Contract.
9. Not Applicable.
10. Opinion and Consent of Counsel as to Legality of
Shares Being Registered.
*11. Consent of Independent Auditors to Use of Report.
12. Not Applicable.
*13. Financial Statement included in Statement of
Additional Information.
*14. Retirement Plans.
15. Rule 12b-1 Distribution Plan
*16. Schedule for Computation of Performance Quotation.
17. Not Applicable.
18. Powers of Attorney.
- -------------------------------
*To be provided in a pre-effective amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of February 1, 1996 there was one holder of record of Registrant's
shares.
ITEM 27. INDEMNIFICATION
Reference is made to Article VIII of the Declaration of Trust of the
Registrant, filed as Exhibit 1 hereto.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Kenwood Group, Inc., the Registrant's investment adviser, renders
investment advisory services to individual, institutional and pension and
profit-sharing plan accounts. None of the officers
II-1
<PAGE> 31
or directors of the Adviser have been engaged in other professions
and/or employment capacities during the past two fiscal years.
ITEM 29. PRINCIPAL UNDERWRITERS
Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All documents and records related to portfolio transactions are located
at The Kenwood Funds, 77 W. Washington Street, Suite 1615, Chicago, IL 60602
All other documents and records are located at Firstar Trust Company,
615 East Michigan Street, Milwaukee, WI 53202.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment with
financial statements, which need not be certified, within four to six months
from the effective date of Registrant's Registration Statement under the
Securities Act of 1933.
Commencing with Registrant's annual report to shareholders for
the year ending April 30, 1996, Registrant undertakes to furnish to each person
to whom a Prospectus is delivered, a copy of the Registrant's latest Annual
Report to Shareholders, upon request and without charge.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE> 32
THE KENWOOD FUNDS
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and State of
Illinois on the 22nd day of February, 1996.
THE KENWOOD FUNDS
By: /s/ Jessica R. Droeger
-----------------------
Jessica R. Droeger,
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by Barbara L. Bowles in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Barbara L. Bowles* Chief Executive and February 23, 1996
- ---------------------
Barbara L. Bowles Principal Financial Officer
and Trustee
</TABLE>
*Jessica R. Droeger signs this document on behalf of the Registrant
and Barbara L. Bowles pursuant to the Powers of Attorney filed as Exhibit 18 to
this Registration Statement.
/s/Jessica R. Droeger
---------------------
Jessica R. Droeger,
Attorney-in-Fact
<PAGE> 33
THE KENWOOD FUNDS
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Patty Litton Delony* Trustee February 22, 1996
- --------------------------
Patty Litton Delony
Lester J. Dugas, Jr.* Trustee February 22, 1996
- --------------------------
Lester J. Dugas, Jr.
Reynaldo P. Glover* Trustee February 22, 1996
- -------------------------
Reynaldo P. Glover
Challis M. Lowe* Trustee February 22, 1996
- --------------------------
Challis M. Lowe
</TABLE>
*Jessica R. Droeger signs this document on behalf of each of the
foregoing persons pursuant to the Powers of Attorney filed as Exhibit 18 to
this Registration Statement.
/s/Jessica R. Droeger
---------------------
Jessica R. Droeger,
Attorney-in-Fact
<PAGE> 1
EXHIBIT 1
THE KENWOOD FUNDS
DECLARATION OF TRUST
TRUST INSTRUMENT, made January 8, 1996 by Barbara L. Bowles (the
"Trustee").
WHEREAS, the Trustee desires to establish a business trust under the
Delaware Business Trust Act for the purpose of carrying on the business of an
investment company;
NOW, THEREFORE, the Trustee declares that all money and property
contributed to the trust hereunder shall be held and managed in trust under
this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. The name of the trust created hereby is "The
Kenwood Funds." Should the Trustees determine that the use of the name of the
Trust or any name of a Series of the Trust is not advisable, they may use such
other name for the Trust or Series as they deem proper and the Trust or Series
may hold its property and conduct its activities under such other name.
Section 1.2 Definitions. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) The "1940 Act" refers to the Investment Company Act
of 1940 and the rules and regulations thereunder, as amended from time to time.
(b) "Bylaws" means the bylaws referred to in Article IV,
Section 4.1(e) hereof, as from time to time amended;
(c) The terms "Affiliated Person," "Assignment,"
"Commission," "Interested Person" and "Principal Underwriter" shall have the
meanings given them in the 1940 Act.
(d) "Net Asset Value" means the net asset value of each
Series of the Trust determined in the manner provided in Article VII, Section
7.3 hereof;
(e) "Shares" means the equal proportionate transferable
units of beneficial interest into which the beneficial interest of each Series
of the Trust or class thereof shall be divided and may include fractions of
Shares as well as whole Shares;
(f) "Outstanding Shares" means those Shares recorded from
time to time in the books of the Trust or its transfer agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust;
<PAGE> 2
(g) "Series" means a series of Shares of the Trust
established in accordance with the provisions of Article II, Section 2.6
hereof;
(h) "Shareholder" means a record owner of Outstanding
Shares of the Trust;
(i) The "Trust" refers to The Kenwood Funds and reference
to the Trust, when applicable to one or more Series of the Trust, shall refer
to any such Series;
(j) The "Trustee" or "Trustees" means the person or
persons who has or have signed this Trust Instrument, so long as such person or
persons shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly qualified and serving as
Trustees in accordance with the provisions of Article III hereof and reference
herein to a Trustee or to the Trustees shall refer to the individual Trustees
in their capacity as Trustees hereunder;
(k) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust or the Trustees or any Series, on behalf of the Trust or any
Series.
ARTICLE II
BENEFICIAL INTEREST
Section 2.1 Shares of Beneficial Interest. The beneficial interest
in the Trust shall be divided into such transferable Shares of one or more
separate and distinct Series or classes of a Series as the Trustees shall from
time to time create or establish. The number of Shares of each Series, and
class thereof, authorized hereunder is unlimited. Each Share shall have no par
value. All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend in Shares or a split or reverse split of
Shares, shall be fully paid and nonassessable.
Section 2.2 Issuance of Shares. The Trustees in their discretion
may, from time to time without a vote of the Shareholders, issue Shares to such
party or parties and for such amounts and type of consideration, subject to
applicable law, including cash or securities (including Shares of a different
Series), at such time or times and on such terms as the Trustees may deem
appropriate, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares into a greater or
lesser number without thereby changing the proportionate beneficial interest in
the Trust.
Section 2.3 Register of Shares and Share Certificates. A register
shall be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As
to Shares for which no certificate has been issued, such register shall be
conclusive as to who are the holders of the Shares
2
<PAGE> 3
and which shall be entitled to receive dividends or other distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or other distribution, nor
to have notice given to said Shareholder as provided herein or in the Bylaws,
until said Shareholder has given the Shareholder's address to the transfer
agent or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. The Trustees need not issue any Share certificates
but, in their discretion, may authorize the issuance of Share certificates and
promulgate appropriate rules and regulations as to their use. In the event
that one or more certificates are issued, whether in the name of a Shareholder
or a nominee, such certificate or certificates shall constitute evidence of
ownership of Shares for all purposes, including transfer, assignment or sale of
such Shares, subject to such limitations as the Trustees may, in their
discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by the agent of said record holder, thereunto duly
authorized in writing, upon delivery to the Trustees or the Trust's transfer
agent of a duly executed instrument of transfer, together with a Share
certificate, if one is outstanding, and such evidence of the genuineness of
each such execution and authorization and of such other matters as may be
required by the Trustees. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor the Trust, nor any transfer agent or
registrar nor any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall,
until reissued pursuant to Section 2.2 hereof, not confer any voting rights on
the Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6 Establishment of Series. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in
their sole discretion, and without obtaining any prior authorization or vote of
the Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes
thereof into a greater or lesser number, to classify or reclassify any issued
Shares or any Series or classes thereof into one or more Series or classes of
Shares, and to take such other action with respect to the Shares as the
Trustees may deem desirable. The establishment and designation of any Series
shall be effective upon the adoption of a resolution by the Trustees setting
forth such establishment and designation and the relative rights and
preferences of the Shares of such Series. A Series may be issued in any number
of Shares.
All references to Shares in this Trust Instrument shall be deemed to
be Shares of any or all Series, or classes thereof, as the context may require.
All provisions herein relating to the Trust shall apply equally to each Series
of the Trust, and each class thereof, except as the context otherwise requires.
3
<PAGE> 4
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder of Shares of
a Series shall be entitled to receive distributions of income and capital
gains, if any, which are made with respect to such Series and which are
attributable to such Shares. Upon redemption of Shares, such Shareholder shall
be paid solely out of the funds and property of such Series of the Trust.
Section 2.7 Investment in the Trust. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or
securities in which the affected Series is authorized to invest, valued as
provided in Article VII, Section 7.3 hereof. Investments in a Series shall be
credited to each Shareholder's account in the form of full Shares at the Net
Asset Value per Share next determined after the investment is received;
provided, however, that the Trustees may, in their sole discretion, (a) fix the
Net Asset Value per Share of the initial capital contribution, (b) impose sales
or other charges upon investments in the Trust, or (c) issue fractional Shares.
Section 2.8 Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets
of the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto,
which are not readily identifiable as belonging to any particular Series shall
be allocated by the Trustees between and among one or more of the Series in
such manner as the Trustees, in their sole discretion, deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes, and such assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto shall be assets belonging
to that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Trust, and shall be held by the Trustees in
trust for the benefit of the holders of Shares of that Series. The assets
belonging to each particular Series shall be charged with the liabilities of
that Series and all expenses, costs, charges and reserves attributable to that
Series. Any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees between or among any one or more
of the Series in such manner as the Trustees in their sole discretion deem fair
and equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes. Without limitation of the
foregoing provisions of this Section 2.8, but subject to the right of the
Trustees in their discretion to allocate general liabilities, expenses, costs,
charges or reserves as herein provided, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular Series shall be enforceable against the assets of such Series only,
and not against the assets of the Trust generally. Notice of this contractual
limitation on inter-Series liabilities shall be set forth in the certificate of
trust of the Trust (whether originally or by amendment) as filed or to be filed
in the Office of the Secretary of State of the State of Delaware pursuant to
the Delaware Business Trust Act,
4
<PAGE> 5
and upon the giving of notice in the certificate of trust, the statutory
provisions of Section 3804 of the Delaware Business Trust Act relating to
limitations on inter-Series liabilities (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may satisfy or enforce
any debt, liability, obligation or expense incurred, contracted for or
otherwise existing with respect to that Series from the assets of that Series
only. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.
Section 2.9 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
Section 2.10 No Personal Liability of Shareholders. Each Shareholder
of the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. A note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series may include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets. The omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust.
Section 2.11 Assent to Trust Instrument. Every Shareholder, by virtue
of having purchased or otherwise acquired a Share, shall become a Shareholder
and shall be held to have expressly assented and agreed to be bound by the
terms hereof and the Bylaws as currently in effect and as amended from time to
time.
ARTICLE III
THE TRUSTEES
Section 3.1 Management of the Trust. The Trustees shall have
exclusive and absolute control over the Trust Property and over the business of
the Trust to the same extent as if the Trustees were the sole owners of the
Trust Property and business in their own right, but with such powers of
delegation as may be permitted by this Trust Instrument. The Trustees shall
have power to conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and without the
State of Delaware, in any and all states of the United States of America, in
the District of Columbia, in any and all commonwealths, territories,
dependencies, colonies, or possessions of the United States of America, and in
any foreign jurisdiction and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be
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conclusive. In construing the provisions of this Trust Instrument, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid powers. The powers of the Trustees
may be exercised without order of or resort to any court.
