U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
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Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
--
Amendment No.
(Check appropriate box or boxes)
CAPITOL SQUARE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
Capitol Square
21 East State Street, Suite 1410
Columbus, Ohio 43215
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (614) 222-4200
Roderick H. Dillon, Jr.
Capitol Square Investment Trust
Capitol Square
21 East State Street, Suite 1410
Columbus, Ohio 43215
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering: As soon as practicable
after this Registration Statement becomes effective.
Registrant hereby declares its intention to register an indefinite
number of shares of beneficial interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
The 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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CAPITOL SQUARE INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
PART A
Item No. Registration Statement Caption Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Performance Information
4. General Description of Registrant Investment Objective,
Investment Policies and Risk
Considerations; Operation of
the Funds
5. Management of the Fund Operation of the Funds
6. Capital Stock and Other Securities Cover Page; Operation of the
Funds; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Exchange Privilege;
Calculation of Share Price;
Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Exchange Privilege
9. Pending Legal Proceedings Inapplicable
PART B
Caption in Statement
of Additional
Item No. Registration Statement Caption Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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12. General Information and History The Trust
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations; Quality
Ratings of Corporate Bonds
and Preferred Stocks;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Inapplicable
of Securities
16. Investment Advisory and Other Services The Investment Adviser; The
Sub-Adviser; Custodian;
Auditors; MGF Service Corp.
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Trust
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price; Redemption in Kind
20. Tax Status Taxes
21. Underwriters Inapplicable
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Statements of Assets and
Liabilities
PART C
The information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration Statement.
(ii)
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PROSPECTUS
_______, 1996
CAPITOL SQUARE INVESTMENT TRUST
CAPITOL SQUARE
21 EAST STATE STREET, SUITE 1410
COLUMBUS, OHIO 43215
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Capitol Square Investment Trust currently offers three separate series
of shares to investors: the Capitol Square Large Cap Fund, the Capitol Square
Small Cap Fund and the Capitol Square Bond Fund (individually a "Fund" and
collectively the "Funds").
The CAPITOL SQUARE LARGE CAP FUND seeks long-term capital appreciation
through investment in common stocks of companies whose market value is greater
than one billion dollars. Dividend and interest income is only an incidental
consideration to the Fund's investment objective.
The CAPITOL SQUARE SMALL CAP FUND seeks long-term capital appreciation
through investment in common stocks of companies whose market value is less than
one billion dollars. Dividend and interest income is only an incidental
consideration to the Fund's investment objective.
The CAPITOL SQUARE BOND FUND seeks both income and capital appreciation
through investment in fixed income securities. Under normal market conditions,
at least 65% of its assets will be invested in securities rated BBB or higher by
Standard and Poor's Ratings Group or Baa by Moody's Investors Service, Inc., or
U.S. Government obligations.
Dillon Capital Management (the "Adviser"), Capitol Square, 21 East
State Street, Columbus, Ohio 43215, manages the Funds' investments. Dillon
Capital Management is an independent investment counsel firm advising
individual, institutional and corporate clients.
The Adviser has retained Midwest Group Financial Services, Inc. (the
"Sub-Adviser"), 312 Walnut Street, Cincinnati, Ohio 45202, to manage the
investments of the Capitol Square Bond Fund.
This Prospectus sets forth concisely the information about the Funds
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated _______, 1996 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling one of the numbers listed below.
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 800-___-____
Cincinnati . . . . . . . . . . . . . . . . . . . . . 513-___-____
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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EXPENSE INFORMATION
Shareholder Transaction Expenses
Sales Load Imposed on Purchases . . . . . . . . .. . . . . . . None
Sales Load Imposed on Reinvested Dividends. . . .. . . . . . . None
Exchange Fee. . . . . . . . . . . . . . . . . . . . . . . . . None
Other Redemption Fees. . . . . . . . . . . . . . . . . . . . . None*
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is
currently $8. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Large Small
Cap Cap Bond
Fund Fund Fund
Management Fees After Waivers** . . . 1.50% 1.75% 1.00%
12b-1 Fees. . . . . . . . . . . . . . None None None
Other Expenses. . . . . . . . . . . . None None None
Total Fund Operating Expenses After Waivers 1.50% 1.75% 1.00%
** The Adviser is contractually required to reduce its management fee in
an amount equal to the fees and expenses of the non-interested
Trustees. See "Operation of the Funds."
The purpose of these tables is to assist the investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. The percentages expressing annual fund operating expenses are
based on estimated amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following
expenses on a $1,000 Large Small
investment, assuming Cap Cap Bond
(1) 5% annual return and Fund Fund Fund
(2) redemption at the end ----- ----- ----
of each time period:
1 Year $15 $18 $10
3 Years 47 55 32
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INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK
CONSIDERATIONS
Capitol Square Investment Trust (the "Trust") is comprised of three
Funds, each with its own portfolio and investment objective. None of the Funds
is intended to be a complete investment program, and there is no assurance that
the investment objective of any Fund can be achieved. Each Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in a Fund's
investment objective, shareholders should consider whether such Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Funds are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
Capitol Square Large Cap Fund
The Capitol Square Large Cap Fund seeks long-term capital appreciation
through investment in common stocks of companies whose market capitalization is
greater than $1 billion. Dividend and interest income is only an incidental
consideration to the Fund's investment objective.
In selecting securities for the Fund, the Adviser utilizes a two-step
security selection process to find values regardless of overall market
conditions. The process begins with fundamental research. The objective is to
find companies with solid growth prospects based on company specific strategies
or industry factors. Prospective companies' corporate and financial histories
are thoroughly examined and management philosophies, missions and forecasts are
scrutinized. Once a company is deemed to be attractive by this rigorous process,
the Adviser applies a proprietary valuation model as a tool for stock selection.
Once a stock is selected, the Adviser continues to monitor the company's
strategies, financial performance and competitive environment.
Investments in common stocks are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As a result, the return and net asset value
of the Fund will fluctuate.
The Fund expects to invest primarily in securities currently paying
dividends although it may buy securities that are not paying dividends but offer
prospects for growth of capital. The Fund will invest primarily in common stocks
of companies whose
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market capitalizations are greater than $1 billion. Under normal market
conditions at least 65% of the Fund's total assets will be invested in such
securities. The Fund, however, may invest a portion of its assets in common
stocks of companies whose market capitalizations are less than $1 billion.
Although the Fund invests primarily in common stocks, the Fund may also invest
in securities convertible into common stock (such as convertible bonds,
convertible preferred stocks and warrants) and non-convertible preferred stocks
and bonds. The Fund may invest in preferred stocks and bonds which are rated at
the time of purchase in the four highest grades assigned by Moody's Investors
Service, Inc. (Aaa, Aa, A or Baa) or Standard & Poor's Ratings Group (AAA, AA, A
or BBB) or unrated securities determined by the Adviser to be of comparable
quality. Preferred stocks and bonds rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest or to
pay the preferred stock obligations than is the case with higher grade
securities. Subsequent to its purchase by the Fund, a security's rating may be
reduced below Baa or BBB and the Adviser will sell such security, subject to
market conditions and the Adviser's assessment of the most opportune time for
sale.
The Fund will invest primarily in the securities of domestic companies,
although it may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
the Adviser will seek to invest in securities that have investment
characteristics and qualities comparable to the kinds of domestic securities in
which the Fund invests. Investment in securities of foreign issuers involves
somewhat different investment risks from those affecting securities of domestic
issuers. In addition to credit and market risks, investments in foreign
securities involve sovereign risk, which includes local political and economic
developments, potential nationalization, withholding taxes on dividend or
interest payments and currency blockage. Foreign companies may have less public
or less reliable information available about them and may be subject to less
governmental regulation than U.S. companies. Securities of foreign companies may
be less liquid or more volatile than securities of U.S. companies.
When the Adviser believes substantial price risks exist for common
stocks because of uncertainties in the investment outlook or when in the
judgment of the Adviser it is otherwise warranted in selling to manage the
Fund's portfolio, the Fund may temporarily hold all or a portion of its assets
in short-term obligations such as bank debt instruments (certificates of
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deposit, bankers' acceptances and time deposits), commercial paper, U.S.
Government obligations having a maturity of less than one year, shares of money
market investment companies or repurchase agreements.
Capitol Square Small Cap Fund
The Capitol Square Small Cap Fund seeks long-term capital appreciation
through investment in common stocks of companies whose market capitalizations
are less than $1 billion. Dividend and interest income is only an incidental
consideration to the Fund's investment objective.
In selecting securities for the Fund, the Adviser utilizes a two-step
security selection process to find values regardless of overall market
conditions. The process begins with fundamental research. The objective is to
find companies with solid growth prospects based on company specific strategies
or industry factors. Prospective companies' corporate and financial histories
are thoroughly examined and management philosophies, missions and forecasts are
scrutinized. Once a company is deemed to be attractive by this rigorous process,
the Adviser applies a proprietary valuation model as a tool for stock selection.
Once a stock is selected, the Adviser continues to monitor the company's
strategies, financial performance and competitive environment.
Investments in common stocks are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As a result, the return and net asset value
of the Fund will fluctuate.
The Fund expects to invest primarily in securities currently paying
dividends although it may buy securities that are not paying dividends but offer
prospects for growth of capital. The Fund will invest primarily in common stocks
of companies whose market capitalizations are less than $1 billion. Under normal
market conditions at least 65% of the Fund's total assets will be invested in
such securities. The Fund, however, may invest a portion of its assets in common
stocks of companies whose market capitalizations are greater than $1 billion.
The Fund may invest a substantial portion of its assets in small,
unseasoned companies. While smaller companies generally have potential for rapid
growth, they often involve higher risks because they lack the management
experience, financial resources, product diversification and competitive
strengths of larger corporations. In addition, in many instances, the securities
of smaller companies are traded only over-the-counter or on a regional
securities exchange, and the frequency and volume of
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their trading is substantially less than is typical of larger companies.
Therefore, the securities of smaller companies may be subject to wider price
fluctuations. When making large sales, the Fund may have to sell portfolio
holdings at discounts from quoted prices or may have to make a series of small
sales over an extended period of time.
Although the Fund invests primarily in common stocks, the Fund may also
invest in securities convertible into common stock (such as convertible bonds,
convertible preferred stocks and warrants) and non-convertible preferred stocks
and bonds. The Fund may invest in preferred stocks and bonds which are rated at
the time of purchase in the four highest grades assigned by Moody's Investors
Service, Inc. (Aaa, Aa, A or Baa) or Standard & Poor's Ratings Group (AAA, AA, A
or BBB) or unrated securities determined by the Adviser to be of comparable
quality. Preferred stocks and bonds rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest or to
pay the preferred stock obligations than is the case with higher grade
securities. Subsequent to its purchase by the Fund, a security's rating may be
reduced below Baa or BBB and the Adviser will sell such security, subject to
market conditions and the Adviser's assessment of the most opportune time for
sale.
The Fund will invest primarily in the securities of domestic companies,
although it may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
the Adviser will seek to invest in securities that have investment
characteristics and qualities comparable to the kinds of domestic securities in
which the Fund invests. Investment in securities of foreign issuers involves
somewhat different investment risks from those affecting securities of domestic
issuers. In addition to credit and market risks, investments in foreign
securities involve sovereign risk, which includes local political and economic
developments, potential nationalization, withholding taxes on dividend or
interest payments and currency blockage. Foreign companies may have less public
or less reliable information available about them and may be subject to less
governmental regulation than U.S. companies. Securities of foreign companies may
be less liquid or more volatile than securities of U.S. companies.
When the Adviser believes substantial price risks exist common stocks
because of uncertainties in the investment outlook or when in the judgment of
the Adviser it is otherwise warranted
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in selling to manage the Fund's portfolio, the Fund may temporarily hold all or
a portion of its assets in short-term obligations such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year or
repurchase agreements.
Capitol Square Bond Fund
The Capitol Square Bond Fund seeks both income and capital appreciation
through investment in fixed income securities. Under normal market conditions,
at least 65% of its assets will be invested in U.S. Government obligations or
securities rated BBB or higher by Standard and Poor's Ratings Group or Baa by
Moody's Investors Service, Inc., or unrated securities determined by the Adviser
to be of comparable quality.
The Fund pursues its objective by investing primarily in U.S.
Government obligations, corporate fixed-income securities, bank debt
instruments, mortgage-backed securities, U.S. dollar-denominated fixed-income
securities issued by foreign issuers, foreign branches of U.S. banks and U.S.
branches of foreign banks, and money market instruments. In addition, the Fund
may purchase securities on a when-issued basis.
The Fund may invest in lower-rated debt securities (commonly called
"junk bonds"), i.e. securities rated below Baa by Moody's or below BBB by S&P,
or the equivalent. Such securities will have speculative characteristics
including the possibility of default or bankruptcy of the issuers of such
securities, market price volatility based upon interest rate sensitivity,
questionable creditworthiness and relative liquidity of the secondary trading
market. Because lower-rated securities have been found to be more sensitive to
adverse economic changes or individual corporate developments and less sensitive
to interest rate changes than higher-rated investments, an economic downturn
could disrupt the market for such securities and adversely affect the value of
outstanding bonds and the ability of issuers to repay principal and interest. In
addition, in a declining interest rate market, issuers of lower-rated securities
may exercise redemption or call provisions, which may force the Fund, to the
extent it owns such securities, to replace those securities with lower yielding
securities. This could result in a decreased return for investors.
Investments in debt securities are subject to inherent market risks and
fluctuations in value due to changes in earnings, economic conditions, quality
ratings and other factors beyond the control of the Adviser. Debt securities are
subject to price fluctuations based upon changes in the level of interest rates,
which will generally result in all those securities
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changing in price in the same way, i.e., all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise. As a result, the return and net asset value of the Fund will fluctuate.
There is no limit on the maturity of the securities in which the Fund
may invest. Securities with longer maturities generally offer both higher yields
and greater exposure to market fluctuation from changes in interest rates.
Consequently, to the extent the Fund is significantly invested in securities
with longer maturities, investors in the Fund should be aware that there is a
possibility of greater fluctuation in the Fund's net asset value.
For defensive purposes, the Fund may temporarily hold all or a portion
of its assets in money market instruments. The money market instruments which
the Fund may own from time to time include U.S. Government obligations having a
maturity of less than one year, shares of money market investment companies,
commercial paper, repurchase agreements, bank debt instruments (certificates of
deposit, time deposits and bankers' acceptances) and other short-term
instruments issued by domestic branches of U.S. financial institutions that are
insured by the Federal Deposit Insurance Corporation and have assets exceeding
$10 billion. The Fund will not invest more than 10% of its total assets in
shares of money market investment companies. Investments by the Fund in shares
of money market investment companies may result in duplication of advisory,
administrative and distribution fees.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in U.S. Government
obligations, which include securities which are issued or guaranteed by the
United States Treasury, by various agencies of the United States Government, and
by various instrumentalities which have been established or sponsored by the
United States Government. U.S. Treasury obligations are backed by the "full
faith and credit" of the United States Government. U.S. Treasury obligations
include Treasury bills, Treasury notes and Treasury bonds. Agencies and
instrumentalities established by the United States Government include the
Federal Home Loan Banks, the Federal Land Bank, the Government National Mortgage
Association, the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the Student Loan Marketing Association, the Small Business
Administration, the Bank for Cooperatives, the Federal Intermediate Credit Bank,
the Federal Financing Bank, the Federal Farm Credit Banks, the Federal
Agricultural Mortgage Corporation, the Resolution Funding Corporation, the
Financing Corporation of America and the Tennessee Valley Authority. Some of
these securities are supported by the full faith and credit of the United States
Government while others are supported only by the credit of the agency or
instrumentality, which may include the right of the issuer to borrow from the
United States Treasury.
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MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed securities, which are mortgage loans made by banks, savings and
loan institutions, and other lenders which are assembled into pools. Often these
securities are issued and guaranteed by an agency or instrumentality of the
United States Government, though not necessarily backed by the full faith and
credit of the United States Government, or are collateralized by U.S. Government
obligations. The Fund invests in mortgage-backed securities representing
undivided ownership interests in pools of mortgage loans, including Government
National Mortgage Association (GNMA), Federal National Mortgage Association
(FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) Certificates and
so-called "CMOs" -- i.e., collateralized mortgage obligations which are issued
by non-governmental entities.
The rate of return on mortgage-backed securities such as GNMA, FNMA and
FHLMC Certificates and CMOs may be affected by early prepayment of principal on
the underlying loans. Prepayment rates vary widely and may be affected by
changes in market interest rates. It is not possible to accurately predict the
average life of a particular pool. Reinvestment of principal may occur at higher
or lower rates than the original yield. Therefore, the actual maturity and
realized yield on mortgage-backed securities will vary based upon the prepayment
experience of the underlying pool of mortgages.
Asset-backed securities may include such securities as Certificates for
Automobile Receivables and Credit Card Receivable Securities. Certificates for
Automobile Receivables represent undivided fractional interests in a pool of
motor vehicle retail installment sales contracts. Underlying sales contracts are
subject to prepayment, which may reduce the overall return to certificate
holders. Certificate holders may also experience delays in payment or losses if
the full amounts due on underlying sales contracts are not realized because of
unanticipated costs of enforcing the contracts or because of depreciation,
damage or loss of the vehicles securing the contracts, or other factors. Credit
Card Receivable Securities are backed by receivables from revolving credit card
agreements. An acceleration in cardholders' payment rates may adversely affect
the overall return to holders of such certificates. Unlike most other
asset-backed securities, Credit Card Receivable Securities are unsecured
obligations of the credit cardholders. The Fund may also invest in other
asset-backed securities that may be developed in the future, provided that this
Prospectus is revised before the Fund does so. The Fund will not invest more
than 15% of its net assets in asset-backed securities for which there is no
established market and other illiquid securities.
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Mortgage-backed securities, when they are issued, have stated
maturities of up to forty years, depending on the length of the mortgages
underlying the securities. In practice, unscheduled or early payments of
principal on the underlying mortgages may make the securities' effective
maturity shorter than this. A security based on a pool of forty-year mortgages
may have an average life of as short as two years. The average life of
asset-backed securities may also be substantially less than the stated maturity
of the contracts or receivables underlying such securities. It is common
industry practice to estimate the average life of mortgage-backed and
asset-backed securities based on assumptions regarding prepayments.
BANK DEBT INSTRUMENTS. The Fund may invest in certificates of deposit,
time deposits and bankers' acceptances issued by commercial banks. Certificates
of deposit are receipts from a bank for funds deposited for a specified period
of time at a specified rate of return. Bankers' acceptances are time drafts
drawn on commercial banks by borrowers, usually in connection with international
commercial transactions. Time deposits are generally similar to certificates of
deposit, but are uncertificated. The Fund will not invest more than 15% of its
net assets in time deposits maturing in greater than seven days and other
illiquid securities.
The Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it is a member of the Federal Deposit Insurance Corporation, and
(iii) in the case of foreign banks, the security is, in the opinion of the
Sub-Adviser, of an investment quality comparable with other debt securities
which may be purchased by the Fund. These limitations do not prohibit
investments in securities issued by foreign branches of U.S. banks, provided
such U.S. banks meet the foregoing requirements.
FOREIGN SECURITIES. The Fund may invest in U.S. dollar-denominated
fixed-income securities issued by foreign issuers, foreign branches of U.S.
banks and U.S. branches of foreign banks. Investment in securities of foreign
issuers and in foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of domestic issuers. In
addition to credit and market risks, investments in foreign securities involve
sovereign risk, which includes local political and economic developments,
potential nationalization, withholding taxes on dividend or interest payments
and currency blockage. Foreign companies may have less public or less
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reliable information available about them and may be subject to less
governmental regulation than U.S. companies. Securities of foreign companies may
be less liquid or more volatile than securities of U.S. companies. The Fund will
not invest more than 15% of its net assets in foreign securities which, in the
opinion of the Sub-Adviser, are not readily marketable and other illiquid
securities.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a
when-issued basis. Delivery of and payment for these securities may occur a
month or more after the date of the purchase commitment. The securities are
subject to market fluctuations during this period and no interest accrues to the
Fund until settlement. The Fund maintains with the Custodian a segregated
account of cash, U.S. Government obligations or other liquid high-grade debt
obligations in an amount at least equal to these commitments.