Section 3.2 Initial Trustee. The initial Trustee shall be the person
named herein.
Section 3.3 Term of Office of Trustees. The Trustees shall hold
office during the existence of this Trust, and until its termination as herein
provided; except that (a) any Trustee may resign his or her trust by written
instrument signed by such Trustee and delivered to the Chairman, President,
Secretary, or other Trustees of the Trust, which shall take effect upon such
delivery or upon such later date as is specified therein; (b) any Trustee may
be removed with or without cause at any time by written instrument, signed by
at least two-thirds of the number of Trustees prior to such removal, specifying
the date when such removal shall become effective; (c) any Trustee who requests
in writing to be retired or who has died, becomes physically or mentally
incapacitated by reason of disease or otherwise, or is otherwise unable to
serve, may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of such Trustee's retirement; and (d) a Trustee
may be removed at any meeting of the Shareholders of the Trust by a vote of
Shareholders owning at least two-thirds of the outstanding eligible votes
unless otherwise provided by law.
Section 3.4 Election, Vacancies and Appointment of Trustees. Except
for the Trustee named herein or Trustees appointed to fill vacancies pursuant
to this section, the Trustees shall be elected by the Shareholders owning of
record a plurality of the votes at a meeting of Shareholders. In case of
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise of a Trustee, or a Trustee
is otherwise unable to serve, or an increase in the number of Trustees, a
vacancy shall occur. Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy shall be
conclusive. In the case of a vacancy, the remaining Trustees may fill such
vacancy by appointing such other person as they in their discretion shall see
fit consistent with the limitations under the 1940 Act.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.4 shall have accepted this trust,
said Trustee shall be deemed a Trustee hereunder. Such acceptance may be in
writing or by an open declaration of acceptance at a meeting of the Board of
Trustees.
In the event that less than a majority of the Trustees have been
elected by the Shareholders, the Trustees shall call a meeting of the
Shareholders to hold an election for the Trustees not elected by the
Shareholders.
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Section 3.5 Temporary Absence of Trustee. Any Trustee may, by power
of attorney, delegate his or her power for a period not exceeding six months at
any one time to any other Trustee or Trustees, provided that in no case shall
less than two Trustees personally exercise the other powers hereunder except as
herein otherwise expressly provided.
Section 3.6 Number of Trustees. The number of Trustees shall be one,
or such other number as shall be fixed from time to time by the Trustees.
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee. The
declination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of
this Trust Instrument.
Section 3.8 Ownership of Assets of the Trust. Legal title in and
beneficial ownership of all of the Trust Property shall at all times be
considered as vested in the Trust, except that the Trustees may cause legal
title in and beneficial ownership of any Trust Property to be held by, or in
the name of one or more of the Trustees acting for and on behalf of the Trust,
or in the name of any person as nominee acting for and on behalf of the Trust.
No Shareholder shall be deemed to have a severable ownership interest in any
individual asset of the Trust or of any Series or any right of partition
thereof, but each Shareholder shall have, except as otherwise provided for
herein, a proportionate undivided beneficial interest in the Trust or Series.
The Shares shall be personal property giving only the rights specifically set
forth in this Trust Instrument. The Trust, or at the determination of the
Trustees, one or more of the Trustees or a nominee acting for and on behalf of
the Trust, shall be deemed to hold legal title and beneficial ownership of any
income earned on securities of the Trust issued by any business entities
formed, organized, or existing under the laws of any jurisdiction, including
the laws of any foreign country.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.1 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders.
The Trustees shall have full power and authority to do any and all acts and to
make and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall have full authority and power to make any and all investments
which they, in their sole discretion, shall deem proper to accomplish the
purpose of this Trust. Without limiting any of the foregoing, the Trustees
shall have power and authority:
(a) To invest and reinvest cash and other property, and
to hold cash or other property uninvested, and to sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the assets of
the Trust;
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(b) To carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
business;
(c) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other person
and to lend Trust Property;
(d) To provide for the distribution of interests of the
Trust either through a Principal Underwriter in the manner hereinafter provided
for or by the Trust itself, or both, or otherwise pursuant to a plan of
distribution of any kind;
(e) To adopt Bylaws not inconsistent with this Trust
Instrument providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders, which Bylaws shall be deemed a part of this Trust Instrument and
are incorporated herein by reference;
(f) To elect and remove such officers and appoint such
agents as they consider appropriate;
(g) To set record dates in the manner provided herein or
in the Bylaws;
(h) To delegate such authority (which delegation may
include the power to subdelegate) as they consider desirable to any officers of
the Trust and to any investment adviser, manager, administrator, transfer
agent, custodian, underwriter or other agent or independent contractor;
(i) To purchase and pay for entirely out of Trust
Property such insurance as they may deem necessary or appropriate for the
conduct of the business of the Trust, including insurance policies insuring the
Trust Property and payment of distributions and principal on its investments,
and insurance policies insuring the Shareholders, Trustees, officers,
representatives, employees, agents, investment advisers, managers,
administrators, custodians, underwriters or independent contractors 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 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.
(j) To sell or exchange any or all of the assets of the
Trust, subject to the provisions of Article IX, Section 9.4(b) hereof;
(k) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to
execute and deliver powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall deem
proper;
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(l) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(m) To hold any security or property in a form not
indicating any trust, whether in bearer, book entry, unregistered or other
negotiable form, or either in the name of the Trust or in the name of a
custodian or a nominee or nominees;
(o) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(p) To compromise, arbitrate, or otherwise adjust claims
in favor of or against the Trust or any matter in controversy including, but
not limited to, claims for taxes;
(q) To make distributions of income and of capital gains
to Shareholders in the manner hereinafter provided;
(r) To establish, from time to time, a minimum investment
for Shareholders in the Trust or in one or more Series or class, and to require
the redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(s) To establish one or more committees composed of one
or more of the Trustees, and to delegate any of the powers of the Trustees to
said committees;
(t) To interpret the investment policies, practices or
limitations of any Series;
(u) To determine and change the fiscal year of the Trust
and the method by which its accounts shall be kept;
(v) To adopt a seal for the Trust, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust;
(w) To employ one or more investment advisers, transfer
agents, distributors, managers administrators, custodians, and keepers of the
books and records or any other agents or independent contractors;
(aa) In general, to carry on any other business in
connection with or incidental to any of the foregoing powers; to do everything
necessary, suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore set
forth, either alone or in association with others; and to do every other act or
thing incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers
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of the Trustees. Any action by one or more of the Trustees in their capacity
as such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, exchange, and otherwise deal in Shares and,
subject to the provisions set forth in Article II and Article VII, to apply to
any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds or property of the Trust, or the particular Series of the
Trust, with respect to which such Shares are issued.
Section 4.3 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if such person were not a Trustee, officer or agent; and the
Trustees may issue and sell, or cause to be issued and sold, Shares to, and buy
such Shares from, any such person, or any firm or company in which such person
is interested, subject to the general limitations herein contained as to the
sale and purchase of such Shares.
Section 4.4 Action by the Trustees and Committees. The Trustees (and
any committee thereof) may act at a meeting held in person or in whole or in
part by conference telephone. One-third, but (except at such times as there is
only one Trustee) no less than two, of the Trustees shall constitute a quorum
at any meeting. Except as the Trustees may otherwise determine, one-third of
the members of any committee shall constitute a quorum at any meeting. The
vote of a majority of the Trustees (or committee members) present at a meeting
at which a quorum is present shall be the act of the Trustees (or any committee
thereof). The Trustees (and any committee thereof) may also act by written
consent signed by a majority of the Trustees (or committee members). Regular
meetings of the Trustees may be held at such places and at such times as the
Trustees may from time to time determine. Special meetings of the Trustees
(and meetings of any committee thereof) may be called in a manner to be set
forth in the Bylaws. Notice of the time, date and place of all meetings of the
Trustees (or any committee thereof) shall be given by the party calling the
meeting to each Trustee (or committee member) by telephone, telefax, electronic
mail or telegram sent to the person's home or business address at least
twenty-four hours in advance of the meeting or by written notice mailed to the
person's home or business address at least seventy-two hours in advance of the
meeting. Notice of all proposed written consents of Trustees (or committees
thereof) shall be given to each Trustee (or committee member) by telephone,
telefax, telegram, electronic mail or first class mail sent to the person's
home or business address. Notice need not be given to any person who attends a
meeting without objecting to the lack of notice or who executes a written
consent or a written waiver of notice with respect to a meeting. Written
consents or waivers may be executed in one or more counterparts. Execution of
a written consent or waiver and delivery thereof may be accomplished by
telefax.
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Section 4.5 Chairman of the Trustees. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees at which said Chairman is present and
may be (but is not required to be) the chief executive officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent prohibited
by applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, distributor or transfer agent for the Trust or with any Interested
Person of such person; and the Trust may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, distributor, transfer agent, dividend disbursing
agent, custodian or in any other capacity upon customary terms.
Section 4.7 Parties to Contract. A contract may be entered into with
any corporation, firm, partnership, trust or association, although one or more
of the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship
be disqualified from voting on or executing the same in such person's capacity
as Shareholder and/or Trustee, nor shall any person holding such relationship
be liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract, when
entered into, was not inconsistent with the provisions of this instrument. The
same person may be the other party to contracts entered into pursuant to this
instrument, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts
mentioned in this Section 4.7.
Section 4.8 Shareholder Approval Required. Any provisions of the
Agreement to the contrary notwithstanding, no act, contract, or instrument
undertaken or entered into by or on behalf of this Trust requiring Shareholder
approval under the 1940 Act shall take effect until such approval is obtained.
ARTICLE V
EXPENSES OF THE TRUST
Section 5.1 General. The Trustees shall have the power to incur and
pay or be reimbursed from the assets of the Trust, or the assets of the
appropriate Series, any expenses which in the opinion of the Trustees are
necessary or incidental to carry out any of the purposes of the Trust or such
Series, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees, and shall be reimbursed from the assets of
the Trust or the assets of the appropriate Series for expenses reasonably
incurred by themselves on behalf of the Trust.
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Section 5.2 Expenses of Series. The Trustees shall have the power to
allocate and charge all expenses which are not readily identifiable as
belonging to any particular Series between or among any one or more of the
Series as set forth in Article II, Section 2.8 of this Trust Instrument.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 6.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article III, Section 3.4
hereof, (ii) for the removal of Trustees as provided in Article III, Section
3.3 hereof, and (iii) with respect to such additional matters relating to the
Trust as may be required by law, by this Trust Instrument, or as the Trustees
may consider desirable. On any matter submitted to a vote of the Shareholders,
all Shares shall be voted separately by individual Series, except that the
Shareholders of all Series shall vote for the election or removal of Trustees
and when the Trustees have determined that any other matter affects the
interests of more than one Series, then the Shareholders of all Series that the
Trustees have determined will be affected shall be entitled to vote thereon.
The Trustees may also determine that a matter affects only the interests of one
or more classes of a Series, in which case any such matter shall be voted on by
such class or classes. Each Shareholder shall have one vote for each dollar of
net asset value per Share for each Share held, irrespective of the Series or
Class thereof, except in the event that net asset value voting would disqualify
the Trust from offering Shares for sale in any jurisdiction in which Shares are
to be offered for sale, each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote and this method of voting shall
continue until such time as such legal requirement is no longer in force or
applicable. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy or in any manner provided for in the
Bylaws. A proxy may be given in writing, by telefax, or in any other manner
provided for in the Bylaws. Anything in this Trust Instrument to the contrary
notwithstanding, in the event a proposal by anyone other than the officers or
Trustees of the Trust is submitted to a vote of the Shareholders of one or more
Series or of the Trust, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust Instrument or
any of the Bylaws of the Trust to be taken by Shareholders.
Section 6.2 Meetings. Meetings of Shareholders may be held within or
without the State of Delaware. Special meetings of the Shareholders of the
Trust or one or more Series or classes may be called by the Trustees and shall
be called by the Trustees upon the written request of Shareholders owning at
least one-tenth of the Outstanding Shares. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940 Act seek the
opportunity of furnishing materials to the other Shareholders with a view to
obtaining signatures on such a request for a meeting, the Trustees shall comply
with the provisions of said Section 16(c) with respect to providing such
Shareholders access to the list of the Shareholders of record of the Trust or
the mailing of such materials to such Shareholders of record, subject to any
rights provided to the Trust or any Trustees
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provided by said Section 16(c). Notice shall be sent, by mail or such other
means determined by the Trustees, at least 15 days prior to any such meeting.
Meetings shall be called on any matter requiring a vote of the Shareholders
under the 1940 Act, including the election of Trustees as required under
Section 16(a) of the 1940 Act.
Section 6.3 Quorum and Required Vote. The presence in person or by
proxy of Shareholders entitled to cast thirty percent of all votes entitled to
be cast shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Trust Instrument
permits or requires that holders of any Series shall vote as a Series (or that
holders of a class shall vote as a class), then the holders of thirty percent
(30%) of the aggregate number of votes of that Series (or that class) entitled
to be cast shall be necessary to constitute a quorum for the transaction of
business by that Series (or that class). Any lesser number shall be sufficient
for adjournments. Any adjourned session or sessions may be held without the
necessity of further notice. Except when a different vote is required by law
or by the Trustees or by any provision of this Trust Instrument, a majority of
the votes cast, voted in person or by proxy, shall decide any questions and a
plurality of the votes cast shall elect a Trustee, provided that where any
provision of law or of this Trust Instrument permits or requires that the
holders of any Series shall vote as a Series (or that the holders of any class
shall vote as a class), then, except when a different vote is required by law
or by the Trustees or by any provision of this Trust Instrument, a majority of
the votes cast in person or by proxy of that Series (or class) shall decide
that matter insofar as that Series (or class) is concerned.
Section 6.4 Action by Written Consent. Any action which may be taken
by the Shareholders of the Trust, or of a Series, may be taken without a
meeting if Shareholders holding more than a majority of the votes entitled to
be cast, except when a larger vote is required by law or by any provision of
this Trust Instrument, shall consent to the action in writing. If the consents
of all Shareholders entitled to vote have not been solicited in writing and if
the unanimous written consent of all such Shareholders shall not have been
received, the Secretary shall give prompt notice to all Shareholders of actions
approved by the Shareholders without a meeting.
ARTICLE VII
DISTRIBUTIONS AND REDEMPTIONS
Section 7.1 Distributions.
(a) The Trustees may from time to time declare and pay
dividends or other distributions with respect to any Series, or class thereof.
The amount of such dividends or distributions and the payment of them and
whether they are in cash or any other Trust property shall be wholly in the
discretion of the Trustees.
(b) Dividends and other distributions may be paid or made
to the Shareholders of record at the time of declaring a dividend or other
distribution or among the Shareholders of record at such other date or time or
dates or times as the Trustees shall determine, which dividends or
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distributions, at the election of the Trustees, may be paid pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine. All dividends and other distributions on Shares of
a particular Series shall be distributed pro rata to the Shareholders of that
Series in proportion to the number of Shares of that Series they held on the
record date established for such payment, except that such dividends and
distributions shall reflect expenses allocated to a particular class of such
Series. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate and may at any time, or from time to time, provide that
all dividends shall be reinvested or that all dividends shall be reinvested
unless the Trust or its transfer agent has been instructed otherwise by a
Shareholder.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Article IX,
Section 9.3 hereof.
Section 7.2 Redemptions. In case any holder of record of Shares
desires to dispose of said Shares or any portion thereof, such holder may
deposit at the office of the transfer agent or other authorized agent of the
Trust a written request or such other form of request and other documents to
authenticate the request as may from time to time be required by the Trust,
requesting that the Shares be redeemed or purchased. The Shareholder so
requesting shall be entitled to require the Trust to purchase, and the Trust or
the Principal Underwriter of the Trust shall purchase such Shares, but only at
the Net Asset Value thereof (as described in Section 7.3). Payment shall be
made for any Shares to be redeemed, as aforesaid, in cash or property from the
assets of the Series represented by such shares. Upon redemption or
repurchase, such Shares shall become Treasury shares and may be re-issued from
time to time.
Section 7.3 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities. The
resulting amount, which shall represent the total Net Asset Value of the
particular Series, shall be divided by the total number of shares of that
Series outstanding at the time and the quotient so obtained shall be the Net
Asset Value per Share of that Series. Such value shall be determined
separately for each Series and shall be determined on such days and at such
times as the Trustees may determine. Such determination shall be made with
respect to securities for which market quotations are readily available, at the
market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees;
provided, however, that the Trustees, without Shareholder approval, may alter
the method of valuing portfolio securities consistent with the 1940 Act. The
Trustees may delegate any of their powers and duties under this Section 7.3
with respect to valuation of assets and liabilities.
At any time, the Trustees may cause the Net Asset Value per Share last
determined to be determined again in similar manner and may fix the time when
such redetermined value shall become effective. If, for any reason, the net
income of any Series, determined at any time, is a negative amount, the
Trustees may, with respect to that Series, (i) offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, or (ii) reduce the
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number of outstanding Shares of such Series by reducing the number of Shares in
the account of each Shareholder by a pro rata portion of that number of full
and fractional Shares which represents the amount of such excess negative net
income, or (iii) cause to be recorded on the books of such Series an asset
account in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series and shall not be paid to any
Shareholder), which account may be reduced by the amount of dividends declared
thereafter upon the Outstanding Shares of such Series on the day such negative
net income is experienced, until such asset account is reduced to zero; (iv)
combine the methods described in clauses (i) and (ii) and (iii) of this
sentence; or (v) take any other action they deem appropriate, in order to cause
(or in order to assist in causing) the Net Asset Value per Share of such Series
to remain at a constant amount per Outstanding Share immediately after each
such determination and declaration. The Trustees shall also have the power not
to declare a dividend out of net income for the purpose of causing the Net
Asset Value per Share to be increased. The Trustees shall not be required to
adopt, but may at any time adopt, discontinue or amend the practice of
maintaining the Net Asset Value per Share of the Series at a constant amount.
Section 7.4 Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such
time as the Trustees shall specify but not later than the close of business on
the business day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment until the Trustees shall
declare the suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw a request for redemption or
receive payment based on the Net Asset Value per Share next determined after
the termination of the suspension. In the event that any Series is divided
into classes, the provisions of this Section 7.4, to the extent applicable as
determined in the discretion of the Trustees and consistent with applicable
law, may be equally applied to each such class.
Section 7.5 Redemption of Shares in Order to Qualify as a Regulated
Investment Company. If the Trustees shall be of the opinion that direct or
indirect ownership of Shares of any Series has or may become concentrated to an
extent which would disqualify any Series as a regulated investment company
under the Internal Revenue Code, then the Trustees shall have the power (but
not the obligation) by lot or other means deemed equitable by them (i) to call
for redemption by any such person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such qualification and (ii) to refuse to
transfer or issue Shares to any person whose acquisition of the Shares in
question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in this Article
VII. Upon demand, the holders of Shares shall disclose to the Trustees in
writing such information with respect to direct and indirect ownership of
Shares as the Trustees deem necessary to comply with the provisions of the
Internal Revenue Code, or to comply with the requirements of any other taxing
authority.
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ARTICLE VIII
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 8.1 Limitation of Liability. No Trustee or officer of the
Trust, when acting in such capacity, shall be personally liable to any person
other than the Trust or a beneficial owner for any act, omission or obligation
of the Trust or any Trustee. No Trustee or officer shall be liable for any act
or omission in his or her capacity as Trustee or officer, or for any act or
omission of any officer or employee of the Trust or of any other person or
party, provided that nothing contained herein or in the Delaware Business Trust
Act shall protect any Trustee or officer against any liability to the Trust or
to Shareholders to which such Trustee or officer 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 as
an officer.
Section 8.2 Indemnification. The Trust shall indemnify each of its
Trustees against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, in which
said Trustee may be involved or with which said Trustee may be threatened,
while as a Trustee or thereafter, by reason of being or having been such a
Trustee except with respect to any matter as to which said Trustee shall have
been adjudicated to have acted in bad faith or with willful misfeasance, gross
negligence or reckless disregard of the duties of office; provided that as to
any matter disposed of by a compromise payment by such person, pursuant to a
consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless the Trust shall have received a
written opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of bad faith had been adjudicated, it
would in the opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions shall not
exclude any other right to which such person may be lawfully entitled; provided
that no person may satisfy any right of indemnity or reimbursement hereunder
except out of the property of the Trust. The Trustees may make advance
payments in connection with the indemnification under this Section 8.2;
provided that the indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that such person
is not entitled to such indemnification.
The Trust shall indemnify officers, and shall have the power
to indemnify representatives and employees of the Trust, to the same extent
that Trustees are entitled to indemnification pursuant to this Section 8.2.
Section 8.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally liable solely by
reason of being or having been a Shareholder of such Series and not because of
such Shareholder's acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon
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request by the Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Series and satisfy any judgment
thereon from the assets of the Series.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Trust Not a Partnership. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder
shall have any power to bind personally either the Trust's officers or any
Shareholder. All persons extending credit to, contracting with or having any
claim against the Trust or the Trustees may satisfy or enforce any debt,
liability, obligation or expense incurred, contracted for or otherwise existing
with respect to the Trust from the assets of the Trust only; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present
or future, shall be personally liable therefor.
Section 9.2 Trustees' Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees or their delegate of the Trustees' powers
and discretions hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested.
Subject to the provisions of Article VIII hereof, the Trustees and officers
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees and officers may take advice of counsel or other experts with respect
to the meaning and operation of this Trust Instrument, and subject to the
provisions of Article VIII hereof, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if
a bond is obtained.
Any Trustees shall, in the performance of their duties, be fully
protected in relying in good faith upon the records of the Trust and upon such
information, opinions, reports or statements presented to the Trust by any of
the Trust's officers or employees, or committees of the Board of Trustees, or
by any other person as to matters the Trustees reasonably believe are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Trust.
Section 9.3 Establishment of Record Dates. The Trustees may close the
Share transfer books of the Trust for a set period or may establish a record
date for the determination of Shareholders entitled to (i) notice of or vote at
a Shareholders' meeting, or (ii) receive any dividend payment or other right as
provided in the Bylaws.
Section 9.4 Termination of Trust or Series.