Investment Techniques and Risk Considerations Applicable to All
Funds
The Funds may also engage in the following investment techniques, each
of which may involve certain risks:
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
banks having assets in excess of $10 billion and the largest and, in the Adviser
or Sub-Adviser's judgment, most creditworthy primary U.S. Government securities
dealers. The Funds will enter into repurchase agreements which are
collateralized by U.S. Government obligations or other liquid high-grade debt
obligations. Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Funds' Custodian at the Federal Reserve Bank. At
the time a Fund enters into a repurchase agreement, the value of the collateral,
including accrued interest, will equal or exceed the value of the repurchase
agreement and, in the case of a repurchase agreement exceeding one day, the
seller agrees to maintain sufficient collateral so that the value of the
underlying collateral, including accrued interest, will at all times equal or
exceed the value of the repurchase agreement. A Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 15% of the value of the net assets of the Fund would be invested in
such securities and other illiquid securities.
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LENDING PORTFOLIO SECURITIES. Each Fund may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks, brokers
and dealers and receive as collateral cash, U.S. Government obligations or
irrevocable bank letters of credit (or any combination thereof), which
collateral will be required to be maintained at all times in an amount equal to
at least 100% of the current value of the loaned securities plus accrued
interest. Although each Fund does have the ability to make loans of all of its
portfolio securities, it is the present intention of the Trust, which may be
changed without shareholder approval, that such loans will not be made with
respect to a Fund if as a result the aggregate of all outstanding loans exceeds
one-third of the value of the Fund's total assets. Securities lending will
afford a Fund the opportunity to earn additional income because the Fund will
continue to be entitled to the interest payable on the loaned securities and
also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. A
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. A Fund may pay reasonable fees in
connection with arranging such loans.
BORROWING AND PLEDGING. Each Fund may borrow money from banks (provided
there is 300% asset coverage) or from banks or other persons for temporary
purposes (in an amount not exceeding 5% of a Fund's total assets). Each Fund
will not make any borrowing which would cause its outstanding borrowings to
exceed one-third of its total assets. Each Fund may pledge assets in connection
with borrowings but will not pledge more than one-third of its total assets.
Borrowing magnifies the potential for gain or loss on the portfolio securities
of the Funds and, therefore, if employed, increases the possibility of
fluctuation in a Fund's net asset value. This is the speculative factor known as
leverage. A Fund's policies on borrowing and pledging are fundamental policies
which may not be changed without the affirmative vote of a majority of its
outstanding shares. It is each Fund's present intention, which may be changed by
the Board of Trustees without shareholder approval, to borrow only for emergency
or extraordinary purposes and not for leverage.
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading
as a primary means of achieving their investment objectives. However, each
Fund's rate of portfolio turnover will depend upon market and other conditions,
and it will not be a limiting factor when portfolio changes are deemed necessary
or appropriate by the Adviser or Sub-Adviser. Although the annual
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<PAGE>
portfolio turnover rate of each Fund cannot be accurately predicted, it is not
expected to exceed 100%, but may be either higher or lower. A 100% turnover rate
would occur, for example, if all the securities of a Fund were replaced once in
a one-year period. High turnover involves correspondingly greater commission
expenses and transaction costs and increases the possibility that the Funds
would not qualify as regulated investment companies under Subchapter M of the
Internal Revenue Code. A Fund will not qualify as a regulated investment company
if it derives 30% or more of its gross income from gains (without offset for
losses) from the sale or other disposition of securities held for less than
three months. High turnover may result in a Fund recognizing greater amounts of
income and capital gains, which would increase the amount of income and capital
gains which the Fund must distribute to shareholders in order to maintain its
status as a regulated investment company and to avoid the imposition of federal
income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
Your initial investment in a Fund ordinarily must be at least
$10,000. A Fund may, in the Adviser's or Sub-Adviser's sole discretion, accept
certain accounts with less than the stated minimum initial investment. Shares of
each Fund are sold on a continuous basis at the net asset value next determined
after receipt of a purchase order by the Trust. Purchase orders received by
dealers prior to 4:00 p.m., Eastern time, on any business day and transmitted to
the Trust's transfer agent, MGF Service Corp., by 5:00 p.m., Eastern time, that
day are confirmed at the net asset value determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by MGF Service Corp. by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
MGF Service Corp. by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by MGF Service Corp. after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m., Eastern time,
are confirmed at the net asset value next determined on the following business
day.
You may open an account and make an initial investment in a Fund by
sending a check and a completed account application form to MGF Service Corp.,
P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Capitol Square Large Cap Fund", the "Capitol Square Small Cap Fund or the
"Capitol Square Bond Fund," whichever is applicable. An account application is
included in this Prospectus.
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<PAGE>
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust reserves
the right to limit the amount of investments and to refuse to sell to any
person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.
You may also purchase shares of the Funds by wire. Please telephone MGF
Service Corp. (Nationwide call toll-free 800-___- ____; in Cincinnati call
___-____) for instructions. You should be prepared to give the name in which the
account is to be established, the address, telephone number and taxpayer
identification number for the account, and the name of the bank which will wire
the money.
Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to MGF Service Corp. Your bank may impose a charge
for sending your wire. There is presently no fee for receipt of wired funds, but
MGF Service Corp. reserves the right to charge shareholders for this service
upon thirty days' prior notice to shareholders.
You may purchase and add shares to your account by mail or by bank
wire. Checks should be sent to MGF Service Corp., P.O. Box 5354, Cincinnati,
Ohio 45201-5354. Checks should be made payable or endorsed to the applicable
Fund. Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at Capitol Square, 21 East State Street,
Suite 1410, Columbus, Ohio 43215. Each additional purchase request must contain
the name of your account and your account number to permit proper crediting to
your account. While there is no minimum amount required for subsequent
investments, the Trust reserves the right to impose such requirement.
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<PAGE>
SHAREHOLDER SERVICES
Contact MGF Service Corp. (Nationwide call toll-free 800-___-____; in
Cincinnati call ___-____) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
You may elect to receive, or may designate another person to receive,
monthly or quarterly payments in a specified amount of not less than $100 each.
There is no charge for this service. Such withdrawals should not reduce the
account below $10,000.
Tax-Deferred Retirement Plans
Shares of the Funds are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
Shares of the Funds may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Funds.
Automatic Investment Plan
You may make automatic monthly investments in a Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $100 under the plan. MGF Service Corp. pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Funds.
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<PAGE>
HOW TO REDEEM SHARES
You may redeem shares of a Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by MGF Service Corp. of your redemption request in the form described
below. Payment is normally made within three business days after tender in such
form, provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares of
the Funds by certified check or wire.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to MGF Service Corp. The request must state the number
of shares or the dollar amount to be redeemed and your account number. The
request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be
deposited directly in the bank account or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
THROUGH BROKER-DEALERS. You may also redeem shares by placing a wire
redemption request through a securities broker or dealer. Unaffiliated
broker-dealers may impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after receipt by the Trust
or its agent of your wire redemption request. It is the responsibility of
broker-dealers to promptly transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee by the Funds'
Custodian. The Trust reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact MGF Service Corp. for more information about ACH
transactions.
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<PAGE>
At the discretion of the Trust or MGF Service Corp., corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than $10,000 (based on actual amounts invested,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given sixty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of the Funds may be exchanged for each other at net asset value.
Shares of the Funds may also be exchanged for the following money market funds:
Short Term Government Income Fund (a series of Midwest Trust) --
invests in short-term U.S. Government obligations backed by the "full
faith and credit" of the United States and seeks high current income
consistent with protection of capital.
Tax-Free Money Fund (a series of Midwest Group Tax Free Trust) --
invests in high quality, short-term municipal obligations and seeks the
highest level of interest income that is exempt from federal income
tax, consistent with protection of capital.
Ohio Tax-Free Money Fund (a series of Midwest Group Tax Free Trust) --
invests in high quality, short-term Ohio municipal obligations and
seeks the highest level of current income that is exempt from federal
income tax and Ohio personal income tax, consistent with liquidity and
stability of principal.
Shares of the Short Term Government Income Fund and the Tax-Free Money Fund
acquired via exchange may be reexchanged for shares of the Funds at net asset
value.
You may request an exchange by sending a written request to MGF Service
Corp. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
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<PAGE>
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at Capitol Square, 21 East State Street, Columbus, Ohio 43215.
An exchange will be effected at the next determined net asset value after
receipt of a request by MGF Service Corp.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange for shares of the Short Term Government
Income Fund or the Tax-Free Money Fund, contact MGF Service Corp. to obtain a
current prospectus and more information about exchanges among the funds.
DIVIDENDS AND DISTRIBUTIONS
The Large Cap Fund and the Small Cap Fund each expects to distribute
substantially all of its net investment income, if any, on an annual basis. All
of the net investment income of the Bond Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Each Fund expects to distribute any net realized long-term capital
gains at least once each year. Management will determine the timing and
frequency of the distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term
capital gains distributions paid in
cash; long-term capital gains
distributions reinvested in additional
shares.
Cash Option - income distributions and
capital gains distributions paid in
cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
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<PAGE>
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option.
TAXES
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. Each Fund intends to distribute substantially all of its net
investment income and any realized capital gains to its shareholders.
Distributions of net investment income as well as from net realized short-term
capital gains, if any, are taxable to investors as ordinary income. Dividends
distributed by the Large Cap Fund and the Small Cap Fund from net investment
income may be eligible, in whole or in part, for the dividends received
deduction available to corporations. Since the investment income of the Bond
Fund is derived from interest rather than dividends, no portion of such
distributions is eligible for the dividends received deduction available to
corporations. Distributions of net realized long-term capital gains are taxable
as long-term capital gains regardless of how long you have held your Fund
shares. Redemptions of shares of the Funds are taxable events on which a
shareholder may realize a gain or loss.
The Funds will mail to each of their shareholders a statement
indicating the amount and federal income tax status of all distributions made
during the year. In addition to federal taxes, shareholders of the Funds may be
subject to state and local taxes on distributions. Shareholders should consult
their tax advisors about the tax effect of distributions and withdrawals from
the Funds and the use of the Automatic Withdrawal Plan and the Exchange
Privilege. The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares.
OPERATION OF THE FUNDS
The Funds are diversified series of Capitol Square Investment Trust, an
open-end management investment company organized as an Ohio business trust on
July 2, 1996. The Board of Trustees supervises the business activities of the
Trust. Like other mutual funds, various organizations are retained to perform
specialized services for the Funds.
The Trust retains Dillon Capital Management, Capitol Square, 21 East
State Street, Columbus, Ohio 43215 (the "Adviser"), to manage the Funds'
investments. The Adviser is an independent investment counsel firm advising
individual, institutional and corporate clients. The Adviser is controlled by
DiCap, Inc., its
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<PAGE>
General Partner. Roderick H. Dillon, Jr. is the controlling shareholder of
DiCap, Inc. and the President of the Adviser. He is the person primarily
responsible for overseeing the management of the Large Cap and Small Cap Fund's
portfolios. The Adviser has not previously provided investment advisory
services to a registered investment company. Mr. Dillon, however, has
previously served as a portfolio manager to a registered investment company
while employed both with Loomis, Sayles and Company and Parker, Dillon, Carlson
and Johnson.
The Large Cap Fund pays the Adviser a fee equal to the annual rate of
1.50% of the average value of its daily net assets up to $50 million; 1.35% of
such assets from $50 million to $100 million; and 1.20% of such assets in excess
of $100 million. The Small Cap Fund pays the Adviser a fee equal to the annual
rate of 1.75% of the average value of its daily net assets up to $50 million;
1.60% of such assets from $50 million to $100 million; and 1.45% of such assets
in excess of $100 million. The Bond Fund pays the Adviser a fee equal to the
annual rate of 1.00% of the average value of its daily net assets up to $50
million; .90% of such assets from $50 million to $100 million; and .80% of such
assets in excess of $100 million. Unlike most mutual funds, the advisory fee
paid by each Fund includes transfer agency, pricing, custodial, auditing and
legal services, and general administrative and other operating expenses of the
Fund except brokerage commissions, taxes, interest, fees and expenses of non-
interested Trustees and extraordinary expenses.
As of the date of this Prospectus, _________ is the sole shareholder of
each Fund.
Midwest Group Financial Services, Inc., 312 Walnut Street, Cincinnati,
Ohio 45202 (the "Sub-Adviser"), has been retained by the Adviser to manage the
Bond Fund's investments. The Sub- Adviser was organized in 1974 and is a
subsidiary of Leshner Financial, Inc., of which Robert H. Leshner is the
controlling shareholder. The Adviser (not the Fund) pays the Sub-Adviser a fee
at the annual rate of ___% of the average value of the Bond Fund's daily net
assets. ___________, the ________ of the Sub- Adviser, is primarily responsible
for managing the Bond Fund's portfolio. __________ has been employed by the
Sub-Adviser since
- ----.
The Adviser has retained MGF Service Corp., P.O. Box 5354, Cincinnati,
Ohio, to provide administrative services and Accounting and pricing services to
the Fund and to serve as its transfer agent and dividend paying agent. MGF
Service Corp. is a subsidiary of Leshner Financial, Inc., of which Robert H.
Leshner is the controlling shareholder. The Adviser (not the Fund) pays
MGF Service Corp. a fee for these services at the rate of -----------.
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<PAGE>
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser or, where applicable,
Sub-Adviser, may give consideration to sales of shares of the Funds as a factor
in the selection of brokers and dealers to execute portfolio transactions of the
Funds. Subject to the requirements of the Investment Company Act of 1940 and
procedures adopted by the Board of Trustees, the Funds may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker (i) which is an affiliated person of the Trust, or (ii) which is an
affiliated person of such person, or (iii) an affiliated person of which is an
affiliated person of the Trust, the Adviser or Sub-Adviser.
Shares of each Fund have equal voting rights and liquidation rights,
and are voted in the aggregate and not by Fund except in matters where a
separate vote is required by the Investment Company Act of 1940 or when the
matter affects only the interest of a particular Fund. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, the share price (net
asset value) of the shares of each Fund is determined as of the close of the
regular session of trading on the New York Stock Exchange, currently 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in a Fund's investments that its net asset value might be materially
affected. The net asset value per share of each Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices
as obtained from one or more of the major market makers for such securities.
Other portfolio securities are valued as follows: (i) securities which are
traded on stock exchanges or are quoted by NASDAQ are valued at the last
reported sale price as of the close of the regular session of trading on
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<PAGE>
the New York Stock Exchange on the day the securities are being valued, or, if
not traded on a particular day, at the closing bid price, (ii) securities traded
in the over-the-counter market, and which are not quoted by NASDAQ, are valued
at the last sale price (or, if the last sale price is not readily available, at
the last bid price as quoted by brokers that make markets in the securities) as
of the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise its "average annual total
return." Each Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
The "average annual total return" of a Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions. A Fund may
also advertise total return (a "nonstandardized quotation") which is calculated
differently from "average annual total return." A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." A nonstandardized quotation of
total return will always be accompanied by a Fund's "average annual total
return" as described above.
The "yield" of a Fund is computed by dividing the net investment income
per share earned during a thirty-day (or one month) period stated in the
advertisement by the net asset value per share on the last day of the period
(using the average number of shares entitled to receive dividends). The yield
formula assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period.
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<PAGE>
From time to time the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc.("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index and the Russell 2000 Index. In connection with a ranking, the Funds
may provide additional information, such as the particular category of funds to
which the ranking relates, the number of funds in the category, the criteria
upon which the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. The Funds may also present their performance and other
investment characteristics, such as volatility or a temporary defensive posture,
in light of the Adviser's view of current or past market conditions or
historical trends.
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<PAGE>
CAPITOL SQUARE INVESTMENT TRUST Capitol Square 21 East State Street, Suite 1410
Columbus, Ohio 43215
Nationwide: (Toll-Free) 800-___-____
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Roderick H. Dillon, Jr.
- ------------------
- ------------------
- ------------------
INVESTMENT ADVISER DILLON CAPITAL MANAGEMENT Capitol Square 21 East State
Street, Suite 1410 Columbus, Ohio 43215
SUB-ADVISER
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-___-____
Cincinnati: 513-___-____
Rate Line
Nationwide: (Toll-Free) 800-852-4052
TABLE OF CONTENTS
Expense Information............................................................
Investment Objectives, Investment Policies and
Risk Considerations..........................................................
How to Purchase Shares.........................................................
Shareholder Services...........................................................
How to Redeem Shares. . . . . .................................................
Exchange Privilege.............................................................
Dividends and Distributions....................................................
Taxes..........................................................................
Operation of the Funds.........................................................
Calculation of Share Price . . . . . ..........................................
Performance Information........................................................
- -------------------------------------------------------------------------------
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<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
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<PAGE>
CAPITOL SQUARE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
_______, 1996
Capitol Square Large Cap Fund
Capitol Square Small Cap Fund
Capitol Square Bond Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the Capitol Square Investment
Trust dated _______, 1996. A copy of the Trust's Prospectus can be obtained by
writing the Trust at Capitol Square, 21 East State Street, Suite 1410, Columbus,
Ohio 43215, or by calling the Trust nationwide toll-free 800-___-____.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Capitol Square Investment Trust
Capitol Square
21 East State Street, Suite 1410
Columbus, Ohio 43215
TABLE OF CONTENTS PAGE
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . .
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS. . . . . . . .
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS. . .
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . .
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . .
THE INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . .
THE SUB-ADVISER. . . . . . . . . . . . . . . . . . . . . . .
SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . . . .
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . .
CALCULATION OF SHARE PRICE . . . . . . . . . . . . . . . . .
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . .
REDEMPTION IN KIND . . . . . . . . . . . . . . . . . . . . .
HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . .
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . .
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . .
MGF SERVICE CORP . . . . . . . . . . . . . . . . . . . . . .
STATEMENTS OF ASSETS AND LIABILITIES . . . . . . . . . . . .
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THE TRUST
Capitol Square Investment Trust (the "Trust") was organized as an Ohio
business trust on July 2, 1996. The Trust currently offers three series of
shares to investors: the Capitol Square Large Cap Fund, the Capitol Square Small
Cap Fund and the Capitol Square Bond Fund (referred to individually as a "Fund"
and collectively as the "Funds"). Each Fund has its own investment objective and
policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objectives, Investment
Policies and Risk Considerations") appears below:
Majority. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any of the Funds) means the lesser of (1) 67% or more of the outstanding shares
of the Trust (or the applicable Fund) present at a meeting, if the holders of
more than 50% of the outstanding shares of the Trust (or the applicable Fund)
are present or represented at such meeting or (2) more than 50% of the
outstanding shares of the Trust (or the applicable Fund).
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Commercial Paper. Commercial paper consists of short-term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. Each Fund will only
invest in commercial paper rated in one of the three highest categories by
either Moody's Investors Service, Inc. (Prime-1, Prime-2 or Prime-3) or Standard
& Poor's Ratings Group (A-1, A-2 or A-3), or which, in the opinion of the
Adviser, is of equivalent investment quality. Certain notes may have floating or
variable rates. Variable and floating rate notes with a demand notice period
exceeding seven days will be subject to each Fund's restriction on illiquid
investments (see "Investment Limitations") unless, in the judgment of the
Adviser, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and, recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1, Prime-2 or Prime- 3.
Commercial paper rated A-1 (highest quality) by Standard & Poor's Ratings Group
has the following characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A" or better, although in some
cases "BBB" credits may be allowed; the issuer has access to at least two
additional channels of borrowing; basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position within the
industry; and, the reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2, or A-3.
Bank Debt Instruments. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time
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(usually from fourteen days to one year) at a stated or variable interest rate.
Bankers' acceptances are credit instruments evidencing the obligation of a bank
to pay a draft which has been drawn on it by a customer, which instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Each Fund will not invest in time deposits maturing in more than
seven days if, as a result thereof, more than 15% of the value of its net assets
would be invested in such securities and other illiquid securities.
Mortgage-Backed and Asset-Backed Securities. The average life of
mortgage-backed securities varies with the maturities of the underlying mortgage
instruments (generally up to 30 years) and with the extent of prepayments of the
mortgages themselves. Any such prepayments are passed through to the certificate
holder, reducing the stream of future payments. Prepayments tend to rise in
periods of falling interest rates, decreasing the average life of the
certificate and generating cash which must be invested in a lower interest rate
environment. This could limit the appreciation potential of the certificates
when compared to similar debt obligations which may not be paid down at will.
The coupon rates of mortgage-backed securities are lower than the interest rate
on the underlying mortgages by the amount of fees paid to the issuing agencies,
usually approximately 1/2 of 1%. When prevailing interest rates increase, the
value of the mortgage-backed securities may decrease, as do other non-redeemable
debt securities. However, when interest rates decline, the value of
mortgage-backed securities may not rise on a comparable basis with other
non-redeemable debt securities.
Mortgage-backed securities include certificates issued by the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation and
the Government National Mortgage Association. The Federal National Mortgage
Association ("FNMA") is a government sponsored corporation owned entirely by
private stockholders. The guarantee of payments under these instruments is that
of FNMA only. They are not backed by the full faith and credit of the U.S.
Treasury but the U.S. Treasury may extend credit to FNMA through discretionary
purchases of its securities. The average life of the mortgages backing newly
issued FNMA Certificates is approximately 10 years. The Federal Home Loan
Mortgage Corporation ("FHLMC") is a corporate instrumentality of the U.S.
Government whose stock is owned by the Federal Home Loan Banks. Certificates
issued by FHLMC represent interests in mortgages from its portfolio. FHLMC
guarantees payments under its certificates but this guarantee is not backed by
the full faith and credit of the United States and FHLMC does not have authority
to borrow from the U.S. Treasury. The average life of
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the mortgages backing newly issued FHLMC Certificates is
approximately 10 years. The Government National Mortgage Association ("GNMA")
Certificates represent pools of mortgages insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by the Veterans
Administration. The guarantee of payments under GNMA Certificates is backed by
the full faith and credit of the United States. The average life of the
mortgages backing newly issued GNMA Certificates is approximately 12 years.
The Bond Fund may also purchase mortgage-backed securities issued by
financial institutions, mortgage banks, and securities broker-dealers (or
affiliates of such institutions established to issue these securities) in the
form of collateralized mortgage obligations ("CMOs"). CMOs are obligations fully
collateralized directly or indirectly by a pool of mortgages on which payments
of principal and interest are passed through to the holders of the CMOs,
although not necessarily on a pro rata basis, on the same schedule as they are
received. The most common structure of a CMO contains four classes of
securities; the first three pay interest at their stated rates beginning with
the issue date, the final one is typically an accrual class (or Z bond). The
cash flows from the underlying mortgage collateral are applied first to pay
interest and then to retire securities. The classes of securities are retired
sequentially. All principal payments are directed first to the shortest-maturity
class (or A bonds). When those securities are completely retired, all principal
payments are then directed to the next-shortest-maturity security (or B bond).
This process continues until all of the classes have been paid off. Because the
cash flow is distributed sequentially instead of pro rata as with pass-through
securities, the cash flows and average lives of CMOs are more predictable, and
there is a period of time during which the investors in the longer- maturity
classes receive no principal paydowns.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage banks, and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. In
addition, such issuers may be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-backed securities.
Pools created by non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because of the absence of
direct or indirect government or agency guarantees. Timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance,
guarantees, and the creditworthiness of the issuers thereof will be considered
in determining whether a mortgage-backed security meets the Bond
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Fund's investment quality standards. There can be no assurance that the private
insurers or guarantors can meet their obligations under the insurance policies
or guarantee arrangements. The Fund may buy mortgage-backed securities without
insurance or guarantees, if the Adviser determines that the securities meet the
Fund's quality standards. The Fund will not purchase mortgage-backed securities
or any other assets which, in the opinion of the Adviser, are illiquid if, as a
result, more than 15% of the value of the Fund's net assets will be illiquid.
The Adviser will, consistent with the Fund's investment objective, policies, and
quality standards, consider making investments in new types of mortgage-backed
securities as such securities are developed and offered to investors.
The Bond Fund may also purchase other asset-backed securities
(unrelated to mortgage loans) such as Certificates for Automobile ReceivablesSM
("CARS"SM) and Credit Card Receivable Securities. CARS represent undivided
fractional interests in a trust whose assets consist of a pool of motor vehicle
retail installment sales contracts and security interests in the vehicles
securing the contracts. Payments of principal and interest on CARS are
"passed-through" monthly to certificate holders, and are guaranteed up to
certain amounts by a letter of credit issued by a financial institutional
unaffiliated with the trustee or originator of the trust. Underlying sales
contracts are subject to prepayment, which may reduce the overall return to
certificate holders. Certificate holders may also experience delays in payment
or losses on CARS if the full amounts due on underlying sales contracts are not
realized by the trust because of unanticipated legal or administrative costs of
enforcing the contracts, or because of depreciation, damage, or loss of the
vehicles securing the contracts, or other factors. Credit Card Receivable
Securities are backed by receivables from revolving credit card agreements.
Credit balances on revolving credit card agreements ("Accounts") are generally
paid down more rapidly than are automobile contracts. Most of the Credit Card
Receivable Securities issued publicly to date have been pass-through
certificates. In order to lengthen the maturity of Credit Card Receivable
Securities, most such securities provide for a fixed period during which only
interest payments on the underlying Accounts are passed through to the security
holder and principal payments received on such Accounts are used to fund the
transfer to the pool of assets supporting the securities of additional credit
card charges made on an Account. The initial fixed period usually may be
shortened upon the occurrence of specified events which signal a potential
deterioration in the quality of the assets backing the security, such as the
imposition of a cap on interest rates. The ability of the issuer to extend the
life of an issue of Credit Card Receivable Securities thus depends upon the
continued generation of additional principal amounts in the underlying Accounts
and the non-occurrence of specified events. The Internal Revenue Code of 1986,
which phased out the deduction
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for consumer interest, as well as competitive and general economic factors,
could adversely affect the rate at which new receivables are created in an
Account and conveyed to an issuer, shortening the expected weighted average life
of the related security, and reducing its yield. An acceleration in cardholders'
payment rates or any other event which shortens the period during which
additional credit card charges on an Account may be transferred to the pool of
assets supporting the related security could have a similar effect on the
weighted average life and yield. Credit card holders are entitled to the
protection of state and federal consumer credit laws, many of which give such
holder the right to set off certain amounts against balances owed on the credit
card, thereby reducing amounts paid on Accounts. In addition, unlike most other
asset-backed securities, Accounts are unsecured obligations of the cardholder.
When-Issued Securities and Securities Purchased On a To-Be- Announced
Basis. The Bond Fund may purchase debt obligations on a "when-issued" or
"to-be-announced" basis. The Fund will only make commitments to purchase
securities on a when-issued or to- be-announced ("TBA") basis with the intention
of actually acquiring the securities. In addition, the Fund may purchase
securities on a when-issued or TBA basis only if delivery and payment for the
securities takes place within 120 days after the date of the transaction. In
connection with these investments, the Fund will direct the Custodian to place
cash, U.S. Government obligations or other liquid high-grade debt obligations in
a segregated account in an amount sufficient to make payment for the securities
to be purchased. When a segregated account is maintained because the Fund
purchases securities on a when-issued or TBA basis, the assets deposited in the
segregated account will be valued daily at market for the purpose of determining
the adequacy of the securities in the account. If the market value of such
securities declines, additional cash or securities will be placed in the account
on a daily basis so that the market value of the account will equal the amount
of the Fund's commitments to purchase securities on a when-issued or TBA basis.
To the extent funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a when-issued or
TBA basis and the securities held in the Fund's portfolio are subject to changes
in market value based upon changes in the level of interest rates (which will
generally result in all of those securities changing in value in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, the Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued or TBA basis, there will be a
possibility that the market value of the Fund's assets will experience greater
fluctuation. The purchase of securities on a when-issued or TBA basis may
involve a risk of loss if the broker-dealer selling the securities fails to
deliver after the value of the securities has risen.
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When the time comes for the Fund to make payment for securities
purchased on a when-issued or TBA basis, the Fund will do so by using then
available cash flow, by sale of the securities held in the segregated account,
by sale of other securities or, although it would not normally expect to do so,
by directing the sale of the securities purchased on a when-issued or TBA basis
themselves (which may have a market value greater or less than the Fund's
payment obligation). Although the Fund will only make commitments to purchase
securities on a when-issued or TBA basis with the intention of actually
acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable by the Adviser as a matter of
investment strategy.
Repurchase Agreements. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
by the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and, in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit quality at least
equal to a Fund's investment criteria for portfolio securities and will be held
by the Custodian or in the Federal Reserve Book Entry System.
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For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Fund subject to a repurchase agreement as being
owned by that Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case a Fund may
incur a loss if the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
Loans of Portfolio Securities. Each Fund may lend its portfolio
securities subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the dividends or interest on loaned securities
and also receive one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be shared with the
borrower. The Funds may also pay fees to placing brokers as well as custodian
and administrative fees in
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connection with loans. Fees may only be paid to a placing broker provided that
the Trustees determine that the fee paid to the placing broker is reasonable and
based solely upon services rendered, that the Trustees separately consider the
propriety of any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated person of the
Trust or an affiliated person of the Adviser or other affiliated person. The
terms of the Funds' loans must meet applicable tests under the Internal Revenue
Code and permit the Funds to reacquire loaned securities on five days' notice or
in time to vote on any important matter.
Foreign Securities. Subject to each Fund's investment policies and
quality and maturity standards, the Funds may invest in the securities (payable
in U.S. dollars) of foreign issuers. Because the Funds may invest in foreign
securities, investment in the Funds involves risks that are different in some
respects from an investment in a fund which invests only in securities of U.S.
domestic issuers. Foreign investments may be affected favorably or unfavorably
by changes in currency rates and exchange control regulations. There may be less
publicly available information about a foreign company than about a U.S. company
and foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of securities markets,
brokers and issuers of securities. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
Warrants and Rights. Warrants are options to purchase equity securities
at a specified price and are valid for a specific time period. Rights are
similar to warrants, but normally have a short duration and are distributed by
the issuer to its shareholders. The Large Cap Fund and the Small Cap Fund may
purchase warrants and rights, provided that the Fund does not invest more than
5% of its net assets at the time of purchase in warrants and rights other than
those that have been acquired in units or attached to other securities. Of such
5%, no more than 2% of each Fund's assets at the time of purchase may be
invested in warrants which are not listed on either the New York Stock Exchange
or the American Stock Exchange.
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QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for corporate bonds in which the Funds may invest are as follows:
Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
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Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Standard & Poor's Ratings Group
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
BB, B, CCC and CC - Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C - The rating C is reserved for income bonds on which no interest is
being paid.
D - Debt rated D are default, and payment of interest and/or repayment
of principal is in arrears.
The ratings of Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group for preferred stocks in which the Funds may invest are as
follows:
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Moody's Investors Service, Inc.
aaa - An issue which is rated aaa is considered to be a top- quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a - An issue which is rated a is considered to be an upper- medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
ba - An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa - An issue which is rated caa is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payments.
Standard & Poor's Ratings Group
AAA - This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
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BBB - An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B and CCC - Preferred stock rated BB, B, and CCC are regarded, on
balance, as predominately speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC - The rating CC is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
C - A preferred stock rated C is a non-paying issue.
D - A preferred stock rated D is a non-paying issue with the issuer in
default on debt instruments.
Risk Factors of Lower-Rated Securities
Lower-rated debt securities (commonly called "junk bonds") may be
subject to certain risk factors to which other securities are not subject to the
same degree. An economic downturn tends to disrupt the market for lower-rated
bonds and adversely affect their values. Such an economic downturn may be
expected to result in increased price volatility of lower-rated bonds and of the
value of a Fund's shares, and an increase in issuers' defaults on such bonds.
Also, many issuers of lower-rated bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, the
securities in which a Fund invests are subordinated to the prior payment of
senior indebtedness, thus potentially limiting such Fund's ability to recover
full principal or to receive payments when senior securities are in default.
The credit rating of a security does not necessarily address its market
value risk. Also, ratings may, from time to time, be changed to reflect
developments in the issuer's financial condition. Lower-rated securities held by
a Fund have speculative characteristics which are apt to increase in number and
significance with each lower rating category.
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<PAGE>
When the secondary market for lower-rated bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for
lower-rated bonds, the relative lack of reliable, objective data makes the
responsibility of the Trustees to value such securities more difficult, and
judgment plays a greater role in the valuation of portfolio securities. Also,
increased illiquidity of the market for lower-rated bonds may affect a Fund's
ability to dispose of portfolio securities at a desirable price.
In addition, if a Fund experiences unexpected net redemptions, it could
be forced to sell all or a portion of its lower-rated bonds without regard to
their investment merits, thereby decreasing the asset base upon which such
Fund's expenses can be spread and possibly reducing such Fund's rate of return.
Also, prices of lower-rated bonds have been found to be less sensitive to
interest rate changes and more sensitive to adverse economic changes and
individual corporate developments than more highly rated investments. Certain
laws or regulations may have a material effect on a Fund's investments in
lower-rated bonds.
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.
The limitations applicable to each Fund are:
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings. Deposit of payment
by the Fund of initial or maintenance margin in connection with futures
contracts and related options is not considered a pledge or hypothecation of
assets.
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<PAGE>
3. Margin Purchases. The Fund will not purchase any securities
on "margin" (except such short-term credits as are necessary for the clearance
of transactions). The deposit of funds in connection with transactions in
options, futures contracts, and options on such contracts will not be considered
a purchase on "margin."
4. Short Sales. The Fund will not make short sales of
securities, or maintain a short position, other than short sales
"against the box,"
5. Commodities; Put or Call Options. The Fund will not purchase or sell
commodities or commodity contracts including futures, or purchase or write put
or call options, except that the Fund may purchase or sell financial futures
contracts and related options.
6. Underwriting. The Fund will not act as underwriter of
securities issued by other persons. This limitation is not applicable to the
extent that, in connection with the disposition of portfolio securities, a Fund
may be deemed an underwriter under certain federal securities laws.
7. Real Estate. The Fund will not purchase, hold or deal in real estate
or real estate mortgage loans, including real estate limited partnership
interests, except that the Fund may purchase (a) securities of companies (other
than limited partnerships) which deal in real estate or (b) securities which are
secured by interests in real estate or by interests in mortgage loans including
securities secured by mortgage-backed securities.
8. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
bonds, debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness.
9. Industry Concentration. The Fund will not invest more
than 25% of its total assets in any particular industry.
10. Senior Securities. The Fund will not issue or sell any
senior security as defined by the Investment Company Act of 1940 except in so
far as any borrowing that the Fund may engage in may be deemed to be an
issuance of a senior security.
The Trust does not intend to pledge, mortgage or hypothecate the assets
of any Fund. The Trust does not intend to make short sales of securities
"against the box" as described in investment limitation 4. The statements of
intention in this paragraph reflect nonfundamental policies which may be changed
by the Board of Trustees without shareholder approval.
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<PAGE>
Other current investment policies of the Fund, which are not
fundamental and which may be changed by action of the Board of Directors without
shareholder approval, are as follows:
1. Illiquid Investments. The Fund will not purchase securities for
which no readily available market exists or engage in a repurchase agreement
maturing in more than seven days if, as a result thereof, more than 15% of the
value of the net assets of the Fund would be invested in such securities.
2. Investing for Control. The Fund will not invest in companies for
the purpose of exercising control or management.
3. Other Investment Companies. The Fund will not invest more than 10%
of its total assets in securities of other investment companies. The Fund will
not invest more than 5% of its total assets in the securities of any single
investment company. The Fund will not hold more than 3% of the outstanding
voting stock of any single investment company.
4. Securities Owned by Affiliates. The Fund will not purchase or retain
the securities of any issuers if those officers and Trustees of the Trust or
officers, directors, or principals of its Adviser, owning individually more than
one-half of 1% of the securities of such issuer, own in the aggregate more than
5% of the securities of such issuer.
5. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases, rights or royalty contracts.
6. Voting Securities of Any Issuer. The Fund will not purchase more
than 10% of the outstanding voting securities of any one issuer.
With respect to the percentages adopted by the Trust as maximum
limitations on a Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk.
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<PAGE>
NAME AGE POSITION HELD
*Roderick H. Dillon, Jr. 39 President/Trustee
*________________ __ Trustee
+________________ __ Trustee
+________________ __ Trustee
Robert G. Dorsey 38 Vice President
Mark J. Seger 34 Treasurer
Tina D. Hosking 28 Secretary
* Mr. Dillon, as President of the General Partner of Dillon Capital
Management, the Trust's investment adviser, is an "interested person"
of the Trust within the meaning of Section 2(a)(19) of the Investment
Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the remaining Trustees and executive
officers of the Trust during the past five years are set forth below:
[To be inserted]
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is President
and Treasurer of MGF Service Corp. (a registered transfer agent) and Treasurer
of Midwest Group Financial Services, Inc. (a registered broker-dealer and
investment adviser) and Leshner Financial, Inc. (a financial services company
and parent of MGF Service Corp. and Midwest Group Financial Services, Inc.)
He is also Vice President of Brundage, Story and Rose Investment Trust, Leeb
Personal FinanceTM Investment Trust, PRAGMA Investment Trust and Markman
MultiFund Trust and Assistant Vice President of Fremont Mutual Funds, Inc.,
Schwartz Investment Trust, The Tuscarora Investment Trust and Williamsburg
Investment Trust (all of which are registered investment companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio, is Vice
President of Leshner Financial, Inc. and MGF Service Corp. He is also Treasurer
of Midwest Trust, Midwest Group Tax Free Trust, Midwest Strategic Trust,
Brundage, Story and Rose Investment Trust, Leeb Personal FinanceTM Investment
Trust, Markman MultiFund Trust, PRAGMA Investment Trust and Williamsburg
Investment Trust, Assistant Treasurer of Schwartz Investment Trust and The
Tuscarora Investment Trust and Assistant Secretary of Fremont Mutual Funds, Inc.
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Counsel of
MGF Service Corp. She is also Assistant Secretary of PRAGMA Investment Trust.
[Trustee compensation to be inserted]
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<PAGE>
THE INVESTMENT ADVISER
Dillon Capital Management (the "Adviser") is the Trust's investment
manager. Mr. Dillon, as President of the Adviser's General Partner, may directly
or indirectly receive benefits from the advisory fees paid to the Adviser. Under
the terms of the advisory agreements between the Trust and the Adviser, the
Adviser manages the Funds' investments. The Large Cap Fund pays the Adviser a
fee equal to the annual rate of 1.50% of the average value of its daily net
assets up to $50 million; 1.35% of such assets from $50 million to $100 million;
and 1.20% of such assets in excess of $100 million. The Small Cap Fund pays the
Adviser a fee equal to the annual rate of 1.75% of the average value of its
daily net assets up to $50 million; 1.60% of such assets from $50 million to
$100 million; and 1.45% of such assets in excess of $100 million. The Bond Fund
pays the Adviser a fee equal to the annual rate of 1.00% of the average value of
its daily net assets up to $50 million; .90% of such assets from $50 million to
$100 million; and .80% of such assets in excess of $100 million. Unlike most
mutual funds, the advisory fee paid by each Fund includes transfer agency,
pricing, custodial, auditing and legal services, and general administrative and
other operating expenses of the Fund except brokerage commissions, taxes,
interest, fees and expenses of non-interested Trustees and extraordinary
expenses. The Adviser is contractually required to reduce its management fee in
an amount equal to each Fund's allocable portion of the fees and expenses of the
non-interested Trustees.
The Adviser pays, out of the investment advisory fees it receives from
the Funds, all the expenses of the Funds except brokerage commissions, taxes,
interest, fees and expenses of the non-interested Trustees of the Trust and
extraordinary expenses. The Trust may have an obligation to indemnify the
Trust's officers and Trustees with respect to litigation to which the Trust may
be a party, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties.
By their terms, each Fund's investment advisory agreement will remain
in force until ___________, 1998 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the majority of
the applicable Fund's outstanding voting securities; provided that in either
event continuance is also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a meeting called
for the purpose of voting on such approval. The Trust's investment advisory
agreements may be terminated at any time, on sixty days' written notice, without
the payment of any penalty, by the Board of Trustees, by a vote of the majority
of the applicable Fund's outstanding voting securities, or by the
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<PAGE>
Adviser. The investment advisory agreements automatically terminates in the
event of their assignment, as defined by the Investment Company Act of 1940
and the rules thereunder.
The Adviser will reimburse the Funds to the extent that the expenses of
a Fund for any fiscal year exceed the applicable expense limitations imposed by
state securities administrators, as such limitations may be lowered or raised
from time to time. The most restrictive limitation is presently 2.5% of the
first $30 million of average daily net assets, 2% of the next $70 million of
average daily net assets and 1.5% of average daily net assets in excess of $100
million. If any such reimbursement is required, the payment of the advisory fee
at the end of any month will be reduced or postponed or, if necessary, a refund
will be made to the Funds at the end of such month. Certain expenses such as
brokerage commissions, if any, taxes, interest, extraordinary items and other
expenses subject to approval of state securities administrators are excluded
from such limitations. If the expenses of a Fund approach the applicable
limitation in any state, the Trust will consider the various actions that are
available to it, including suspension of sales to residents of that state.