(a) This Trust shall continue without limitation of time
but subject to the provisions of sub- section (b) of this Section 9.4.
(b) The Trustees may
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(i) sell and convey all or substantially all of
the assets of the Trust or any Series to another trust,
partnership, association or corporation, or to a separate
series of shares thereof, organized under the laws of any
state, for adequate consideration which may include the
assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or any
Series, and which may include shares of beneficial interest,
stock or other ownership interests of such trust, partnership,
association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all
of the assets of the Trust or any series.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities in either (i) or (ii), by
such assumption or otherwise, the Trustees shall distribute the remaining
proceeds or assets (as the case may be) of each Series (or class) ratably among
the holders of Shares of that Series then outstanding.
(c) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in subsection (b), the Trust or
any affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware
Business Trust Act, which certificate of cancellation may be signed by any one
Trustee.
Section 9.5 Reorganization. Anything in this Trust Instrument to the
contrary notwithstanding, the Trustees, in order to change the form of
organization and/or domicile of the Trust, may, without prior Shareholder
approval, (i) cause the Trust to merge or consolidate with or into one or more
trusts, partnerships, associations or corporations which is formed, organized
or existing under the laws of a state, commonwealth possession or colony of the
United States or (ii) cause the Trust to incorporate under the laws of
Delaware. Any agreement of merger or consolidation or certificate of merger
may be signed by one or more of the Trustees. Pursuant to and in accordance
with the provisions of Section 3815(f) of the Delaware Business Trust Act, and
notwithstanding anything to the contrary contained in this Trust Instrument, an
agreement of merger or consolidation approved by the Trustees in accordance
with this Section 9.5 may effect any amendment to the Trust Instrument or
effect the adoption of a new trust instrument of the Trust if it is the
surviving or resulting trust in the merger or consolidation. Any merger or
consolidation of the Trust other than as described in the foregoing provisions
of this Section 9.5 shall, in addition to the approval of the Trustees, require
the approval of the holders of a majority of the Outstanding Shares.
Section 9.6 Filing of Copies, References, Headings. The original or a
copy of this Trust Instrument and of each amendment hereof, or Trust Instrument
supplemental hereto, shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
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amendments or supplements have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this Trust Instrument or of any such amendment or supplemental
Trust Instrument. In this Trust Instrument or in any such amendment or
supplemental Trust Instrument, references to this Trust Instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer
to this Trust Instrument as amended or affected by any such supplemental Trust
Instrument. Where the context so requires, words used in singular shall
include the plural and vice versa, and words of one gender shall include all
other genders. The term "person" shall be deemed to include an entity (such as
a proprietorship, corporation, partnership, trust or association) or an
individual as the context requires. Headings are placed herein for convenience
of reference only and, in case of any conflict, the text of this Trust
Instrument rather than the headings, shall control. This Trust Instrument may
be executed in any number of counterparts each of which shall be deemed an
original.
Section 9.7 Applicable Law. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Business
Trust Act and the laws of said State; provided, however, that there shall not
be applicable to the Trust, the Trustees or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Business Trust Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining court or other governmental approval
concerning the acquisition, holding or disposition of real or personal
property, (iv) fees or other sums payable to trustees, officers, agents or
employees of a trust, (v) the allocation of receipts and expenditures to income
or principal, (vi) restrictions or limitations on the permissible nature,
amount or concentration of trust investments or requirements relating to the
titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or
limitations on the acts or powers of Trustees, which are inconsistent with the
limitations or liabilities or authorities and powers of the trustees set forth
or referenced in this Trust Instrument. The Trust shall be 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 under Delaware law. The Trust specifically reserves the right to
exercise any of the powers or privileges afforded to trusts or actions that may
be engaged in by trusts under the Delaware Business Trust Act, and the absence
of a specific reference herein to any such power, privilege or action shall not
imply that the Trust may not exercise such power or privilege or take such
actions.
Section 9.8 Amendments. Except as specifically provided herein, the
Trustees may, without Shareholder vote, amend or otherwise supplement this
Trust Instrument by making an amendment, a Trust Instrument supplemental hereto
or an amended and restated trust instrument. Shareholders shall have the right
to vote (i) on any amendment which would affect their right to vote granted in
Section 6.1 hereof, (ii) on any amendment to this Section 9.8, (iii) on any
amendment that they are required by law to vote on, and (iv) on any amendment
submitted to them by the Trustees. Any amendment required or permitted to be
submitted to Shareholders which, as the Trustees determine,
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shall affect the Shareholders of one or more Series shall be authorized by vote
of the Shareholders of each Series affected and no vote of Shareholders of a
Series not affected shall be required. Anything in this Trust Instrument to
the contrary notwithstanding, any amendment to Article VIII hereof shall not
limit the right to indemnification or insurance provided therein with respect
to any action or omission prior to such amendment.
Section 9.9 Fiscal Year. The fiscal year of the Trust shall end on a
specified date as determined from time to time by the Trustees.
Section 9.10 Provisions in Conflict with Law. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940
Act, the regulated investment company provisions of the Internal Revenue Code
or with other applicable laws and regulations, the conflicting provision shall
be deemed never to have constituted a part of this Trust Instrument; provided,
however, that such determination shall not affect any of the remaining
provisions of this Trust Instrument or render invalid or improper any action
taken or omitted prior to such determination. If any provision of this Trust
Instrument shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any other
jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, has executed this Instrument this 8th day of January, 1996.
/s/Barbara L. Bowles, Initial Trustee
-------------------------------------
Barbara L. Bowles, Initial Trustee
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EXHIBIT 2
KENWOOD FUNDS
BYLAWS
These Bylaws of The Kenwood Funds (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated January
8, 1996, as from time to time amended, supplemented or restated (the "Trust
Instrument"). Capitalized terms used herein which are defined in the Trust
Instrument are used as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in such
location as the Trustees may from time to time determine. The Trust may
establish and maintain such other offices and places of business as the
Trustees may from time to time determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Section 2.1 Officers. The officers of the Trust shall be a
President, a Treasurer, a Secretary, and such other officers as the Trustees
may from time to time elect. It shall not be necessary for any Trustee or
other officer to be a holder of Shares in the Trust.
Section 2.2 Election of Officers. Two or more offices may be
held by a single person. Subject to the provisions of Section 2.3 hereof, the
officers shall hold office until their successors are chosen and qualified and
serve at the pleasure of the Trustees.
Section 2.3 Resignations. Any officer of the Trust may
resign by filing a written resignation with the President, the Secretary or the
Trustees, which resignation shall take effect on being so filed or at such
later time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.1 President. The President shall be the chief
executive officer of the Trust. Subject to the direction of the Trustees, the
chief executive officer shall have general administration of the business and
policies of the Trust. Except as the Trustees may otherwise order, the chief
executive officer shall have the power to (i) grant, issue, execute or sign
such powers of attorney, proxies, agreements or other documents as may be
deemed advisable or necessary in the furtherance of the interests of the Trust
or any Series thereof and (ii) employ attorneys, accountants and other advisers
and agents and counsel for the Trust.
<PAGE> 2
Section 3.2 Treasurer. The Treasurer shall be the principal
financial and accounting officer of the Trust and shall deliver all funds and
securities of the Trust which may come into his or her hands to such company as
the Trustees shall employ as custodian in accordance with the Trust Instrument
and applicable provisions of law. The Treasurer shall (i) make annual reports
regarding the business and condition of the Trust, which reports shall be
preserved in Trust records, and (ii) furnish such other reports regarding the
business and condition of the Trust as the Trustees may from time to time
require. The Treasurer shall perform such additional duties as the Trustees or
the chief executive officer may from time to time designate.
Section 3.3 Secretary. The Secretary shall record, in books
kept for the purpose, all votes and proceedings of the Trustees and the
Shareholders at their respective meetings and shall have the custody of the
seal of the Trust, if any. The Secretary shall perform such additional duties
as the Trustees or the chief executive officer may from time to time designate.
Section 3.4 Vice President. Any Vice President of the Trust
shall perform such duties as the Trustees or the chief executive officer may
from time to time designate. At the request or in the absence or disability of
the President, the most senior Vice President present and able to act may
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President.
Section 3.5 Assistant Treasurer. Any Assistant Treasurer of
the Trust shall perform such duties as the Trustees or the Treasurer may from
time to time designate, and, in the absence of the Treasurer, the most senior
Assistant Treasurer present and able to act may perform all the duties of the
Treasurer.
Section 3.6 Assistant Secretary. Any Assistant Secretary of
the Trust shall perform such duties as the Trustees or the Secretary may from
time to time designate, and, in the absence of the Secretary, the most senior
Assistant Secretary present and able to act may perform all the duties of the
Secretary.
Section 3.7 Subordinate Officers. The Trustees from time to
time may appoint such other officers or agents as they may deem advisable, each
of whom shall have such title, hold office for such period, have such authority
and perform such duties as the Trustees may determine.
Section 3.8 Surety Bonds. The Trustees may require any
officer or agent of the Trust to execute a bond (including, without limitation,
any bond required by the 1940 Act) in such sum and with such surety or sureties
as the Trustees may determine, conditioned upon the faithful performance of his
duties to the Trust including responsibility for negligence and for the
accounting of any of the Trust's property, funds or securities that may come
into his hands.
Section 3.9 Removal. Any officer may be removed from office
at any time by the Trustees.
Section 3.10 Remuneration. The salaries or other
compensation, if any, of the officers of the Trust shall be fixed from time to
time by resolution of the Trustees.
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ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 4.1 Notices. Notices of any meeting of the
Shareholders shall be given by the Secretary by delivering or mailing, postage
prepaid, to each Shareholder entitled to vote at said meeting, written or
printed notification of such meeting at least fifteen days before the meeting,
to such address as may be registered with the Trust by the Shareholder. Notice
of any Shareholder meeting need not be given to any Shareholder if a written
waiver of notice, executed before or after such meeting, is filed with the
record of such meeting, or to any Shareholder who shall attend such meeting in
person or by proxy. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced
at the meeting or reasonable notice is given to persons present at the meeting.
Section 4.2 Voting-Proxies. Subject to the provisions of the
Trust Instrument, Shareholders entitled to vote may vote either in person or by
proxy, provided that either (i) an instrument authorizing such proxy to act is
executed by the Shareholder in writing and dated not more than eleven months
before the meeting, unless the instrument specifically provides for a longer
period or (ii) the Trustees adopt by resolution an electronic, telephonic,
computerized or other alternative to execution of a written instrument
authorizing the proxy to act, which authorization is received not more than
eleven months before the meeting. Proxies shall be delivered to the Secretary
of the Trust or other person responsible for recording the proceedings before
being voted. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Trust receives a specific written notice to the
contrary from any one of them. Unless otherwise specifically limited by their
terms, proxies shall entitle the holder thereof to vote at any adjournment of a
meeting. A proxy purporting to be exercised by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden or proving invalidity shall rest on the challenger. At all meetings of
the Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualifications of voters, the validity of proxies, and the
acceptance or rejection of votes shall be decided by the Chairman of the
meeting. Except as otherwise provided herein or in the Trust Instrument, all
matters relating to the giving, voting or validity of proxies shall be governed
by the General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Shareholders were shareholders of a Delaware corporation.