The name "Capitol Square" is a property right of the Adviser. The
Adviser may use the name "Capitol Square" in other connections and for other
purposes, including in the name of other investment companies. The Trust has
agreed to discontinue any use of the name "Capitol Square" if the Adviser ceases
to be employed as the Trust's investment adviser.
THE SUB-ADVISER
Midwest Group Financial Services, Inc., 312 Walnut Street, Cincinnati,
Ohio (the "Sub-Adviser"), has been retained by the Adviser, pursuant to a
Sub-Advisory Agreement, to manage the Bond Fund's investments. The Adviser (not
the Fund) pays the Sub- Adviser a fee at the annual rate of ___% of the average
value of the Bond Fund's daily net assets.
By its terms, the Trust's Sub-Advisory Agreement will remain in force
until ___________, 1998 and from year to year thereafter, subject to annual
approval by (a) the Board of Trustees or (b) a vote of the majority of the Bond
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Trust, by a vote cast in person at a meeting called for the purpose of
voting on such approval. The Trust's Sub-Advisory Agreement may be terminated at
any time, on sixty days' written notice, without the payment of any penalty, by
the Board of Trustees, by a vote of the majority of the Bond Fund's outstanding
voting securities, or by the Adviser
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<PAGE>
or Sub-Adviser. The Sub-Advisory Agreement automatically terminates in the event
of its assignment, as defined by the Investment Company Act of 1940 and the
rules thereunder.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser (with respect to the Large Cap Fund and the
Small Cap Fund) and the Sub-Adviser (with respect to the Bond Fund) and are
subject to review by the Board of Trustees of the Trust. In the purchase and
sale of portfolio securities, the Adviser and the Sub-Adviser seek best
execution for the Funds, taking into account such factors as price (including
the applicable brokerage commission or dealer spread), the execution capability,
financial responsibility and responsiveness of the broker or dealer and the
brokerage and research services provided by the broker or dealer. The Adviser
and the Sub-Adviser generally seek favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of the Bond Fund are
generally traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio securities
transactions of the Fund will consist primarily of dealer or underwriter
spreads.
The Adviser and the Sub-Adviser are specifically authorized to select
brokers who also provide brokerage and research services to the Fund(s) and/or
other accounts over which the Adviser and/or Sub-Adviser exercise investment
discretion and to pay such brokers a commission in excess of the commission
another broker would charge if the Adviser or Sub-Adviser determines in good
faith that the commission is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of a particular transaction or the Adviser or Sub-Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information
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<PAGE>
with respect to the availability of securities or purchasers or sellers of
securities. Although this information is useful to the Funds and the Adviser
and/or Sub-Adviser, it is not possible to place a dollar value on it. Research
services furnished by brokers through whom the Funds effect securities
transactions may be used by the Adviser and/or Sub-Adviser in servicing all of
their accounts and not all such services may be used by the Adviser and/or
Sub-Adviser in connection with the Funds.
The Adviser and the Sub-Adviser may aggregate purchase and sale orders
for the Fund(s) and its other clients if it believes such aggregation is
consistent with its duty to seek best execution for the Fund(s) and their other
clients. The Adviser will not favor any advisory account over any other account,
and each account that participates in an aggregated order will participate at
the average share price for all transactions of the Adviser or Sub-Adviser in
that security on a given business day, with all transaction costs shared on a
pro rata basis.
The Adviser may compensate dealers based on sales of shares of the
Funds to clients of the dealer or based on the average balance of all accounts
in the Funds for which the dealer is designated as the party responsible for the
account.
Code of Ethics. The Trust, the Adviser and the Sub-Adviser have each adopted a
Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Code
significantly restricts the personal investing activities of all employees of
the Adviser and Sub-Adviser and, as described below, imposes additional, more
onerous, restrictions on investment personnel of the Adviser and Sub-Adviser.
The Code requires that all employees of both the Adviser and Sub-Adviser
preclear any personal securities (with limited exceptions, such as U.S.
Government obligations). The preclearance requirement and associated procedures
are designed to identify any substantive prohibition or limitation applicable to
the proposed investment. In addition, no employee may purchase or sell any
security which, at that time, is being purchased or sold (as the case may be),
or to the knowledge of the employee is being considered for purchase or sale, by
any of the Funds. The substantive restrictions applicable to investment
personnel of the Adviser and the Sub-Adviser include a ban on acquiring any
securities in an initial public offering. Furthermore, the Code provides for
trading "blackout periods" which prohibit trading by investment personnel of the
Adviser and the Sub-Adviser within periods of trading by the Funds in the same
(or equivalent) security.
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
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<PAGE>
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that the portfolio turnover rate for each Fund
normally will not exceed 100%. A 100% turnover rate would occur if all of a
Fund's portfolio securities were replaced once within a one year period.
Generally, each Fund intends to invest for long-term purposes. However,
the rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when the Adviser or the Sub-Adviser believes
that portfolio changes are appropriate.
CALCULATION OF SHARE PRICE
The share price (net asset value) of the shares of each Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) on each day the Trust is open
for business. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Trust may also be open for business on other days in which there is
sufficient trading in any Fund's portfolio securities that its net asset value
might be materially affected. For a description of the methods used to determine
the share price, see "Calculation of Share Price" in the Prospectus.
TAXES
Each Fund's Prospectus describes generally the tax treatment of
distributions by the Funds. This section of the Statement of Additional
Information includes additional information concerning federal taxes.
Each Fund intends to qualify annually for the special tax treatment
afforded a "regulated investment company" under Subchapter M of the Internal
Revenue Code so that it does not pay federal taxes on income and capital gains
distributed to shareholders. To so qualify a Fund must, among other things, (i)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currency, or certain other
income (including but not limited to gains from options, futures and forward
contracts) derived with respect to its business of investing in stock,
securities or currencies; (ii) derive less than 30% of its gross income in each
taxable year from the sale or other disposition of the following assets held for
less than three months: (a) stock or securities, (b) options, futures or forward
contracts not directly related to its principal business of investing in stock
or securities; and (iii) diversify its holdings so that at the end of each
quarter of its taxable year the following two conditions are met: (a) at least
50% of the value of the Fund's total assets is represented by cash, U.S.
Government securities,
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<PAGE>
securities of other regulated investment companies and other securities (for
this purpose such other securities will qualify only if the Fund's investment is
limited in respect to any issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer) and (b) not
more than 25% of the value of the Fund's assets is invested in securities of any
one issuer (other than U.S. Government securities or securities of other
regulated investment companies).
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on November 30 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding or demonstrates an
exemption from withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
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<PAGE>
HISTORICAL PERFORMANCE INFORMATION
From time to time, each Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment
of all dividends and distributions. If a Fund has been in existence less than
one, five or ten years, the time period since the date of the initial public
offering of shares will be substituted for the periods stated. Each Fund may
also advertise total return (a "nonstandardized quotation") which is calculated
differently from average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation may also indicate average annual
compounded rates of return over periods other than those specified for average
annual total return. A nonstandardized quotation of total return will always be
accompanied by a Fund's average annual total return as described above.
From time to time, each of the Funds may also advertise its yield. A
yield quotation is based on a 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
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<PAGE>
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. Generally, interest earned (for the purpose of "a" above) on
debt obligations is computed by reference to the yield to maturity of each
obligation held based on the market value of the obligation (including actual
accrued interest) at the close of business on the last business day prior to the
start of the 30-day (or one month) period for which yield is being calculated,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest). With respect to the treatment of discount and
premium on mortgage or other receivables-backed obligations which are expected
to be subject to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Funds may use the following
publications or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis and Lipper Fixed Income Fund
Performance Analysis measure total return and average current yield for the
mutual fund industry and rank individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
loads. In addition, the Funds may use comparative performance information of
relevant indices, including the S&P 500 Index, the Dow Jones Industrial Average
and the Russell 2000 Index. The S&P 500 Index is an unmanaged index of 500
stocks, the purpose of which is to portray the pattern of common stock price
movement. The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed on the New York Stock Exchange.
The Russell 2000 Index is an unmanaged index comprised of the 2,000 smallest
U.S. domiciled publicly-traded common stocks in the Russell 3000 Index (an
unmanaged index of the 3,000 largest U.S. domiciled publicly-traded common
stocks by market capitalization).
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the
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items included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there can be
no assurance that the Fund will continue this performance as compared to such
other averages.
CUSTODIAN
The ___________ Bank, ________________________, __________, ____, has
been retained to act as Custodian for the Funds' investments. The ___________
Bank acts as each Fund's depository, safekeeps its portfolio securities,
collects all income and other payments with respect thereto, disburses funds as
instructed and maintains records in connection with its duties.
AUDITORS
The firm of ___________________ has been selected as independent public
accountants for the Trust for the fiscal year ending ___________, 1996.
_____________________________ performs an annual audit of the Trust's financial
statements and advises the Funds as to certain accounting matters.
MGF SERVICE CORP.
The Trust's transfer agent, MGF Service Corp. ("MGF"), 312 Walnut
Street, Cincinnati, Ohio, maintains the records of each shareholder's account,
processes purchases and redemptions of the Funds' shares and acts as dividend
and distribution disbursing agent. MGF also provides administrative services to
the Fund, calculates daily net asset value per share and maintains such books
and records as are necessary to enable MGF to perform its duties. For the
performance of these services, the Adviser (not the Fund) pays MGF a fee at the
annual rate of ___________.
STATEMENTS OF ASSETS AND LIABILITIES
The Funds' Statements of Assets and Liabilities as of ___________,
1996, which have been audited by ________________, are attached to this
Statement of Additional Information.
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CAPITOL SQUARE INVESTMENT TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (i) Financial Statements included in Part A:
None
(ii) Financial Statements included in Part B:
Statements of Assets and Liabilities,
___________, 1996*
Notes to Financial Statements*
Report of Independent Accountants*
(b) Exhibits
(1) Agreement and Declaration of Trust
(2) Bylaws
(3) Inapplicable
(4) Inapplicable
(5) (i) Form of Advisory Agreement with Dillon
Capitol Management for the Capitol Square
Large Cap Fund and Capitol Square Small Cap
Fund
(ii) Form of Advisory Agreement with Dillon
Capitol Management for the Capitol Square
Bond Fund
(iii) Form of Sub-Advisory Agreement with Midwest
Group Financial Services
(6) Inapplicable
(7) Inapplicable
(8) Form of Custody Agreement with ___________*
(9) Form of Administration, Accounting and
Transfer Agency Agreement with MGF Service
Corp.
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Public Accountants*
<PAGE>
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital
(14) Inapplicable
(15) Inapplicable
(16) Inapplicable
(17) Financial Data Schedule*
(18) Inapplicable
- --------------------------------------
* To be filed by Amendment
Item 25. Persons Controlled by or Under Common Control with
Registrant
After commencement of the public offering of the Registrant's
shares, the Registrant expects that no person will be directly
or indirectly controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
As of July 1, 1996, there are no holders of the shares of
beneficial interest of the Registrant.
Item 27. Indemnification
Article VI of the Registrant's Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS,
ETC. Subject to and except as otherwise provided in
the Securities Act of 1933, as amended, and the 1940
Act, the Trust shall indemnify each of its Trustees
and officers, including persons who serve at the
Trust's request as directors, officers or trustees of
another organization in which the Trust has any
interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which
such Covered Person may be or may have been involved
as a party or otherwise or with which such person may
be or may
<PAGE>
have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee or
officer, director or trustee, and except that no
Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which
such Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's
office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall
advance attorneys' fees or other expenses incurred by
a Covered Person in defending a proceeding to the
full extent permitted by the Securities Act of 1933,
as amended, the 1940 Act, and Ohio Revised Code
Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section
1701.13(E), as amended, these laws, and not Ohio
Revised Code Section 1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The
right of indemnification provided by this Article VI
shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall
include such person's heirs, executors and
administrators. Nothing contained in this article
shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person."
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
<PAGE>
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.
The Registrant expects to maintain a standard mutual fund and
investment advisory professional and directors and officers
liability policy. The policy will provide coverage to the
Registrant, its Trustees and officers, and Dillon Capital
Management, the Trust's Adviser. Coverage under the policy
will include losses by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty.
The Advisory Agreements with the Adviser provide that, in the
absence of willful misfeasance, bad faith, 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 Fund or to any shareholder of the Fund for
any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
The Sub-Advisory Agreement with the Sub-Adviser provides that
the Sub-Adviser shall not be liable for any action taken,
omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by
the Agreement, or in accordance with (or in the absence of)
specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted
from the Sub-Adviser's willful misfeasance, bad faith or gross
negligence, a violation of the standard of care established by
and applicable to the Sub-Adviser in its actions under the
Agreement or breach of its duty or of its obligations
hereunder.
Item 28. Business and Other Connections of the Investment
Adviser
(a) Dillon Capital Management (the "Adviser") is a
registered investment adviser providing investment
advisory services to individual, institutional and
corporate clients.
Midwest Group Financial Services, Inc. (the "Sub-
Adviser") is a registered investment adviser
providing investment advisory services to five series
of the Midwest Trust, seven series of Midwest Group
Tax Free Trust and to four series of Midwest
Strategic Trust, all of which are registered
investment companies. The Sub-Adviser provides
investment advisory services to individual and
institutional accounts and is a registered
broker-dealer.
<PAGE>
(b) The directors and officers of the Adviser and any
other business, profession, vocation or employment of
a substantial nature engaged in at any time during
the past two years:
(i) Roderick H. Dillon, Jr. - President of the
Adviser.
President of the Registrant.
(ii) T. Calloway Robertson, III - Vice President
of the Adviser.
(iii) Randall J. Demyan - Secretary and Treasurer
of the Adviser.
The directors and officers of the Sub-Adviser and any
other business, profession, vocation or employment of
a substantial nature engaged in at any time during
the past two years:
(i) Robert H. Leshner - Chairman of the Board
and a Director of the Sub-Adviser.
President and a Trustee of Midwest Strategic
Trust, Midwest Trust and Midwest Group Tax
Free Trust, registered investment companies.
Chairman of the Board and a Director of
Leshner Financial, Inc., a financial
services company.
Chairman of the Board and a Director of MGF
Service Corp., a registered transfer agent.
President and a Director of Leshner
Financial Services, Inc., a registered
investment adviser and registered
broker-dealer until December 1994.
(ii) Michael F. Andrews - President of the Sub-
Adviser.
President of ABT Financial Services, Inc.,
340 Royal Palm Way, Palm Beach, Florida
33480, until June 1995.
(iii) James A. Markley, Jr. - A Director of the
Sub-Adviser.
President and a Director of Leshner
Financial, Inc.
A Director of MGF Service Corp.
<PAGE>
A Director of Sycamore National Bank, 3209
West Galbraith Road, Cincinnati, Ohio 45239.
President of the Sub-Adviser until July
1995.
President of MGF Service Corp. until
December 1994.
A Director of Leshner Financial Services,
Inc. until December 1994.
(iv) John J. Goetz - Chief Investment Officer of
the Sub-Adviser.
Vice President of Leshner Financial, Inc.
Vice President-Investments of Leshner
Financial Services, Inc. until December
1994.
(v) Maryellen Peretzky - Vice President,
Assistant Secretary and a Director of the
Sub-Adviser.
Vice President and a Director of Leshner
Financial, Inc.
Vice President of MGF Service Corp.
Assistant Secretary of The Tuscarora
Investment Trust
Vice President and a Director of Leshner
Financial Services, Inc. until December
1994.
(vi) Sharon L. Karp - Vice President of the Sub-
Adviser.
Vice President of Leshner Financial, Inc.
(vii) John F. Splain - Secretary and General
Counsel of the Sub-Adviser.
Secretary, General Counsel and a Director of
Leshner Financial, Inc.
Secretary and General Counsel of MGF Service
Corp.
Secretary of Midwest Group Tax Free Trust,
Midwest Trust, Midwest Strategic Trust,
Brundage, Story and Rose Investment Trust,
Leeb PERSONAL FINANCETM Investment Trust,
Williamsburg Investment Trust, Markman
MultiFund Trust, The Tuscarora Investment
Trust and PRAGMA Investment Trust,
registered investment companies.
<PAGE>
Assistant Secretary of Fremont Mutual Funds,
Inc. and Schwartz Investment Trust,
registered investment companies.
Secretary and General Counsel of Leshner
Financial Services, Inc. until December
1994.
(viii) Robert G. Dorsey - Treasurer of the Sub-
Adviser.
President of MGF Service Corp.
Treasurer and a Director of Leshner
Financial, Inc.
Vice President of Brundage, Story and Rose
Investment Trust, Leeb PERSONAL FINANCETM
Investment Trust, Markman MultiFund Trust
and PRAGMA Investment Trust.
Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust,
Fremont Mutual Funds, Inc. and The Tuscarora
Investment Trust
Treasurer of Leshner Financial Services,
Inc. until December 1994.
(ix) Susan F. Flischel - Vice President-
Investments of the Sub-Adviser.
Assistant Vice President-Investments of
Leshner Financial Services, Inc. until
December 1994.
(x) Terrie A. Wiedenheft - Controller of the
Sub-Adviser.
(xi) Michele McClellan Hawkins - Assistant Vice
President of the Sub-Adviser.
(xii) Scott Weston - Assistant Vice President-
Investments of the Sub-Adviser.
(xiii) Elizabeth A. Santen - Assistant Secretary of
the Sub-Adviser.
Assistant Secretary of Leshner Financial,
Inc.
Assistant Vice President of MGF Service
Corp.
Assistant Secretary of Midwest Trust,
Midwest Group Tax Free Trust, Midwest
Strategic Trust and The Tuscarora Investment
Trust.
Assistant Secretary of Leshner Financial
Services, Inc. until December 1994.
<PAGE>
Item 29. Principal Underwriters
(a) Inapplicable
(b) Inapplicable
(c) Inapplicable
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant at its offices located at Capitol Square, 21 East
State Street, Suite 1410, Columbus, Ohio 43215, as well as at
the offices of the Registrant's transfer agent located at 312
Walnut Street, 21st Floor, Cincinnati, Ohio 45202.
Item 31. Management Services Not Discussed in Parts A or B
Inapplicable
Item 32. Undertakings
(a) Inapplicable
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective
date of this Registration Statement.
(c) The Registrant undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant undertakes to call a meeting
of shareholders, if requested to do so by
holders of at least 10% of the Trust's
outstanding shares, for the purpose of voting
upon the question of removal of a trustee or
trustees and to assist in communications with
other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
<PAGE>
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust
(2) Bylaws
(3) Inapplicable
(4) Inapplicable
(5)(i) Form of Advisory Agreement with Dillon Capitol
Management for the Capitol Square Large Cap Fund and
Capitol Square Small Cap Fund
(5)(ii) Form of Advisory Agreement with Dillon Capitol
Management for the Capitol Square Bond Fund
(5)(iii) Form of Sub-Advisory Agreement with Midwest Group
Financial Services
(6) Inapplicable
(7) Inapplicable
(8) Form of Custody Agreement*
(9) Form of Administration, Accounting and Transfer Agency
Agreement with MGF Service Corp.
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Public Accountants*
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital
(14) Inapplicable
(15) Inapplicable
(16) Inapplicable
(17) Financial Data Schedule*
(18) Inapplicable
- ----------------------------
* To be filed by Amendment
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus and State of Ohio, on the 5th day of July,
1996.
CAPITOL SQUARE INVESTMENT TRUST
By:/s/ Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Roderick H. Dillon, Jr. President July 5, 1996
Roderick H. Dillon, Jr. and Trustee
/s/ Mark J. Seger Treasurer July 5, 1996
Mark J. Seger
<PAGE>
CAPITOL SQUARE INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
JULY 2, 1996
<PAGE>
CAPITOL SQUARE INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
PAGE
ARTICLE I. NAME AND DEFINITIONS........................................1
Section 1.1 Name........................................................1
Section 1.2 Definitions.................................................1
(a) "Trust"............................................1
(b) "Trustees".........................................1
(c) "Shares"...........................................1
(d) "Series"...........................................1
(e) "Shareholder"......................................2
(f) "1940 Act".........................................2
(g) "Commission".......................................2
(h) "Declaration of Trust".............................2
(i) "Bylaws"...........................................2
ARTICLE II. PURPOSE OF TRUST............................................2
ARTICLE III. THE TRUSTEES................................................2
Section 3.1 Number, Designation, Election, Term, etc....................2
(a) Initial Trustees...................................2
(b) Number.............................................2
(c) Term...............................................3
(d) Resignation and Retirement.........................3
(e) Removal............................................3
(f) Vacancies..........................................3
(g) Effect of Death, Resignation, etc..................4
(h) No Accounting......................................4
Section 3.2 Powers of the Trustees......................................4
(a) Investments........................................5
(b) Disposition of Assets..............................5
(c) Ownership Powers...................................5
(d) Subscription.......................................5
(e) Form of Holding....................................6
(f) Reorganization, etc................................6
(g) Voting Trusts, etc.................................6
(h) Compromise.........................................6
(i) Partnerships, etc..................................6
- i -
<PAGE>
(j) Borrowing and Security............................6
(k) Guarantees, etc...................................6
(l) Insurance.........................................7
Section 3.3 Certain Contracts..........................................7
(a) Advisory..........................................8
(b) Administration....................................8
(c) Distribution......................................8
(d) Custodian and Depository..........................8
(e) Transfer and Dividend Disbursing Agency...........8
(f) Shareholder Servicing.............................8
(g) Legal, Accounting, Taxes and Other................8
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees................................................9
Section 3.5 Ownership of Assets of the Trust...........................10
ARTICLE IV. SHARES.....................................................10
Section 4.1 Description of Shares......................................10
Section 4.2 Establishment and Designation of Series....................12
(a) Assets Belonging to Series........................12
(b) Liabilities Belonging to Series...................13
(c) Dividends.........................................13
(d) Liquidation.......................................14
(e) Voting............................................14
(f) Redemption by Shareholder.........................15
(g) Redemption by Trust...............................15
(h) Net Asset Value...................................16
(i) Transfer..........................................16
(j) Equality..........................................16
(k) Fractions.........................................16
(l) Conversion Rights.................................17
Section 4.3 Ownership of Shares........................................17
Section 4.4 Investments in the Trust...................................17
Section 4.5 No Preemptive Rights.......................................17
Section 4.6 Status of Shares and Limitation of Personal
Liability..................................................17
- ii -
<PAGE>
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS...................18
Section 5.1 Voting Powers..............................................18
Section 5.2 Meetings...................................................18
Section 5.3 Record Dates...............................................19
Section 5.4 Quorum and Required Vote...................................19
Section 5.5 Action by Written Consent..................................20
Section 5.6 Inspection of Records......................................20
Section 5.7 Additional Provisions......................................20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION...................20
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice.............................................20
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety..........................................21
Section 6.3 Indemnification of Shareholders............................21
Section 6.4 Indemnification of Trustees, Officers, etc.................22
Section 6.5 Advances of Expenses.......................................22
Section 6.6 Indemnification Not Exclusive, etc.........................22
Section 6.7 Liability of Third Persons Dealing with
Trustees...................................................23
ARTICLE VII. MISCELLANEOUS..............................................23
Section 7.1 Duration and Termination of Trust..........................23
Section 7.2 Reorganization.............................................23
Section 7.3 Amendments.................................................24
Section 7.4 Filing of Copies; References; Headings.....................24
Section 7.5 Applicable Law.............................................25
- iii -
<PAGE>
CAPITOL SQUARE INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made this 2nd day of July, 1996, by
the Trustees hereunder, and by the holders of Shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust is being formed to carry on the business
of an investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of an Ohio business trust in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME. This Trust shall be known as "Capitol Square
Investment Trust" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) The "Trust" refers to the Ohio business trust established
by this Agreement and Declaration of Trust, as amended
from time to time;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series of
the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of
Article IV;
<PAGE>
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as
amended from time to time;
(g) "Commission" shall have the meaning given it in the 1940
Act;
(h) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to
time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended
from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to engage in any and all lawful acts or activities for
which business trusts may be formed under Chapter 1746.01 through 1746.99 of the
Ohio Revised Code. Until the Trustees determine otherwise, the principal office
of the Trust is to be located at Capitol Square, 21 East State Street, Suite
1410, Columbus, Ohio 43215.
ARTICLE III
THE TRUSTEES
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) Initial Trustees. Upon execution of this Declaration of
Trust or a counterpart hereof or some other writing in
which he accepts such Trusteeship and agrees to the
provisions hereof, Roderick H. Dillon, Jr. shall become
a Trustee hereof.
(b) Number. The Trustees serving as such, whether named
above or hereafter becoming a Trustee, may increase or
decrease the number of Trustees to a number other than
the number theretofore determined. No decrease in the
number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term,
but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to
subsection (e) of this Section 3.1.
- 2 -
<PAGE>
(c) Term. Each Trustee shall serve as a Trustee during the
lifetime of the Trust and until its termination as
hereinafter provided or until such Trustee sooner dies,
resigns, retires or is removed. The Trustees may elect
their own successors and may, pursuant to Section 3.1(f)
hereof, appoint Trustees to fill vacancies; provided
that, immediately after filling a vacancy, at least two-
thirds of the Trustees then holding office shall have
been elected to such office by the Shareholders at an
annual or special meeting. If at any time less than a
majority of the Trustees then holding office were so
elected, the Trustees shall forthwith cause to be held as
promptly as possible, and in any event within 60 days, a
meeting of Shareholders for the purpose of electing
Trustees to fill any existing vacancies.
(d) Resignation and Retirement. Any Trustee may resign his trust
or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect
upon such delivery or upon such later date as is specified in
such instrument.
(e) Removal. Any Trustee may be removed with or without
cause at any time: (i) by written instrument, signed by
at least two-thirds of the number of Trustees prior to
such removal, specifying the date upon which such removal
shall become effective, (ii) by vote of the Shareholders
holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting
called for the purpose, or (iii) by a declaration in
writing signed by Shareholders holding not less than two-
thirds of the Shares then outstanding and filed with the
Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation, the death,
resignation, retirement, removal or incapacity of any of
the Trustees or resulting from an increase in the number
of Trustees by the Trustees, may (but so long as there
are at least three remaining Trustees, need not unless
required by the 1940 Act) be filled either by a majority
of the remaining Trustees through the appointment in
writing of such other person as such remaining Trustees
in their discretion shall determine (unless a shareholder
election is required by the 1940 Act) or by the election
by the Shareholders, at a meeting called for the purpose,
of a person to fill such vacancy, and such appointment or
election shall be effective upon the written acceptance
of the person named therein to serve as a Trustee and
- 3 -
<PAGE>
agreement by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to
be effective at a later date 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 so
appointed or elected shall have accepted such appointment or
election and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment or election is
effective, the Trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further act
or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one
of them, shall not operate to annul or terminate the Trust or
to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Declaration of
Trust.
(h) No Accounting. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for
cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
Section 3.2 POWERS OF THE TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders; they may as they consider appropriate elect and
remove officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one or
more advisers, administrators, depositories and custodians and may
- 4 -
<PAGE>
authorize any depository or custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or Shareholder servicing agents or any of the foregoing, provide for
the distribution of Shares by the Trust through one or more distributors,
principal underwriters or otherwise, set record dates or times for the
determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
principal underwriter, depository, custodian, transfer and dividend disbursing
agent, or any other agent or consultant of the Trust such authority, powers,
functions and duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without implied limitation
the power and authority to act in the name of the Trust and of the Trustees, to
sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority:
(a) Investments. To invest and reinvest cash and other
property, and to hold cash or other property uninvested
without in any event being bound or limited by any
present or future law or custom in regard to investments
by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or
all of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise
any rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute
and deliver proxies or powers of attorney to such person
or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with
relation to securities, debt instruments or property as
the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of
subscription or otherwise which in any manner arise out
of ownership of securities or debt instruments;
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(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
(f) Reorganization, etc. To consent to or participate in any
plan for the reorganization, consolidation or merger of
any corporation or issuer, any security or debt
instrument of which is or was held in the Trust; to
consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to
pay calls or subscriptions with respect to any security
or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a
committee, depository, voting trustee or otherwise, and
in that connection to deposit any security or debt
instrument with, or transfer any security or debt
instrument to, any such committee, depository or trustee,
and to delegate to them such power and authority with
relation to any security or debt instrument (whether or
not so deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such
committee, depository or trustee as the Trustees shall
deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for
taxes;
(i) Partnerships, etc. To enter into joint ventures, general
or limited partnerships and any other combinations or
associations;
(j) Borrowing and Security. To borrow funds and to mortgage
and pledge the assets of the Trust or any part thereof to
secure obligations arising in connection with such
borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust property
or any part thereof to secure any of or all such obligations;
and
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(l) Insurance. 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, including,
without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance
policies insuring the Shareholders, Trustees, officers,
employees, agents, consultants, investment advisers,
managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof
(or any person connected therewith), of the Trust
individually against all claims and liabilities of every
nature arising by reason of holding, being or having held
any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person
in any such capacity, including any action taken or
omitted that may be determined to constitute negligence;
provided, however, that insurance which protects the
Trustees and officers against liabilities rising from
action involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of their offices may not be purchased.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the Bylaws, any action to be taken by the Trustees
may be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office (or such larger
or different number as may be required by the 1940 Act or other applicable law).
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals
("Contracting Party") to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or of the
Trust and/or the Trustees, and to provide for the performance and assumption of
such other services, duties and responsibilities in addition to those set forth
below as the Trustees may determine appropriate:
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(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the
Trustees with respect to the investments of the Trust or
of the assets belonging to any Series of Shares of the
Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make
investment decisions with respect thereto, and to place
purchase and sale orders for portfolio transactions
relating to such investments and assets;
(b) Administration. Subject to the general supervision of
the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust, to
supervise all or any part of the operations of the Trust,
and to provide all or any part of the administrative and
clerical personnel, office space and office equipment and
services appropriate for the efficient administration and
operations of the Trust;
(c) Distribution. To distribute the Shares of the Trust, to
be principal underwriter of such Shares, and/or to act as
agent of the Trust in the sale of Shares and the
acceptance or rejection of orders for the purchase of
Shares;
(d) Custodian and Depository. To act as depository for and
to maintain custody of the property of the Trust and
accounting records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain
records of the ownership of outstanding Shares, the
issuance and redemption and the transfer thereof, and to
disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest
any such dividends;
(f) Shareholder Servicing. To provide service with respect
to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares,
and similar matters; and
(g) Legal, Accounting, Taxes and Other. To handle all or any
part of the legal, accounting, tax or other
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may
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contain such terms interpretive of or in addition to the delineation of the
services, duties and responsibilities provided for, including provisions that
are not inconsistent with the 1940 Act relating to the standard of duty of and
the rights to indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or limit the
Trust or a Contracting Party from entering into subcontractual arrangements
relative to any of the matters referred to in Sections 3.3(a) through (g)
hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust, or
that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good faith
reasonably justified by such facts by a majority of such Trustees not having any
such relationship or interest (even though such unrelated or disinterested
Trustees are less than a quorum of all of the Trustees), or (2) the specific
contract involved is fair to the Trust as of the time it is authorized, approved
or ratified by the Trustees or by the Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the
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Trustees deem fair, all expenses, fees, charges, taxes and liabilities incurred
or arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares, as they deem necessary or desirable, to establish and designate such
Series, and to fix and determine the relative rights and preferences as between
the different Series of Shares as to right of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Series shall have
separate voting rights or no voting rights. Except as aforesaid all Shares of
the different Series shall be identical.
The Shares of each Series may be issued or reissued from time to time
in one or more classes ("Classes"), as determined by the Board of Trustees
pursuant to resolution. Each Class shall be appropriately designated, prior to
the issuance of any shares thereof, by some distinguishing letter, number or
title. All Shares within a Class shall be alike in every particular. All Shares
of each Series shall be of equal rank and have the same powers, preferences and
rights, and shall be subject to the same qualifications, limitations and
restrictions without distinction between the shares of different Classes
thereof, except with respect to such differences among such Classes, as the
Board of Trustees shall from time to time determine to be necessary or
desirable, including differences in the rate or rates of dividends
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or distributions. The Board of Trustees may from time to time increase the
number of Shares allocated to any Class already created by providing that any
unissued Shares of the applicable Series shall constitute part of such Class, or
may decrease the number of Shares allocated to any Class already created by
providing that any unissued Shares previously assigned to such Class shall no
longer constitute part thereof. The Board of Trustees is hereby empowered to
classify or reclassify from time to time any unissued Shares of each Series by
fixing or altering the terms thereof and by assigning such unissued shares to an
existing or newly created Class. Notwithstanding anything to the contrary in
this paragraph the Board of Trustees is hereby empowered (i) to redesignate any
issued Shares of any Series by assigning a distinguishing letter, number or
title to such shares and (ii) to reclassify all or any part of the issued Shares
of any Series to make them part of an existing or newly created Class. The
number of authorized Shares and the number of Shares of each Series that
may be issued is unlimited, and the Trustees may issue Shares of any Series
for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable (but may be
subject to mandatory contribution back to the Trust as provided in subsection
(g) of Section 4.2). The Trustees may classify or reclassify any unissued
Shares or any Shares previously issued and reacquired of any Series into one or
more Series that may be established and designated from time to time. The
Trustees may hold as treasury Shares (of the same or some other Series), reissue
for such consideration and on such terms as they may determine, or cancel,
at their discretion from time to time, any Shares of any Series reacquired by
the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders of
Shares entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
The establishment and designation of any Series of Shares in addition
to that established and designated in Section 4.2, or of any Class of Shares,
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series or Class, or as otherwise provided in such
instrument. At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated the Trustees may by an
instrument executed by a majority of their number abolish that Series or Class
and the establishment and designation thereof. Each instrument referred to in
this paragraph shall have the status of an amendment to this Declaration of
Trust.
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Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Series of the Trust to the same extent as if such person were not
a Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate three
Series of Shares: "Capitol Square Large Cap Fund", "Capitol Square Small Cap
Fund" and "Capitol Square Bond Fund". The Shares of these Series and any Shares
of any further Series that may from time to time be established and designated
by the Trustees shall (unless the Trustees otherwise determine with respect to
some further Series or Class at the time of establishing and designating the
same) have the following relative rights and preferences:
(a) Assets Belonging to 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 irrevocably belong to that Series for
all purposes, subject only to the rights of creditors,
and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same
may be, together with any General Items allocated to that
Series as provided in the following sentence, are herein
referred to as "assets belonging to" that Series. In the
event that there are any assets, incomes, earnings,
profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any
particular Series (collectively "General Items"), the
Trustees shall allocate such General Items to and among
any one or more of the Series established and designated
from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to a particular Series
shall belong to that Series. Each such allocation by the
Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
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The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding
upon the Shareholders.
(b) Liabilities Belonging to Series. The assets belonging to
each particular Series shall be charged with the
liabilities of the Trust in respect of that Series and
all expenses, costs, charges and reserves attributable to
that Series, and 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 to
and among any one or more of the Series established and
designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a Series are
herein referred to as "liabilities belonging to" that
Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive
and binding upon the holders of all Series for all
purposes.
(c) Dividends. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from
such of the estimated income and capital gains, accrued
or realized, from the assets belonging to that Series, as
the Trustees may determine, after providing for actual
and accrued liabilities belonging to that Series. All
dividends and distributions on Shares of a particular
Series shall be distributed pro rata to the holders of
that Series in proportion to the number of Shares of that
Series held by such holders at the date and time of
record established for the payment of such dividends or
distributions, except that in connection with any
dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by
the time or times established by the Trustees under such
program or procedure, and except that if Classes have
been established for any Series, the rate of dividends or
distributions may vary among such Classes pursuant to
resolution, which may be a standing resolution, of the
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Board of Trustees. Such dividends and distributions may be
made in cash or Shares or a combination thereof as determined
by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (h)
of Section 4.2.
The Trust intends to qualify each Series as a "regulated
investment company" under the Internal Revenue Code of 1986,
as amended, or any successor or comparable statute thereto,
and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of
the Trust, the Board of Trustees shall have the power, in its
sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part
as capital gains distributions, amounts sufficient, in the
opinion of the Board of Trustees, to enable each Series to
qualify as a regulated investment company and to avoid
liability of the Series for federal income tax in respect of
that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions
greater than or less than the amount necessary to qualify as a
regulated investment company and to avoid liability of each
Series for such tax.
(d) Liquidation. In event of the liquidation or dissolution
of the Trust, the Shareholders of each Series that has
been established and designated shall be entitled to
receive, as a Series, when and as declared by the
Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series.
The assets so distributable to the Shareholders of any
particular Series shall be distributed among such
Shareholders in proportion to the number of Shares of
that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be
authorized by vote of a majority of the Trustees then in
office subject to the approval of a majority of the
outstanding voting Shares of that Series, as defined in
the 1940 Act.
(e) Voting. All shares of all Series shall have "equal voting
rights" as such term is defined in the Investment Company Act
of 1940 and except as otherwise provided by that Act or rules,
regulations or orders promulgated
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thereunder. On each matter submitted to a vote of the
Shareholders, all Shares of all Series shall vote as a single
class ("Single Class Voting"); provided, however, that (a) as
to any matter with respect to which a separate vote of any
Series is required by the 1940 Act or rules and regulations
promulgated thereunder, or would be required under the Ohio
General Corporation Law if the Trust were an Ohio corporation,
such requirements as to a separate vote by that Series shall
apply in lieu of Single Class Voting as described above; (b)
in the event that the separate vote requirements referred to
in (a) above apply with respect to one or more Series, then,
subject to (c) below, the Shares of all other Series shall
vote as a single class; and (c) as to any matter which does
not affect the interest of a particular Series, only the
holders of Shares of the one or more affected Series shall be
entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Series shall have the right at such times as
may be permitted by the Trust, but no less frequently
than once each week, to require the Trust to redeem all
or any part of his Shares of that Series at a redemption
price equal to the net asset value per Share of that
Series next determined in accordance with subsection (h)
of this Section 4.2 after the Shares are properly
tendered for redemption. Payment of the redemption price
shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or
partly in securities or other assets belonging to the
Series of which the Shares being redeemed are part at the
value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem
Shares of that Series during any period or at any time when
and to the extent permissible under the 1940 Act, and such
redemption is conditioned upon the Trust having funds or
property legally available therefor.
(g) Redemption by Trust. Each Share of each Series that has been
established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if
such Share was then being redeemed by the Shareholder pursuant
to subsection (f) of this Section
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4.2: (a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially
adverse consequences to all or any of the holders of the
Shares, or any Series thereof, of the Trust, or (b) upon such
other conditions as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Shareholder accounts of a
minimum amount. Upon such redemption the holders of the Shares
so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any
Series shall be the quotient obtained by dividing the
value of the net assets of that Series (being the value
of the assets belonging to that Series less the
liabilities belonging to that Series) by the total number
of Shares of that Series outstanding, all determined in
accordance with the methods and procedures, including
without limitation those with respect to rounding,
established by the Trustees from time to time.
(i) Transfer. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Series
will be recorded on the Share transfer records of the Trust
applicable to that Series only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of
that Series and at such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of each particular Series shall
represent an equal proportionate interest in the assets
belonging to that Series (subject to the liabilities
belonging to that Series), and each Share of any
particular Series shall be equal to each other Share of
that Series; but the provisions of this sentence shall
not restrict any distinctions permissible under
subsection (c) of this Section 4.2 that may exist with
respect to dividends and distributions on Shares of the
same Series. The Trustees may from time to time divide
or combine the Shares of any particular Series into a
greater or lesser number of Shares of that Series without
thereby changing the proportionate beneficial interest in
the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.
(k) Fractions. Any fractional Share of any Series or Class, if any
such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole
Share of that Series or Class, including with respect to
voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
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(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series shall have the
right to convert said Shares into Shares of one or more other
Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
that has been established and designated. No certificates certifying the
ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Series and Class held from time to time by each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
Section 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have
no preemptive or other right to subscribe to any additional Shares
or other securities issued by the Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares
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constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Series to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of an Ohio business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of Trust, the
Bylaws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the Bylaws to be taken by Shareholders.
Section 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time to time for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating
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the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders (including a meeting involving only the holders of Shares of one or
more but less than all Series) for a period of 30 days after written application
by Shareholders holding at least 25% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein or in the Bylaws, then Shareholders holding at least 25% of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
Section 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or (subject to any provisions permissible
under subsection (c) of Section 4.2 with respect to dividends or distributions
on Shares that have not been ordered and/or paid for by the time or times
established by the Trustees under the applicable dividend or distribution
program or procedure then in effect) to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date and time
disposed of his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
Section 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is
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present, shall decide any questions and a plurality shall elect a Trustee,
except when a different vote is required or permitted by any provision of the
1940 Act or other applicable law or by this Declaration of Trust or the Bylaws.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of an Ohio corporation under the Ohio General Corporation Law.