Section 4.3 Closing of Transfer Books: Record Dates. The
Board of Trustees may fix the time, not exceeding twenty days preceding the
date of any meeting of Shareholders, any dividend payment date or any date for
the allotment of rights, during which the books of the Corporation shall be
closed against transfers of stock. If such books are closed for the purpose of
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of providing for the closing of the books
against transfers of stock as aforesaid, the Board of Trustees may fix, in
advance, a date, not exceeding one hundred days and not less than ten days
preceding any dividend payment date or any date for the allotment of rights, as
a record date for the determination of the Shareholders entitled to notice of
and to vote at such meeting, or entitled to receive such dividends or rights,
as the case may
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be; and only Shareholders of record on such date shall be entitled to notice of
and to vote at such meeting or to receive such dividends or rights, as the case
may be.
Section 4.4 Conduct of Shareholders' Meetings. The meetings
of the Shareholders shall be presided over by the Chairman of the Board or, if
the Chairman shall not be present then by the President or, if the President
shall not be present, then by a Vice President or, if no Vice President is
present, then by a chairman to be elected at the meeting. The Secretary of the
Trust, if present, shall act as Secretary of such meeting, or if the Secretary
is not present, an Assistant Secretary shall so act; if neither the Secretary
nor an Assistant Secretary is present, then the presiding officer shall appoint
a secretary.
Section 4.5 Concerning Validity of Proxies, Ballots, Etc. At
every meeting of the Shareholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary of
the meeting, who shall decide all questions touching on the qualification of
voters, the validity of the proxies, and the acceptance or rejection of votes.
Section 4.6 Place of Meeting. Meetings of the Shareholders
shall be held at such places as the Trustees may designate.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1 Share Certificate. No certificates certifying
the ownership of Shares shall be issued except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series
or class thereof for any purpose and the issuance of a certificate to one or
more Shareholders shall not require the issuance of certificates generally. In
the event that the Trustees authorize the issuance of Share certificates, such
certificate shall be in the form prescribed from time to time by the Trustees
and shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be
facsimiles if the certificate is signed by a Transfer Agent or shareholder
services 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 have ceased 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.
Section 5.2 Loss of Certificate. 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 may
prescribe.
Section 5.3 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 Share
certificates to the Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of Shares in the Trust.
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ARTICLE VI
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees.
ARTICLE VII
SEAL
The seal of the Trust shall be circular in form bearing the inscription:
"The Kenwood Funds -- 1996
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the
Trustees and the seal may be used by causing it or a facsimile to be impressed
or affixed or printed or otherwise reproduced.
Any officer or Trustee of the Trust shall have authority to
affix the seal of the Trust to any document, instrument or other paper executed
and delivered by or on behalf of the Trust; however, 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 by or on behalf of the Trust.
ARTICLE VIII
AMENDMENTS
These By-laws may be amended from time to time by the Trustees.
ARTICLE IX
HEADINGS
Headings are placed in these By-laws for convenience of
reference only and, in case of any conflict, the text of these By-laws rather
than the headings shall control.
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EXHIBIT 5
THE KENWOOD FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of January 26, 1996, by and between THE KENWOOD
FUNDS, a Delaware business trust (hereinafter called the "Trust"), and THE
KENWOOD GROUP, INC., an Illinois corporation (hereinafter called the
"Adviser").
W I T N E S S E T H:
In consideration of the mutual covenants hereinafter contained, IT IS
HEREBY AGREED by and between the parties hereto as follows:
1. The Trust, a registered investment company under the
Investment Company Act of 1940 and Regulations thereunder (the "Act"), employs
the Adviser to act as its investment adviser and to manage the investment and
reinvestment of the assets of each series of the Trust (each a "Fund")
identified in a currently effective addendum to this Agreement pursuant to
Section 11 of this Agreement, subject to the supervision of the Board of
Trustees of the Trust and in conformity with the Registration Statement of the
Trust as in effect from time to time for the period and on the terms herein set
forth. The Adviser hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth
for the compensation herein provided. The Adviser from time to time or at any
time may also be employed by the Board of Trustees to provide administrative,
underwriting or other services to the Trust not directly related to management
of investments upon such terms and conditions, including compensation, as may
be agreed between the parties. The Adviser shall be an independent contractor
and, unless otherwise expressly provided or authorized hereunder or by the
Board of Trustees, shall have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
<PAGE> 2
2. The Adviser shall, at its own expense, furnish suitable office
space in its own offices or in such other place as may be agreed upon from time
to time, and all necessary office facilities, equipment and personnel for
carrying out its duties hereunder and shall arrange, if desired by the Trust,
for members of the Adviser's organization to serve, without compensation from
the Trust, as trustees, officers or agents of the Trust if duly elected or
appointed to such positions by the shareholders or by the Board of Trustees,
subject to their individual consent and to any limitations imposed by law.
3. The Adviser shall be responsible only for those expenses
expressly stated in paragraph 2 to be the responsibility of the Adviser and
shall not be responsible for any other expenses of the Trust including, as
illustrative and without limitation, maintenance and verification of books and
records; filings with state and federal authorities; fees and charges of any
custodian (including charges as custodian and for keeping books and records and
similar services); fees and expenses of trustees, other than trustees described
in paragraph 2; fees and expenses of independent auditors, legal counsel,
transfer agents, dividend disbursing agents, and registrars; costs of and
incident to issuance, redemption and transfer of shares, and distributions to
shareholders (including dividend payments and reinvestment of dividends); costs
of acquiring portfolio securities, including brokers' commissions; interest
charges; taxes and corporate fees payable to any government or governmental
body or agency (including those incurred on account of the registration or
qualification of securities issued by the Trust); dues and other expenses
incident to the Trust's membership in the Investment Company Institute and
other like associations; cost of stock certificates, stockholder meetings,
corporate reports, reports and notices to stockholders; costs of printing,
stationery, and bookkeeping forms; and amounts to be paid by the Trust in
accordance with any Rule 12b-1 Distribution Plan. The Adviser shall be
reimbursed by the Trust on or before the fifteenth day of each calendar month
for all expenses paid or incurred during the preceding
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calendar month by the Adviser for or on behalf of or at the request or
direction of the Trust which are not the responsibility of the Adviser
hereunder.
4. Services of the Adviser herein provided are not to be deemed
exclusive, and the Adviser shall be free to render similar services or other
services to others so long as its services hereunder shall not be impaired
thereby. In the absence of willful misfeasance, bad faith or gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Adviser, the Adviser shall not be subject to liability to the Trust or any
shareholder of the Trust for any act or omission in the course of, or in
connection with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
5. As compensation for the services rendered and obligations
assumed hereunder by the Adviser, the Trust shall pay to the Adviser out of the
assets of the Fund on or before the fifteenth day of each calendar month a fee
calculated on the basis of average daily net assets at the annual rates for the
Fund set forth in the written addendum to this Agreement executed by both
parties. Such fee shall be computed and accrued daily. Upon termination of
this Agreement as to any Fund before the end of any calendar month, the fee of
that Fund for such period shall be prorated. For purposes of calculating the
fee of the Adviser, the daily value of each Fund's net assets shall be computed
by the same method as the Trust uses to compute the value of net assets in
connection with the determination of the net asset value of each Fund's shares.
6. If the total expenses of a Fund shall exceed any applicable
expense limitation prescribed by any statute or regulatory authority of a
jurisdiction in which a Fund's shares are qualified for offer and sale, the
Adviser shall reimburse that Fund in the amount of such excess to the extent
required by such securities law or regulation.
3
<PAGE> 4
7. It is understood that the officers, trustees, agents and
shareholders of the Trust are or may be interested in the Adviser as officers,
employees or agents and that the officers, employees and agents of the Adviser
may be interested in the Trust otherwise than as shareholders.
8. The Trust acknowledges that the use of the term "Kenwood" in
its name is with the permission of the Adviser. If for any reason, the Adviser
no longer acts as the Trust's investment adviser, the Trust shall cease using
the name "Kenwood" upon demand made by the Adviser.
9. This Agreement shall be effective as to a Fund on the date of
initial effectiveness stated in the addendum with respect to that Fund and
continue with respect to the Fund for an initial term specified in such
addendum unless sooner terminated as hereinafter provided. It shall continue
from year to year thereafter as long as its continuance with respect to the
Fund is approved annually in accordance with the Act. This Agreement may be
terminated as to any Fund at any time, without payment of any penalty, by the
Trust's Board of Trustees, or by a vote of the holders of a majority of the
eligible votes of such Fund upon 60 days' prior written notice to the Adviser
and by the Adviser upon 60 days' prior written notice to the Trust. This
Agreement may be amended as to a Fund at anytime by the parties, subject to
approval by the Trust's Board of Trustees and, if required by law or applicable
regulations, the affirmative vote of the holders of a majority of the total
votes entitled to vote thereon. This Agreement shall terminate automatically
in the event of its assignment as defined under the Act except as the
application of such term to a particular transaction is suspended or modified
by reason of any exemption order issued pursuant to the Act or any no-action
letter issued by the staff of the Securities and Exchange Commission.
10. As of the date of this Agreement, the Trust has one series of
shares, the Growth & Income Fund. This Agreement shall apply to and be
effective as to such series and any series hereafter created by the Trust for
which this Agreement has been approved in the manner required by the Act,
provided
4
<PAGE> 5
that there is a written addendum to this Agreement executed by both parties
which identifies such series as a Fund to be managed pursuant to this
Agreement, specifies the fee payable to the Adviser with respect to such
series, and states the initial effective and termination dates of this
Agreement with respect to each Fund.
11. The Adviser acknowledges that it has received notice of and
accepts the limitations upon the Trust's liability set forth in Article II of
its Declaration of Trust. The Adviser agrees that the Trust's obligations
hereunder in any case shall be limited to the Trust and its assets and that the
Adviser shall not seek satisfaction of any such obligation from any current or
former shareholder of the Trust nor from any current or former Trustee,
officer, employee or agent of the Trust.
12. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and made effective as of January 26, 1996.
THE KENWOOD FUNDS
By: /s/Barbara L. Bowles
-------------------------------
Its: President
THE KENWOOD GROUP, INC.
By: /s/ Barbara L. Bowles
-------------------------------
Its: President
5
<PAGE> 6
ADDENDUM TO INVESTMENT ADVISORY AGREEMENT
DATED JANUARY 26, 1996 BETWEEN
THE KENWOOD FUNDS AND THE KENWOOD GROUP, INC.
IN RESPECT TO THE GROWTH & INCOME FUND
The Investment Advisory Agreement shall be effective as to the series
designated The Growth & Income Fund on the date that the registration statement
for the shares of this series is effective under the Securities Act of 1933
and shall continue for an initial term ending no more than two years from such
date unless sooner terminated as provided in the Agreement. The compensation
payable out of the assets of the Fund pursuant to the Agreement shall be at the
following annual rates:
<TABLE>
<CAPTION>
Annual Rate Value of Average Daily Net Assets
----------- ---------------------------------
<S> <C>
0.75% First $500 Million
0.70% Next $500 Million
0.65% $1 Billion and above
</TABLE>
Dated: January 26, 1996
THE KENWOOD FUNDS
By: /s/Barbara L. Bowles
------------------------------
Its: President
THE KENWOOD GROUP, INC.
By: /s/ Barbara L. Bowles
------------------------------
Its: President
<PAGE> 1
EXHIBIT 6
FORM OF
UNDERWRITING AGREEMENT
THIS AGREEMENT is made on ____________, 1996, by and between THE
KENWOOD FUNDS, a Delaware business trust (the "Trust"), and AMERIPRIME
FINANCIAL SECURITIES, INC., a Texas corporation ("Underwriter").
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities
and Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of THE KENWOOD FUNDS.
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment. The trust hereby appoints Underwriter as its
exclusive agent for the distribution of the Shares, and the Underwriter hereby
accepts such appointment under the terms of this Agreement. While this
Agreement is in force, the Trust shall not sell any Shares except on the terms
set forth in this Agreement. Notwithstanding any other provision hereof, the
Trust may terminate, suspend or withdraw the offering of Shares of any Series
whenever, in its sole discretion, it deems such action to be desirable.
2. Compensation. The compensation to be paid for the services
performed and the obligations assumed by Underwriter under this Agreement shall
be as set forth in Exhibit A attached hereto.
3. The compensation to be paid for the services performed and the
obligations assumed by the Distributor under this Agreement shall be as set
forth in Exhibit A attached hereto.
4. Sale and Repurchase of Shares
(a) Underwriter will have the right, as agent for the
Trust, to enter into dealer agreements with responsible investment dealers, and
to sell Shares to such investment dealers against orders therefor at the public
offering price (as defined in subparagraph 2(e) hereof) less a discount
determined by Underwriter, which discount shall not exceed the amount of the
sales charge stated in the Trust's effective Registration Statement on Form
N-1A under the Securities Act of 1933, as amended, including the then current
prospectus and statement of additional information (the "Registration
Statement"). Upon receipt of an order to purchase Shares from a dealer with
whom Underwriter has a dealer agreement, Underwriter will promptly cause such
order to be filled by the Trust.
<PAGE> 2
(b) Underwriter will have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
(c) Underwriter will also have the right, as agent for
the Trust, to sell shares at their net asset value to such persons as may be
approved by the Trustees of the Trust, all such sales to comply with the
provisions of the Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
(d) Underwriter will also have the right to take, as
agent for the Trust, all actions which, in Underwriter's judgment, are
necessary to carry into effect the distribution of the Shares.
(e) The public offering price for the Shares of each
Series (and, with respect to each Series offering multiple classes of Shares,
the Shares of each Class of such Series) shall be the respective net asset
value of the Shares of that Series (or Class of that Series) then in effect,
plus any applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and rules and regulations of
the Securities and Exchange Commission promulgated thereunder. In no event
shall any applicable sales charge exceed the maximum sales charge permitted by
the Rules of Fair Practice of the NASD.
(f) The net asset value of the Shares of each Series (or
Class of a Series) shall be determined in the manner provided in the
Registration Statement, and when determined shall be applicable to transactions
as provided for in the Registration Statement. The net asset value of the
Shares of each Series (or each Class of a Series) shall be calculated by the
Trust or by another entity on behalf of the Trust. Underwriter shall have no
duty to inquire into or liability for the accuracy of the net asset value per
share as calculated.
(g) On every sale, the Trust shall receive the applicable
net asset value of the Shares promptly, but in no event later than the tenth
business day following the date on which Underwriter shall have received an
order for the purchase of the Shares.
(h) Upon receipt of purchase instructions, Underwriter
will transmit such instructions to the Trust or its transfer agent for
registration of the Shares purchased.
(i) Nothing in this Agreement shall prevent Underwriter
or any affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its
or their own account or for accounts of others for whom it or they may be
acting' provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(j) Underwriter, as agent of and for the account of the
Trust may repurchase the Shares at such prices and upon such terms and
conditions as shall be specified in the Registration Statement.
5. Sales of Shares by the Trust. The Trust reserves the right to
issue any Shares at any time directly to the holders of Shares
("Shareholders"), to sell Shares to its Shareholders or to other persons
approved by Underwriter at not less than net asset value and to issue Shares,
at a price to be
<PAGE> 3
solely determined by the Trust, in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
6. Basis of Sales of Shares. Underwriter does not agree to sell
any specific number of Shares. Underwriter, as agent for the Trust, undertakes
to sell Shares on a best efforts basis only against orders therefor.
7. Compliance with NASD and Government Rules.
(a) Underwriter will conform to the Rules of Fair
Practice of the NASD and the securities laws of any jurisdiction in which it
sells, directly or indirectly, and Shares.
(b) Underwriter, at its own expense, will pay the costs
incurred in establishing and maintaining its relationship with the dealers
selling the Shares. Underwriter will require each dealer with who Underwriter
has a dealer agreement to conform to the applicable provisions hereof and the
Registration Statement, and neither Underwriter nor any such dealers shall
withhold the placing of purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as
dealer or broker, or otherwise, under all applicable State or federal laws
required in order that Shares may be sold in such States as may be mutually
agreed upon by the parties.
(c) Underwriter shall not make, or permit any
representative, broker or dealer to make, in connection with any sale or
solicitation of a sale of the Shares, any representations concerning the Shares
except those contained in the then current prospectus and statement of
additional information covering the Shares and in printed information approved
the Trust as information supplemental to such prospectus and statement of
additional information. Copies of the then effective prospectus and statement
of additional information and any such printed supplemental information will be
supplied by the Trust to Underwriter in reasonable quantities upon request.
8. Records to be Supplied by Trust. The Trust shall furnish to
Underwriter copies of all information, financial statements and other papers
which Underwriter may reasonably request for use in connection with the
distribution of the Shares, and this shall include, but shall not be limited
to, one certified copy, upon request by Underwriter, of all financial
statements prepared for the Trust by independent public accountants.
9. Expenses to be Borne by Trust. The Trust will bear the
following expenses:
(a) preparation, setting in type, printing of sufficient
copies of the prospectus and statement of additional information for
distribution to shareholders, and the distribution to shareholders of the
prospectus and statement of additional information;
(b) preparation, printing and distribution of reports and
other communications to shareholders;
<PAGE> 4
(c) registration of the Shares under the federal
securities law;
(d) qualification of the Shares for sale in the
jurisdictions as agreed between Underwriter and the Trust;
(e) qualification of the Trust as a dealer or broker
under the laws of jurisdictions designated by Underwriter as well as
qualification of the Trust to do business in any jurisdiction, if Underwriter
and the Trust's legal counsel determine that such qualification is necessary or
desirable for the purpose of facilitating sales of the Shares;
(f) maintaining facilities for the issue and transfer of
the Shares;
(g) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and
(h) any original issue taxes or transfer taxes applicable
to the sale or delivery of the Shares of certificates therefor.
10. Services to and Actions for Trust, Not Underwriter. Any
person, even though also a director, officer, employee, shareholder or agent of
Underwriter, who may be or become an officer, trustee, employee or agent of the
Trust, shall be deemed, when rendering services to the Trust or acting on any
business of the Trust (other than services or business in connection with
Underwriter's duties hereunder), to be rendering such services to or acting
solely for the Trust and not as a director, officer, employee, shareholder or
agent, or one under the control or direction of Underwriter, even though paid
by it.
11. The Trust agrees to indemnify, defend and hold Underwriter,
its several officers and directors, and any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act of 1933 (the "1933
Act"), free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) which Underwriter, its officers or directors, or any such
controlling person may incur, under the 1933 Act or under common law or
otherwise, arising out of or based upon (i) a breach by the Trust of its
obligations under this Agreement or (ii) any alleged untrue statement of a
material fact contained in the Registration Statement, Prospectus or Statement
of Additional Information of the Trust or arising out of or based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that in no
event shall anything contained in this Agreement be construed so as to protect
Underwriter against any liability to the Trust or its shareholders to which
Underwriter would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence, in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this Agreement.
12. Underwriter agrees to indemnify, defend and hold the Trust,
its several officers and directors, and any person who controls the Trust
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its officers or
directors, or any such controlling person may incur, under the 1933 Act or
under common law or otherwise, arising out of or based upon (i) a breach by
Underwriter of its obligations under this agreement or (ii) any alleged untrue
statement of a material fact contained in information furnished in writing by
Underwriter to the Trust
<PAGE> 5
for use in the Registration statement, Prospectus or Statement of Additional
Information of a Fund or arising out of or based upon any alleged omission to
state a material fact in connection with such information required to be stated
in the Registration Statement, Prospectus or Statement of Additional
Information or necessary to make such information not misleading.
13. Termination and Amendment of this Agreement. This Agreement
shall automatically terminate, without the payment of any penalty, in the event
of its "assignment" (as defined under the Investment Company Act of 1940. This
Agreement may be amended only if such amendment is approved (i) by Underwriter,
(ii) either by action of the Board of Trustees of the Trust or at a meeting of
the Shareholders of the Trust by the affirmative vote of a majority of the
outstanding Shares, and (iii) by a majority of the Trustees of the Trust who
are not interested persons of the Trust or of Underwriter, by vote cast in
person at a meeting called for the purpose of voting on such approval. Either
the Trust or Underwriter may at any time terminate this Agreement on sixty (60)
days' written notice delivered or mailed by registered mail, postage prepaid,
to the other party.
14. Effective Period of this Agreement. This Agreement shall take
effect upon its execution and shall remain in full force and effect for a
period of two years from the date of its execution (unless terminated
automatically as set forth in Paragraph 12, and from year to year thereafter),
subject to annual approval (i) by Underwriter, (ii) by the Board of Trustees of
the Trust or a vote of a majority of the outstanding Shares, and (iii) by a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of Underwriter, by vote cast in person at a meeting called for the
purpose of voting on such approval.
15. Limitation of Trust's Liability. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, Shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of this
Agreement have been authorized by the Trustees and Shareholders of the Trust
and signed by the officers of the Trust, acting as such, and neither such
authorization by such Trustees and Shareholders nor such execution and delivery
by such officers shall be deemed to have been made by any of them individually
or to impose any liability on them personally, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust. A copy of the
Certificate of Trust of the Trust is on file with the Secretary of State of the
State of Delaware.
16. New Series. The terms and provisions of this Agreement shall
become automatically applicable to any additional series of the Trust
established during the initial or renewal term of this Agreement.
17. Successor Investment Company. Unless this Agreement has been
terminated in accordance with Paragraph 13, the terms and provisions of this
Agreement shall become automatically applicable to any investment company which
is a successor to the Trust as a result of a reorganization, recapitalization
or change of domicile.
18. Severability. In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
<PAGE> 6
19. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the
internal laws of the State of Illinois.
(b) Any questions of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to such term or
provision of the Act and to interpretation thereof, if any, by the United
states courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the Act, reflected in any provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
20. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that for this purpose the
address of the Trust is 77 West Washington Street, Chicago, Illinois 60602
and of the Underwriter shall be 1793 Kingswood Drive, Suite 200, Southlake,
Texas 76092.
21. Counterparts. This Agreement may be in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. Binding Effect. Each of the undersigned expressly warrants
and represents that he has the full power and authority to sign this Agreement
on behalf of the party indicated, and that his signature will operate to bind
the party indicated to the foregoing terms.
23. Force Majeure. If either party shall be delayed in its
performance of services or prevented entirely or in part from performing
services due to causes or events beyond its control, including and without
limitation, acts of God, interruption of power or other utility, transportation
or communication services, acts of civil or military authority, sabotages,
national emergencies, explosion, flood, accident, earthquake or other
catastrophe, fire, strike or other labor problems, legal action, present or
future law, governmental order, rule or regulation, or shortages of suitable
parts, materials, labor or transportation, such delay or non-performance shall
be excused and a reasonable time for performance in connection with this
Agreement shall be extended to include the period of such delay or non-
performance.