Section 5.7 ADDITIONAL PROVISIONS. The Bylaws may include
further provisions for Shareholders' votes and meetings and related
matters not inconsistent with the provisions hereof.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been executed or
done only by or for the Trust or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the 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 of such officer.
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Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of the State of Ohio and
shall recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties. Nothing stated herein is intended to detract from
the protection accorded to Trustees by Ohio Revised Code Sections 1746.08 and
1701.59, as amended from time to time.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the
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Shareholder) shall assume the defense against such charge and satisfy any
judgment thereon, and the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of its Trustees and officers, including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a proceeding to
the full extent permitted by the Securities Act of 1933, as amended, the 1940
Act, and Ohio Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as amended, these laws,
and not Ohio Revised Code Section 1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right
of indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. A
used in this Article VI, "Covered Person" shall include such person's heirs,
executors and administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
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Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Series. Following such transfer, the Trustees shall distribute
such cash, shares or other securities (giving due effect to the assets and
liabilities belonging to and any other differences among the various Series the
assets belonging to which have so been transferred) among the Shareholders of
the Series the assets belonging to which have been so transferred; and if all of
the assets of the Trust have been so transferred, the Trust shall be terminated.
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Section 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Class or (b) having the purpose of changing
the name of the Trust or the name of any Shares theretofore established and
designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
Section 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original
or a copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of the State of Ohio, as well as any other governmental office
where such filing may from time to time be required, but the failure to make
any such filing shall not impair the effectiveness of this instrument or any
such amendment. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments have been made,
as to the identities of the Trustees and officers, and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such amendments. In this instrument and in
any such amendment, references to this
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instrument, and all expressions like "herein," "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the feminine
and neuter genders. Headings are placed herein for convenience of reference only
and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
Section 7.5 APPLICABLE LAW. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Ohio, including the Ohio General Corporation Law as the same may be
amended from time to time, but the reference to said Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in connection
with an entity organized in corporate form. The Trust shall be of the type
referred to in Section 1746.01 of the Ohio Revised Code, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
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IN WITNESS WHEREOF, the undersigned has hereunto set his hand for
himself and his assigns, as of the day and year first above written.
/s/Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.
STATE OF OHIO )
) ss:
COUNTY OF FRANKLIN )
Before me, a Notary Public in and for said county and state, personally
appeared the above named Roderick H. Dillon, Jr., who acknowledged that he did
sign the foregoing instrument and that the same is his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on this 2nd day of July, 1996.
Shirley A. Mara
Notary Public
My Commission Expires: November 24, 1996
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BYLAWS
OF
CAPITOL SQUARE INVESTMENT TRUST
ARTICLE 1
Agreement and Declaration of Trust and Offices
1.1 Agreement and Declaration of Trust. These Bylaws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Capitol Square Investment Trust, the Ohio business
trust established by the Declaration of Trust (the "Trust").
1.2 Offices. The Trust may maintain one or more other offices,
including its principal office, in or outside of Ohio, in such cities as the
Trustees may determine from time to time. Unless the Trustees otherwise
determine, the principal office of the Trust shall be located in Columbus, Ohio.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as any meeting of the shareholders.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the President or the Treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the Secretary or an Assistant Secretary
or by the officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the
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meeting, or to any Trustee who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to him or her. Neither notice
of a meeting nor a waiver of a notice need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940.
2.6 Action by Consent. Any action required or permitted to be taken at
any meeting of the Trustees or any committee thereof may be taken without a
meeting, if a written consent of such action is signed by a majority of the
Trustees then in office or a majority of the members of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Trustees or such committee.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The President of the Trust shall be a Trustee and
may but need not be a shareholder; and any other officer may be but none need be
a Trustee or shareholder. Any two or more offices may be held by the same
person.
3.2 Election. The President, the Treasurer and the Secretary shall
be elected annually by the Trustees. Other officers, if any, may be elected
or appointed by the Trustees at any time. Vacancies in any office may be
filled at any time.
3.3 Tenure. The President, the Treasurer and the Secretary shall hold
office for one year and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
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3.4 Powers. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as an Ohio
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 President. Unless the Trustees otherwise provide, the President, or
in the absence of the President, any other Trustee chosen by the Trustees, shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be the chief executive officer of the Trust.
3.6 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these Bylaws may not be
delegated. Except as the
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Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these Bylaws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. The fiscal year of the Trust shall be fixed,
and shall be subject to change by the Trustees.
ARTICLE 7
Seal
7.1 General. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Ohio", together with the name of the
Trust and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice
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President, the Secretary or the Treasurer and need not bear the seal of the
Trust, but shall state the substance of or make reference to the provisions of
Section 6.1 of the Declaration of Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him, in such form as shall be prescribed
from time to time by the Trustees. Such certificate shall be signed by the
President and by the Treasurer or Assistant Treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent, or by a registrar,
other than a Trustee, officer or employee of the Trust. In case any officer who
has signed or whose facsimile signature has been placed on such certificate
shall cease to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he were such officer at the time
of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 Issuance of New Certificate to Pledgee. In the event certificates
have been issued, a pledgee of shares transferred as collateral security shall
be entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral security,
and the name of the pledgor shall be stated thereon, who alone shall be liable
as a shareholder, and entitled to vote thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of 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 10
Custodian
10.1 General. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Five Hundred
Thousand ($500,000) Dollars as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
Dealings with Trustees and Officers
11.1 General. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which he is interested.
ARTICLE 12
Shareholders
12.1 Meetings. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940 for that purpose or whenever otherwise required pursuant to
the Declaration of Trust. Any meeting shall be held on such day and at such time
as the President or the Trustees may fix in the notice of the meeting.
12.2 Record Dates. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a time, which shall be not more than 60
days before the date of any meeting of shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case, only shareholders of record on such record date shall have
such right, notwithstanding any transfer of shares on the books of the Trust
after the record date; or without fixing such record date the Trustees may for
any such purposes close the register or transfer books for all or any part of
such period.
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ARTICLE 13
Amendments to the Bylaws
13.1 General. These Bylaws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
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<PAGE>
ADVISORY AGREEMENT
AGREEMENT made this ____ day of _______, 1996, between Capitol Square
Investment Trust (the "Trust"), a business trust organized under the laws of the
State of Ohio, and Dillon Capital Management (the "Adviser"), a limited
partnership organized under the laws of the State of Ohio.
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series or funds, each having separate investment objectives and
policies; and
WHEREAS, the Capitol Square Large Cap Fund and the Capitol Square Small
Cap Fund (the "Funds") have been established as series of the Trust; and
WHEREAS, the Funds have been created for the purpose of investing and
reinvesting their assets in securities pursuant to its investment objective and
policies as set forth in the Trust's registration statements under the 1940 Act
and the Securities Act of 1933 ("Registration Statements"), as heretofore
amended and supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of a manager and to have a
manager provide or perform for it various management, statistical and other
services for the Funds;
NOW, THEREFORE, the Trust and the Adviser agree as follows:
1. Employment of the Adviser. The Trust hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Funds in the manner
set forth in paragraph 2 of this Agreement, subject to the direction of the
Board of Trustees and the officers of the Trust, for the period, in the manner,
and on the terms hereinafter 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. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Funds in any way or otherwise be deemed an agent of the Funds.
2. Obligation of and Services to be Provided by the Adviser. The
Adviser undertakes to provide the services hereinafter set forth and to assume
the following obligations:
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<PAGE>
A. Investment Management Services.
(a) The Adviser shall have responsibility for the
management and investment of the assets and portfolio
securities of the Funds subject to and in accordance
with the investment objective and policies of each
Fund, and any directions which the Trust's Board of
Trustees may issue to the Adviser from time to time.
(b) The Adviser shall provide overall investment programs
and strategies for each Fund, shall revise such
programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the
implementation of the programs.
(c) The Adviser shall provide or arrange for and
supervise the provision by third parties to the Funds
of custody, transfer agency, administrative,
accounting, legal, audit and similar services.
(d) The Adviser shall render regular reports to the
Trust, at regular meetings of the Board of Trustees,
of, among other things, the portfolio investments of
the Funds and measurement and analysis of the results
achieved by the Funds.
B. Provision of Information Necessary for Preparation of
Securities Registration Statements, Amendments and
Other Materials.
The Adviser will make available and provide financial,
accounting and statistical information required by the Trust
in the preparation of registration statements, reports and
other documents required by federal and state securities laws,
and such information as the Trust may reasonably request for
use in the preparation of registration statements, reports and
other documents required by federal and state securities laws.
C. Other Obligations and Services.
The Adviser shall make available its officers and employees to
the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration and
management of the Funds and their investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions.
The Adviser, subject to the limitations contained in this paragraph 3, shall
place, on behalf of the Funds, orders for the execution of portfolio
transactions. The Adviser is not authorized by the Funds to take any action,
including the
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<PAGE>
purchase or sale of securities for a Fund's account, (a) in contravention of (i)
any investment restrictions set forth in the 1940 Act and the rules thereunder,
(ii) specific instructions adopted by the Board of Trustees and communicated to
the Adviser, (iii) the investment objective, policies and restrictions of each
Fund as set forth in the Trust's Registration Statement, or (iv) instructions
from the Trust communicated to the Adviser, or (b) which would have the effect
of causing each Fund to fail to qualify or to cease to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, or any
succeeding statute.
Subject to the foregoing, the Adviser shall determine the securities to
be purchased or sold by a Fund and will place orders pursuant to its
determination with or through such persons, brokers or dealers in conformity
with the policy with respect to brokerage as set forth in the Trust's
Registration Statement or as the Board of Trustees may direct from time to time.
It is recognized that, in providing the Funds with investment supervision of the
placing of orders for portfolio transactions, the Adviser will give primary
consideration to securing the best qualitative execution, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. Consistent with this policy, the Adviser may select brokers or
dealers who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the other
accounts over which it exercises investment discretion. It is understood that
neither the Trust nor the Adviser have adopted a formula for allocation of
either Fund's investment transaction business. It is also understood that it is
desirable for the Funds that the Adviser have access to supplemental investment
and market research and security and economic analyses provided by certain
brokers who may execute brokerage transactions at a higher commission to the
Funds than may result when allocating brokerage to other brokers on the basis of
seeking the lowest commission. Therefore, the Adviser is authorized to place
orders for the purchase and sale of securities for the Funds with such certain
brokers, subject to review by the Trust's Board of Trustees from time to time
with respect to the extent and continuation of this practice, provided that the
Adviser determines in good faith that the amount of the commission is reasonable
in relation to the value of the brokerage and research services provided by the
executing broker or dealer. The determination may be viewed in terms of either a
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other accounts over which it exercises investment discretion. It
is understood that although the information may be useful to the Funds and the
Adviser, it is not possible to place a dollar value on such information.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking
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<PAGE>
best qualitative execution, the Adviser may give consideration to sales of
shares of the Funds as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Funds.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Funds as well as other clients, the Adviser,
to the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.
Consistent with the policies described in this paragraph 3, the Adviser
may execute any portfolio transactions for the Funds' accounts with a broker or
dealer which is an "affiliated person" (as defined in the Act) of the Trust or
the Adviser, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice.
For each fiscal quarter of the Funds, the Adviser shall render reports
to the Trust's Board of Trustees of the total brokerage business placed by the
Funds and the manner in which the allocation has been accomplished.
4. Expenses of the Funds. The Adviser will pay all of the expenses of
the Funds (including the fees and charges of third-party service providers
engaged pursuant to paragraph 2 above) except the following: organizational
expenses; interest; taxes; brokerage commissions; extraordinary expenses; and
the fees and expenses, including ordinary counsel fees, of those Trustees who
are not "interested persons" as defined in the 1940 Act (hereinafter referred to
as the "Independent Trustees"). The Adviser will provide the Trust with such
facilities and personnel as may, from time to time, be required to carry on the
business of the Funds including but not limited to office space, office
furniture, fixtures and equipment, office supplies, computer hardware and
software and salaried and hourly paid personnel. The Adviser may at its expense
employ others to provide all or any part of such facilities and personnel.
- 4 -
<PAGE>
5. Activities and Affiliates of the Adviser.
A. The services of the Adviser hereunder are not to be deemed
exclusive, and the Adviser and any of its affiliates shall be
free to render similar services to others. The Adviser
shall use the same skill and care in the management of the
Funds' assets as it uses in the administration of other
accounts to which it provides asset management, consulting
and portfolio manager selection services, but shall not be
obligated to give the Funds more favorable or preferential
treatment vis-a-vis its other clients.
B. Subject to and in accordance with the Agreement and
Declaration of Trust and Bylaws of the Trust and to Section
10(a) of the 1940 Act, it is understood that Trustees,
officers and agents of the Trust and shareholders of the
Funds are or may be interested in the Adviser or its
affiliates as directors, officers, agents, stockholders or
partners of the Adviser or its affiliates; that directors,
officers, agents, stockholders or partners of the Adviser or
its affiliates are or may be interested in the Trust as
Trustees, officers, agents, shareholders or otherwise; that
the Adviser or its affiliates may be interested in the Trust
as shareholders or otherwise; and that the effect of any such
interests shall be governed by said Declaration of Trust,
Bylaws and the 1940 Act.
6. Compensation of Adviser. (a) As full compensation for the services
and such facilities as may from time to time be furnished by the Adviser under
this Agreement, the Capitol Square Large Cap Fund agrees to pay the Adviser a
fee equal to the annual rate of 1.50% of the average value of its daily net
assets up to $50 million, 1.35% of such assets from $50 million to $100 million,
and 1.20% of such assets in excess of $100 million, less the accrued fees and
expenses, including ordinary counsel fees, of the Independent Trustees of the
Trust. As full compensation for the services and such facilities as may from
time to time be furnished by the Adviser under this Agreement, the Capitol
Square Small Cap Fund agrees to pay the Adviser a fee equal to the annual rate
of 1.75% of the average value of its daily net assets up to $50 million; 1.60%
of such assets from $50 million to $100 million; and 1.45% of such assets in
excess of $100 million, less the accrued fees and expenses, including ordinary
counsel fees, of the Independent Trustees of the Trust. Such fee shall be
accrued daily and payable monthly. For purposes of calculating such fee, such
net asset value shall be determined by taking the average of all determinations
of net asset value made in the manner provided in the Funds' current Prospectus
and Statement of Additional Information.
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<PAGE>
(b) For any period less than a full month during which this Agreement
is in effect the compensation payable to the Adviser hereunder shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses of a Fund for any fiscal
year exceed the permissible limits applicable to such Fund in any state in which
such Fund's shares are then qualified for sale, the compensation due the Adviser
for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof at the time such compensation is payable after the
end of each calendar month during such fiscal year of such Fund, subject to
readjustment during such Fund's fiscal year.
7. Liabilities of the Adviser.
A. In the absence of willful misfeasance, bad faith, 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 Funds
or to any shareholder of the Funds for any act or
omission in the course of, or connected with, rendering
services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any
security.
B. No provision of this Agreement shall be construed to protect
any Trustee, director, officer or agent of the Trust or the
Adviser from liability in violation of Sections 17(h) and (i)
of the 1940 Act.
8. Renewal and Termination.
A. This Agreement shall become effective on the date first
written above and shall remain in full force and effect
for two (2) years from the date hereof and from year to
year thereafter, but only so long as such continuance
is specifically approved at least annually by the vote
of a majority of the Trustees who are not interested
persons of the Trust or the Adviser, cast in person at
a meeting called for the purpose of voting on such
approval and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of each
Fund. The aforesaid provision that this Agreement may
be continued "annually" shall be construed in a manner
consistent with the Act and the rules and regulations
thereunder.
B. This Agreement:
(a) may at any time be terminated, without the payment
of any penalty, either by vote of the Board of
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<PAGE>
Trustees of the Trust or, with respect to each Fund,
by vote of a majority of the outstanding voting
securities of such Fund, on sixty (60) days' written
notice to the Adviser;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Adviser on sixty (60)
days' written notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act
and the rules and regulations thereunder.
D. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed postpaid, to
the other party to this Agreement at its principal
place of business.
9. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
10. Limitation of 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 any of them personally, but shall bind only the trust property of
the Trust as provided in its Declaration of Trust.
11. Use of Name. The Adviser may use the name "Capitol Square" or any
derivation thereof in connection with another business enterprise, including any
registered investment company with which the Adviser is, or may become
associated, so long as such use is permitted under the Act and other applicable
law. The Trust will discontinue any use of the name "Capitol Square" if the
Adviser ceases to be employed as the Trust's investment manager.
12. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, and no
amendment of this Agreement shall be effective until approved by vote of the
holders of a majority of the
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<PAGE>
outstanding voting securities of the affected Fund and by the Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on such approval.
13. Governing Law. To the extent that state law has not
been preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the
State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
CAPITOL SQUARE INVESTMENT TRUST
ATTEST: By:
Title: President
DILLON CAPITAL MANAGEMENT
ATTEST: By:
Title: President
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<PAGE>
ADVISORY AGREEMENT
AGREEMENT made this ____ day of _______, 1996, between Capitol Square
Investment Trust (the "Trust"), a business trust organized under the laws of the
State of Ohio, and Dillon Capital Management (the "Adviser"), a limited
partnership organized under the laws of the State of Ohio.
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series or funds, each having separate investment objectives and
policies; and
WHEREAS, the Capitol Square Bond Fund (the "Fund") has been
established as a series of the Trust; and
WHEREAS, the Fund has been created for the purpose of investing and
reinvesting its assets in securities pursuant to its investment objective and
policies as set forth in the Trust's registration statements under the 1940 Act
and the Securities Act of 1933 ("Registration Statements"), as heretofore
amended and supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of a manager and to have a
manager provide or perform for it various management, statistical, portfolio
adviser selection and other services for the Fund;
NOW, THEREFORE, the Trust and the Adviser agree as follows:
1. Employment of the Adviser. The Trust hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund in the manner
set forth in paragraph 2 of this Agreement, subject to the direction of the
Board of Trustees and the officers of the Trust, for the period, in the manner,
and on the terms hereinafter 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. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. Obligation of and Services to be Provided by the Adviser.
The Adviser undertakes to provide the services hereinafter set forth and to
assume the following obligations:
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<PAGE>
A. Investment Management Services.
(a) The Adviser shall have overall supervisory
responsibility for the general management and
investment of the assets and portfolio securities of
the Fund subject to and in accordance with the
investment objective and policies of the Fund, and
any directions which the Trust's Board of Trustees
may issue to the Adviser from time to time.
(b) The Adviser shall provide overall investment programs
and strategies for the Fund, shall revise such
programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the
implementation of the programs.
(c) The Adviser shall provide or arrange for and
supervise the provision by third parties to the Fund
of custody, transfer agency, administrative,
accounting, legal, audit and similar services.
(d) The Adviser, with the approval of the Board of
Trustees of the Trust as to particular
appointments, intends to (i) appoint one or more
persons or companies (the "Sub-Adviser") and,
subject to the terms and conditions of this
Agreement, the Sub-Adviser shall have full
investment discretion and shall make all
determinations with respect to the investment of
the Fund's assets and the purchase and sale of
portfolio securities with those assets, and (ii)
take such steps as may be necessary to implement
such appointments. The Adviser shall be solely
responsible for paying the fees and expenses of
the Sub-Adviser for its services to the Fund. The
Adviser shall not be responsible or liable for the
investment merits of any decision by the Sub-
Adviser to purchase, hold or sell a portfolio
security for the Fund.
(e) The Adviser shall evaluate advisers and shall
recommend to the Board of Trustees the adviser
which the Adviser believes is best suited to
invest the assets of the Fund; shall monitor and
evaluate the investment performance of the Sub-
Adviser; shall recommend changes in the Sub-
Adviser when appropriate; shall coordinate the
investment activities of the Sub-Adviser to ensure
compliance with applicable restrictions and
limitations applicable to the Fund; and shall
compensate the Sub-Adviser.
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<PAGE>
(f) The Adviser shall render regular reports to the
Trust, at regular meetings of the Board of Trustees,
of, among other things, the portfolio investments of
the Fund and measurement and analysis of the results
achieved by the Fund.
B. Provision of Information Necessary for Preparation of
Securities Registration Statements, Amendments and
Other Materials.
The Adviser will make available and provide financial,
accounting and statistical information required by the Trust
in the preparation of registration statements, reports and
other documents required by federal and state securities laws,
and such information as the Trust may reasonably request for
use in the preparation of registration statements, reports and
other documents required by federal and state securities laws.
C. Other Obligations and Services.
The Adviser shall make available its officers and employees to
the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration and
management of the Fund and its investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. The
Sub-Adviser, subject to the limitations contained in this paragraph 3, shall
place, on behalf of the Fund, orders for the execution of portfolio
transactions. The Sub-Adviser is not authorized by the Fund to take any action,
including the purchase or sale of securities for the Fund's account, (a) in
contravention of (i) any investment restrictions set forth in the 1940 Act and
the rules thereunder, (ii) specific instructions adopted by the Board of
Trustees and communicated to the Sub-Adviser, (iii) the investment objective,
policies and restrictions of the Fund as set forth in the Trust's Registration
Statement, or (iv) instructions from the Adviser communicated to the
Sub-Adviser, or (b) which would have the effect of causing the Fund to fail to
qualify or to cease to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended, or any succeeding statute.
Subject to the foregoing, the Sub-Adviser shall determine the
securities to be purchased or sold by the Fund and will place orders pursuant to
its determination with or through such persons, brokers or dealers in conformity
with the policy with respect to brokerage as set forth in the Trust's
Registration Statement or as the Board of Trustees may direct from time to time.
It is recognized that, in providing the Fund with investment supervision of the
placing of orders for portfolio
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<PAGE>
transactions, the Sub-Adviser will give primary consideration to securing the
best qualitative execution, taking into account such factors as price (including
the applicable brokerage commission or dealer spread), the execution capability,
financial responsibility and responsiveness of the broker or dealer and the
brokerage and research services provided by the broker or dealer. Consistent
with this policy, the Sub-Adviser may select brokers or dealers who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the other accounts over which it
exercises investment discretion. It is understood that neither the Trust, the
Adviser nor the Sub-Adviser have adopted a formula for allocation of the Fund's
investment transaction business. It is also understood that it is desirable for
the Fund that the Sub-Adviser have access to supplemental investment and market
research and security and economic analyses provided by certain brokers who may
execute brokerage transactions at a higher commission to the Fund than may
result when allocating brokerage to other brokers on the basis of seeking the
lowest commission. Therefore, the Sub-Adviser is authorized to place orders for
the purchase and sale of securities for the Fund with such certain brokers,
subject to review by the Trust's Board of Trustees from time to time with
respect to the extent and continuation of this practice, provided that the
Sub-Adviser determines in good faith that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker or dealer. The determination may be viewed in
terms of either a particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to other accounts over which it
exercises investment discretion. It is understood that although the information
may be useful to the Fund and the Sub-Adviser, it is not possible to place a
dollar value on such information. Consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
best qualitative execution, the Sub- Adviser may give consideration to sales of
shares of the Fund as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Fund.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other clients.
- 4 -
<PAGE>
Consistent with the policies described in this paragraph 3, the
Sub-Adviser may execute any portfolio transactions for the Fund's account with a
broker or dealer which is an "affiliated person" (as defined in the Act) of the
Trust, the Adviser or the Sub-Adviser, subject to review by the Trust's Board of
Trustees from time to time with respect to the extent and continuation of this
practice. The Adviser agrees that it will provide the Sub- Adviser with a list
of brokers and dealers which are "affiliated persons" of the Trust or the
Adviser.
For each fiscal quarter of the Fund, the Sub-Adviser shall render
reports to the Adviser and the Trust's Board of Trustees of the total brokerage
business placed by the Fund and the manner in which the allocation has been
accomplished.
4. Expenses of the Fund. The Adviser will pay all of the expenses of
the Fund (including the fees and charges of third-party service providers
engaged pursuant to paragraph 2 above) except the following: organizational
expenses; interest; taxes; brokerage commissions; extraordinary expenses; and
the fees and expenses, including ordinary counsel fees, of those Trustees who
are not "interested persons" as defined in the 1940 Act (hereinafter referred to
as the "Independent Trustees"). The Adviser will provide the Trust with such
facilities and personnel as may, from time to time, be required to carry on the
business of the Fund including but not limited to office space, office
furniture, fixtures and equipment, office supplies, computer hardware and
software and salaried and hourly paid personnel. The Adviser may at its expense
employ others to provide all or any part of such facilities and personnel.
5. Activities and Affiliates of the Adviser.
A. The services of the Adviser hereunder are not to be
deemed exclusive, and the Adviser and any of its
affiliates shall be free to render similar services to
others. The Adviser shall use the same skill and care
in the management of the Fund's assets as it uses in
the administration of other accounts to which it
provides asset management, consulting and portfolio
manager selection services, but shall not be obligated
to give the Fund more favorable or preferential
treatment vis-a-vis its other clients.
B. Subject to and in accordance with the Agreement and
Declaration of Trust and Bylaws of the Trust and to Section
10(a) of the 1940 Act, it is understood that Trustees,
officers and agents of the Trust and shareholders of the Fund
are or may be interested in the Adviser or its affiliates as
directors, officers, agents, stockholders or partners of the
Adviser or its
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<PAGE>
affiliates; that directors, officers, agents, stockholders or
partners of the Adviser or its affiliates are or may be
interested in the Trust as Trustees, officers, agents,
shareholders or otherwise; that the Adviser or its affiliates
may be interested in the Trust as shareholders or otherwise;
and that the effect of any such interests shall be governed by
said Declaration of Trust, Bylaws and the 1940 Act.
6. Compensation of Adviser. (a) As full compensation for the services
and such facilities as may from time to time be furnished by the Adviser under
this Agreement, the Capitol Square Bond Fund agrees to pay to the Adviser a fee
equal to the annual rate of 1.00% of the average value of its daily net assets
up to $50 million, .90% of such assets from $50 million to $100 million, and
.80% of such assets in excess of $100 million, less the accrued fees and
expenses, including ordinary counsel fees, of the Independent Trustees of the
Trust. Such fee shall be accrued daily and payable monthly. For purposes of
calculating such fee, such net asset value shall be determined by taking the
average of all determinations of net asset value made in the manner provided in
the Fund's current Prospectus and Statement of Additional Information.
(b) For any period less than a full month during which this Agreement
is in effect the compensation payable to the Adviser hereunder shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses of the Fund for any
fiscal year exceed the permissible limits applicable to the Fund in any state in
which the Fund's shares are then qualified for sale, the compensation due the
Adviser for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof at the time such compensation is payable after the
end of each calendar month during such fiscal year of the Fund, subject to
readjustment during the Fund's fiscal year.
7. Liabilities of the Adviser.
A. In the absence of willful misfeasance, bad faith, 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 Fund
or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering
services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any
security.
B. No provision of this Agreement shall be construed to
protect any Trustee, director, officer or agent of the
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<PAGE>
Trust or the Adviser from liability in violation of Sections
17(h) and (i) of the 1940 Act.
8. Renewal and Termination.
A. This Agreement shall become effective on the date first
written above and shall remain in full force and effect
for two (2) years from the date hereof and from year to
year thereafter, but only so long as such continuance
is specifically approved at least annually by the vote
of a majority of the Trustees who are not interested
persons of the Trust, the Adviser or the Sub-Adviser,
cast in person at a meeting called for the purpose of
voting on such approval and by a vote of the Board of
Trustees or of a majority of the outstanding voting
securities of the Fund. The aforesaid provision that
this Agreement may be continued "annually" shall be
construed in a manner consistent with the Act and the
rules and regulations thereunder.
B. This Agreement:
(a) may at any time be terminated, without the payment of
any penalty, either by vote of the Board of Trustees
of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, on sixty
(60) days' written notice to the Adviser;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Adviser on sixty (60)
days' written notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act
and the rules and regulations thereunder.
D. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed postpaid, to
the other party to this Agreement at its principal
place of business.
9. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
10. Limitation of 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
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<PAGE>
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 any of them personally, but shall bind only the
trust property of the Trust as provided in its Declaration of Trust.
11. Use of Name. The Adviser may use the name "Capitol Square" or any
derivation thereof in connection with another business enterprise, including any
registered investment company with which the Adviser is, or may become
associated, so long as such use is permitted under the Act and other applicable
law. The Trust will discontinue any use of the name "Capitol Square" if the
Adviser ceases to be employed as the Trust's investment manager.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on such approval.
13. Governing Law. To the extent that state law has not
been preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the
State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
CAPITOL SQUARE INVESTMENT TRUST
ATTEST: By:
Title: President
DILLON CAPITAL MANAGEMENT
ATTEST: By:
Title: President
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<PAGE>
SUB-ADVISORY AGREEMENT
Midwest Group Financial Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Ladies and Gentlemen:
Capital Square Investment Trust (the "Trust") is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and subject to the rules and regulations
promulgated thereunder. The Trust's shares of beneficial interest are divided
into separate series or funds. The Capitol Square Bond Fund (the "Fund") has
been established as one series of the Trust.
Dillon Capital Management (the "Adviser") acts as the investment
manager for the Fund pursuant to the terms of an Advisory Agreement. The Adviser
is responsible for the coordination of investment of the Fund's assets in
portfolio securities. The Adviser is also responsible for retaining and
supervising third parties to make specific portfolio purchases and sales for the
investment portfolio of the Fund, subject to approval by the Board of Trustees
of the Trust.
1. Appointment as Sub-Adviser. The Trust and the Adviser,
being duly authorized, hereby appoint and employ Midwest Group Financial
Services, Inc. (the "Sub-Adviser") as the discretionary portfolio manager of
the Fund, on the terms and conditions set forth herein.
2. Acceptance of Appointment; Standard of Performance.
The Sub-Adviser accepts the appointment as the discretionary portfolio manager
of the Fund and agrees to use its best professional judgment to make timely
investment decisions for the Fund in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Sub-Adviser. The Sub- Adviser is
hereby employed and authorized to select portfolio securities for investment by
the Fund, to purchase and sell securities of the Fund, and upon making any
purchase or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, the Sub- Adviser shall be subject to
such investment restrictions as are set forth in the 1940 Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws, the
supervision
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<PAGE>
and control of the Board of Trustees of the Trust, such specific instructions as
the Board of Trustees may adopt and communicate to the Sub-Adviser, the
investment objective, policies and restrictions of the Fund furnished pursuant
to paragraph 4, the provisions of Schedule A hereto and instructions from the
Adviser. The Sub-Adviser is not authorized by the Trust to take any action,
including the purchase or sale of securities for the Fund, in contravention of
any restriction, limitation, objective, policy or instruction described in the
previous sentence. The Sub-Adviser shall maintain on behalf of the Fund the
records listed in Schedule A hereto (as amended from time to time). At the
Trust's reasonable request, the Sub-Adviser will consult with the Adviser with
respect to any decision made by it with respect to the investments of the Fund.
4. Investment Objective, Policies and Restrictions. The
Trust will provide the Sub-Adviser with the information concerning the
investment objective, policies and restrictions applicable to the Fund as
contained in the Trust's registration statement under the 1940 Act and the
Securities Act of 1933, and any instructions adopted by the Board of Trustees
supplemental thereto. The Trust will provide the Sub-Adviser with such
further information concerning the investment objective, policies and
restrictions applicable thereto as the Sub-Adviser may from time to time
reasonably request. The Trust retains the right, on written notice to the
Sub-Adviser from the Trust or the Adviser, to modify any such objective,
policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by __________________ or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or securities
due to or from the Fund, and the Sub-Adviser shall not have possession or
custody thereof. The Sub-Adviser shall advise the Custodian and confirm in
writing to the Trust and to the Adviser all investment orders for the Fund
placed by it with brokers and dealers. The Sub-Adviser shall issue to the
Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Sub-Adviser. It shall be the
responsibility of the Sub-Adviser to take appropriate action if the Custodian
fails to confirm in writing proper execution of the instructions.
6. Allocation of Brokerage. The Sub-Adviser shall have
the authority and discretion to select brokers and dealers to execute portfolio
transactions initiated by the Sub-Adviser, and for the selection of the markets
on or in which the transactions will be executed.
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<PAGE>
A. In doing so, the Sub-Adviser will give primary
consideration to securing the best qualitative execution, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. Consistent with this policy, the Sub-Adviser may select
brokers or dealers who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to
the other accounts over which it exercises investment discretion. It is
understood that neither the Trust, the Adviser nor the Sub-Adviser have adopted
a formula for allocation of the Fund's investment transaction business. It is
also understood that it is desirable for the Fund that the Sub-Adviser have
access to supplemental investment and market research and security and economic
analyses provided by certain brokers who may execute brokerage transactions at a
higher commission to the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the lowest commission. Therefore, the
Sub-Adviser is authorized to place orders for the purchase and sale of
securities for the Fund with such certain brokers, subject to review by the
Trust's Board of Trustees from time to time with respect to the extent and
continuation of this practice, provided that the Sub-Adviser determines in good
faith that the amount of the commission is reasonable in relation to the value
of the brokerage and research services provided by the executing broker or
dealer. The determination may be viewed in terms of either a particular
transaction or the Sub-Adviser's overall responsibilities with respect to the
Fund and to the other accounts over which it exercises investment discretion. It
is understood that although the information may be useful to the Fund and the
Sub-Adviser, it is not possible to place a dollar value on such information.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best qualitative execution, the
Sub-Adviser may give consideration to sales of shares of the Fund as a factor in
the selection of brokers and dealers to execute portfolio transactions of the
Fund.
B. On occasions when the Sub-Adviser deems the purchase or
sale of a security to be in the best interest of the Fund as well as other
clients, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be sold or purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as expenses incurred in the
transaction, will be made by the Sub- Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund and
to such other clients.
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<PAGE>
C. Consistent with the policies described in this paragraph 6,
the Sub-Adviser may execute any portfolio transactions for the Fund's account
with a broker or dealer which is an "affiliated person" (as defined in the 1940
Act) of the Trust, the Adviser or the Sub-Adviser, subject to review by the
Trust's Board of Trustees from time to time with respect to the extent and
continuation of this practice. The Adviser agrees that it will provide the
Sub-Adviser with a list of brokers and dealers which are "affiliated persons" of
the Trust or the Adviser.
D. For each fiscal quarter of the Fund, the Sub- Adviser shall
prepare and render reports to the Adviser and the Trust's Board of Trustees of
the total brokerage business placed by the Fund and the manner in which the
allocation has been accomplished. Such reports shall set forth at a minimum the
information required to be maintained by Rule 31a-1(b)(9) under the 1940 Act.
7. Proxies. The Trust will vote all proxies solicited by
or with respect to the issuers of securities in which assets of the Fund may
be invested from time to time. At the Trust's request, the Sub-Adviser shall
provide the Trust with its recommendations as to the voting of such proxies.
8. Reports to the Sub-Adviser. The Trust will provide the
Sub-Adviser with such periodic reports concerning the status of the Fund as th
Sub-Adviser may reasonably request.
9. Fees for Services. For the services provided to the Trust, the
Adviser shall pay the Sub-Adviser a fee equal to the annual rate of ____ of the
value of the daily net assets of the Fund. The Sub-Adviser's fees shall be
payable monthly within ten days following the end of each month. Pursuant to the
provisions of the Advisory Agreement between the Trust and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub- Adviser, and
the Sub-Adviser agrees to seek payment of the Sub- Adviser's fees solely from
the Adviser.
10. Other Investment Activities of the Sub-Adviser. The Trust
acknowledges that the Sub-Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the Sub-
Adviser, its affiliates or any of its or their directors, officers, agents or
employees may buy, sell or trade in any securities for its or their respective
accounts ("Affiliated Accounts"). Subject to the provisions of paragraph 2
hereof, the Trust agrees that the Sub-Adviser or its affiliates may give
advice or exercise investment responsibility and take such other action with
respect to other Affiliated Accounts which may differ
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<PAGE>
from the advice given or the timing or nature of action taken with respect to
the Fund, provided that the Sub-Adviser acts in good faith, and provided
further, that it is the Sub-Adviser's policy to allocate, within its reasonable
discretion, investment opportunities to the Fund over a period of time on a fair
and equitable basis relative to the Affiliated Accounts, taking into account the
investment objective and policies of the Fund and any specific investment
restrictions applicable thereto. The Trust acknowledges that one or more of the
Affiliated Accounts may at any time hold, acquire, increase, decrease, dispose
of or otherwise deal with positions in investments in which the Fund may have an
interest from time to time, whether in transactions which involve the Fund or
otherwise. The Sub-Adviser shall have no obligation to acquire for the Fund a
position in any investment which any Affiliated Account may acquire, and the
Trust shall have no first refusal, co-investment or other rights in respect of
any such investment, either for the Fund or otherwise.
11. Certificate of Authority. The Trust, the Adviser and the
Sub-Adviser shall furnish to each other from time to time certified copies of
the resolutions of their Board of Trustees or Board of Directors or executive
committees, as the case may be, evidencing the authority of officers and
employees who are authorized to act on behalf of the Trust, the Adviser and/or
the Sub-Adviser.
12. Limitation of Liability. The Sub-Adviser shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not have
resulted from the Sub-Adviser's willful misfeasance, bad faith or gross
negligence, a violation of the standard of care established by and applicable to
the Sub-Adviser in its actions under this Agreement or breach of its duty or of
its obligations hereunder. Nothing in this paragraph 12 shall be construed in a
manner inconsistent with Sections 17(h) and (i) of the 1940 Act.
13. Confidentiality. Subject to the duty of the Sub- Adviser and the
Trust to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Fund and the actions of the Sub-
Adviser and the Trust in respect thereof.
14. Assignment. No assignment of this Agreement shall be
made by the Sub-Adviser, and this Agreement shall terminate automatically in
the event of such assignment. The Sub-Adviser shall notify the Trust in writing
sufficiently in advance of any
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<PAGE>
proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as
will enable the Trust to consider whether an assignment will occur, and to take
the steps necessary to enter into a new contract with the Sub-Adviser.
15. Representations, Warranties and Agreements of the Trust. The
Trust represents, warrants and agrees that:
A. The Sub-Adviser has been duly appointed by the
Board of Trustees of the Trust to provide investment services to the Fund as
contemplated hereby.
B. The Trust will deliver to the Sub-Adviser a true and
complete copy of the then current prospectus and statement of additional
information for the Fund as effective from time to time and such other documents
or instruments governing the investments of the Fund and such other information
as is necessary for the Sub-Adviser to carry out its obligations under this
Agreement.
C. The Trust is currently in compliance and shall at
all times comply with the requirements imposed upon the Fund by
applicable laws and regulations.
16. Representations, Warranties and Agreements of the Sub-
Adviser. The Sub-Adviser represents, warrants and agrees that:
A. The Sub-Adviser is registered as an "investment
adviser" under the Investment Advisers Act of 1940.
B. The Sub-Adviser will maintain, keep current and preserve on
behalf of the Trust, in the manner and for the time periods required or
permitted by the Act, the records identified in Schedule A. The Sub-Adviser
agrees that such records (unless otherwise indicated on Schedule A) are the
property of the Trust, and will be surrendered to the Trust promptly upon
request.
C. The Sub-Adviser will complete such reports concerning
purchases or sales of securities on behalf of the Fund as the Adviser or the
Trust may from time to time require to ensure compliance with the Act, the
Internal Revenue Code and applicable state securities laws.
D. The Sub-Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and will provide the
Trust with a copy of the code of ethics and evidence of its adoption. Within
forty-five (45) days of the end of the last calendar quarter of each year while
this Agreement is in effect, the president or a vice president of the
Sub-Adviser shall certify to the Trust that the Sub-Adviser has complied with
the requirements of Rule 17j-1 during the previous year and that there has been
no violation of the Sub-Adviser's
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<PAGE>
code of ethics or, if such a violation has occurred, that appropriate action was
taken in response to such violation. Upon the written request of the Trust, the
Sub-Adviser shall submit to the Trust the reports required to be made to the
Sub-Adviser by Rule 17j-1(c)(1).
E. Upon request of the Trust, the Sub-Adviser will
furnish a copy of any amendment to its Form ADV to the Trust and
to the Adviser.
F. The Sub-Adviser will immediately notify the Trust and the
Adviser of the occurrence of any event which would disqualify the Sub-Adviser
from serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
17. Amendment. This Agreement may be amended at any time, but only by
written agreement between the Sub-Adviser, the Adviser and the Trust, which
amendment, other than amendments to Schedule A, is subject to the approval of
the Board of Trustees and the shareholders of the Fund in the manner required by
the 1940 Act and the rules thereunder, subject to any applicable exemptive order
of the Securities and Exchange Commission modifying the provisions of the Act
with respect to approval of amendments to this Agreement.