<PAGE> 7
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this
Agreement to be signed on its behalf, all as of the day and year first above
written.
ATTEST: THE KENWOOD FUNDS
BY:
ATTEST: AMERIPRIME FINANCIAL SECURITIES, INC.
BY:
<PAGE> 1
EXHIBIT 8a
CUSTODIAN AGREEMENT
THIS AGREEMENT made on ____________, 1996, between The Kenwood
Funds, a Delaware Business Trust (hereinafter called the "Trust"), and FIRSTAR
TRUST COMPANY, a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),
W I T N E S S E T H :
WHEREAS, the Trust desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Trust by any
two of the President, a Vice President, the Secretary and the Treasurer of the
Trust, or any other persons duly authorized to sign by the Board of Trustees.
2. NAMES, TITLES, AND SIGNATURES OF THE TRUST'S OFFICERS
An officer of the Trust will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Trustees, together with any changes which may occur from time to time.
3. ADDITIONAL SERIES. The Trust is authorized to issue separate series of
shares of beneficial interest representing interests in separate investment
portfolios. The parties intend that each portfolio established by the trust,
now or in the future, be covered by the terms and conditions of this Agreement.
This Agreement currently covers the Kenwood Growth and Income Fund.
4. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or
accounts in the name of the Trust, subject only to draft or order by Custodian
acting pursuant to the terms of this Agreement. Custodian shall hold in such
account or accounts, subject to the provisions hereof, all
- 1 -
<PAGE> 2
cash received by it from or for the account of the Trust. Custodian shall make
payments of cash to, or for the account of, the Trust from such cash only:
(a) for the purchase of securities for the portfolio
of the Trust upon the delivery of such securities to Custodian,
registered in the name of the Trust or of the nominee of Custodian
referred to in Section 8 or in proper form for transfer;
(b) for the purchase or redemption of shares of
beneficial interest of the Trust upon delivery thereof to
Custodian, or upon proper instructions from the Trust;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees, distributor fees, underwriting fees,
and operating expenses (including, without limitation thereto,
fees for legal, accounting, auditing and custodian services and
expenses for printing and postage and other expenses);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the
Trust held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Trustees of the Trust.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating that it
is for a purpose permitted under the terms of items (a), (b), (c), or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom such payment
is to be made, provided, however, that an officers' certificate need not
precede the disbursement of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by Custodian
for the account of the Trust.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Trust as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of checks received in
payment for shares of the Trust which are deposited into the Trust's account.
- 2 -
<PAGE> 3
5. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or securities.
6. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Trust
upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms
into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Trust upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of
- 3 -
<PAGE> 4
this Section 6 and also, in respect of item (i), upon receipt of an officers'
certificate specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom delivery of
such securities shall be made, provided, however, that an officers' certificate
need not precede any such transfer, exchange or delivery of a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
7. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of the Trust, which call for payment
upon presentation and hold the cash received by it upon such payment for the
account of the Trust; (b) collect interest and cash dividends received, with
notice to the Trust, for the account of the Trust; (c) hold for the account of
the Trust hereunder all stock dividends, rights and similar securities issued
with respect to any securities held by it hereunder; and (d) execute, as agent
on behalf of the Trust, all necessary ownership certificates required by the
Internal Revenue Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state now or hereafter in effect,
inserting the Trust's name on such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so.
8. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of Custodian as defined in the Internal
Revenue Code and any Regulations of the Treasury Department issued hereunder or
in any provision of any subsequent federal tax law exempting such transaction
from liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. Custodian shall use its best
efforts to the end that the specific securities held by it hereunder shall be
at all times identifiable in its records.
The Trust shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee, any
securities which it may hold for the account of the Trust and which may from
time to time be registered in the name of the Trust.
9. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Trust, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the Trust
all notices, proxies and proxy soliciting materials with relation to such
securities, such
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<PAGE> 5
proxies to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Trust), but without indicating the
manner in which such proxies are to be voted.
10. TRANSFER TAX AND OTHER DISBURSEMENTS
The Trust shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder, and for
all other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries
of any such securities.
11. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of
the Board, and may rely on the genuineness of any such document which it may in
good faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred by or assessed against it or its nominee in
connection with the performance of this Agreement, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account of the Trust
for such items.
Custodian agrees to indemnify and hold harmless the Trust from
all taxes, charges, expenses, assessments, claims and liabilities (including
counsel fees) incured by or assessed against it or its nominee in connection
with the performance of this Agreement, except as such as may arise from the
Trust's or its nominee's own negligent action, negligent failure to act or
willful misconduct.
Custodian acknowledges that it has received notice of and accepts
the limitations upon the Trust's liability set forth in Article II of its
Declaration of Trust. Custodian agrees that the Trust's obligations hereunder
in any case shall be limited to the Trust and its assets and that Custodian
shall not seek satisfaction of any such obligation from any current or former
shareholder of the Trust nor from any current or former Trustee, officer,
employee, or agent of the Trust.
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<PAGE> 6
In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Trust, or in the event
that Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Trust shall be security therefore.
12. SUBCUSTODIANS
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Trust's assets, so long as
any such bank or trust company is a bank or trust company organized under the
laws of any state of the United States, having an aggregate capital, surplus
and undivided profit, as shown by its last published report, of not less than
Two Million Dollars ($2,000,000) and provided further that, if the Custodian
utilizes the services of a Subcustodian, the Custodian shall remain fully
liable and responsible for any losses caused to the Trust by the Subcustodian
as fully as if the Custodian was directly responsible for any such losses under
the terms of the Custodian Agreement.
Notwithstanding anything contained herein, if the Trust requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Trust agrees to indemnify and hold harmless Custodian
from all claims, expenses and liabilities incurred or assessed against it in
connection with the use of such Subcustodian in regard to the Trust's assets,
except as may arise from Custodian's own negligent action, negligent failure to
act or willful misconduct.
13. REPORTS BY CUSTODIAN
Custodian shall furnish the Trust periodically as agreed upon
with a statement summarizing all transactions and entries for the account of
Trust. Custodian shall furnish to the Trust, at the end of every month, a list
of the portfolio securities showing the aggregate cost of each issue. The
books and records of Custodian pertaining to its actions under this Agreement
shall be open to inspection and audit at reasonable times by officers of, and
of auditors employed by, the Trust.
14. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Trust, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Trust at
Suite 1615, 77 West Washington Street, Chicago, Illinois 60602, Attention
President, as the case may be. Upon any termination of this Agreement, pending
appointment of a successor to Custodian or a vote of the shareholders of the
Trust to dissolve or to function without a custodian of its cash, securities
and other property, Custodian shall not deliver cash, securities or other
property of the Trust to the Trust, but may deliver them to a bank or trust
company of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report of not less than Two
Million Dollars
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<PAGE> 7
($2,000,000) as a Custodian for the Trust to be held under terms similar to
those of this Agreement, provided, however, that Custodian shall not be
required to make any such delivery or payment until full payment shall have
been made by the Trust of all liabilities constituting a charge on or against
the properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees, compensation,
costs and expenses, subject to the provisions of Section 11 of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Trust, authorized or approved by a resolution of its Board of
Trustees.
15. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the use
by Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Trustees of the Trust approves by resolution the
use of such central securities clearing agency or securities depository.
16. RECORDS
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Trust
pursuant to the provisions of the Investment Company Act of 1940, as amended,
or the rules and regulations promulgated thereunder, Custodian agrees to make
any such records available to the Trust upon request and to preserve such
records for the periods prescribed in Rule 31a-2 under the Investment Company
Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and their respective corporate seals to be affixed hereto as of
the date first above-written by their respective officers thereunto duly
authorized.
Attest: FIRSTAR TRUST COMPANY
________________________________ By ____________________________
Assistant Secretary Vice President
Attest: THE KENWOOD FUNDS
________________________________ By ____________________________
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<PAGE> 1
EXHIBIT 8b
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this _____ day of
____________, 1996, by and between The Kenwood Funds, A Delaware Business
Trust, (hereinafter referred to as the "Trust") and Firstar Trust Company, a
corporation organized under the laws of the State of Wisconsin (hereinafter
referred to as the "Agent").
WHEREAS, the Trust is an open-end management investment company which is
registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
NOW, THEREFORE, the Trust and the Agent do mutually promise and agree
as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs_and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order;
D. Pay monies in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
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<PAGE> 2
G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory indemnification
or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Trust;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Trust and maintain a record
of the total number of shares of the Trust which are authorized, issued and
outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed upon with
the Trust; and
O. Provide a Blue Sky System which will enable the Trust to monitor
the total number of shares sold in each state. In addition, the Trust shall
identify to the Agent in writing those transactions and assets to be treated
as exempt from the Blue Sky reporting of the Trust for each state.
2. COMPENSATION
The Trust agrees to pay the Agent for performance of the duties listed
in this Agreement; the fees and out-of-pocket expenses include, but are not
limited to the following: printing, postage, forms, stationery, record
retention, mailing, insertion, programming, labels, shareholder lists and proxy
expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Trust and the Agent.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
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<PAGE> 3
3. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Trust that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities Exchange
Act of 1934, as amended.
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
G. It will comply with all applicable requirements of the
Securities Act of 1933, as amended, Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, and any laws, rules,
and regulations of governmental authorities having jurisdiction.
4. REPRESENTATIONS OF THE TRUST
The Trust represents and warrants to the Agent that:
A. The Trust is an open-end, diversified, management investment
company under the Investment Company Act of 1940;
B. The Trust is a business trust organized, existing, and in good
standing under the laws of Delaware;
C. The Trust is empowered under applicable laws and by its
Declaration of Trust and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Declaration of Trust
have been taken to authorize it to enter into and perform this Agreement;
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<PAGE> 4
E. A registration statement under the Securities Act of 1933 is
currently effective or will be filed and remain effective.
5. COVENANTS OF TRUST AND AGENT
The Trust shall furnish the Agent a certified copy of the resolution of
the Board of Trustees of the Trust authorizing the appointment of the Agent
and the execution of this Agreement. The Trust shall provide to the Agent a
copy of the Declaration of Trust.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Trust and will be preserved, maintained and
made available in accordance with such section and rules and will be
surrendered to the Trust on and in accordance with its request.
6. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent shall exercise reasonable care in the performance of its
duties under this Agreement. The Agent shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with matters to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power supplies beyond
the Agent's control, except a loss resulting from the Agent's refusal or
failure to comply with the terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in the performance of its duties
under this Agreement. Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless the Agent from and against any and
all claims, demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable attorneys'
fees) which the Agent may sustain or incur or which may be asserted against the
Agent by any person arising out of any action taken or omitted to be taken by
it in performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction provided to
the Agent by any duly authorized officer of the Trust, such duly authorized
officer to be included in a list of authorized officers furnished to the Agent
and as amended from time to time in writing by resolution of the Board of
Trustees of the Trust.
Further, the Trust will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action,
or suit as a result of the negligence of the Trust or the principal underwriter
(unless contributed to by the Agent's breach of this Agreement or other
Agreements between the Trust and the Agent, or the Agent's own negligence or
bad faith); or as a result of the Agent acting upon telephone instructions
relating to the exchange or redemption of shares received by the Agent and
reasonably believed by the Agent under a standard of care customarily
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<PAGE> 5
used in the industry to have originated from the record owner of the subject
shares; or as a result of acting in reliance upon any genuine instrument or
stock certificate signed, countersigned, or executed by any person or persons
authorized to sign, countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such a
breakdown at the expense of the Agent. The Agent agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing equipment
to the extent appropriate equipment is available. Representatives of the Trust
shall be entitled to inspect the Agent's premises and operating capabilities at
any time during regular business hours of the Agent, upon reasonable notice to
the Agent.
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the Trust may be asked to
indemnify or hold the Agent harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use all reasonable care to notify the
Trust promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Trust.
The Trust shall have the option to defend the Agent against any claim which may
be the subject of this indemnification. In the event that the Trust so elects,
it will so notify the Agent and thereupon the Trust shall take over complete
defense of the claim, and the Agent shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
section. The Agent shall in no case confess any claim or make any compromise
in any case in which the Trust will be asked to indemnify the Agent except with
the Trust's prior written consent.
The Agent shall indemnify and hold the Trust harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which may be asserted against the Trust by any person arising
out of any action taken or omitted to be taken by the Agent as a result of the
Agent's refusal or failure to comply with the terms of this Agreement, its bad
faith, negligence, or willful misconduct.
The Agent acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in Article II of its
Declaration of Trust. The Agent agrees that the Trusts's obligations hereunder
in any case shall be limited to the Trust and its assets and that the Agent
shall not seek satisfaction of any such obligation from any current or former
shareholder of the Trust nor from any current or former Trustee, officer,
employee or agent of the Trust.
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<PAGE> 6
7. CONFIDENTIALITY
The Agent agrees, on behalf of itself and its employees, to treat
confidentially all records and other information relative to the Trust and its
shareholders and such information shall not be disclosed to any other party,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Agent may be exposed to civil or criminal contempt proceedings for failure to
comply after being requested to divulge such information by duly constituted
authorities.
8. ADDITIONAL SERIES
The Trust is authorized to issue separate series of shares of beneficial
interest representing interests in separate investment portfolios. The parties
intend that each portfolio established by the Trust, now or in the future, be
covered by the terms and conditions of this Agreement. This Agreement
currently covers the Kenwood Growth and Income Fund.
9. RECORDS
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Trust but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
The Investment Company Act of 1940 as amended and the rules and regulations
thereunder (the "Investment Company Act"). The Agent agrees that all such
records prepared or maintained by the Agent relating to the services to be
performed by the Agent hereunder are the property of the Trust and will be
preserved, maintained, and made available in accordance with the Investment
Company Act and will be promptly surrendered to the Trust on and in accordance
with its request.
10. WISCONSIN LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.
11. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE
A. This Agreement may be amended by the mutual written consent of
the parties.
B. This Agreement may be terminated upon ninety (90) day's written
notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the other
party.
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<PAGE> 7
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party. If to the
Agent, such notice should to be sent to 615 East Michigan Street, Milwaukee,
Wisconsin 53202, Attention: Joe Nueberger. If to the Trust, such notice
should be sent to 77 West Washington Street, Suite 1615, Chicago, Illinois
60602, Attention: President.
E. In the event that the Trust gives to the Agent its written
intention to terminate and appoint a successor transfer agent, the Agent agrees
to cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other data
established or maintained by the Agent under this Agreement.
F. Should the Trust exercise its right to terminate this Agreement,
all out-of-pocket expenses associated with the movement of records and material
will be paid by the Trust.
THE KENWOOD FUNDS FIRSTAR TRUST COMPANY
By: ______________________________ By: ______________________________
Attest: __________________________ Attest: __________________________
Assistant Secretary
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<PAGE> 1
EXHIBIT 10
Board of Directors
Page 1
April 6, 1995
February 22, 1995
Board of Directors
The Kenwood Funds
77 West Washington Street
Chicago, Illinois 60602
RE: Registration of Shares Beneficial Interest under
Securities Act of 1933 and Investment
Company Act of 1940
Dear Ladies and Gentlemen:
We have acted as counsel to The Kenwood Funds, a Delaware business
trust (the "Trust"), in connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") of a registration
statement on Form N-1A (the "Registration Statement") under the Securities Act
of 1933 and the Investment Company Act of 1940, relating to the registration,
pursuant to Commission Rule 24f-2(a)(1), of an indefinite number of shares of
the Trust's Shares of Beneficial Interest (the "Shares").
In this regard, we have examined originals or copies of (i) the
Declaration of Trust and Bylaws of the Trust, and (ii) resolutions of the Board
of Trustees and such other documents and Trust records as we have deemed
appropriate for purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that (i) the Shares
have been duly authorized, and (ii) the Shares, when issued by the Trust in the
manner set forth in the Registration Statement, will be legally issued, fully
paid, and non-assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the references to our name in the prospectus and
statement of additional information included in the Registration Statement.
Very truly yours,
D'ANCONA & PFLAUM
1
<PAGE> 2
Board of Directors
Page 2
April 6, 1995
By: /s/Arthur Don
-----------------------
Arthur Don, Partner
2
<PAGE> 1
EXHIBIT 15
THE KENWOOD FUNDS
RULE 12B-1 DISTRIBUTION PLAN
IN RESPECT TO THE GROWTH & INCOME FUND
THE PLAN:
1. PURPOSE. In respect to the Growth & Income Fund ("Fund"), The
Kenwood Funds (the "Trust") shall finance the distribution of the shares of the
Fund ("Shares") pursuant to Rule 12b-1 under the Investment Company Act of 1940
("Act") according to the terms of this Distribution Plan (the "Plan").
2. FEES. Amounts, not exceeding in the aggregate a maximum
annual amount equal to 0.25% of the averages of the daily net asset values of
the shares during each fiscal year of the Trust, may be paid by the Trust out
of the assets attributable to such shares at any time after the effective date
of the Plan to: (i) compensate an underwriter or distributor (the
"Distributor") for its services in marketing and selling the shares, (ii)
reimburse fees paid to salespersons of the Distributor and to other firms which
offer and sell the shares and the continuing servicing of holders of the shares
and (iii) reimburse other distribution expenses incurred by a Distributor, the
Investment Adviser or any other person, including expenses of promotion, sales
seminars, wholesaling, advertising, and sales literature. For this purpose
sales literature shall not include reports sent to shareholders and regulatory
bodies which are paid for by the Trust.
To the extent that any investment advisory fees or administrative fees
paid by the Trust may be deemed to be indirectly financing any activity which
is primarily intended to result in the sale of shares within the meaning of
Rule 12b-1, the payments of such fees are authorized under this Plan.
3. REQUIRED APPROVALS AND TERM. Subject to paragraph 8, the Plan
shall not take effect until it has been approved by the vote of the
shareholders entitled to cast at least a majority of the eligible votes. In
addition, the Plan shall not take effect until it has been approved, together
with any related agreements, by votes of the majority of both (i) the Board of
Trustees of the Trust and (ii) those trustees who are not "interested persons"
of the Trust as defined in the Act and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it
("Independent Trustees"), cast in person at a meeting called for the purpose of
voting on the Plan or such Agreements. Unless sooner terminated pursuant to
the terms hereof, the Plan shall continue in effect for a period of one year
from its effective date, and thereafter shall continue in effect so long as
such continuance is specifically approved at least annually in the manner
provided for by Rule 12b-1.
4. PERIODIC REPORTS. Any person authorized to direct the
disposition of monies paid or payable by the Trust pursuant to the Plan or any
related agreement shall provide to the Trust's
<PAGE> 2
Board of Trustees, and the Board of Trustees shall review at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
5. TERMINATION. Subject to paragraph 8, the Plan may be
terminated at any time by a vote of a majority of the Independent Trustees, or
by vote of the holders of a majority of the eligible votes.
6. RELATED AGREEMENTS. Any agreement related to the Plan shall
be in writing, and shall provide:
(i) That such agreement may be terminated at any time, without
payment of penalty, by vote of a majority of the Independent Trustees or by
holders of a majority of the outstanding Shares on not more than 60 days
written notice to any other party to the agreement; and
(ii) That such agreement shall terminate automatically in the event of
its assignment.
7. AMENDMENTS. The Plan may not be amended to increase
materially the amount of distribution expenses provided for in paragraph 2
unless such amendment is approved in the manner provided in paragraph 3 for the
initial approval of the Plan, and no material amendment to the Plan shall be
made unless approved by the Board of Trustees and the Independent Trustees.
8. SPECIAL PROCEDURES FOR SERIES AND CLASSES. If the Trust
becomes a series company (as defined in Rule 18f-2 under the Act) or issues
more than one class of stock in respect to any series, then the Plan shall not
take effect as to the shares of any series or class and no amendment may be
effected to increase materially the amount of distribution expenses as to the
shares of any series until it has been approved as to such series or class by
the Board of Trustees, the Independent Trustees and the shareholders of such
series in the manner provided in paragraph 3. No material amendment to the
Plan in respect to such series or class shall be made unless approved as to
such series or class by the Board of Trustees and Independent Trustees. The
Plan may be terminated as to any series or class at any time by vote of a
majority of the Independent Trustees or by the vote of the holders of a
majority of the eligible votes.
2
<PAGE> 1
EXHIBIT 18
THE KENWOOD FUNDS
POWER OF ATTORNEY
KNOW ALL PEOPLE BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Barbara L. Bowles, Sharon Morrow, Sheldon R. Stein,
Arthur Don and Jessica R. Droeger, and each of them, his or her attorneys-in-
fact, each with the power of substitution, for him or her in any and all
capacities, to sign any registration statement for The Kenwood Funds under the
Securities Act of 1933 and/or the Investment Company Act of 1940 on Form N-1A,
or any successor forms thereof, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and all appropriate state or federal regulatory authorities. Each
of the undersigned hereby ratifies and confirms all that each of the aforenamed
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 26th day of January, 1996.
/s/Barbara L. Bowles /s/Patty Litton Delony
- -------------------- ----------------------
Barbara L. Bowles, Patty Litton Delony,
Trustee, Chief Executive Trustee
and Financial Officer and President
/s/Lester J. Dugas, Jr. /s/Reynaldo P. Glover
- ----------------------- ---------------------
Lester J. Dugas, Jr., Reynaldo P. Glover,
Trustee Trustee
/s/Challis M. Lowe
- ------------------
Challis M. Lowe,
Trustee
<PAGE> 2
EXHIBIT 18
THE KENWOOD FUNDS
POWER OF ATTORNEY
Know All People by These presents, that the undersigned, acting on
behalf of The Kenwood Funds, a Delaware business trust (the "Company")
constitutes and appoints Barbara L. Bowles, Sharon Morrow, Sheldon R. Stein,
Arthur Don and Jessica R. Droeger jointly and severally, the Company's
attorneys-in-fact, each with power of substitution, for it in any and all
capacities, to sign any registration statement of the Company on Form N-1A
under the Securities Act of 1933 and/or the Investment Company Act of 1940, and
all amendments thereto (including pre and post-effective amendments), and to
file the same, including exhibits and other documents in connection therewith,
with the Securities and Exchange Commission, and all applicable state or
federal regulatory authorities, hereby ratifying and confirming all that each
of said attorneys-in-fact, or his or her substitute or substitutes, may do or
cause to be done by virtue hereof.
Dated this 26th day of January, 1996.
THE KENWOOD FUNDS
By: /s/Barbara L. Bowles
Barbara L. Bowles, President