18. Effective Date; Term. This Agreement shall become effective on the
date of its execution and shall remain in full force and effect for two (2)
years from the date hereof and from year to year thereafter but only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Trustees who are not interested persons of the Trust, the
Adviser or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval, and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of the Fund. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
19. Termination. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
20. Shareholder Liability. The Sub-Adviser is hereby expressly put
on notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed by the
Trust pursuant to this
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<PAGE>
Agreement shall be limited in all cases to the Trust and its assets. The
Sub-Adviser agrees that it shall not seek satisfaction of any such obligations
from the shareholders or any individual shareholder of the Fund, nor from the
Trustees or any individual Trustee of the Trust.
21. Definitions. As used in paragraphs 14 and 18 of this
Agreement, the terms "assignment," interested person" and "vote
of a majority of the outstanding voting securities" shall have
the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
22. Applicable Law. To the extent that state law is not
preempted by the provisions of any law of the United States
heretofore or hereafter enacted, as the same may be amended from
time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Ohio.
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<PAGE>
DILLON CAPITAL MANAGEMENT CAPITOL SQUARE
INVESTMENT TRUST
By: By:
Title: Title:
Date: __________, 1996 Date: __________, 1996
ACCEPTANCE
The foregoing Agreement is hereby accepted.
MIDWEST GROUP FINANCIAL
SERVICES, INC.
By:
Title:
Date: __________, 1996
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<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Sub-Adviser on behalf
of the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf
of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or
dealers.
(ii) The supplying of services or benefits by brokers
or dealers to:
(a) The Trust;
(b) the Adviser;
(c) the Sub-Adviser;
(d) any person affiliated with the foregoing
persons.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.
B. Shall show the nature of the services or benefits made
available.
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<PAGE>
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate
memorandum identifying the person or persons, committees or
groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be
retained as part of this record: any memorandum,
recommendation or instruction supporting or authorizing the
purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rules
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Sub-Adviser's transactions with respect to the Fund.
*Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or portfolio adviser reviews.
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<PAGE>
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of July __, 1996 between Capitol Square Investment
Trust (the "Trust"), an Ohio business trust, Dillon Capitol Management
("Dillon"), an Ohio limited partnership and MGF Service Corp. ("MGF"), an Ohio
corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Dillon is registered as an investment adviser under the
Investment Advisers Act of 1940 and provides advisory services to the Trust
pursuant to an Advisory Agreement; and
WHEREAS, under the Advisory Agreement, Dillon is responsible for
retaining and compensating agents to provide non-advisory services to the Trust;
and
WHEREAS, Dillon wishes to employ the services of MGF to serve as its
administrative agent, accounting and pricing agent and transfer and dividend
disbursing agent; and
WHEREAS, MGF wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and MGF agree as follows:
1. APPOINTMENT.
Dillon, being hereby authorized, hereby employs MGF as agent
to perform those services described in this Agreement for the Trust. MGF shall
act under such appointment and perform the obligations thereof upon the terms
and conditions hereinafter set forth.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;
<PAGE>
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
MGF;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
F. Such other certificates, documents or opinions which
MGF may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which MGF is to act
as plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of Dillon and the
Trustees of the Trust, MGF shall supervise the Trust's business affairs not
otherwise supervised by other agents of Dillon or the Trust. To the extent not
otherwise the primary responsibility of, or provided by, other agents of the
Trust, MGF shall supply (i) office facilities, (ii) internal auditing and
regulatory services, and (iii) executive and administrative services. MGF shall
coordinate the preparation of (i) reports to shareholders of the Trust, (ii)
reports to and filings with the SEC and state securities authorities including
preliminary and definitive proxy materials, post-effective amendments to the
Trust's registration statement, and the Trust's Form N-SAR, and (iii) necessary
materials for Board of Trustees' meetings unless prepared by other parties under
agreement with Dillon or the Trust. MGF shall also supervise the preparation of
all federal, state and local tax returns and reports of the Trust required by
applicable law. MGF shall provide personnel to serve as officers of the Trust if
so elected by the Board of Trustees; provided, however, that Dillon shall
reimburse MGF for the reasonable out-of-pocket expenses incurred by such
personnel in attending Board of Trustees' meetings and shareholders' meetings of
the Trust.
4. CALCULATION OF NET ASSET VALUE.
MGF will maintain and keep current the general ledger for each
series of the Trust, recording all income and expenses, capital share activity
and security transactions of the Trust. MGF will calculate the net asset value
of each series of the
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<PAGE>
Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's current prospectus and statement of additional
information, once daily as of the time selected by the Trust's Board of
Trustees. MGF will prepare and maintain a daily valuation of all securities and
other assets of the Trust in accordance with instructions from a designated
officer of the Trust or Dillon and in the manner set forth in the Trust's
current prospectus and statement of additional information. In valuing
securities of the Trust, MGF may contract with, and rely upon market quotations
provided by, outside services.
5. PAYMENT OF TRUST EXPENSES.
MGF shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust, MGF
shall prepare checks in the appropriate amounts which shall be signed by an
authorized officer of MGF and mailed to the appropriate party.
6. MGF TO RECORD SHARES.
MGF shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. MGF shall also provide the Trust on a regular
basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
7. MGF TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to MGF of certificates, if any, in proper form for transfer, MGF shall
approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
MGF shall notify the Trust in writing of each such transaction and shall make
appropriate entries on the shareholder records maintained by MGF.
8. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, MGF will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares
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and subject to the limitation that no certificates representing newly purchased
shares shall be mailed to the investor until the cash purchase price of such
shares has been collected and credited to the account of the Trust maintained by
the Custodian. The Trust shall supply MGF with a sufficient supply of blank
share certificates and from time to time shall renew such supply upon request of
MGF. Such blank share certificates shall be properly signed, manually or, if
authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, MGF may continue to countersign certificates which bear the manual
or facsimile signature of such officer until otherwise directed by the Trust. In
case of the alleged loss or destruction of any share certificate, no new
certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to MGF and the Trust, and issued by a
surety company satisfactory to MGF and the Trust.
9. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust, MGF shall stamp the check or instrument with the date of receipt,
determine the amount thereof due the Trust and shall forthwith process the same
for collection. Upon receipt of notification of receipt of funds eligible for
share purchases in accordance with the Trust's then current prospectus and
statement of additional information, MGF shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
10. PURCHASE ORDERS.
Upon receipt of an order for the purchase of shares of the
Trust, accompanied by sufficient information to enable MGF to establish a
shareholder account, MGF shall, as of the next determination of net asset value
after receipt of such order in accordance with the Trust's then current
prospectus and statement of additional information, compute the number of shares
due to the shareholder, credit the share account of the shareholder, subject to
collection of the funds, with the number of shares so purchased, shall notify
the Trust in writing or by computer report at the close of each business day of
such transactions and shall mail to the shareholder and/or dealer of record a
notice of such credit when required by applicable securities laws or
regulations.
11. RETURNED CHECKS.
In the event that MGF is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, MGF will:
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A. Give prompt notification to the Trust of the non-
payment of said check;
B. In the absence of other instructions from the Trust, take
such steps as may be necessary to redeem any shares purchased on the basis of
such returned check and cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the account of the Trust
and to request the Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the
Trust's records maintained by MGF pursuant to this Agreement.
12. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish MGF with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
MGF shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available from
the Custodian or the Trust any required information for each dividend and other
distribution. After deducting any amount required to be withheld by any
applicable laws, MGF shall, as agent for each shareholder who so requests,
invest the dividends and other distributions in full and fractional shares in
accordance with the Trust's then current prospectus and statement of additional
information. If a shareholder has elected to receive dividends or other
distributions in cash, then MGF shall disburse dividends to shareholders of
record in accordance with the Trust's then current prospectus and statement of
additional information. MGF shall, on or before the mailing date of such checks,
notify the Trust and the Custodian of the estimated amount of cash required to
pay such dividend or distribution, and the Trust shall instruct the Custodian to
make available sufficient funds therefor in the appropriate account of the
Trust. MGF shall mail to the shareholders periodic statements, as requested by
the Trust, showing the number of full and fractional shares and the net asset
value per share of shares so credited. When requested by the Trust, MGF shall
prepare and file with the Internal Revenue Service, and when required, shall
address and mail to shareholders, such returns and information relating to
dividends and distributions paid by the Trust as are required to be so prepared,
filed and mailed by applicable laws, rules and regulations.
13. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
MGF shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by MGF,
of all shareholders for which there are, as of the end of the calendar year,
dividends, distributions
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<PAGE>
or redemption proceeds for which checks or share certificates mailed in payment
of distributions have been returned. MGF shall use its best efforts to contact
the shareholders affected and to follow any other written instructions received
from the Trust concerning the disposition of any such unclaimed dividends,
distributions or redemption proceeds.
14. REDEMPTIONS AND EXCHANGES.
A. MGF shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by MGF. Upon its approval of such redemption
transactions, MGF, if requested by the Trust, shall mail to the shareholder
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For each such redemption, MGF shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Trust and signature by
an authorized officer of MGF and mail the checks to the appropriate person, or
(b) in the event redemption proceeds are to be wired through the Federal Reserve
Wire System or by bank wire, cause such proceeds to be wired in federal funds to
the bank account designated by the shareholder, or (c) effectuate such other
redemption procedures which are authorized by the Trust's Board of Trustees or
its then current prospectus and statement of additional information. The
requirements as to instruments of transfer and other documentation, the
applicable redemption price and the time of payment shall be as provided in the
then current prospectus and statement of additional information, subject to such
supplemental instructions as may be furnished by the Trust and accepted by MGF.
If MGF or the Trust determines that a request for redemption does not comply
with the requirements for redemptions, MGF shall promptly notify the shareholder
indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, MGF, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. MGF shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for effecting
redemption orders accepted from shareholders or dealers of record by telephone
or other methods shall be established by mutual agreement between MGF and the
Trust consistent with the Trust's then current prospectus and statement of
additional information.
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<PAGE>
D. The authority of MGF to perform its responsibilities under
Paragraph 10, Paragraph 12, and this Paragraph 14 shall be suspended with
respect to any series of the Trust upon receipt of notification by it of the
suspension of the determination of such series' net asset value.
15. AUTOMATIC WITHDRAWAL PLANS.
MGF will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by MGF from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and MGF will withdraw
from a shareholder's account and present for repurchase or redemption as many
shares as shall be sufficient to make such withdrawal payment pursuant to the
provisions of the shareholder's withdrawal plan and the current prospectus and
statement of additional information of the Trust. From time to time on new
automatic withdrawal plans a check for payment date already past may be issued
upon request by the shareholder.
16. WIRE-ORDER PURCHASES.
MGF will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
MGF. Upon receipt of any check drawn or endorsed to the Trust (or MGF, as agent)
or otherwise identified as being payment of an outstanding wire- order, MGF will
stamp said check with the date of its receipt and deposit the amount represented
by such check to MGF's deposit accounts maintained with the Custodian. MGF will
cause the Custodian to transfer federal funds in an amount equal to the net
asset value of the shares so purchased to the Trust's account with the
Custodian, and will notify the Trust before noon of each business day of the
total amount deposited in the Trust's deposit accounts, and in the event that
payment for a purchase order is not received by MGF or the Custodian on the
tenth business day following receipt of the order, prepare an NASD "notice of
failure of dealer to make payment".
17. OTHER PLANS.
MGF will process such accumulation plans, automatic withdrawal
plans, group programs and other plans or programs for investing in shares of the
Trust as are now provided for in the Trust's current prospectus and statement of
additional information and will act as plan agent for shareholders pursuant to
the terms of such plans and programs duly executed by such shareholders.
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<PAGE>
18. RECORDKEEPING AND OTHER INFORMATION.
MGF shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with Dillon or the Trust. All such records shall be the property of the
Trust at all times and shall be available for inspection and use by the Trust.
Where applicable, such records shall be maintained by MGF for the periods and in
the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of Dillon. MGF shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust and
Dillon or their agents, or any regulatory agency having authority over the
Trust.
19. SHAREHOLDER RECORDS.
MGF shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
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<PAGE>
J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for MGF to perform
the calculations contemplated under this Agreement.
20. TAX RETURNS AND REPORTS.
MGF will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
21. FORM N-SAR.
MGF shall maintain such records within its control and shall
be requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
22. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
MGF will also maintain such records as shall be necessary to furnish to the
Trust the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations and checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements.
23. COOPERATION WITH ACCOUNTANTS.
MGF shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
24. SHAREHOLDER SERVICE AND CORRESPONDENCE.
MGF will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. MGF will answer written correspondence
from shareholders relating to their share accounts and such other written or
oral inquiries as may from time to time be mutually agreed upon, and MGF will
notify the Trust of any correspondence or inquiries which may require an answer
from the Trust.
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<PAGE>
25. PROXIES.
MGF shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
26. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
27. COMPENSATION.
For the performance of MGF's obligations under this Agreement,
the Adviser shall pay MGF ______________.
28. EXPENSES.
MGF shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by MGF under
this Paragraph 28 shall be paid by Dillon, including, but not limited to, costs
and expenses of officers and employees of MGF in attending meetings of the Board
of Trustees and shareholders of the Trust, as well as costs and expenses for
postage, envelopes, checks, drafts, continuous forms, reports, communications,
statements and other materials, telephone, telegraph and remote transmission
lines, use of outside pricing services, use of outside mailing firms, necessary
outside record storage, media for storage of records (e.g., microfilm,
microfiche, computer tapes), printing, confirmations and any other shareholder
correspondence and any and all assessments, taxes or levies assessed on MGF for
services provided under this Agreement. Postage for mailings of dividends,
proxies, reports and other mailings to all shareholders shall be advanced to MGF
three business days prior to the mailing date of such materials.
29. REFERENCES TO MGF, DILLON OR THE TRUST.
A. The Trust or Dillon shall not circulate any printed matter
which contains any reference to MGF without the prior written approval of MGF,
excepting solely such printed matter as merely identifies MGF as Administrative
Services Agent, Transfer, Shareholder Servicing and Dividend Disbursing Agent
and Accounting Services Agent. The Trust or Dillon will submit printed matter
requiring approval to MGF in draft form, allowing sufficient time for review by
MGF and its counsel prior to any deadline for printing.
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<PAGE>
B. MGF shall not circulate any printed matter which contains
any reference to the Trust or Dillon without the prior written approval of the
Trust or Dillon, excepting solely such printed matter as merely identifies
Dillon and the Trust as clients of MGF. MGF will submit printed matter requiring
approval to Dillon and/or the Trust in draft form, allowing sufficient time for
review by Dillon and/or the Trust and its counsel prior to any deadline for
printing.
30. EQUIPMENT FAILURES.
In the event of equipment failures beyond MGF's control, MGF
shall take all steps necessary to minimize service interruptions but shall have
no liability with respect thereto. MGF shall endeavor to enter into one or more
agreements making provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
31. INDEMNIFICATION OF MGF.
A. MGF may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither MGF nor its shareholders, officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by Dillon or
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or
negligence on the part of any such persons in the performance of the duties of
MGF under this Agreement or by reason of reckless disregard by any of such
persons of the obligations and duties of MGF under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, 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, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of MGF or any of its affiliates,
even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement,
Dillon and the Trust shall each indemnify and hold harmless MGF, its directors,
officers, employees, shareholders, agents, control persons and affiliates from
and against any and all claims, demands, expenses and liabilities (whether with
or
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<PAGE>
without basis in fact or law) of any and every nature which MGF may sustain or
incur or which may be asserted against MGF by any person by reason of, or as a
result of: (i) any action taken or omitted to be taken by MGF in good faith in
reliance upon any certificate, instrument, order or share certificate believed
by it to be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instructions of an
authorized person of the Trust or upon the opinion of legal counsel for the
Trust or its own counsel; or (ii) any action taken or omitted to be taken by MGF
in connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of MGF or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
32. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by MGF, (2) by Dillon, (3) by vote, cast in
person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this Agreement or interested persons (as defined
in the 1940 Act) of any such party, and (4) by vote of a majority of the Trust's
Board of Trustees or a majority of the Trust's outstanding voting securities.
B. Any party may terminate this Agreement on any date by
giving the other parties at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefore. Upon termination of this
Agreement, Dillon shall pay to MGF such compensation as may be due as of the
date of such termination, and shall likewise reimburse MGF for any out-of-pocket
expenses and disbursements reasonably incurred by MGF to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of MGF's duties or responsibilities under this
Agreement is designated by Dillon or the Trust by written notice to MGF, MGF
shall, promptly upon such termination and at the expense of Dillon, transfer all
records maintained by MGF under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from MGF's cognizant personnel in the establishment of books, records and other
data by such successor.
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<PAGE>
33. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent MGF or any affiliated
person (as defined in the 1940 Act) of MGF from providing services for any other
person, firm or corporation (including other investment companies); provided,
however, that MGF 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.
34. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any services for
Dillon or the Trust which services could cause MGF to be deemed an "investment
adviser" of the Trust within the meaning of Section 2(a)(20) of the 1940 Act or
to supersede or contravene the Trust's prospectus or statement of additional
information or any provisions of the 1940 Act and the rules thereunder. Except
as otherwise provided in this Agreement and except for the accuracy of
information furnished to it by MGF, the Trust assumes full responsibility for
complying with all applicable requirements of the 1940 Act, the Securities Act
of 1933, as amended, and any other laws, rules and regulations of governmental
authorities having jurisdiction, it being acknowledged that the Trust is relying
on the best efforts of MGF.
35. LIMITATION OF 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. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
36. 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.
37. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of
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<PAGE>
the 1940 Act shall be resolved by reference to such term or provision of the
1940 Act and to interpretations 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 SEC issued pursuant to said 1940 Act. In addition,
where the effect of a requirement of the 1940 Act, reflected in any provision of
this Agreement, is revised by rule, regulation or order of the SEC, such
provision shall be deemed to incorporate the effect of such rule, regulation or
order.
38. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Capitol Square Investment Trust
Capitol Square
21 East State Street, Suite 1410
Columbus, Ohio 43215
To Dillon: Dillon Capital Management
Capitol Square
21 East State Street, Suite 1410
Columbus, Ohio 43215
To MGF: MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Paragraph 38. Each such notice shall be deemed delivered (a) on
the date delivered if by personal delivery; (b) on the date telecommunicated if
by telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
39. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by all parties.
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<PAGE>
40. 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.
41. COUNTERPARTS.
This Agreement may be executed 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.
42. FORCE MAJEURE.
If MGF 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.
43. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CAPITOL SQUARE INVESTMENT TRUST
By:_____________________________
Its: President
Date:
DILLON CAPITAL MANAGEMENT
By:_____________________________
Its: President
Date:
MGF SERVICE CORP.
By:_____________________________
Its: President
Date:
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Schedule A
COMPENSATION
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<PAGE>
AGREEMENT RELATING TO INITIAL CAPITAL
July __, 1996
CAPITOL SQUARE INVESTMENT TRUST
Capitol Square
21 East State Street
Suite 1410
Columbus, Ohio 43215
Dear Sir/Madam:
In conjunction with the purchase by __________________ (the
"Purchaser") of ______ shares of beneficial interest of the Capitol Square Large
Cap Fund, ______ shares of beneficial interest of the Capitol Square Small Cap
Fund and ______ shares of beneficial interest of the Capitol Square Bond Fund of
the Capitol Square Investment Trust (The "Shares"), the Purchaser hereby
represents that it is acquiring the Shares for investment with no intention of
reselling or otherwise distributing the Shares. The Purchaser hereby further
agrees that any transfer of any of the Shares or any interest therein shall be
subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to
you prior to the time of transfer, a written description of
the proposed transfer specifying its nature and consequence
and giving the name of the proposed transferee.
2. You shall have obtained from your counsel a written
opinion stating whether in the opinion of such
counsel the proposed transfer may be effected
without registration under the Securities Act of
1933. If such opinion states that such transfer
may be so effected, the Purchaser shall then be
entitled to transfer the Shares in accordance with
the terms specified in its description of the
transaction to you. If such opinion states that
the proposed transfer may not be so effected, the
Purchaser will not be entitled to transfer the
Shares unless the Shares are registered.
The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the
<PAGE>
Shares, including the imposition of a requirement that any transferee of the
Shares sign a letter agreement similar to this one. The Purchaser agrees that in
the event the Shares are redeemed by the Purchaser or its successors or any
current holder prior to the complete amortization of organization expenses by
the Capitol Square Large Cap Fund, the Capitol Square Small Cap Fund or the
Capitol Square Bond Fund, the redemption proceeds payable in respect of the
Shares so redeemed shall be reduced by the pro-rata share (based on the
proportionate share of the Shares redeemed to the total number of the Shares
outstanding at the time of redemption) of the then unamortized deferred
organization expenses as of the date of such redemption.
Very truly yours,
By: ___________________________
Its:
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